1chap. 12 marketing 7e lamb hair mcdaniel ©2004 south-western/thomson learning marketing channels...

1Chap. 12 Marketing 7e Lamb Hair McDaniel©2004 South-Western/Thomson Learning

Marketing Channels andMarketing Channels andSupply Chain ManagementSupply Chain Management

Prepared byPrepared byDeborah BakerDeborah Baker

Texas Christian UniversityTexas Christian University

Chapter 12


Learning ObjectivesLearning Objectives

1. Explain what a marketing channel is and why intermediaries are needed.

2. Define the types of channel intermediaries and describe their functions and activities.


Learning Objectives Learning Objectives (continued)(continued)

3. Describe the channel structures for consumer and business-to-business products and discuss alternative channel arrangements.

4. Define supply chain management and discuss its benefits.

5. Discuss the issues that influence channel strategy.



6. Explain channel leadership, conflict, and partnering.

7. Describe the logistical components of the supply chain.

8. Discuss new technology and emerging trends in supply chain management.



9. Discuss channels and distribution decisions in global markets.

10. Identify the special problems and opportunities associated with distribution in service organizations.


Learning Objective Learning Objective

Explain what a marketing channel is and why intermediaries are needed.

11

On Linehttp://www.heb.com

On Linehttp://www.heb.com


Marketing ChannelsMarketing Channels

MarketingChannel

MarketingChannel

SupplyChain

SupplyChain

A set of interdependent organizations that ease the transfer of ownership as

products move from producer to business user or consumer.

A set of interdependent organizations that ease the transfer of ownership as

products move from producer to business user or consumer.

The connected chain of all the business entities, both internal and external to the company, that perform or support

the logistics function.

The connected chain of all the business entities, both internal and external to the company, that perform or support

the logistics function.

11


Marketing Channel FunctionsMarketing Channel Functions

Specialization andDivision of Labor

Specialization andDivision of Labor

ChannelsFulfillThree

ImportantFunctions

ChannelsFulfillThree

ImportantFunctions

OvercomingDiscrepanciesOvercoming

Discrepancies

Providing ContactEfficiency

Providing ContactEfficiency

11


Specialization and Specialization and Division of LaborDivision of Labor

Provides efficiency and cost savings

Attains economies of scale

Aids producers who lack resources to market directly

Builds good relationships with customers

11


Overcoming DiscrepanciesOvercoming Discrepancies

Discrepancyof

Quantity

Discrepancyof

Quantity

Discrepancyof

Assortment

Discrepancyof

Assortment

The difference between the amount of product produced and the amount an end user wants to buy.

The difference between the amount of product produced and the amount an end user wants to buy.

The lack of all the items a customer needs to receive full satisfaction from a product or products.

The lack of all the items a customer needs to receive full satisfaction from a product or products.

11


Overcoming DiscrepanciesOvercoming Discrepancies

TemporalDiscrepancy

TemporalDiscrepancy

SpatialDiscrepancy

SpatialDiscrepancy

A situation that occurs when a product is produced but a

customer is not ready to buy it.

A situation that occurs when a product is produced but a

customer is not ready to buy it.

The difference between the location of a producer and the

location of widely scattered markets.

The difference between the location of a producer and the

location of widely scattered markets.

11


Contact EfficiencyContact Efficiency11



Define the types of channel intermediaries and describe their functions and activities.

22


Channel IntermediariesChannel Intermediaries

RetailerRetailer

MerchantWholesalerMerchant

Wholesaler

Agents andBrokers

Agents andBrokers

A channel intermediary that sells mainly to customers.

A channel intermediary that sells mainly to customers.

An institution that buys goods from manufacturers, takes title

to goods, stores them, and resells and ships them.

An institution that buys goods from manufacturers, takes title

to goods, stores them, and resells and ships them.

Wholesaling intermediaries who facilitate the sale of a product by representing channel member.

Wholesaling intermediaries who facilitate the sale of a product by representing channel member.

22


Channel IntermediariesChannel Intermediaries

RetailersRetailersRetailersRetailers

Merchant Merchant WholesalersWholesalersMerchant Merchant

WholesalersWholesalers

Agents Agents andand

BrokersBrokers

Agents Agents andand

BrokersBrokers

Take Title to GoodsTake Title to GoodsTake Title to GoodsTake Title to Goods

Take Title to GoodsTake Title to GoodsTake Title to GoodsTake Title to Goods

Do NOT Take Title to GoodsDo NOT Take Title to GoodsDo NOT Take Title to GoodsDo NOT Take Title to Goods

22


Factors Suggesting Type of Factors Suggesting Type of Wholesaling Intermediary to Wholesaling Intermediary to

UseUse22


Channel Functions Channel Functions Performed by IntermediariesPerformed by Intermediaries

Contacting/Promotion

Negotiating

Risk Taking

Researching

Financing

Physically distributing

Storing

Sorting

FacilitatingFunction

FacilitatingFunction

TransactionalFunctions

TransactionalFunctions

Logistical Functions

Logistical Functions

22


LogisticsLogistics

The process of strategically

managing the efficient flow

and storage of raw

materials, in-process

inventory, and finished

goods from point of origin

to point of consumption.

