Chapter 12 Marketing Channels and Supply Chain Management

Chapter 12 Marketing Channels and Supply Chain Management

Firm Customer Channels o o o retail stores wholesalers telemarketing mail order catalogs web sites "Push" : getting channels to carry your product "Pull" : getting consumers to ask for your product by name

Functions performed by intermediaries Transactional (promote & negotiate) Logistical Facilitating (researching and financing)

Physical Distribution Gets It to Customers TISH Logistics or Physical Distribution Coordinating the flow of information among channel members

Supply Chain Management Customer-driven philosophy Goal is enhanced value Two roles Communicator of customer demand Manager of the physical flow process

Channel Specialists Adjust Discrepancies with Regrouping Activities Accumulating (EGGS) Accumulating (Medical Clinics) QUANTITY Allocating or Bulk-Breaking COSTCO Heterogeneity Sorting (Grading Oranges) ASSORTMENT Assorting (Winn Dixie)

Channel Specialists Increase Contact Efficiencies Multiplicative Pioneer JVC Magnavox Sony Rock Fan Pop Fan Classical Fan "Dr. E" Country Fan Reggae Fan New Age Fan Rap Fan

Channel Specialists Increase Contact Efficiencies Pioneer JVC Dan’s Stereos Magnavox Rock Fan Pop Fan Classical Fan "Dr. E" Country Fan Reggae Fan New Age Fan Sony Rap Fan Additive

Channel Intermediaries Retailers Take Title to Goods Merchant Wholesalers Take Title to Goods Agents and Brokers Do NOT Take Title to Goods

Factors Suggesting Type of Wholesaling Intermediary to Use Factor Merchant Wholesalers Agents/Brokers Nature of product Standard Technicality of product Complex Nonstandard, custom Simple Product’s gross margin High Low Concentration of customers Dispersed Concentrated

Types of Marketing Channels for Consumer Products Direct Channel TRADITIONAL DUAL DISTRIBUTION & REVERSE CHANNELS

Types of Marketing Channels for Industrial Products

CHANNEL STRATEGY DECISIONS Market exposure – optimal Selection of a Marketing Channel Intensity of Distribution Management of Relationships

Intensity of Market Coverage Intensive Distribution Market Exposure Sell it where they buy it!

Intensity of Market Coverage Selective Distribution Market Exposure Sell it where it sells best!

Intensity of Market Coverage Extreme case of Selective Distribution. Market Exposure Exclusive Distribution

VMS Corporate VMS Vertical marketing system Contractual VMS Administered VMS Planned channel system to improve distribution efficiency and cost effectiveness by integrating various functions Forward Integration Backward Integration

Vertical Marketing Systems Focus on Final Customers Type of channel Characteristics Vertical marketing systems Administered Contractual Corporate Amount of cooperation Some to good Fairly good to good Complete Control maintained by Economic power and leadership Contracts One company ownership Examples General Electric Mc. Donald’s Florsheim

Firm Customer Channels "Captive Channels" : channels owned by firm "Non-Captive Channels" : channels not owned by firm "When do retailers have "channel power"? firm's product is not well differentiated from competitors threat of backward integration (e. g. Shaw's cola)

Firm Customer Channels Channel conflict examples Firm: Your retail prices are too high, and are driving down demand Retailer: With your wholesale prices, it’s the only way we can make money Firm: You carry too many lines, our product isn't even noticed on shelves Retailer: Customers come first. BTW, why don't you prune your line.

Firm Retail store Website "free – riding" by internet channel customers who use more than one channel get confused • return policies • origin of merchandise • different prices Customer

Manufacturer Vertical Distributor Retailer Consumers

Horizontal Distributor Retailer

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