Marketing Channels and Supply Chain Management

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• Chapter 13
• Marketing Channels and Supply Chain Management

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Objectives

• Describe the roles that marketing channels and
  logistics play in marketing strategy.
• Describe the various types of distribution
  channels available to marketers.
• Outline the major channel strategy decisions.
• Describe the concepts of management, conflict,
  and cooperation within the marketing channel.
• Identify and compare the major components of a
  physical distribution system.
• Compare the major transportation alternatives on
  the basis of speed, dependability, cost,
  frequency of shipments, availability in different
  locations, and flexibility in handling products.
• Discuss how transportation intermediaries and
  combined transportation modes can improve
  physical distribution.

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Roles of Marketing Channels

• First, they facilitate the exchange process.
• Second, distributors adjust for discrepancies in
  the markets assortment of goods and services.
• Third, they involve standardizing exchange
  transactions by setting expectations for
  products.
• Finally, marketing channels facilitate searches
  by both buyers and sellers.

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Types of Marketing ChannelsConsumer Goods
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Leading retailers

• Who are the leading retailers and what are the
  guidelines for selection?

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Types of Marketing ChannelsBusiness Goods
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Major Channel Strategy Decisions

• Level of distribution intensity.
• Desirability of vertical marketing systems.
• Performance of current intermediaries.

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Market Factors Influencing Channel Strategies
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Producer Factors Influencing Channel Strategies
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Competitive Factors InfluencingChannel Strategies
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Distribution Intensity

• Intensive Distribution strategy seeks to
  distribute a product through all available
  channels in a trade area.
• Intensive distribution strategy suits items with
  wide appeal across broad groups of consumers.
• Selective distribution, a firm chooses only a
  limited number of retailers in a market area to
  handle its line.
• Helps to control price cutting since relatively
  few dealers handle the firms line.
• Exclusive distribution, when a producer grants
  exclusive rights to a wholesaler or retailer to
  sell its products in a specific geographical
  region.

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Creative Distribution Channels

• Gasoline at Home Depot 9/05
• Apple I-pod accessories at vending machines in
  hotels, airports, convention centers 9/05
• Pet clothes at Urban Outfitters

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Legal Problems of Exclusive Distribution

• Three main areas
• Exclusive dealing prohibits the handling of
  competing products .
• Closed sales territories to restrict their
  distributors to certain geographical regions.
• Tying agreements which allow channel members to
  becoming exclusive dealers only if they also
  carry products other than those that they want to
  sell.
• Tying agreements violate the Sherman Act and the
  Clayton Act when they reduce competition or
  create monopolies that keep competitors out of
  major markets.

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Vertical Marketing System (VMS)

• VMS is a planned channel system designed to
  improve distribution efficiency and cost
  effectiveness.
• Forward integration, a firm attempts to control
  downstream distribution.
• Backward integration occurs when a manufacturer
  attempts to gain greater control over inputs in
  its production process.
• A VMS offers several benefits.
• First, it improves chances for controlling and
  coordinating the steps in the distribution or
  production process.
• May also let a manufacturer expand into
  profitable new businesses.

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VMS Article

• Discover the answers to the following questions
  and more when visiting this web site
• What does a vertical market system (VMS) look
  like?
• What are the disadvantages of vertical marketing
  systems?
• Are there different types of vertical marketing
  systems?

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Three Categories of VMS

• Corporate Marketing System - where a single owner
  runs organizations at each stage of the marketing
  channel it operates.
• Administered Marketing System - achieves channel
  coordination when a dominant channel member
  exercises its power.
• Contractual Marketing System - coordinates
  distribution through formal agreements among
  channel members.

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Major Components of a Physical Distribution System

• Customer service - What level of customer service
  the distribution activities should support.
• Transportation - How the firm should ship its
  products.
• Inventory control - How much inventory the firm
  should maintain.
• Protective packaging and materials handling.
• Order processing.
• Warehousing - Where the distribution system will
  locate stocks of goods.

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Physical Distribution Expenditures
SOURCE These 2003 estimates were provided by Dr.
Julie Gentry, Logistics Faculty, University of
Arkansas-Fayetteville
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Shipping Transportation Hints

• What are some of the considerations for a firm
  looking to ship internationally?

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Comparison of Transport Modes