Chapter 12: Marketing Channels and
Supply Chain Management
Prepared by David Ferrell, B-books, Ltd.
Designed by Eric Brengle, B-books, Ltd.
Copyright 2012 by Cengage Learning Inc. All Rights Reserved 1
Learning Outcomes
LO1 Explain what a marketing channel is and why
intermediaries are needed
Define the types of channel intermediaries and
LO2
describe their functions and activities
LO3 Describe the channel structures for consumer
and business products and discuss alternative
channel arrangements
LO4 Define the terms supply chain and supply
chain management, and discuss the benefits
of supply chain management
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Learning Outcomes
LO5 Discuss the issues that influence channel
strategy
LO6 Describe the different channel relationship
types and their unique costs and benefits
LO7 Describe the logistical components of the
supply chain
LO8 Discuss new technology and emerging trends in
supply chain management
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Learning Outcomes
LO9 Explain channel leadership, conflict, and
partnering
Discuss channels and distribution decisions
LO10
in global markets
LO11 Identify the special problems and
opportunities associated with distribution
in service organizations
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Marketing Channels
LO1
Explain what a marketing
channel is and why
intermediaries are needed.
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Marketing Channels
A set of
interdependent organizations
that ease the transfer of
ownership as products move
from producer to business
user or consumer.
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Marketing Channel Functions
Specialization and division of labor
Overcoming discrepancies
Providing contact efficiency
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Specialization and Division of Labor
Creates greater efficiency
Provides lower costs
Achieves economies of scale
Aids producers who lack resources to
market directly
Builds good relationships with customers
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Overcoming Discrepancies
The difference between the
Discrepancy
amount of product produced
of
and the amount an end user
Quantity
wants to buy.
The lack of all the items a
Discrepancy
customer needs to receive full
of
satisfaction from a product or
Assortment
products.
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Overcoming Discrepancies
A situation that occurs when a
Temporal
product is produced but a
Discrepancy
customer is not ready to buy it.
The difference between the
Spatial location of a producer and the
Discrepancy location of widely
scattered markets.
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Providing Contact Efficiency
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LO1 Review Learning Outcome
Marketing Channels
Marketing
Channel
Providing Specialization
and Division of Labor
Overcoming
Discrepancies
Providing Contact
Efficiency
Supply
Chain
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Channel Intermediaries
LO2
Define the types of channel
intermediaries and describe
their functions and activities.
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Channel Intermediaries
A channel intermediary that
Retailer
sells mainly to customers.
An institution that buys goods
Merchant from manufacturers, takes title
Wholesaler to goods, stores them,
and resells and ships them.
Wholesaling intermediaries who
facilitate the sale of a product from
Agents and
producer to end user by representing
Brokers retailers, wholesalers, or
manufacturers.
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Channel Intermediaries
Retailers Take Title to Goods
Merchant
Wholesalers Take Title to Goods
Agents
and Do NOT Take Title to Goods
Brokers
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Factors Suggesting Type of
Wholesaling Intermediary to Use
Product characteristics
Buyer considerations
Market characteristics
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Channel Functions Performed
by Intermediaries
Contacting/Promotion
Transactional
Negotiating
Functions
Risk Taking
Physically distributing
Logistical Storing
Functions
Sorting
Facilitating Researching
Functions Financing
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Logistics
The efficient and cost-effective
forward and reverse flow as
well as storage of goods, services, and
related information, into, through, and
out of channel member companies.
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LO2 Review Learning Outcome
Channel Intermediaries and Functions
CHANNEL CHANNEL
INTERMEDIARIES FUNCTIONS
Perform
Retailers Transactional
Wholesalers Logistical
Agents and Brokers Facilitating
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Channels for Consumer Products
Direct Channel - A distribution
channel in which producers
sell directly to consumers.
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Channel Structures
LO3
Describe the channel
structures for consumer
and business products
and discuss alternative
channel arrangements.
