Marketing Channels and Supply Chain ManagementObjectivesSlide 3Slide 3DefinitionSlide 5Nature & Importance of Marketing ChannelsSlide 7Slide 9Slide 10Slide 10Slide 11Slide 13Slide 13Slide 15Channel Behavior and OrganizationSlide 16Slide 18Slide 19Slide 19Slide 21Slide 22Slide 23Channel Design DecisionsSlide 25Slide 25Slide 27Slide 27Slide 28Slide 29Slide 31Slide 32Slide 33Channel Management DecisionsSlide 35Public Policy and Distribution DecisionsMarketing Logistics and Supply Chain ManagementSlide 37Slide 39Slide 40Slide 41Slide 42BusinessNowSlide 44Slide 44Slide 45Slide 47Marketing Channels and Marketing Channels and Supply Chain Supply Chain ManagementManagementChapter 13Chapter 1313- 2ObjectivesKnow why companies use Know why companies use distribution channels and understand distribution channels and understand the functions that these channels the functions that these channels perform.perform.Learn how channel members interact Learn how channel members interact and how they organize to perform the and how they organize to perform the work of the channel.work of the channel.Know the major channel alternatives Know the major channel alternatives that are open to a company.that are open to a company.13- 3ObjectivesComprehend how companies Comprehend how companies select, motivate, and evaluate select, motivate, and evaluate channel members.channel members.Understand the nature and Understand the nature and importance of marketing logistics importance of marketing logistics and integrated supply chain and integrated supply chain management.management.13- 4Dominates world’s Dominates world’s markets for heavy markets for heavy construction and mining construction and mining equipment.equipment.Independent dealers are Independent dealers are key to success key to success Dealer network is linked Dealer network is linked via computersvia computersCaterpillar stresses Caterpillar stresses dealer profitability, dealer profitability, extraordinary dealer extraordinary dealer support, personal support, personal relationships, dealer relationships, dealer performance and full, performance and full, honest, and frequent honest, and frequent communicationscommunicationscCaterpillarCaterpillar13- 5DefinitionValue Delivery NetworkValue Delivery NetworkThe network made up of the The network made up of the company, suppliers, distributors, company, suppliers, distributors, and ultimately customers who and ultimately customers who “partner” with each other to “partner” with each other to improve the performance of the improve the performance of the entire system.entire system.13- 6In building its value delivery network, Palm manages a whole community of suppliers, assemblers, resellers and complementors who must work effectively together.13- 7Channel choices affect Channel choices affect other decisions in the other decisions in the marketing mixmarketing mixA strong distribution A strong distribution system can be a system can be a competitive advantage competitive advantage Channel decisions involve Channel decisions involve long-term commitments to long-term commitments to other firmsother firmsNature & Importance of Marketing Channels13- 8Figure 13-1: How Channel Members Add Value13- 9How Channel Members How Channel Members Add ValueAdd ValueIntermediaries Intermediaries Require fewer contacts to Require fewer contacts to move the product to the final move the product to the final purchaser.purchaser.Help match product Help match product assortment demand assortment demand with supply. with supply. Help bridge major time, Help bridge major time, place, and possession gapsplace, and possession gapsNature & Importance of Marketing Channels13- 10Nature & Importance of Marketing ChannelsKey Functions Performed Key Functions Performed by Channel Membersby Channel MembersInformationInformationPromotionPromotionContactContactMatchingMatchingNegotiationNegotiationPhysical Physical DistributionDistributionFinancingFinancingRisk takingRisk taking13- 11Figure 13-2a: Consumer Marketing Channels13- 12Figure 13-2b: Business Marketing Channels13- 13Number of Channel LevelsNumber of Channel LevelsThe number of intermediary levels The number of intermediary levels indicates the length of a marketing indicates the length of a marketing channel.channel. Direct ChannelsDirect Channels Indirect ChannelsIndirect ChannelsProducers lose more control and face Producers lose more control and face greater channel complexity as greater channel complexity as additional channel levels are added.additional channel levels are added.Nature & Importance of Marketing Channels13- 14L.L. Bean sells direct via the Internet, telephone, and mail catalogs13- 15Nature & Importance of Marketing ChannelsChannel Members Are Connected Channel Members Are Connected Via A Variety of FlowsVia A Variety of FlowsPhysical Physical FlowFlowPayment Payment FlowFlowInformation Information FlowFlowPromotion Promotion FlowFlowFlow of OwnershipFlow of Ownership13- 16Channel ConflictChannel ConflictOccurs when channel members Occurs when channel members disagree on roles, activities, or disagree on roles, activities, or rewards.rewards.Types of Conflict:Types of Conflict: Horizontal conflict:Horizontal conflict: occurs among occurs among firms at the same channel levelfirms at the same channel level Vertical conflict:Vertical conflict: occurs among firms occurs among firms at different channel levelsat different channel levelsChannel Behavior and Organization13- 17Figure 13-3: Conventional Versus Vertical Marketing System13- 18Vertical Marketing SystemsVertical Marketing SystemsCorporate VMSCorporate VMSContractual VMSContractual VMS Manufacturer-sponsored Manufacturer-sponsored retailer franchise system retailer franchise system Manufacturer-sponsored Manufacturer-sponsored wholesaler franchise system wholesaler franchise system Service-firm-sponsored Service-firm-sponsored retailer franchise system retailer franchise systemAdministered VMSAdministered VMSChannel Behavior and Organization13- 19Horizontal Horizontal Marketing SystemsMarketing SystemsTwo or more Two or more companies at one companies at one level join together to level join together to follow a new follow a new marketing marketing opportunity.opportunity.Channel Behavior and OrganizationNestle and General Mills work together to Nestle and General Mills work together to market cereal outside