MARKETING STRATEGYO.C. FERRELL • MICHAEL D. HARTLINE 9 Distribution and Supply Chain Management
Marketing Channels “An organized system of marketing institutions through which products, resources, information, funds, and/or product ownership flow from the point of production to the final user.” Physical Distribution “Coordinating the flow of information and products among members of the channel to ensure that products are available in the right places, in the right quantities, at the right times, and in a cost-efficient manner.” Distribution andSupply Chain Concepts
Graphical Depiction of a Supply Chain Exhibit 9.1
Channel Function Specializations Sorting Breaking Bulk Maintaining Inventories Maintaining Convenient Locations Providing Services Channel Effectiveness and Efficiency Distribution Decision Criteria (1) Is the channel effective? (2) Is the channel efficient? Marketing Channel Functions
Discussion Question • Some manufacturers and retailers advertise that customers should buy from them because they “eliminate the middleman.” Evaluate this comment in light of the functions that must be performed in a marketing channel. Does a channel with fewer members always deliver products to customers at lower prices? Defend your position.
Marketing Channel Structure Exclusive Distribution Selective Distribution Intensive Distribution Channel Integration (three key factors) Connectivity Community Collaboration Creating and Enhancing Value in the Supply Chain Strategic Issues in Distributionand Supply Chain Management
Discussion Question • Describe the characteristics of a product that represent something you would go to great lengths to acquire, thus supporting a manufacturer’s use of an exclusive distribution strategy. How much more knowledgeable are the salespeople at an exclusive distribution location versus those at an intensive distribution location? Why is this so?
Marketing Strategy in Action • Clinique cosmetics uses a selective distribution strategy as their primary marketing channel structure. • What is the motivation for using this strategy for this type of product line? What are the apparent benefits that Clinique receives from this strategy?
Maximizing Profit Margin Performance Exhibit 9.2
The Basis of Conflict in the Supply Chain Five basic sources of power: Legitimate Power Reward Power Coercive Power Information Power Referent Power Conflict and Collaborationin the Supply Chain(1 of 2)
Factors in SuccessfulSupply Chain Collaboration Exhibit 9.3
Collaborative Supply Chains Category management must be: Customer driven Strategically driven Multifunctional Financially based Systems dependent Focused on immediate consumer response Conflict and Collaborationin the Supply Chain(2 of 2)
Major Components ofCategory Management Exhibit 9.4
Advancing Technology Growth of Internet and e-commerce Radio frequency identification (RFID) Shifting Power in the Channel Discount mass merchandise retailers Wal-Mart, Kmart, and Target Category focused retailers (category killers) Toys “R” Us, Lowe’s, Office Depot, AutoZone, and Best Buy Outsourcing Channel Functions Outsourcing is growing rapidly Trends in Marketing Channels(1 of 2)
The Trend in Outsourcing Exhibit 9.5
The Growth of Direct Distribution and Nonstore Retailing Examples of Nonstore Channels Catalog and Direct Marketing Direct Selling E-Commerce Home Shopping Networks Vending Direct Response Advertising The Growth of Dual Distribution Trends in Marketing Channels(2 of 2)
Discussion Question • What are the major differences you have experienced in buying a product through a physical retail store, a manufacturer’s physical store, a catalog, and an online merchant? What have some retailers in your area done to justify their ongoing presence in the channel?
Dual Distribution Exclusive Channel Arrangements Tying Arrangements Counterfeit Products Legal and Ethical Issuesin the Supply Chain