Marketing Channel & Supply

Chain Management
Contents
• Marketing Channel & Supply Chain Management
• Supply Chains & the Value Delivery Network
• The importance of marketing channels
• Channel Members Adding Value
• Channel Behavior and Organization
• Changing Channel Organization
• Channel Design Decisions
• Designing International Distribution Channels
• Channel Management Decisions
• Nature and Importance of Marketing Logistics
• Major Logistics Functions
• Integrated Logistics Management
 Marketing Channel

• A firm’s success spends on how well it

performs and how well its marketing channels
competes with Competitor’s Channels.
 Supply Chain

• The supply Chain consists of “Upstream” and

“Downstream” partners.
Upstream
• A set of firms that provide the company:
• Raw materials
• Components
• Parts
 Supply Chain

• Information
• Finances
• Expertise
Downstream
• Marketing and Distribution Channels that look
forward toward the customer.
• Wholesalers
• Retailers
 Value Delivery Network

The network made up of

the company, suppliers,
distributors, and
ultimately customers
who partner with each
other to improve the
performance of the
entire system.
 Supply Chain View

Takes a make-and-sell view of business.

• Raw material, productive inputs and factory
capacity is starting point for market planning.
 Demand Chain View

• Sense and Response view of the market

• Panning starts with needs of target customers
• Companies organize a chain or resources and
activities for creating customer value
 Importance of marketing channels

• Not every company sells or capable of selling directly

to the end user.
• They form Marketing Channels distribution channel
to bring the product in the market.
• Decisions on Channels affect every marketing
decisions.
• Pricing-national discount chains, types of stores,
online selling.
 Importance of marketing channels

• Sales force and communication-persuasion, training,

motivation and support its channel partners need.
• Companies with their own distribution channels can
change their advertising, pricing, promotion over
night.
• Companies dependent on franchise, independent
dealers cannot make changes as the market demand
changes.
 Channel Members Adding Value

• They create greater efficiency in availability of the

goods to target markets.
• Contacts, specialization, experience and scale of
promotions. Intermediaries offer more than a firm
can achieve on its own.
 Channel Members Adding Value

• Intermediaries bridge the major time, possessions

gaps.
• Key functions of Intermediaries
• Information: gathering and distributing marketing
research intelligence for planning and aiding
exchange.
• Promotion: Persuasive communication
• Contact: Finding and communicating with
prospective buyers.
 Channel Members Adding Value

• Matching: Shaping and fitting offers to buyer’s needs.

• Negotiation: Pricing and agreement.
• Physical Distribution
• Financing: Acquiring and using funds to channel
products.
• Risk Taking: Risk of carrying the channel work.
 Numbers of Channel Levels

Companies distribute their products/services in

different ways.
The number of intermediary levels indicate the
length of channels.
1. Direct marketing channel
• No intermediary levels
• Direct selling to customers
2. Indirect Marketing Channels
• Contains one or more intermediaries
 Channel Behavior and Organization

• A marketing channel consists of firms that have

partnered for their common good.
• Each member depends on the other member.
• Cooperation to achieve overall channel goals
sometimes means giving up individual company
goals.
Channel Conflict
• Horizontal Conflict (with other dealers)
• Vertical Conflict (with producer/company)
 Vertical Marketing Systems (VMS)

Conventional Distribution Channel

• Consists of one of one or more independent producers,
wholesalers, and retailers.
• No channel members has much control over the other
members and no formal means to resolve conflicts.
VMS
• Consists of producers, wholesalers and retailers acting as a
unified system.
• One channel members owns the other members and
contracts with them.
3 Types

1. Corporation: production distribution under single ownership

2. Contractual: Consists of independent firms at different levels

of production/distribution.
Conflicts are resolved through contractual agreements.
A franchise is the most common contracted organization.

3. Administrated: Leader is assumed through the size and power

of one or a few dominant channel members. Manufacturers
of top bran can obtain strong support from resellers.
 Horizontal Marketing Systems

Two or more companies at one level join together to

follow a new marketing opportunity.

