15-1McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.

15-2

LO1Explain what is meant by a marketing channel of distribution and why intermediaries are needed.

Distinguish among traditional marketing channels, electronic marketing channels, and different types of vertical marketing systems.

LO2

LEARNING OBJECTIVES (LO)

AFTER READING CHAPTER 15, YOU SHOULD BE ABLE TO:

15-3

LEARNING OBJECTIVES (LO)

AFTER READING CHAPTER 15, YOU SHOULD BE ABLE TO:

LO3Describe factors that marketing executives consider when selecting and managing a marketing channel.

Explain what supply chain and logistics management are and how they relate to marketing strategy.

LO4

15-4

CALLAWAY GOLF: DESIGNING AND DELIVERING THE GOODS FOR GREAT GOLF

15-5

FIGURE 15-1FIGURE 15-1 The variety of terms usedfor marketing intermediaries that vary in specificity and use in consumer and business markets

15-6

NATURE AND IMPORTANCE OF MARKETING CHANNELS

THE VALUE CREATED BY INTERMEDIARIES

LO1

Marketing Channel

Functions Performed by Intermediaries

• Transactional Function

• Logistical Function

• Facilitating Function

Utilities Received by Consumers

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FIGURE 15-2FIGURE 15-2 Marketing channel intermediaries perform three functions,each consisting of different activities

15-8

CHANNEL STRUCTURE & ORGANIZATIONMARKETING CHANNELS FOR

CONSUMER PRODUCTS AND SERVICES

LO2

Direct Channel

Indirect Channel

• Retailers

• WholesalersRetailers

• AgentsWholesalersRetailers

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FIGURE 15-3FIGURE 15-3 Common marketing channels for consumer products and services by the kind and number of intermediaries

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CHANNEL STRUCTURE & ORGANIZATIONMARKETING CHANNELS FOR

BUSINESS PRODUCTS AND SERVICES

LO2

Direct Channel

Indirect Channel

• Industrial Distributor

• Agents

• AgentsIndustrial Distributors

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FIGURE 15-4FIGURE 15-4 Common marketing channels for business products and services by the kind and number of intermediaries

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CHANNEL STRUCTURE & ORGANIZATIONELECTRONIC & DIRECT MARKETING CHANNELS;

MULTICHANNEL MARKETING

LO2

Electronic Marketing Channels

Direct Marketing Channels

Multichannel Marketing

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FIGURE 15-5FIGURE 15-5 Consumer electronic marketing channels are similar to those for consumer products and services

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CHANNEL STRUCTURE & ORGANIZATIONDUAL DISTRIBUTION &

STRATEGIC CHANNEL ALLIANCES

LO2

Dual Distribution

Strategic ChannelAlliances

Honey NutCherrios Ad

15-15

MARKETING MATTERSNestlé and General Mills—Cereal Partners Worldwide

LO2

15-16

FIGURE 15-6FIGURE 15-6 Three types of vertical marketing systems: corporate, contractual (most popular), and administered

15-17

CHANNEL STRUCTURE & ORGANIZATIONVERICAL MARKETING SYSTEMS

LO2

Vertical Marketing Systems

Corporate Systems

• Wholesaler-Sponsored Voluntary Chains

Contractual Systems

• Retailer-Sponsored Cooperatives

• Forward Integration

• Backward Integration

15-18

CHANNEL STRUCTURE & ORGANIZATIONVERICAL MARKETING SYSTEMS

LO2

Contractual Systems

• Franchising

Manufacturer-Sponsored Retail Franchises

Manufacturer-Sponsored Wholesale Franchises

Service-Sponsored Retail Franchises

Service-Sponsored Franchises

Administered Systems

15-19

CHANNEL CHOICE AND MANAGEMENTCHANNEL CHOICE CONSIDERATIONS

LO3

Target Market Coverage (Density)

• Intensive Distribution

• Exclusive Distribution

• Selective Distribution

Gucci

15-20

CHANNEL CHOICE AND MANAGEMENTCHANNEL CHOICE CONSIDERATIONS

LO3

• Information • Convenience

• Variety • Pre- or Post-SaleService

Buyer Requirements

Profitability

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Jiffy Lube and PetcoWhat buyer requirements have been satisfied?

LO3

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GOING ONLINEVisit an Apple Store to

See What All the Excitement is About

LO3

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USING MARKETING DASHBOARDSChannel Sales and Profit at

Charlesburg Furniture

LO3

15-24

CHANNEL CHOICE AND MANAGEMENTCHANNEL RELATIONSHIPS

LO3

Sources of Channel Conflict

• Vertical Conflict

• Disintermediation

• Horizontal Conflict

15-25

CHANNEL CHOICE AND MANAGEMENTCHANNEL RELATIONSHIPS

LO3

Channel Influence

• Economic

• Expertise

• Identification

• Legitimate Right

Channel Captain

15-26

CHANNEL CHOICE AND MANAGEMENTCHANNEL RELATIONSHIPS

LO4

Legal Considerations

• Dual Distribution

• Vertical Integration

• Exclusive Dealing

• Tying Arrangements

• Refusal to Deal

• Resale Restrictions

• Full-Line Forcing

15-27

FIGURE 15-7FIGURE 15-7 The Clayton Act and Sherman Act place legal restrictions on specific marketing channel strategies and practices

