Marketing chapter 3 good customers

Marketing Channels and Supply Chain
Management
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Principles of Marketing
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Tuesday, 15 November 11
Learning Objectives
After studying this chapter, you should be able to:
1. Explain how companies use marketing channels and
discuss the functions these channels perform
2. Discuss how channel members interact and how they
organise to perform the work of the channel
3. Identify the major channel alternatives open to a
company
4. Explain how companies select, motivate, and
evaluate channel members
5. Discuss the nature and importance of marketing
logistics and integrated supply chain management
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Chapter Outline
1. Supply Chains and the Value Delivery Network
2. The Nature and Importance of Marketing Channels
3. Channel Behaviour and Organisation
4. Channel Design Decisions
5. Channel Management Decisions
6. Public Policy and Distribution Decisions
7. Marketing Logistics and Supply Chain Management
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1. Supply Chain and the Value Delivery

Network
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Supply Chains and
the Value Delivery Network
+ Upstream partners include raw
material suppliers, components, parts,
information, finances, and expertise to
create a product or service
+ Downstream partners include the
marketing channels or distribution
channels that look toward the customer
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Company
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Supply Chains and
the Value Delivery Network
+ Supply chain “make and sell” view includes the firm’s
raw materials, productive inputs, and factory capacity. It
suggests that these components should serve as the
starting point for market planning.
+ Demand chain “sense and respond” view suggests
that planning starts with the needs of the target
customer and the firm responds to these needs by
organising a chain of resources and activities with the
goal of creating customer value
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Supply Chains and
the Value Delivery Network

+ The value delivery network is the firm’s
suppliers, distributors, and ultimately customers
who partner with each other to improve the
performance of the entire system
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Company
Suppliers
Distributor
Consumers
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Supply Chains and
the Value Delivery Network
Marketing Channel Questions
•
What is the nature of marketing channels and
why are they important?
•
How do channel firms interact and organise to
do the work of the channel?
•
What role do physical distribution and supply
chain management play in attracting
customers?
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2. The Nature and Importance of Marketing
Channels
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The Nature and Importance of

Marketing Channels
+ Marketing channel (distribution channel) is a
set of independent organisations that help make a
product or service available for use or
consumption by the consumer or business users
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Channel members add value by bridging the major time,
place, and possession gaps that separate goods and
services from those who would use them
+ Producers use intermediaries because they create
greater efficiency in making goods available to target
markets.
+ Intermediaries offer the firm more than it can achieve
on its own through their contacts, experience,
specialisation, and scale of operations
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The Nature and Importance of
Marketing Channels
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How Channel Members Add Value
+ Information refers to the gathering and distributing
research and intelligence information about actors
and forces in the marketing environment needed for
planning and aiding exchange
+ Promotion refers to the development and
spreading persuasive communications about an offer
+ Contacts refers to finding and communicating with
prospective buyers
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The Nature and Importance of
Marketing Channels
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How Channel Members Add Value
+ Matching refers to shaping and fitting the offer to
the buyer’s needs, including activities such as
manufacturing, grading, assembling, and packaging
+ Negotiation refers to reaching an agreement on
price and other terms of the offer so that ownership or
possession can be transferred
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The Nature and Importance of
Marketing Channels
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How Channel Members Add Value
+ Physical distribution refers to transporting and
storing goods
+ Financing refers to acquiring and using funds to
cover the costs or carrying out the channel work
+ Risk taking refers to assuming the risks of carrying
out the channel work
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The Nature and Importance of
Marketing Channels
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Number of Channel Members
+ Channel level refers to each layer of marketing
intermediaries that performs some work in bringing the
product and its ownership closer to the final buyer
+ Direct marketing channel has no intermediary levels;

the company sells directly to consumers
+ Indirect marketing channel contains one or more
intermediaries
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The Nature and Importance of
Marketing Channels
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Number of Channel Members
Connected by types of flows:
•
Physical flow of products
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Flow of ownership
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Payment flow
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Information flow
•
Promotion flow
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The Nature and Importance of
Marketing Channels
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3. Channel Behaviour and Organisation
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Channel Behaviour and Organisation
+ Marketing channel consists of firms that have
partnered for their common good with each
member playing a specialised role

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+ Channel conflict refers to disagreement over
goals, roles, and rewards by channel members
•
Horizontal conflict
•
Vertical conflict
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Channel Behaviour and Organisation
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+ Conventional distribution systems consist of
one or more independent producers, wholesalers,
and retailers. Each seeks to maximise its own
profits and there is little control over the other
members and no formal means for assigning roles
and resolving conflict.
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Channel Behaviour and Organisation
Wholesaler
Producer
Retailer
Consumer
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Channel Behaviour and Organisation
+ Vertical marketing systems
(VMS) provide channel leadership
and consist of producers,
wholesalers, and retailers acting as
a unified system and consist of:

•
Corporate marketing systems
•
Contractual marketing systems
•
Administered marketing systems
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Wholesaler
Producer
Retailer
Consumer
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Channel Behaviour and Organisation
+ Corporate vertical marketing system integrates
successive stages of production and distribution
under single ownership
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+ Contractual vertical marketing system consists of
independent firms at different levels of production and
distribution who join together through contracts to obtain
more economies or sales impact than each could achieve
alone.
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Channel Behaviour and Organisation
The most common form is
the franchise organisation.
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+ Franchise organisation links several stages in
the production distribution process

•
Manufacturer-sponsored retailer franchise system
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Manufacturer-sponsored wholesaler franchise
system
•
Service firm-sponsored retailer franchise system
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Channel Behaviour and Organisation
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+ Administered vertical marketing system has a
few dominant channel members without common
ownership. Leadership comes from size and power.
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Channel Behaviour and Organisation
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