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  • 1. Chapter 12 Distribution Channels and Supply Chain Management
  • 2. Learning Goals
    • Explain why companies use distribution channels and discuss the functions that these channels perform
    • Discuss how channel members interact and how they organize to perform the work of the channel
    • Identify the major channel alternatives open to a company
    • Explain how companies select, motivate, and evaluate channel members
    • Discuss the nature and importance of physical distribution
    12-
  • 3. Case Study Caterpillar
    • Dominates world’s markets for heavy construction and mining equipment.
    • Independent dealers are key to success
    • Dealer network is linked via computers
    • Caterpillar stresses dealer profitability, extraordinary dealer support, personal relationships, dealer performance and full, honest, and frequent communications
    12-
  • 4. Learning Goals
    • Explain why companies use distribution channels and discuss the functions that these channels perform
    • Discuss how channel members interact and how they organize to perform the work of the channel
    • Identify the major channel alternatives open to a company
    • Explain how companies select, motivate, and evaluate channel members
    • Discuss the nature and importance of physical distribution
    12-
  • 5. Supply Chains and the Value Delivery Network
    • A supply chain consists of upstream and downstream partners
    • Marketers have traditionally focused on the downstream side
      • Supply chain – make-and-sell view
      • Demand chain – sense-and-respond-view
    • 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.
    12-
  • 6. Nature & Importance of Distribution Channels
    • Marketing channel
      • Set of interdependent organizations involved in the process of making a product or service available for use or consumption by the consumer or business user.
    12-
  • 7.
    • Channel choices affect other decisions in the marketing mix
      • Pricing, marketing communications
    • A strong distribution system can be a competitive advantage
    • Channel decisions involve long-term commitments to other firms
    Nature & Importance of Marketing Channels 12-
  • 8. Nature & Importance of Marketing Channels
    • How Channel Members Add Value
      • Fewer contacts.
      • Match product assortment demand with supply.
      • Bridge, time, place, and possession gaps that separate products from users.
    12-
  • 9. How Channel Members Add Value
      • Information
      • Promotion
      • Contact
      • Matching
      • Negotiation
      • Physical Distribution
      • Financing
      • Risk taking
      • Environmental sustainability
    12-
    • Channel members add value by bridging the major time, place, and possession gaps.
    • Key functions:
  • 10. Nature & Importance of Marketing Channels
    • Number of Channel Levels
      • The number of intermediary levels indicates the length of a marketing channel.
        • Direct Channels
        • Indirect Channels
      • Producers lose more control and face greater channel complexity as additional channel levels are added.
    12-
  • 11. Channel Members are Connected Via a Variety of Flows
    • Physical Flow
    • Payment Flow
    • Information Flow
    • Promotion Flow
    • Flow of Ownership
    12-
  • 12. Learning Goals
    • Explain why companies use distribution channels and discuss the functions that these channels perform
    • Discuss how channel members interact and how they organize to perform the work of the channel
    • Identify the major channel alternatives open to a company
    • Explain how companies select, motivate, and evaluate channel members
    • Discuss the nature and importance of physical distribution
    12-
  • 13.
    • Channel Conflict
      • Occurs when channel members disagree on roles, activities, or rewards.
      • Types of Conflict:
        • Horizontal conflict: occurs among firms at the same channel level
        • Vertical conflict: occurs among firms at different channel levels
    Channel Behaviour and Organization 12-
  • 14.
    • Conventional Distribution Channels
      • Consist of one or more independent channel members
      • Each seeking to maximize its own profits
      • Often result in poor performance
    • Vertical Marketing Systems
      • Producers, wholesalers, and retailers act as a unified system
      • One channel member owns, has contracts with, or has so much power that they all cooperate
      • Benefits should include greater control, less conflict, and economies of scale due to the size of the system
    Channel Behaviour and Organization 12-
  • 15. Channel Behaviour and Organization
    • Vertical Market System (VMS)
      • Corporate VMS
      • Contractual VMS
      • Administered VMS
    • Integrates successive stages of production and distribution under single ownership – channel ownership is established through common ownership
    • Coordination and conflict through regular organizational channels
    12-
  • 16. Channel Behaviour and Organization
    • Vertical Market System (VMS)
      • Corporate VMS
      • Contractual VMS
      • Administered VMS
    • Individual firms who join through contracts
    • Franchise organizations
      • Manufacturer-sponsored retailer franchise system
      • Manufacturer-sponsored wholesaler franchise system
      • Service-firm-sponsored retailer franchise system
    12-
  • 17. Channel Behaviour and Organization
    • Vertical Market System (VMS)
      • Corporate VMS
      • Contractual VMS
      • Administered VMS
    • Leadership through the size and power of dominant channel members
    • Leadership could be manufacturer or retailer
    12-
  • 18.
    • Horizontal Marketing Systems
      • Companies at the same level work together with channel members
    • Multichannel Distribution Systems
      • Also called hybrid marketing channels
      • Occurs when a firm uses two or more marketing channels
    • Changing Channel Organization
      • Disintermediation
    Channel Behaviour and Organization 12-
  • 19. Learning Goals
    • Explain why companies use distribution channels and discuss the functions that these channels perform
    • Discuss how channel members interact and how they organize to perform the work of the channel
    • Identify the major channel alternatives open to a company
    • Explain how companies select, motivate, and evaluate channel members
    • Discuss the nature and importance of physical distribution
    12-
  • 20.
