Lecture Principles of Marketing - Chapter 10: Marketing channels and supply chain management

Lecture Principles of Marketing - Chapter 10 explain why companies use distribution channels and discuss the functions these channels perform, discuss how channel members interact and how they organize to perform the work of the channel, identify the major channel alternatives open to a company, explain how companies select, motivate, and evaluate channel members.

Chapter 10

Marketing Channels and Supply Chain Management

Roadmap: Previewing the Concepts

1 Explain why companies use distribution

channels and discuss the functions these

channels perform.

2 Discuss how channel members interact and

how they organize to perform the work of the channel.

3 Identify the major channel alternatives open

to a company.

4 Explain how companies select, motivate,

and evaluate channel members.

5 Discuss the nature & importance of marketing

 Caterpillar dominates the

world’s markets for heavy

construction and mining

equipment.

 Independent dealers are

key to success, providing

customer service, market

intelligence, and more.

 Distribution system is built

on a base of mutual trust and shared dreams.

 Caterpillar stresses dealer profitability, extraordinary dealer support, personal relationships, dealer

performance, and full, honest, and frequent communications.

Supply Chains

available to buyers requires building relationships with “upstream” and

“downstream” partners.

– Upstream: firms that supply the raw

materials, components, parts, and other elements necessary to create a good.

– Downstream: marketing channel partners that link the firm to the customer.

Marketing Channel

or Distribution Channel

involved in the process of making a

product or service available for use or consumption by the consumer or

How Channel Members Add Value

their greater efficiency in making

goods available to target markets.

on its own through the intermediaries:

– Contacts

– Experience

– Specialization

– Scale of operation

Key Channel Functions

Completing:

– Information – Promotion – Contact

– Matching – Negotiation

Number of Channel Levels

indicates the length of a channel.

– Direct marketing channels

• Have no intermediary levels between the

manufacturer and the customer.

– Indirect marketing channels

• Contains one or more intermediaries.

by several types of flows.

Channel Behavior

 The channel will be most effective when:

– Each member is assigned tasks it can do best.

– All members cooperate to attain overall channel

goals.

 If this does not happen, conflict occurs:

– Horizontal Conflict occurs among firms at the

same level of the channel (e.g., retailer to retailer).

– Vertical Conflict occurs between different levels

of the same channel (e.g., wholesaler to retailer).

 Some conflict can be healthy competition.

Vertical Marketing System

which producers, wholesalers, and

retailers act as a unified system.

has contracts with them, or has so

much power that they all cooperate.

Types of Vertical Marketing Systems

Franchise Organizations

 Manufacturer-Sponsored Retailer Franchise

– Ford and its independent franchised dealers

 Manufacturer-Sponsored Wholesaler

Franchise

– Coca-Cola’s licensed bottlers

 Service-Firm Sponsored Retailer Franchise

– McDonald’s, Avis, and Holiday Inn

Innovations in Marketing Systems

– Two or more companies at one level join

together to follow a new marketing

opportunity.

– Occurs when a single firm sets up two or

more marketing channels to reach one or more customer segments.

– Also called hybrid marketing system.

Changing Channel Organization

– Occurs when product and service

producers cut out intermediaries and go

directly to final buyers, or when radically

new types of channel intermediaries

displace traditional ones.

Channel Design Decisions

Analyzing Consumer Needs

determine customer needs:

– Do consumers want to buy from nearby

locations or are they willing to travel?

– Do they value breadth of assortment or do

they prefer specialization?

– Do consumers want many add-on services?

and consumer price preferences.

Setting Channel Objectives

levels of customer service.

– Cost

– Nature of the company

– The firm’s products

– Marketing intermediaries

– Competitors

– Environment

Identifying Major Alternatives

Evaluating the Major Alternatives

– A company compares the likely sales,

costs, and profitability of different channel alternatives.

Channel Management Decisions

members

– Partner relationship management

Public Policy and Distribution Decisions

Marketing Logistics

the physical flow of goods, services,

and related information from points of origin to points of consumption to meet customer requirements at a profit.

– Outbound distribution

– Inbound distribution

Goals of the Logistics System

& Major Logistics Functions

– Deliver a targeted level of customer

service at the least cost.

Inventory Management

too little inventory.

Integrated Logistics Management

 The logistics concept that emphasizes

teamwork, both inside the company and

among all the marketing channel

organizations, to maximize the performance

of the entire distribution system.

 Involves:

– Cross-functional teamwork inside the company – Building logistics partnerships

– Third-party logistics

Rest Stop: Reviewing the Concepts

1 Explain why companies use distribution

channels and discuss the functions these

channels perform.

2 Discuss how channel members interact and

how they organize to perform the work of the channel.

3 Identify the major channel alternatives open

to a company.

4 Explain how companies select, motivate,

and evaluate channel members.

5 Discuss the nature & importance of marketing