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2
What is a Distribution 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.
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.
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Why are Marketing Intermediaries Used?
The use of intermediaries results from their greater efficiency in making goods available to target markets.Offers the firm more than it can achieve on its own through the intermediaries:
Contacts,Experience,Specialization,Scale of operation.
Purpose: match supply from producers to demand from consumers.
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ContactContact
FinancingFinancing
InformationInformationRisk TakingRisk Taking
PromotionPromotion
MatchingMatchingNegotiationNegotiation
PhysicalDistribution
PhysicalDistribution
These Functions Should be Assigned to the Channel Member Who Can Perform Them Most
Efficiently and Effectively.
Distribution Channel Functions
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Channel Behavior & OrganizationThe channel will be most effective when:
each member is assigned tasks it can do best.all members cooperate to attain overall channel goals and satisfy the target market.
When this doesn’t happen, conflict occurs:Horizontal Conflict occurs among firms at the same level of the channel, i.e retailer to retailer.Vertical Conflict occurs between different levels of the same channel, i.e. wholesaler to retailer.
Each channel member’s role must be specified and conflict must be managed.
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Corporate VMSCommon Ownership at Different Levels of the Channel i.e. Sears
Contractual VMSContractual Agreements Among
Channel Members i.e Western Auto
Administered VMSLeadership is Assumed by One or
a Few Dominant Members i.e. Kraft
Degree of Direct Control
Types of Vertical Marketing Systems
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ContractualVMS
ContractualVMS
RetailerCooperatives
RetailerCooperatives
FranchiseOrganizations
FranchiseOrganizations
Wholesaler SponsoredVoluntary Chain
Wholesaler SponsoredVoluntary Chain
Service-Firm-Sponsored RetailerFranchise System
Service-Firm-Sponsored RetailerFranchise System
Manufacturer-Sponsored Wholesaler
Franchise System
Manufacturer-Sponsored Wholesaler
Franchise System
Manufacturer-Sponsored RetailerFranchise System
Manufacturer-Sponsored RetailerFranchise System
CorporateVMS
CorporateVMS
AdministeredVMS
AdministeredVMS
Types of Vertical Marketing Systems
Vertical Marketing Systems (VMS)
Vertical Marketing Systems (VMS)
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Innovations in Marketing Systems
Horizontal Marketing System
Two or More Companies at One Channel Level Join
Together to Follow a New Marketing Opportunity.
Example:
Banks in Grocery Stores
Horizontal Marketing System
Two or More Companies at One Channel Level Join
Together to Follow a New Marketing Opportunity.
Example:
Banks in Grocery Stores
Hybrid Marketing System
A Single Firm Sets Up Two or More
Marketing Channels to Reach One or
More Customer Segments.
Example:
Retailers, Catalogs, and Sales Force
Hybrid Marketing System
A Single Firm Sets Up Two or More
Marketing Channels to Reach One or
More Customer Segments.
Example:
Retailers, Catalogs, and Sales Force
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Changing Channel Organization
A Major Trend is Toward Disintermediation Which Means
that Product and Service Producers are Bypassing Intermediaries and Going Directly to Final Buyers or
That New Types of Channel Intermediaries are Emerging to
Displace Traditional Ones.
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Analyzing Consumer Service Needs
Setting Channel Objectives & Constraints
Responsibilities ofIntermediaries
Number ofIntermediaries
Types ofIntermediaries
Identifying Major Alternatives
Evaluating the Major Alternatives
Designing International Distribution Channels
Channel Design Decisions
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IntensiveDistributionIntensive
DistributionSelective
DistributionSelective
Distribution
Exclusive DistributionExclusive Distribution
Number of Marketing Intermediaries
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Selecting Channel MembersSelecting Channel Members
Motivating Channel Members Motivating Channel Members
Evaluating Channel MembersEvaluating Channel Members
FEED
BA
CK
Channel Management Decisions
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Marketing Logistics and Supply Chain Management
Involves getting the right product to the right customers in the right place at the right time.Marketing logistics addresses:
Outbound distribution,Inbound distribution,Reverse distribution,Entire supply chain management.
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Goals of the Logistics System
Lower Distribution Costs;
Lower Customer Service Levels
Higher Distribution Costs;
Higher Customer Service Levels
Goal: To Provide a Targeted Level of Customer Service
at the Least Cost.
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InventoryWhen to order
How much to orderJust-in-time
InventoryWhen to order
How much to orderJust-in-time
CostsMinimize Costs ofAttaining Logistics
Objectives
CostsMinimize Costs ofAttaining Logistics
Objectives
WarehousingStorage
DistributionAutomated
WarehousingStorage
DistributionAutomated
Order ProcessingReceivedProcessedShipped
Order ProcessingReceivedProcessedShipped
Logistics
FunctionsTransportation Rail, Truck,
Water, Pipeline, Air,
Intermodal
Major Logistics Functions
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RailNation’s largest carrier, cost-effective for shipping bulk products, piggyback
RailNation’s largest carrier, cost-effective for shipping bulk products, piggyback
TruckFlexible in routing & time schedules, efficient
for short-hauls of high value goods
TruckFlexible in routing & time schedules, efficient
for short-hauls of high value goodsWater
Low cost for shipping bulky, low-value, non-perishable goods, slowest form
WaterLow cost for shipping bulky, low-value,
non-perishable goods, slowest form
PipelineShip petroleum, natural gas, and chemicals
from sources to markets
PipelineShip petroleum, natural gas, and chemicals
from sources to markets
AirHigh cost, ideal when speed is needed or
distance markets have to be reached
AirHigh cost, ideal when speed is needed or
distance markets have to be reached
Transportation Modes
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Integrated Logistics ManagementConcept Recognizes that Providing Better Customer Service and Trimming Distribution Costs Requires TeamworkTeamwork, Both Inside the Company and Among All the Marketing Channel Organizations.Involves:
Cross-functional teamwork inside the companyBuilding channel partnershipsThird-party logistics
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Rest Stop: Reviewing the ConceptExplain why companies use distribution channels and discuss the functions 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 marketing logistics and supply chain management.