15-28

LOGISTICS & SUPPLY CHAIN MANAGEMENTKEY CONCEPTS

LO4

Logistics

LogisticsManagement

• CustomerRequirements

• Customer Service

Supply Chain

Supply ChainManagement

• Cost-Effective Flow

• The AutomotiveSupply Chain

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FIGURE 15-8FIGURE 15-8 Relating logistics management and supply chain management to supplier networks and marketing channels

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FIGURE 15-9FIGURE 15-9 The automotive supply chain includes thousands of firms that provide the 5,000 or so parts in a typical car

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Aligning a Supply Chain with Marketing Strategy

• Understand the Customer

• Understand the Supply Chain

• Harmonize the Supply Chainwith the Marketing Strategy

LOGISTICS & SUPPLY CHAIN MANAGEMENTSUPPLY CHAIN MGMT & MKT STRATEGY

LO4

15-32

MARKETING MATTERSIBM’s Integrated Supply Chain—

Delivering a Total Solution for Its Customers

LO4

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LOGISTICS & SUPPLY CHAIN MANAGEMENTSUPPLY CHAIN MGMT & MKT STRATEGY

LO4

Dell: A Responsive Supply Chain

Wal-Mart: An Efficient Supply Chain

• Cross-docking

15-34

TWO CONCEPTS OF LOGISTICS MANAGEMENT IN A SUPPLY CHAIN

LO4

Total Logistics Cost Concept

Customer Service Concept

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FIGURE 15-10FIGURE 15-10 Supply chain managers balance five total logistics cost factors against four customer service factors

15-36

TWO CONCEPTS OF LOGISTICS MANAGEMENT IN A SUPPLY CHAIN

LO4

Time

• Lead Time

Order Cycle Time

Replenishment Time

• Quick Response

• Efficient Consumer Response

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TWO CONCEPTS OF LOGISTICS MANAGEMENT IN A SUPPLY CHAIN

LO4

Dependability

Communication

Convenience

• Vendor-Managed Inventory (VMI)

15-38

CLOSING THE LOOP:REVERSE LOGISTICS

LO4

Reverse Logistics UPS Video

15-39

MAKING RESPONSIBLE DECISIONSReverse Logistics and Green Marketing

Go Together at Hewlett-Packard: Recycling e-Waste

LO4

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AMAZON: DELIVERING THE GOODS…MILLIONS OF TIMES A DAY

VIDEO CASE 15

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VIDEO CASE 15AMAZON

1. How do Amazon.com’s logistics and supply chain management activities help the company create value for its customers?

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VIDEO CASE 15AMAZON

2. What systems did Amazon develop to improve the flow of products from suppliers to Amazon distribution centers? What systems improved the flow of orders from the distribution centers to customers?

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VIDEO CASE 15AMAZON

3. Why will logistics and supply chain management play an important role in the future success of Amazon.com?

15-44

Marketing Channel

A marketing channel consistsof Individuals and firms involvedin the process of making aproduct or service available for use or consumption by consumers or industrial users.

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Multichannel Marketing

Multichannel marketing involvesthe blending of different communication and delivery channels that are mutually reinforcing in attracting, retaining, and building relationships with consumers who shop and buy in traditional intermediaries and online.

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Dual Distribution

Dual distribution involves an arrangement whereby a firm reaches different buyers by employing two or more different types of channels for the same basic product.

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Vertical Marketing Systems

Vertical marketing systemsare professionally managed and centrally coordinated marketing channels designed to achieve channel economies andmaximum marketing impact.

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Intensive Distribution

Intensive distribution is a level of distribution density whereby a firm tries to place its products and services in as many outlets as possible.

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Exclusive Distribution

Exclusive distribution is a level of distribution density whereby only one retailer in a specific geographical area carries the firm’s products.

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Selective Distribution

Selective distribution is a level of distribution density whereby a firm selects a few retailers in a specific geographical area to carry its products.

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Channel Conflict

Channel conflict arises whenone channel member believes another channel member is engaged in behavior thatprevents it from achieving its goals.

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Disintermediation

Disintermediation involveschannel conflict that arises whena channel member bypasses another member and sells orbuys products direct.

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Logistics

Logistics consists of those activities that focus on getting the right amount of the right products to the right place at the right time at the lowest possible cost.

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Supply Chain

A supply chain consists of a sequence of firms that perform activities required to create and deliver a product or service to ultimate consumers or industrial users.

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Total Logistics Cost

Total logistics cost consists of the expenses associated with transportation, materials handling and warehousing, inventory, stockouts (being out of inventory), order processing, and return goods handling.

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Customer Service

Customer service is the abilityof logistics management to satisfy users in terms of time, dependability, communication, and convenience.

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Vendor-Managed Inventory (VMI)

Vendor-managed inventory (VMI) is an inventory-management system whereby the supplier determines the product amount and assortment a customer (such as a retailer) needs and automatically delivers the appropriate items.

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Reverse Logistics

Reverse logistics is a processof reclaiming recyclable and reusable materials, returns, and reworks from the point of consumption or use for repair, remanufacturing, redistribution,or disposal.