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Marketing Management
More Channels thanthe Dish Network
Paul Dishman*, Ph.D.Department of Business Management
Marriott School of Management
Brigham Young University
Lecture 14 *not affiliated with the Dish Network
Paul Dishman, Ph.D.
Marketing Management
Strategic Channel Change
Involves getting the right product to the right customers in the right place at the right time.
Paul Dishman, Ph.D.
Marketing Management
What is theNature
of Existing DistributionChannels?
What is theNature
of Existing DistributionChannels?
How do Channel Firms Interact andOrganize to do the
Work of theChannel?
How do Channel Firms Interact andOrganize to do the
Work of theChannel?
Strategic QuestionsConcerning Channels
What Problems doCompanies Face in
Designing andManaging Their
Channels?
What Problems doCompanies Face in
Designing andManaging Their
Channels?
What Role Does Physical Distribution
Play in Attracting and Satisfying
Customers?
What Role Does Physical Distribution
Play in Attracting and Satisfying
Customers?
Paul Dishman, Ph.D.
Marketing Management
What is a Distribution Channel?
• “A set of interdependent organizations (intermediaries) involved in the process of making a product or service available for use or consumption by the consumer or business user.”
• Marketing Channel decisions are among the most important decisions that management faces and will directly affect every other marketing decision.
Paul Dishman, Ph.D.
Marketing Management
Why are Marketing Intermediaries Used?• The use of intermediaries results from their greater
efficiency in making goods available to target markets.
• Offer the firm more than it can achieve on it’s own through the intermediaries:– Contacts,– Experience,– Specialization,– Scale of operation.
• Purpose: match supply from producers to demand from consumers.
Paul Dishman, Ph.D.
Marketing Management
How a Marketing Intermediary Reduces the Number of Channel Transactions
Paul Dishman, Ph.D.
Marketing Management
InformationInformationRisk TakingRisk Taking
These Functions Should be Assigned to the Channel Member Who Can Perform Them Most Efficiently and Effectively to Provide Satisfactory Assortments of Goods and
Services to Target Customers.
Distribution Channel Functions
In this video clip, a Dupont executive speaks about managing the supply chain and the logistics process for two well-knownbrands: Nomex and Kevlar.
Click to play
Click to return
MatchingMatching
ContactContact
FinancingFinancing PromotionPromotion
NegotiationNegotiation
PhysicalDistribution
PhysicalDistribution
Paul Dishman, Ph.D.
Marketing Management
MM WW JJ RR CC
MM CC
MM RR CC
MM WW RR CC
Short
Long
Channel Level - Each Layer of Marketing Intermediaries that Perform Some Work in Bringing the Product and its Ownership Closer to the Final Buyer.
Number of Channel Levels (Fig. 12.2)
Direct Channel
Indirect Channel
Paul Dishman, Ph.D.
Marketing Management
Channel Behavior & Conflict
• The channel will be most effective when:– each member is assigned tasks it can do best.– all members cooperate to attain overall channel goals and
satisfy the target market.
• When this doesn’t happen, conflict occurs:– Horizontal Conflict occurs among firms at the same level of
the channel, i.e retailer to retailer.– Vertical Conflict occurs between different levels of the same
channel, i.e. wholesaler to retailer.
• For the channel to perform well, each channel member’s role must be specified and conflict must be managed.
Paul Dishman, Ph.D.
Marketing Management
Conventional Marketing Channel vs. a Vertical Marketing System (Fig. 12.3)
Conventional Marketing Channel
Vertical MarketingSystem
Manufacturer
Wholesaler
Retailer
Consumer
Manufacturer
Retailer
Manufacturer
Retailer
Wh
ole
sale
rW
hole
sale
rConsumer
Paul Dishman, Ph.D.
Marketing Management
Degree of Direct Control
Types of Vertical Marketing Systems
CorporateCommon Ownership at Different Levels of the Channel
AdministeredLeadership is Assumed by One ora Few Dominant Members
ContractualContractual Agreements AmongChannel Members
Paul Dishman, Ph.D.