22



Describe the channel structures for consumer and business-to-business products and discuss alternative channel arrangements.

33


Direct ChannelDirect Channel

A distribution channel in

which producers sell

directly to consumers.

33


Channels for Consumer Channels for Consumer ProductsProducts

Producer Producer Producer Producer

Consumers Consumers Consumers Consumers

Retailers Retailers Retailers

Wholesalers Wholesalers

Agents orBrokers

WholesalerWholesalerChannelChannel

RetailerRetailerChannelChannel

DirectDirectChannelChannel

Agent/BrokerAgent/BrokerChannelChannel

33


Channels for Channels for Business-to-Business ProductsBusiness-to-Business Products

Producer

IndustrialUser


Producer

Govt.Buyer


Producer Producer Producer

IndustrialUser

IndustrialUser

IndustrialUser

IndustrialDistributor

IndustrialDistributor

Agents orBrokers

Agents orBrokers

Agent/BrokerAgent/BrokerChannelChannel

IndustrialIndustrialDistributorDistributor

Agent/BrokerAgent/BrokerIndustrialIndustrialChannelChannel

33


Business-to-Business Business-to-Business Exchanges Exchanges

on the Interneton the Internet

Linking buyers and sellers

Dropping the middleman from the supply chain

Creating “private exchanges” to automate the supply chain

33

On Linehttp://www.sherwinwilliams.com

On Linehttp://www.sherwinwilliams.com


Alternative Channel Alternative Channel ArrangementsArrangements

Multiple Channels

Strategic ChannelAlliances

NontraditionalChannels

33



Define supply chain management and discuss its benefits.

44


Supply Chain ManagementSupply Chain Management

A management system that

coordinates and integrates

all of the activities

performed by supply chain

members into a seamless

process, from the source to

the point of consumption.

44


Physical flow process that engineers the

movement of goods

Physical flow process that engineers the

movement of goods

Communicator of customer demand frompoint of sale to supplier

Communicator of customer demand frompoint of sale to supplier

Role of Supply Chain Role of Supply Chain ManagementManagement

44


Benefits of Benefits of Supply Chain ManagementSupply Chain Management

Greater Supply Chain Flexibility Greater Supply Chain Flexibility

Improved Customer ServiceImproved Customer Service

Higher RevenuesHigher Revenues

Reduced Costs Reduced Costs

44

On Linehttp://www.nashfinch.com

On Linehttp://www.nashfinch.com



Discuss the issues that influence channel strategy.

55


Channel Strategy DecisionsChannel Strategy Decisions

Producer FactorsProducer Factors

Product FactorsProduct Factors

Market FactorsMarket Factors

Factors Factors Affecting Affecting Channel Channel ChoiceChoice

Factors Factors Affecting Affecting Channel Channel ChoiceChoice

Exclusive DistributionExclusive Distribution

Selective DistributionSelective Distribution

Intensive DistributionIntensive Distribution

Level ofLevel ofDistributionDistribution

IntensityIntensity

Level ofLevel ofDistributionDistribution

IntensityIntensity

55


Market FactorsMarket Factors

Market FactorsMarket FactorsThat Affect That Affect

ChannelChannelChoicesChoices

Market FactorsMarket FactorsThat Affect That Affect


Customer ProfilesCustomer Profiles

Consumer or IndustrialCustomer

Consumer or IndustrialCustomer

Size of MarketSize of Market

Geographic Location

55


Product FactorsProduct Factors

Product FactorsProduct FactorsThat Affect That Affect


Product FactorsProduct FactorsThat Affect That Affect


Product Complexity Product Complexity

Product PriceProduct Price

Product Life CycleProduct Life Cycle

Product DelicacyProduct Delicacy

55


Producer FactorsProducer Factors

Producer FactorsProducer FactorsThat Affect That Affect


Producer FactorsProducer FactorsThat Affect That Affect


Producer Resources Producer Resources

Number of Product LinesNumber of Product Lines

Desire for Channel ControlDesire for Channel Control

55


Levels of Distribution Levels of Distribution IntensityIntensity

Intensity LevelIntensity LevelIntensity LevelIntensity Level ObjectiveObjectiveObjectiveObjective Number of Number of IntermediariesIntermediaries

Number of Number of IntermediariesIntermediaries

IntensiveIntensive

SelectiveSelective

ExclusiveExclusive

Achieve mass marketselling.

