Marketing Channels and Supply Chain Management Copyright © Houghton Mifflin Company. All rights reserved. PowerPoint Presentation by Charlie Cook 14 Part

Marketing Channels andSupply Chain Management

Copyright © Houghton Mifflin Company. All rights reserved.Copyright © Houghton Mifflin Company. All rights reserved. PowerPoint Presentation by Charlie CookPowerPoint Presentation by Charlie Cook

1414

Part FourPart FourDistribution Distribution DecisionsDecisions

Copyright © Houghton Mifflin Company. All rights reserved. 14–2

Chapter Learning Objectives

• To describe the nature and functions of marketing channels

• To explain how supply chain management can facilitate distribution for the benefit of all channel members, especially customers

• To identify the types of marketing channels• To examine the major levels of marketing

coverage• To explore the concepts of leadership,

cooperation, and conflict in channel relationships


Chapter Learning Objectives (cont’d)

• To specify how channel integration can improve channel efficiency

• To examine the legal issues affecting channel management


Chapter Outline

• The Nature of Marketing Channels• Types of Marketing Channels• Intensity of Market Coverage• Supply Chain Management• Legal Issues in Channel Management


The Nature of Marketing Channels

• Distribution–The activities that make products available to

customers when and where they want to purchase them

• Marketing Channel–A group of individuals and

organizations directing products from producers to customers



The Nature of Marketing Channels (cont’d)

• Marketing Intermediary–A middleman linking producers to other middlemen or to

ultimate consumers through contractual arrangements or through the purchase and resale of products

ProducerProducerProducer


CustomerCustomerCustomer

CustomerCustomerCustomerIntermediaryIntermediaryIntermediary

Direct ChannelDirect Channel

Indirect ChannelIndirect Channel









Direct ChannelDirect Channel

Indirect ChannelIndirect Channel



• Marketing Channels Create Utility–Time utility: have products available when the

customer wants them (newspaper delivery).–Place utility: making products available in locations

where the customers wish to purchase them (convenience stores).

–Possession utility: the customerhas access to the product to use or to store for future use (raincoats).



• Marketing Channels Facilitate Exchange Efficiencies–Reduce the overall costs of market exchanges–Reduce search costs for customers–Maintain order in the marketplace


Efficiency in Exchanges Providedby an Intermediary

FIGURE 14.1


Marketing Channels Form a Supply Chain

• Supply Chain Management–Long-term partnerships among marketing channel

members that reduce inefficiencies, costs, and redundancies and develop innovative approaches to satisfy customers

–Optimizes costs throughout the whole channel for efficiency and service

–Includes all entities that facilitate product distribution and benefit from cooperative efforts

–Arises from the need to achieve a more competitive position


Typical Marketing Channels forConsumer Products

FIGURE 14.2


Typical Marketing Channels forBusiness Products

FIGURE 14.3


Distribution Intermediaries

• Industrial Distributor–An independent business that takes title to business

products and carries inventories–Advantages of using a distributor

• Perform needed selling activities in local markets

• Are aware of local needs and can pass market information on to producers

• Reduce producers’ capital requirements by holding inventories for local markets.

–Disadvantages of using a distributor• Difficult to control • Stocking of competing brands

• Less likely to handle bulky and slow-selling items

• Lack of technical knowledge


Distribution Intermediaries (cont’d)

• Manufacturers’ Agent–An independent businessperson who sells, on

commission, the complementary products of several producers; does not takes title to or hold inventories.

–Advantages of using an agent• Possess technical and market information

• Has an established set of customers

• Serves as substitute for a sales force

–Disadvantages of using an agent• Difficult to control

• Concentration on only large accounts

• Sales focus limited to commission-related activities


Multiple Marketing Channels and Channel Alliances

• Dual Distribution–The use of two or more channels to distribute the same

product to the same target market

• Strategic Channel Alliance–An agreement whereby the products of one

organization are distributed through the marketing channels of another


Intensity of Market Coverage

• Intensive Distribution–Using all available outlets to distribute a product.

• Convenience products with high replacement rates

–Provides availability and reduces search time–Availability is more important than outlet type


Intensity of Market Coverage (cont’d)

• Selective Distribution–Using only some available outlets to distribute a

product• Shopping products and durable goods with low

replacement rates

–High qualification requirements for intermediaries to distribute, sell, service, and support products

Tuscaloosa’s Only Authorized

Dealer


Intensity of Market Coverage (cont’d)

• Exclusive Distribution–Using a single outlet in a fairly large geographic area to

distribute a product• Expensive, high-quality products purchased

infrequently

–Exclusive outlets provide an incentive to sellers in limited markets.

–Dealers carry complete inventory and have trained staff for sales and service.


Supply Chain Management:Channel Leadership

• Channel Captain–The dominant member (producer, wholesaler, or

retailer) of a marketing channel or supply chain• Establishes channel policies and coordinates

development of the marketing mix

• Channel Power–The ability of one channel member

to influence another member’s goal achievement


Supply Chain Management:Channel Cooperation

• Benefits of Cooperation–Speeds up inventory replacement–Improves customer service–Reduces distribution costs

• Improving Channel Cooperation–Unifying channel to maintain market order–Agreeing to direct efforts toward common objectives–Precisely defining each channel member’s tasks


Supply Chain Management:Channel Conflict

• Sources of Channel Conflict–Disagreements arising among channel members–Communication difficulties jeopardizing coordination–Increased use of multiple distribution channels by

manufacturers creating conflicts with distributors and retailers

–Intermediaries diversifying into and offering competing products

–Producers attempting to circumvent intermediaries and dealing directly with retailers


Supply Chain Management:Channel Integration

• Vertical Channel Integration–Two or more stages of the marketing channel are under

one management.–Channel members coordinate their efforts to reach a

target market.