Marketing Management
Innovations in Marketing Systems
Horizontal Marketing System
Two or More Companies at One Channel Level Join
Together to Follow a New Marketing Opportunity.
Example:
Horizontal Marketing System
Two or More Companies at One Channel Level Join
Together to Follow a New Marketing Opportunity.
Example:
Hybrid Marketing System
A Single Firm Sets Up Two or More Marketing Channels to Reach One or More Customer
Segments.
Example:
Hybrid Marketing System
A Single Firm Sets Up Two or More Marketing Channels to Reach One or More Customer
Segments.
Example:
Paul Dishman, Ph.D.
Marketing Management
Changing Channel Organization
A Major Trend is Toward Disintermediation Which Means that Product and Service
Producers are Bypassing Intermediaries and Going Directly to Final Buyers or
That New Types of Channel Intermediaries are Emerging to Displace
Traditional Ones.
Paul Dishman, Ph.D.
Marketing Management
Analyzing Consumer Service Needs
Setting Channel Objectives & Constraints
ExclusiveDistribution
SelectiveDistribution
IntensiveDistribution
Identifying Major Alternatives
Channel Design Decisions
Paul Dishman, Ph.D.
Marketing Management
Nature and Importance of Marketing Logistics
• Involves getting the right product to the right customers in the right place at the right time.
• Companies today place greater emphasis on logistics because:– customer service and satisfaction have become the
cornerstone of marketing strategy.– logistics is a major cost element for most companies.– the explosion in product variety has created a need for
improved logistics management.– Improvements in information technology has created
opportunities for major gains in distribution efficiency.
Paul Dishman, Ph.D.
Marketing Management
Goals of the Logistics System
Lower Distribution Costs;
Lower Customer Service Levels
Higher Distribution Costs;
Higher Customer Service Levels
Goal: To Provide a Targeted Level of Customer Service
at the Least Cost.
Paul Dishman, Ph.D.
Marketing Management
Transportation Rail, Truck,
Water, Pipeline, Air, Intermodal
InventoryWhen to order
How much to orderJust-in-time
InventoryWhen to order
How much to orderJust-in-time
CostsMinimize Costs ofAttaining Logistics
Objectives
CostsMinimize Costs ofAttaining Logistics
Objectives
WarehousingStorage
DistributionAutomated
WarehousingStorage
DistributionAutomated
Order ProcessingReceivedProcessedShipped
Order ProcessingReceivedProcessedShipped
Logistics
Functions
Major Logistics Functions
Paul Dishman, Ph.D.
Marketing Management
RailNation’s largest carrier, cost-effective for shipping bulk products, piggyback
RailNation’s largest carrier, cost-effective for shipping bulk products, piggyback
TruckFlexible in routing & time schedules, efficient
for short-hauls of high value goods
TruckFlexible in routing & time schedules, efficient
for short-hauls of high value goodsWater
Low cost for shipping bulky, low-value, non perishable goods, slowest form
WaterLow cost for shipping bulky, low-value,
non perishable goods, slowest form
AirHigh cost, ideal when speed is needed or
distance markets have to be reached
AirHigh cost, ideal when speed is needed or
distance markets have to be reached
Transportation Modes
PipelineShip petroleum, natural gas, and chemicals
from sources to markets
PipelineShip petroleum, natural gas, and chemicals
from sources to markets
Paul Dishman, Ph.D.
Marketing Management
1. Speed2. Dependability
3. Availability4. Costs5. Others
Checklist for ChoosingTransportation Modes
Choosing Transportation Modes
Paul Dishman, Ph.D.
Marketing Management
Concept Recognizes that Providing Better Customer Service and Trimming Distribution Costs Requires TeamworkTeamwork, Both Inside the Company and Among All the Marketing Channel Organizations.
Cross-Functional Teamwork inside the CompanyCross-Functional Teamwork inside the Company
Building Channel PartnershipsBuilding Channel Partnerships
Third-Party LogisticsThird-Party Logistics
Integrated Logistics Management
Third party logistics
Many companies are now outsourcing logistics tasks to companies like Ryder Integrated Logistics.
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