Convenience goods.

Achieve mass marketselling.

Convenience goods.

Work with selected intermediaries.

Shopping and some specialty goods.

Work with selected intermediaries.

Shopping and some specialty goods.

Work with singleintermediary. Specialty

goods and industrial equipment.

Work with singleintermediary. Specialty

goods and industrial equipment.

ManyMany

SeveralSeveral

OneOne

55

On Linehttp://www.radioshack.comhttp://www.sprint.comhttp://www.compaq.comhttp://www.rca.comhttp://www.directv.com

On Linehttp://www.radioshack.comhttp://www.sprint.comhttp://www.compaq.comhttp://www.rca.comhttp://www.directv.com



Explain channel leadership, conflict, and partnering.

66


Managing Channel Managing Channel RelationshipsRelationships

Channel PartneringChannel Partnering

Channel ConflictChannel Conflict

Channel LeadershipChannel Leadership

Channel ControlChannel Control

Channel PowerChannel Power

Social Social Dimensions Dimensions of Channelsof Channels

Social Social Dimensions Dimensions of Channelsof Channels

66


Channel Power, Channel Power, Control, and LeadershipControl, and Leadership

ChannelPower

ChannelPower

ChannelControl

ChannelControl

Channel Leader

Channel Leader

A channel member’s capacity to control or influence the behavior

of other channel members

A channel member’s capacity to control or influence the behavior

of other channel members

A situation that occurs when one marketing channel member intentionally affects another

member’s behavior.

A situation that occurs when one marketing channel member intentionally affects another

member’s behavior.

A member of a marketing channelthat exercises authority/power over

the activities of other members.

A member of a marketing channelthat exercises authority/power over

the activities of other members.

66


Channel ConflictChannel Conflict

A clash of goals and methods

between distribution channel members.

HorizontalConflict

HorizontalConflict

Occurs among channel members on the same level

Occurs among channel members on the same level

VerticalConflictVerticalConflict

Occurs among channel members at different levels

Occurs among channel members at different levels

66


Channel PartneringChannel Partnering

The joint effort of all

channel members to create

a supply chain that serves

customers and creates a

competitive advantage.

66


Transaction-Transaction-BasedBased

Partnership-BasedPartnership-Based

Supplier / Supplier / Manufacturer Manufacturer RelationshipsRelationships

Short-term

Adversarial

Independent

Price important

Long-term

Cooperative

Dependent

Value-added services

Number of Number of SuppliersSuppliers

Many Few

Information Information SharingSharing

Minimal High

Investment Investment RequiredRequired

Minimal High

Transaction- vs. Transaction- vs. Partnership-Based FirmsPartnership-Based Firms

66



Describe the logistical components of the supply chain.

77


Integrated Logistical Integrated Logistical Components of the Supply ChainComponents of the Supply Chain

Sourcing & ProcurementSourcing & Procurement

Production SchedulingProduction Scheduling

Order Processing & Customer ServiceOrder Processing & Customer Service

Inventory ControlInventory Control

SupplySupplyChainChainTeamTeam

SupplySupplyChainChainTeamTeam

Warehouse & Materials HandlingWarehouse & Materials Handling

TransportationTransportation

Lo

gis

tics

Info

rma

tio

n S

yste

mL

og

isti

cs In

form

ati

on

Sys

tem

77


Sourcing and ProcurementSourcing and Procurement

NegotiateService Levels

NegotiateService Levels

NegotiatePrice

NegotiatePrice

SelectSuppliers

SelectSuppliers

DevelopSpecifications

DevelopSpecifications

Plan Purchasing Strategies

Plan Purchasing Strategies

Role ofRole ofPurchasingPurchasing

DepartmentsDepartments

Role ofRole ofPurchasingPurchasing

DepartmentsDepartments

77


Production SchedulingProduction Scheduling

Push / Pull Push / Pull StrategyStrategyPush / Pull Push / Pull StrategyStrategy

Traditional FocusTraditional Focus Traditional FocusTraditional Focus

PushPush

Start of Start of ProductionProductionStart of Start of ProductionProduction

ManufacturingManufacturingManufacturingManufacturing

Inventory-BasedInventory-Based

Mass ProductionMass Production

Customer FocusCustomer Focus Customer FocusCustomer Focus

PullPull

Customer-Order Based

Customer-Order Based

Mass CustomizationMass Customization

77


Just-in-Time ManufacturingJust-in-Time Manufacturing

A process that redefines

and simplifies

manufacturing by reducing

inventory levels and

delivering raw materials

just when they are needed

on the production line.