    • Step 1: Analyzing Consumer Needs
      • Cost and feasibility of meeting needs must be considered
    • Step 2: Setting Channel Objectives
      • Set channel objectives in terms of targeted level of customer service
      • Many factors influence channel objectives
        • Nature of the company (size/financial position) and its products
        • Marketing intermediaries
        • Competition
        • Marketing environment
    Channel Design Decisions 12-
  • 21. Channel Design Decisions
    • Step 3: Identifying Major Alternatives
      • Types of intermediaries
        • Company sales force, manufacturer’s agency, industrial distributors
      • Number of marketing intermediaries
        • Intensive, selective, and exclusive distribution
      • Responsibilities of channel members
    12-
  • 22. Channel Design Decisions
    • Step 4: Evaluating Major Alternatives
      • Economic criteria
      • Control issues
      • Adaptive criteria
    12-
  • 23. Channel Design Decisions
    • Designing International Distribution Channels
      • Global marketers usually adapt their channel strategies to structures that exist within foreign countries
      • Key challenges:
        • May be complex or hard to penetrate
        • May be scattered, inefficient, or totally lacking
    12-
  • 24. Learning Goals
    • Explain why companies use distribution channels and discuss the functions that these channels perform
    • Discuss how channel members interact and how they organize to perform the work of the channel
    • Identify the major channel alternatives open to a company
    • Explain how companies select, motivate, and evaluate channel members
    • Discuss the nature and importance of physical distribution
    12-
  • 25. Channel Management Decisions
    • Selecting channel members
    • Managing and motivating channel members
    • Evaluating channel members
    • Which characteristics are important?
      • Years in business
      • Lines carried
      • Growth and profit record
      • Cooperativeness and reputation
      • Type of customer
      • Location
    12-
  • 26. Channel Management Decisions
    • Selecting channel members
    • Managing and motivating channel members
    • Evaluating channel members
    • Partner relationship management (PRM) for long-term partnerships
    • Software available to coordinate members
    12-
  • 27. Channel Management Decisions
    • Selecting channel members
    • Managing and motivating channel members
    • Evaluating channel members
    • Check channel performance of:
      • Sales
      • Inventory
      • Customer delivery
      • Promotion and training
      • Customer service
    12-
  • 28. Public Policy and Distribution Decisions
    • Exclusive dealing. Sellers cannot demand exclusivity for their product from resellers if it can be proven that it will lessen competition or create a monopoly
    • Exclusive territories. Sellers may grant exclusive territories, but may have trouble demanding that resellers deal only within that exclusive territory
    • Tying agreements. demanding that resellers buy and/or stock all products within a product line, as a condition of doing business. Not illegal but a source of much channel conflict
    12-
  • 29. Public Policy and Distribution Decisions
    • Dealers’ rights. Producers are free to select dealers, but are limited in their ability to terminate dealers; they must show cause, and cannot drop dealers who refuse to participate in doubtful legal arrangements
    • Sources of supply. Ethical concerns over supply sources from countries with human rights violations or use the proceeds to fund armed conflict
    12-
  • 30. Learning Goals
    • Explain why companies use distribution channels and discuss the functions that these channels perform
    • Discuss how channel members interact and how they organize to perform the work of the channel
    • Identify the major channel alternatives open to a company
    • Explain how companies select, motivate, and evaluate channel members
    • Discuss the nature and importance of physical distribution
    12-
  • 31. Marketing Logistics and Supply Chain Management
    • Marketing logistics (physical distribution).
      • Tasks involved in planning, implementing, and controlling the physical flow of materials, final goods and related information
    • Supply chain management.
      • Managing upstream and downstream value-added flows of materials, final goods, and related information among suppliers, the company, resellers, and final consumers
    12-
  • 32. Marketing Logistics and Supply Chain Management
    • Marketing Logistics
      • Outbound distribution
      • Inbound distribution
      • Reverse distribution
      • Involves the entire supply chain management system
    12-
  • 33. Marketing Logistics and Supply Chain Management
    • Why Greater Emphasis is Being Placed on Logistics:
      • Offers firms a competitive advantage
      • Can yield cost savings
      • Greater product variety requires improved logistics
      • Improvements in distribution efficiency are possible due to information technology
    12-
  • 34. Marketing Logistics and Supply Chain Management
    • Goals of the Logistics System
      • No system can both maximize customer service and minimize costs.
      • The goal of marketing logistics should be to provide a targeted level of customer service at the least cost.
      • Firms must first weigh the benefits of higher service against the costs.
    12-
  • 35. Marketing Logistics and Supply Chain Management
    • Major Logistics Functions
      • Warehousing
      • Inventory Management
      • Transportation
      • Logistics Information Management
    12-
  • 36.
    • Truck
    • Rail
    • Water
    • Pipeline
    • Air
    • Internet
    Marketing Logistics and Supply Chain Management 12- Transportation Carrier Options Intermodal transportation is becoming more common
  • 37. Marketing Logistics and Supply Chain Management
    • Integrated Logistics Management
      • Cross-functional teamwork inside the company is critical
      • Logistics partnerships are also built through shared projects
      • Outsourcing of logistics firms to third-party firms is becoming more common
    12-
  • 38. Learning Goals
    • Explain why companies use distribution channels and discuss the functions that these channels perform
    • Discuss how channel members interact and how they organize to perform the work of the channel
    • Identify the major channel alternatives open to a company
    • Explain how companies select, motivate, and evaluate channel members
    • Discuss the nature and importance of physical distribution
    12-