Multi channel Marketing Systems

• Also called hybrid marketing channels.
• A single firm sets up two or more marketing channels
to reach one or more customer segments.
• Hybrid marketing channels use has increased lately.
 Changing Channel Organization

• Disintermediation
• Product or service producers cut out intermediaries
& go directly to final buyers.
• Dell, Southwest airlines.
 Channel Design Decisions

• Analyzing Customer Needs

• Starts from customer wants.
• Target customer wants to purchase from close or far
located store?
• In person or on the phone?
• Types or products?
 Setting Channel Objectives

• Marketing channel objectives in terms of targeted

level of customer service.
• Channel objectives influenced by:
• The nature of the company products
• Marketing intermediaries
• Competitors
• Environment
• Direct selling for perishable goods.
 Identifying major alternatives

Types of intermediaries/numbers and

responsibilities of channel members.

Types:
1. Company sales force
2. Manufacturer’s agency
3. Industrial distributors: find distributors in different
regions for industries.
 Identifying major alternatives

Number:
• Intensive distribution
• Exclusive distribution: limited number of dealers,
often seen for luxury cars & prestige women clothing
• Selective distribution: Selecting certain distributors
to build higher profitable relationship with selected
channel members.
 Evaluating the major alternatives

• Selecting one or more channel that best satisfy its long-run

objectives.
• Each alternative should be evaluated against economic,
control and adaptive criteria.
• Economic criteria: A company compares the likely sales, cost
and profitability of different channel alternatives.
• Control: Giving control to intermediaries.
• Adaptive criteria: Often involves long term commitment yet
company wants flexible channels to adapt to environmental
changes.
 Designing International Distribution Channels

• Channel systems vary country to country

• Global marketers must adapt their channel strategies
to the existing structures within each country.
• In some markets, distribution system is complex and
hard to penetrate.
• Govt. regulation can greatly restricts how a company
distributes products in global market.
 Channel Management Decisions

Deciding on the best channel design.

Requires selecting, managing and motivating individual
channel members & evaluation their performance over time.

1. Selecting Channel Members

• The company should determine the characteristics which
makes a member more desirable.
• Profitability, Cooperativeness & Reputation.
 Channel Management Decisions

2. Managing and motivating channel members

• After selection, channel members must be continuously
managed & motivated to perform maximum.

3. Evaluating channel Members

• Actively check member’s performance against standards such
as sales, quotas, inventory levels, lost goods, promotions etc.
• Dealers must be treated right to get their full support.
 Public Policy and Distribution Decisions

By law, companies are free to develop whatever

channel arrangements suit them.

• Exclusive distribution
• Exclusive dealing: dealers cannot handle
competitors’ products.
• Exclusive territorial agreements.
 Nature and Importance of Marketing Logistics

Marketing logistics or physical distribution

outbound, inbound distribution and reverse
distribution.
• Planning
• Implementing
• & Controlling
• For right product, customer, time.
 Major Logistics Functions

1. Warehousing
Product and consumption cycles rarely match so companies
must store their tangible goods.
• Storage warehouse
• Distribution warehouse

2. Inventory Management
Avoiding a situation of carrying too little or carrying too
much.
Just-in-time logistics system: new stock arrives exactly
when needed.
 Major Logistics Functions

3. Transportation
Modes: truck (most used), rail, water, pipeline, and air.
Internet for digital products.

Intermodel transportation
 Logistics Information Management

• Companies design a simple, accessible, fast and

accurate process for capturing, processing &
sharing channel information.
• Information shared & managed by mail, telephone
and sales people.
• EDI-Electronic Data Interchange.
 Integrated Logistics Management

The goal of integrated supply chain management is to to

harmonize all of the company’s logistics decisions.

1. Cross-functional team work inside the company

• Logistics activities are done through different departments
of the company.
• Decisions taken by different departments must be
communicated to all related departments in the team to
achieve better logistics performance.
• Supply chain manager position links logistics activities.
 Integrated Logistics Management

2. Building Logistics partnerships

• Company must work with the other channel partners to

improve whole channel distribution.
• Success of each channel member depends on the
performance of the entire supply chain.
• Cross-company teams.
 Integrated Logistics Management

3. Third party logistics

• Many companies avoid getting involved in loading,

unloading, bundling, sorting and transporting of a
distribution process.
• They outsource some or all of their logistics to third-party
logistics(3PL) providers.
• 3PLs help companies deliver their products to customers
fast, efficiently and effectively.
• Outsourcing logistics saves companies money and help
them focus on their core business.