CHAPTER

MANAGING
MARKETING
CHANNELS AND
SUPPLY CHAINS

What is a Marketing Channel?

A
A set
set of
of interdependent
interdependent organizations
organizations
that
that ease
ease the
the transfer
transfer of
of ownership
ownership as
as
products
products move
move from
from producer
producer to
to
business
business user
user or
or consumer.
consumer.

Names for Marketing Intermediaries

Retailer
Retailer

A
A channel
channel intermediary
intermediary that
that
sells
sells mainly
mainly to
to customers.
customers.

Wholesaler
Wholesaler

An
An institution
institution that
that buys
buys goods
goods
from
from manufacturers,
manufacturers, takes
takes title
title
to
to goods,
goods, stores
stores them,
them,
and
and resells
resells and
and ships
ships them.
them.

Agents
Agents and
and
Brokers
Brokers

Wholesaling
Wholesaling intermediaries
intermediaries who
who
facilitate
facilitate the
the sale
sale of
of aa product
product by
by
representing
representing channel
channel member.
member.

JOB OF INTERMEMDIARIES
Specialization
Specialization and
and
Division
Division of
of Labor
Labor
Three
Three
Main
Main
Functions
Functions

Overcoming
Overcoming
Discrepancies
Discrepancies
Providing
Providing Contact
Contact
Efficiency
Efficiency

SPECIALIZATION AND DIVISION OF

LABOR

Providesefficiencyandcostsavings
Attainseconomiesofscale
Aidsproducerswholackresourcestomarket
directly
Buildsgoodrelationshipswithcustomers

OVERCOMING DISCREPANCIES

Discrepancy
Discrepancy
of
of
Quantity
Quantity

The
The difference
difference between
between the
the
amount
amount of
of product
product produced
produced
and
and the
the amount
amount an
an end
end user
user
wants
wants to
to buy.
buy.

Discrepancy
Discrepancy
of
of
Assortment
Assortment

The
The lack
lack of
of all
all the
the items
items aa
customer
customer needs
needs to
to receive
receive full
full
satisfaction
satisfaction from
from aa product
product or
or
products.
products.

OVERCOMING DISCREPANCIES

Temporal
Temporal
Discrepancy
Discrepancy

A
A situation
situation that
that occurs
occurs when
when aa
product
product is
is produced
produced but
but aa
customer
customer is
is not
not ready
ready to
to buy
buy it.
it.

Spatial
Spatial
Discrepancy
Discrepancy

The
The difference
difference between
between the
the
location
location of
of aa producer
producer and
and the
the
location
location of
of widely
widely
scattered
scattered markets.
markets.

ContactEfficiency

CHANNEL INTERMEMDIARIES

Retailers
Retailers

Take
Take Title
Title to
to Goods
Goods

Merchant
Merchant
Wholesalers
Wholesalers

Take
Take Title
Title to
to Goods
Goods

Agents
Agents
and
and
Brokers
Brokers

Do
Do NOT
NOT Take
Take Title
Title to
to Goods
Goods

CHANNELS FOR CONSUMER PRODUCTS

DIRECT

RESELLER

Producer

Producer

WHOLESALER

Producer

AGENT
Producer

What makes you choose a particular

channel?

Factors
Factors
Affecting
Affecting
Channel
Channel
Choice
Choice

Level
Level of
of
Distribution
Distribution
Intensity
Intensity

Market
Market Factors
Factors

Intensive
Intensive Distribution
Distribution

Product
Product Factors
Factors

Selective
Selective Distribution
Distribution

Producer
Producer Factors
Factors

Exclusive
Exclusive Distribution
Distribution

MARKET FACTORS
Customer
Customer Profiles
Profiles
Consumer
Consumer or
or Industrial
Industrial
Customer
Customer

Market
Market Factors
Factors
That
That Affect
Affect
Channel
Channel
Choices
Choices

Size
Size of
of Market
Market

Geographic Location

PRODUCT FACTORS
Product
Product Complexity
Complexity

Product
Product Price
Price
Product
Product Life
Life Cycle
Cycle
Product
Product Factors
Factors
That
That Affect
Affect
Channel
Channel
Choices
Choices

Product
Product Delicacy
Delicacy

PRODUCER FACTORS

Producer
Producer Resources
Resources

Number
Number of
of Product
Product Lines
Lines
Producer
Producer Factors
Factors
That
That Affect
Affect
Channel
Channel
Choices
Choices

Desire
Desire for
for Channel
Channel Control
Control

LEVELS OF DISTRIBUTION INTENSITY

Intensity
Intensity Level
Level

Objective
Objective

Number
Number of
of
Intermediaries
Intermediaries

Intensive
Intensive

Achieve
Achievemass
massmarket
market
selling.
selling.
Convenience
Conveniencegoods.
goods.

Many
Many

Selective
Selective

Work
Workwith
withselected
selected
intermediaries.
intermediaries.
Shopping
Shoppingand
andsome
some
specialty
specialtygoods.
goods.

Several
Several

Exclusive
Exclusive

Work
Workwith
with single
single
intermediary.
intermediary.Specialty
Specialty
goods
goodsand
andindustrial
industrial
equipment.
equipment.

One
One

LEVELS OF DISTRIBUTION INTENSITY

TRANSPORTATION FACTORS
Cost
Cost
Transit
Transit Time
Time
Reliability
Reliability

Criteria
Criteria
for
for
Transportation
Transportation
Mode
Mode
Choice
Choice

Capability
Capability
Accessibility
Accessibility
Traceability
Traceability

Advantages and disadvantages of five

modes of transportation

VERTICAL INTEGRATION
Thedegreetowhichafirmownsthestages
ofitssupplychainmanagement
frommaterialssupplytomanufacturetodistributiontosale.

Backward an Forward Integration

buy the step before or after you in the chain

HORIZONTAL INTEGRATION
Whenacompanytakesoveranotherinthesamebusiness,thus
eliminatingacompetitorandachievingabiggermarketshare
ForexampleWholeFoodsbuysWildOatstogain
abiggershareofthehealthfoodmarket
Problemismonopolycreation,sogovtswatchthesesalesclosely

Mitsubishi
Dealership

Mazda
Dealership

Nissan
Dealership

Toyota
Dealership

Honda
Dealership