77


Benefits of JITBenefits of JIT

Reduces raw material inventories

Shortens lead times

Creates better supplier relationships

Reduces production and storeroom costs

Reduces paperwork

77


JIT RequirementsJIT Requirements

Requirements Requirements forfor

Manufacturers Manufacturers Using JITUsing JIT

Requirements Requirements forfor

Manufacturers Manufacturers Using JITUsing JIT

Receive High-Quality Parts Receive High-Quality Parts

Meet Supplier Delivery Commitments

Meet Supplier Delivery Commitments

Have a Crisis Management Plan

Have a Crisis Management Plan

77


Electronic Data InterchangeElectronic Data Interchange

Information technology

that replaces paper

documents that accompany

business transactions.

77

On Linehttp://www.walmartstores.com

On Linehttp://www.walmartstores.com


Inventory Control SystemInventory Control System

A method of developing

and maintaining an

adequate assortment of

materials or products to

meet a manufacturer’s or a

customer’s demand.

77


MRP and DRPMRP and DRP

MaterialsRequirement

Planning

MaterialsRequirement

Planning

DistributionResourcePlanning

DistributionResourcePlanning

An inventory control system that manages the replenishment of raw materials, supplies, and components from the supplier to the manufacturer.

An inventory control system that manages the replenishment of raw materials, supplies, and components from the supplier to the manufacturer.

An inventory control system that manages the replenishment of goods from the manufacturer to the final consumer.

An inventory control system that manages the replenishment of goods from the manufacturer to the final consumer.

77


Warehouse and Warehouse and Materials-HandlingMaterials-Handling

Materials Materials HandlingHandlingFunctionsFunctions

Materials Materials HandlingHandlingFunctionsFunctions

Receive goods into warehouse

Dispatch the goods totemporary storage

Recall, select, or pick the goods for shipment

Identify, sort, and label goods

77


TransportationTransportation

CostCost

Transit TimeTransit Time

ReliabilityReliability

CapabilityCapability

AccessibilityAccessibility

TraceabilityTraceability

Criteria Criteria forfor

Transportation Transportation ModeMode

ChoiceChoice

Criteria Criteria forfor

Transportation Transportation ModeMode

ChoiceChoice

77


Criteria for RankingCriteria for RankingModes of TransportationModes of Transportation

Relative Cost

TransitTime

Reliability

Capability

Accessibility

Traceability

HighestHighest LowestLowest

Air WaterPipeRailTruck

Water Rail Pipe Truck Air

Pipe Truck Rail Air Water

Water

Truck

Rail Truck Air Pipe

Rail Air Water Pipe

Air Truck Rail Water Pipe

77



Discuss new technology and emerging trends in supply chain management.

88


Trends in Trends in Supply Chain ManagementSupply Chain Management

Electronic DistributionElectronic Distribution

Outsourcing ofLogistics Functions

Outsourcing ofLogistics Functions

AdvancedComputer Technology

AdvancedComputer TechnologyTrends Trends

Affecting the Affecting the Logistics Logistics IndustryIndustry

Trends Trends Affecting the Affecting the

Logistics Logistics IndustryIndustry

88



Discuss channels and distribution decisions in global markets.

99


Channels and Distribution Channels and Distribution Decisions for Global MarketsDecisions for Global Markets

Global SupplyGlobal SupplyChain ManagementChain Management

Global SupplyGlobal SupplyChain ManagementChain Management

Awareness of trade legalitiesAwareness of trade legalities

Transportation IssuesTransportation Issues

Global Channel Global Channel DevelopmentDevelopment

Global Channel Global Channel DevelopmentDevelopment

Channel structure and type differ

Channel structure and type differ

Gray marketing channelsGray marketing channels

99

On Linehttp://www.wto.com

On Linehttp://www.wto.com


Learning ObjectiveLearning Objective

Identify the special problems and opportunities associated with distribution in service organizations.

1010


Channels and DistributionChannels and DistributionDecisions for ServicesDecisions for Services

Areas of Focus Areas of Focus forfor

Service Service DistributionDistribution

Areas of Focus Areas of Focus forfor

Service Service DistributionDistribution

Minimizing wait times Minimizing wait times

Managing service capacityManaging service capacity

Improving service delivery Improving service delivery

1010

1chap. 12 marketing 7e lamb hair mcdaniel ©2004 south-western/thomson learning marketing channels...

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