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Channels for Consumer Products
Direct Retailer Wholesaler Agent/Broker
Channel Channel Channel Channel
Producer Producer Producer Producer
Agents or
Brokers
Wholesalers Wholesalers
Retailers Retailers Retailers
Consumers Consumers Consumers Consumers
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Channels for Business Products
Direct Direct Industrial Agent/Broker Agent/Broker
Channel Channel Distributor Channel Industrial
Channel
Producer Producer Producer Producer Producer
Agents or Agents or
Brokers Brokers
Industrial Industrial
Distributor Distributor
Industrial Govt. Industrial Industrial Industrial
User Buyer User User User
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Business Exchanges on the Internet
Agents link buyers and sellers
Companies drop the intermediary from
the supply chain
“Private exchanges” with select suppliers
automate the supply chain
http://www.sherwinwilliams.com
Online
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Alternative Channel Arrangements
Multiple channels
Nontraditional channels
Strategic channel alliances
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LO3 Review Learning Outcome
Channel Structures
CONSUMER BUSINESS ALTERNATIVE
CHANNELS CHANNELS CHANNELS
Direct Direct Multiple
Retail Industrial Nontraditional
Wholesaler Agent/broker Strategic
Agent/broker Agent/broker alliances
industrial
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Making Channel Strategy Decisions
LO5
Discuss the issues that
influence channel strategy.
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Channel Strategy Decisions
Factors
Level of
Affecting
Distribution
Channel
Intensity
Choice
Market Factors Intensive Distribution
Product Factors Selective Distribution
Producer Factors Exclusive Distribution
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Market Factors
Customer profiles
Consumer or Industrial
Customer
Market Size of market
Factors
That Affect
Channel
Choices Geographic location
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Product Factors
Product Complexity
Product Price
Product Standardization
Product Product Life Cycle
Factors
That Affect
Channel Product Delicacy
Choices
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Producer Factors
Producer Resources
Number of Product Lines
Producer
Factors
That Affect
Channel Desire for Channel Control
Choices
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Levels of Distribution Intensity
A form of distribution aimed at
Intensive having a product available
in every outlet
A form of distribution achieved
Selective by screening dealers to eliminate
all but a few in any single area
A form of distribution that
established one or a few
Exclusive dealers within a given area
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Levels of Distribution Intensity
Intensity Number of
Objective
Level Intermediaries
Achieve mass market
Intensive selling. Many
Convenience goods.
Work with selected
intermediaries.
Selective Shopping and some
Several
specialty goods.
Work with single
intermediary. Specialty
Exclusive goods and industrial
One
equipment.
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LO5 Review Learning Outcome
Issues Influencing Channel Strategy
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Transportation
Airways
Water
Pipelines
Motor Carriers
Railroads
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Transportation Mode Choice
Cost
Transit time
Reliability
Capability
Accessibility
Traceability
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Criteria for Ranking
Modes of Transportation
Highest Lowest
Relative Air Truck Rail Pipe Water
Cost
Transit Water Rail Pipe Truck Air
Time
Reliability Pipe Truck Rail Air Water
Capability Water Rail Truck Air Pipe
Accessibility Truck Rail Air Water Pipe
Traceability Air Truck Rail Water Pipe
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Managing Channel Relationships
LO9
Explain channel leadership,
conflicts, and partnering.
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Managing Channel Relationships
Power
Control
Leadership
Conflict
Partnering
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Channel Power, Control, and Leadership
The capacity of a particular
Channel marketing channel member to
Power control or influence the behavior
of other channel members
A situation that occurs when
Channel one marketing channel member
Control intentionally affects another
member’s behavior
A member of a marketing
Channel
channel that exercises
Leader
authority/power over the
(channel captain)
activities of other members
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Channel Conflict and Partnering
Channel Conflict – A clash of
goals and methods between
distribution channel members.
Channel Partnering (Channel Cooperation) –
The joint effort of all channel
members to create a supply
chain that serves customers and
creates a competitive advantage.
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Channel Conflict
Conflicts may occur if channel members:
• Have conflicting goals
• Fail to fulfill expectations of other channel members
• Have ideological differences
• Have different perceptions of reality
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LO9 Review Learning Outcome
Channel Leadership, Conflict, and Partnering
Channel Power, Channel
Control, Leadership Partnering
Channel
Relationship
Synergy
Channel Conflict
Horizontal Vertical
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Channels and Distribution Decisions
for Services
LO11
Identify the special problems
and opportunities
associated with distribution
in service organizations
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Channels and Distribution Decisions
for Services
Minimizing wait times
Managing service capacity
Improving service delivery
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LO11
Review Learning Outcome
Channels and Distribution Decisions for Services
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