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Marketing Chapter 11.docx

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Ambika Badh

Chapter 11 – Marketing Channels and Supply-Chain Management Introduction  Distribution – movement of goods and services from producers to customers  Marketing (distribution channel) – system of marketing institutions that enhances the physical flow of goods and services along with ownership title, from producer to customer  Logistics – coordinating the flow of information goods, services among members of the distribution channel  Supply-chain management – control of the activities of purchasing, processing and delivery through which raw materials are transformed into products and made available to final customers  Physical distribution – broad range of activities aimed at efficient movement of finished goods from end of production line to the customer Role of Marketing Channels in Marketing Strategy  Four functions of marketing channels o Facilitating the exchange process by reducing the number of marketplace contacts necessary to make a sale o Adjusting for discrepancies in the market’s assortment of goods and services via sorting o Standardizing exchange transactions by setting expectations for products o Facilitating searches by both sellers and buyers Marketing Channels  Direct selling o Direct channel – carries goods directly from a producer to a business purchaser or ultimate user  Direct selling – a strategy designed to establish direct sales contacts between producer and finals user o Indirect channels (intermediaries)  Members of marketing channels o Marketing intermediary – organization that operates between producers and consumers or business users o Wholesaler – takes title to the goods it handles and then distributes those goods to retailers, other distributors or sometimes end consumers  Service firms – market through short channels because of the need to maintain personal relationships Chapter 11 – Marketing Channels and Supply-Chain Management  Channels using marketing intermediaries o Agents are people who do not take title of the product o P to W to R to C o P to W to BU o P to A to W to R to C o P to A to W to BU o P to A to BU  Dual distribution o Dual distribution – movement of products through more the one channel to reach the firm’s target market  Reverse channels o Reverse channels – channels designed to return goods to their producers (e.g. used for repairs or defects) o Growing importance because of:  Rising prices of raw materials  Increasing availability of recycling facilities  Passage of additional antipollution conservation laws table 11F.actors Influencing Marketing Channel Strategies Characteristics of Short Channe Clsaracteristics of Long Channels Market factors Business users Consumers Geographically concentrated Geographically dispersed Extensive techowlledge and regular servicinLgittle technical knowledge and regular servicing not required required Large orders Small orders Product factors Perishable Durable Complex Standardized Expensive Inexpensive Organizational factors Manufacturerdequate resources to perfoMhannalcturer lacks adequate resources to perform functions channel functions Broad product line Limited product line Channel control important Channel control not important Manufacturerfatsfied with marketing intdiais’cturer feels dissatisfied with marketing Competitive factors performance in promoting products intermediaries’ performance in promoting products Chapter 11 – Marketing Channels and Supply-Chain Management Channel Strategy Decisions  Determining distribution intensity o Intensive distribution – distribution of a product through all available channels o Selective distribution – distribution of a product through a limited number of channels o Exclusive distribution – distributions of a product through a single wholesaler or retailer in a specific geographic region  Legal problems of exclusive distribution o Exclusive dealing agreement – prohibits a marketing intermediary from handling competing products  For a higher percentage of products, it can be illegal o Closed sales territories – restrict their distributors to certain geographic regions o Tying agreements – allow channel members to become exclusive deals only if they also carry products other than those they want to sell  Channel management and leadership o Channel captain – dominant and controlling member of a marketing channel  Channel conflict o Horizontal conflict – disagreements among channel members at the same level, such as two competing discount stores o Vertical conflict – occurs among members at levels of the channel o The grey market – goods produced for overseas markets that re- enter the Canadian market and compete against domestic versions (e.g. kindle)  Achieving channel cooperation o Best achieved when all members of channel see themselves as equal components of the same organization (equally important) o Channel captain should provide this leadership Horizontal Marketing Systems  Horizontal marketing systems - organizations at the same level work together for improving their marketing abilities o E.g. McDonalds and Walmart Vertical Marketing Systems  Vertical marketing systems - planned channel system designed to improve distribution efficiency and cost-effectiveness by integrating various functions throughout the distribution chain Chapter 11 – Marketing Channels and Supply-Chain Management  Rely on forward and backward integration o Forward integration – firm attempts to control downstream distribution o Backward integration – manufacturer attempts to gain greater control over input in its production process, such as raw materials  Benefits o Improves chances for controlling and coordinating the steps in the distribution or production process o May lead to the development of economies of scale that ultimately saves money o May let a manufacturer expand into profitable new businesses  Disadvantages o Involves some costs o Marketers lose some flexibility  Marketers have developed three categories of VMS o Corporate marketing system – VMS in which a single owner operates the entire marketing channel o Administered marketing system – VMS that achieves channel coordination when a dominant channel member exercises its power o Contractual marketing system – VMS that coordinates channel activities through formal agreements among participants  Wholesaler-sponsored voluntary chain  A wholesaler has formal agreement with retailers to use a common name and to purchase the wholesaler’s goods  Retail cooperative  Retailers establish a shared wholesaling operation  Franchise  A wholesaler or dealer (franchisee) agrees to meet the operating requirements of a manufacturer or other franchisor Logistics and Supply-Chain Management 
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