Ch 1213 Objectives

1
Ch 12/13 Objectives

• Recognize the importance of marketing channels
  and distribution
• Understand marketing channels in terms of
  creating time, place, and possession utilities
• Understand some of the complexity of physical
  distribution

2
What is a Distribution Channel?

• A distribution channel consists of the set of
  people and firms involved in transfer of title to
  a product as it moves from producer to ultimate
  consumer or business user.
• Every firm wants to have a distribution channel
  that meets customer's needs and also provides a
  competitive advantage.

3
Common Marketing Channels for Consumer Products
Producer
Producer
Producer
Wholesaler Channel
Retailer Channel
Direct Channel

Wholesalers
Retailers
Retailers
Consumers
Consumers
Consumers
4
Determining Intensity of Distribution

• A firm must decide on the appropriate intensity
  of distribution for its product.
• Intensity is actually a continuum, but three
  categories are normally used
• Intensive
• Selective
• Exclusive

5
Fig. 14-4 - Intensity-of- Distribution Continuum
INTENSIVE
SELECTIVE
EXCLUSIVE
Distribution through every reasonable outlet in a
market
Distribution through multiple, but not
all, reasonable outlets in a market
Distribution through a single wholesaling middlema
n and/or retailer in a market
6
Terms Used for Marketing Intermediaries

• TERM DESCRIPTION
• Middleman Any intermediary between manufacturer
  and end-
• user markets
• Agent or Any intermediary with legal authority to
  act on
• Broker behalf of the manufacturer
• Wholesaler An intermediary who sells to other
  intermediaries,
• usually to retailers usually applies to
  consumer
• markets
• Retailer An intermediary who sells to consumers

7
How Intermediaries Minimize Transactions
8
Marketing Channel Functions Performed by
Intermediaries
-Buying. Purchasing products for resale or as an
agent for supply of a product -Selling.
Contracting potential customers, promoting
products, and soliciting orders -Risk Taking.
Assuming business risks in the ownership of
inventory that can become obsolete or deteriorate.
Transactional Function
Logistical Function
Facilitating Function
Look through this on your own!
9
Channel Terms

• Disintermediation
• What is Disintermediation?

10
Terms

• Disintermediation
• The removal of organizations or business process
  layers responsible for certain intermediary steps
  in a given value chain
• Show channel delayering graphs

11
(No Transcript)
12
(No Transcript)
13
(No Transcript)
14
(No Transcript)
15
(No Transcript)
16
Rationale for Middlemen

• You can eliminate the middleman, but you cant
  eliminate the middlemans function
• Benefit both Producers and Retailers

17
Direct Distribution

• What is it?
• For what types of products does it seem to work?
• Doesnt work for all products...

18
(No Transcript)
19
2-Step Dist. Is Extremely Efficient!!!
PRODUCERS
A
B
C
D
WHOLESALING MIDDLEMAN
6
5
4
3
2
1
RETAILERS
20
Channel Conflict
21
Conflict in Marketing Channels

• 1. Vertical Conflict
• 2. Horizontal Conflict
• Dont worry about this distinction
• Conflict is conflict.

22
Channel Conflict An Internet Example

• Go to the clinique web site
• www.clinique.com

23
Vertical Marketing Systems

• Vertical marketing systems are professionally
  managed and centrally coordinated marketing
  channels designed to achieve channel economies
  and maximum marketing impact.
• Major types of vertical marketing systems
• corporate
• contractual
• administered

Look at this stuff on your own...
24
Definition of a Supply Chain
A Supply Chain is . . . .
a sequence of firms that perform activities
required to create and deliver a good or service
to consumers or industrial users.
25
The Supply Chain

• A supply chain differs from a marketing channel
  in terms of membership.
• A supply chain includes suppliers who
  provide raw material inputs to a manufacturer as
  well as the wholesalers and retailers who deliver
  finished goods.

26
PP17-2 The Automotive Supply Chain
27
Types Of Wholesaling Intermediaries
Merchant Wholesalers
MerchantWholesalers
Full Service
Limited Service

• General Wholesalers

• Cash And Carry Wholesalers

• Limited Line Wholesalers

• Truck Jobbers

• Specialty Line Wholesalers

• Drop Shippers

• Industrial Distributors

• Mail-order Wholesalers

• Rack Jobbers