• Vertical Marketing System (VMS)–A marketing channel managed by a single channel

member to achieve efficient, low-cost distribution• Corporate VMS

• Administered VMS

• Contractual VMS


Legal Issues in Channel Management

• Dual Distribution–A producer can have two different channels into the

same market unless it is using one channel to compete with independent distributors of its products.

• Restricted Sales Territories–Granting exclusive sales territory rights to distributors is

permissible if the rights do not restrain trade.

• Tying Arrangements–Requiring a channel member to buy additional products

from the supplier in order to purchase a particular product from the supplier


Legal Issues in Channel Management (cont’d)

• Full-Line Forcing–Requiring a channel member to carry a supplier’s entire

product line to obtain any of the supplier’s products

• Exclusive Dealing–Forbidding an intermediary to carry products of a

competing manufacturer–Is anticompetitive if

• blocking competitors from 10% of the market

• sales revenues are sizable

• the manufacturer is larger than the dealer


Legal Issues in Channel Management (cont’d)

• Refusal to Deal–Suppliers can choose their distributors and refuse to

deal with others so long as their decisions are not based on anticompetitive motives or part of an organized refusal-to-deal with certain channel members.


After reviewing this chapter you should:

• Be able to describe the nature and functions of marketing channels.

• Be able to explain how supply chain management can facilitate distribution for the benefit of all channel members, especially customers.

• Be able to identify the types of marketing channels.• Be familiar with the major levels of marketing coverage.• Understand the concepts of leadership, cooperation, and

conflict in channel relationships.• Able to specify how channel integration can improve

channel efficiency.• Be cognizant of the legal issues affecting channel

management.

Chapter 14 Chapter 14 Supplemental SlidesSupplemental Slides



Key Terms and Concepts

• The following slides (a listing of terms and concepts) are intended for use at the instructor’s discretion.

• To rearrange the slide order or alter the content of the presentation–select “Slide Sorter” under View on the main menu.–left click on an individual slide to select it; hold and drag

the slide to a new position in the slide show.–To delete an individual slide, click on the slide to select,

and press the Delete key.–Select “Normal” under View on the main menu to return

to normal view.


Important Terms

• Distribution–The activities that make products available to

customers when and where they want to purchase them

• Marketing Channel–A group of individuals and organizations directing

products from producers to customers

• Marketing Intermediary–A middleman linking producers to other middlemen or

to ultimate consumers through contractual arrangements or through the purchase and resale of products


Important Terms

• Time Utility–The availability of products when the customer wants

them

• Place Utility–The availability of products in locations where the

customers wish to purchase them

• Possession Utility–The accessibility of products that allows the customer

to have the product to use or to store for future use


Important Terms

• Supply Chain Management–Long-term partnerships among marketing channel

members that reduce inefficiencies, costs, and redundancies and develop innovative approaches to satisfy customers

• Industrial Distributor–An independent business that takes title to business

products and carries inventories

• Manufacturers’ Agent–An independent businessperson who sells, on

commission, the complementary products of several producers; does not takes title to or hold inventories.


Important Terms

• Dual Distribution–The use of two or more channels to distribute the same

product to the same target market

• Strategic Channel Alliance–An agreement whereby the products of one

organization are distributed through the marketing channels of another

• Intensive Distribution–Using all available outlets to distribute a product.

• Convenience products with high replacement rates

–Provides availability and reduces search time–Availability is more important than outlet type


Important Terms

• Selective Distribution–Using only some available outlets to distribute a

product

• Exclusive Distribution–Using a single outlet in a fairly large geographic area to

distribute a product

• Channel Captain–The dominant member (producer, wholesaler, or

retailer) of a marketing channel or supply chain

• Channel Power–The ability of one channel member to influence another

member’s goal achievement


Important Terms

• Vertical Channel Integration–Two or more stages of the marketing channel are under

one management.

• Vertical Marketing System (VMS)–A marketing channel managed by a single channel

member to achieve efficient, low-cost distribution




Important Terms



• Restricted Sales Territories–Granting exclusive sales territory rights to distributors is

permissible if the rights do not restrain trade.

• Tying Arrangements–Requiring a channel member to buy additional products

from the supplier in order to purchase a particular product from the supplier


Important Terms

• Full-Line Forcing–Requiring a channel member to carry a supplier’s entire

product line to obtain any of the supplier’s products

• Exclusive Dealing–Forbidding an intermediary to carry products of a

competing manufacturer

• Refusal to Deal–Suppliers can choose their distributors and refuse to

deal with others so long as their decisions are not based on anticompetitive motives or part of an organized refusal-to-deal with certain channel members.


Transparency Figure 14E

Legal Issues in Channel Management

• Dual distribution

• Restricted sales territories

• Tying agreements

• Exclusive dealing

• Refusal to deal

Documents

Marketing Channels and Supply Chain Management Copyright © Houghton Mifflin Company. All rights reserved. PowerPoint Presentation by Charlie Cook 14 Part