Chapter 12

Marketing Channels and Supply Chain Management

The Place Component of the
Marketing Mix:
Channels of
Distribution
Logistics
Materials
Management
Physical Distribution
Marketing Channels
A set of Supply Chain – the
interdependent connected chain of
organizations that business entities
facilitate the transfer (internal and external)
of ownership as that perform or
products move from support the channel
producer to business functions
user or consumer
Marketing Channel Functions
Specialization
Specialization and
and division
division of
of labor
labor

Overcoming
Overcoming discrepancies
discrepancies

Providing
Providing contact
contact efficiency
efficiency
Overcoming Discrepancies
The
The difference
difference between
between the
the
Discrepancy
Discrepancy amount
amount ofof product
product produced
produced
of
of and
and the
the amount
amount an
an end
end user
user
Quantity
Quantity wants
wants to
to buy.
buy.

The
The lack
lack of
of all
all the
the items
items aa
Discrepancy
Discrepancy customer
customer needs
needs toto receive
receive full
full
of
of satisfaction
satisfaction from
from aa product
product oror
Assortment
Assortment products.
products.
Providing Contact Efficiency

6
Channel members - Intermediaries
Retailers – Wholesalers –
Organizations whose Organizations that sell
activities are directed to retailers or other
toward sales to final wholesalers, and/or to
(ultimate) consumers businesses or
institutions for use in
the conduct of
business
Channel Intermediaries
Take
Take Title
Title to
to Goods
Goods
Retailers
Retailers

Merchant Take
Merchant
Wholesalers Take Title
Title to
to Goods
Goods
Wholesalers

Agents Do
Agents
and
and
Do NOT
NOT Take
Take Title
Title to
to Goods
Goods
Brokers
Brokers
Factors Suggesting Type of
Wholesaling Intermediary to Use

Product
Productcharacteristics
characteristics

Buyer
Buyerconsiderations
considerations

Market
Marketcharacteristics
characteristics
 Channels for Consumer Products
Direct Retailer Wholesaler Agent/Broker
Channel Channel Channel Channel
Producer Producer Producer Producer

Agents or
Brokers

Wholesalers Wholesalers

Retailers Retailers Retailers

Consumers Consumers Consumers Consumers

 Channels for Business Products
Direct Direct Industrial Agent/Broker Agent/Broker
Channel Channel Distributor Channel Industrial
Channel
Producer Producer Producer Producer Producer

Agents or Agents or
Brokers Brokers

Industrial Industrial
Distributor Distributor

Industrial Govt. Industrial Industrial Industrial

User Buyer User User User
Alternative Channel
Arrangements
Multiple channels

Nontraditional channels

Strategic channel alliances

Supply Chain Management
A management system that
coordinates and integrates all
Supply Chain
of the activities performed by
supply chain members into a
seamless process, from the
source to the point of
consumption, resulting in
enhanced customer and
economic value.
 Benefits of Supply Chain
Management
Means of differentiation

Reduced costs

Greater supply chain flexibility

Improved customer service

Higher revenues
Channel Strategy Decisions
Factors
Factors Level
Levelof
of
Affecting
Affecting Distribution
Distribution
Channel
Channel Intensity
Intensity
Choice
Choice

Market
Market Factors
Factors Intensive
Intensive Distribution
Distribution
Product
Product Factors
Factors Selective
Selective Distribution
Distribution
Producer
Producer Factors
Factors Exclusive
Exclusive Distribution
Distribution
Market Factors
Customer
Customer profiles
profiles

Consumer
Consumer or
or Industrial
Industrial
Customer
Customer

Market
Size
Size of
of market
market
Market
Factors
Factors
That
That Affect
Affect
Channel
Channel
Choices
Choices Geographic location
Product Factors
Product
Product Complexity
Complexity

Product
Product Price
Price

Product
Product Standardization
Standardization

Product
Product Product
Product Life
Life Cycle
Cycle
Factors
Factors
That
That Affect
Affect
Channel
Channel
Choices
Product
Product Delicacy
Delicacy
Choices
Producer Factors
Producer
Producer Resources
Resources

Number
Number of
of Product
Product Lines
Lines

Producer
Producer
Factors
Factors
That
That Affect
Affect
Channel
Channel
Desire
Desire for
for Channel
Channel Control
Control
Choices
Choices
Levels of Distribution Intensity
A form of distribution aimed at
Intensive having a product available
in every outlet

A form of distribution achieved

Selective by screening dealers to eliminate
all but a few in any single area

A form of distribution that

Exclusive established one or a few
dealers within a given area
Channel Leadership, Conflict, &
Partnering
Channel Power, Channel
Control, Leadership Partnering

Channel
Relationship
Synergy

Channel Conflict

Horizontal Vertical
Logistical Components of the
Supply Chain
Sourcing
Sourcing && Procurement
Procurement

System
Information System
Production
Production Scheduling
Scheduling

Logistics Information
Order
Order Processing
Processing
Supply
Chain
Team Inventory
Inventory Control
Control
Logistics

Warehouse
Warehouse && Materials
Materials Handling
Handling

Transportation
Transportation
Channels and Distribution Decisions
for Services

Minimizing wait times

Managing service capacity

Improving service delivery