12-1 12-1

PRINCIPLES OF MARKETING

Chapter 12 Chapter 12

Distribution Channels and Logistics Management

• Channel decisions – affect other marketing decisions – involve long-term commitments .12-2 12-2 Distribution Channels Distribution Channels • A set of interdependent organizations (intermediaries) involved in the process of making a product or service available for use or consumption.

. • Intermediaries provide – Contacts – Experience – Specialization – Scale of operation • Match supply and demand.12-3 12-3 Role of Intermediaries Role of Intermediaries • Greater efficiency in making goods available to target markets.

Channel Functions Channel Functions •Information •Promotion •Contact •Matching •Negotiation •Physical Distribution •Financing •Risk taking 12-4 12-4 .

12-5 12-5 Channel Levels Channel Levels •Manufacturer •Wholesaler •Retailer •Consumer .

– Vertical Conflict occurs between different levels of the same channel. . – all members cooperate to attain overall channel goals and satisfy the target market.12-6 12-6 Channel Behavior and Conflict Channel Behavior and Conflict • The channel will be most effective when: – each member is assigned tasks it can do best. • Focus on individual goals leads to conflict – Horizontal Conflict occurs among firms at the same level of the channel.

12-7 12-7 Vertical Marketing Systems Vertical Marketing Systems • Corporate – common ownership at different channel levels • Contractual – contractual agreement among channel members • Administered – leadership assumed by dominant members .

12-8 12-8 Innovations in Marketing Systems Innovations in Marketing Systems Horizontal Marketing Horizontal Marketing System System Two or more companies at one channel level join together to increase coverage Example:Banks in Grocery Stores Hybrid Marketing Hybrid Marketing System System A single firm sets up two or more marketing channels to increase coverage Example:Retailers. Catalogs. and Sales Force .

Channel Design Decisions Channel Design Decisions Analyzing Consumer Service Needs Analyzing Consumer Service Needs Setting Channel Objectives & Constraints Setting Channel Objectives & Constraints Identifying Major Alternatives Identifying Major Alternatives Intensive Intensive Distribution Distribution Selective Selective Distribution Distribution Exclusive Exclusive Distribution Distribution 12-9 12-9 Evaluating the Major Alternatives Evaluating the Major Alternatives .

Channel Management Decisions Channel Management Decisions Selecting Selecting FEEDBACK 12-10 12-10 Motivating Motivating Evaluating Evaluating .

– information technology has created opportunities for major gains in distribution efficiency. – the explosion in product variety has created a need for improved logistics management.Logistics Logistics • Involves entire supply chain • Increasing importance of logistics 12-11 12-11 – effective logistics is becoming a key to winning and keeping customers. – logistics is a major cost element for most companies. .

Goals of Logistics system Goals of Logistics system • Maximize Profits. Not Sales. Higher Distribution Costs/ Higher Customer Service Levels Lower Distribution Costs/ Lower Customer Service Levels . 12-12 12-12 • Provide a Targeted Level of Customer Service at the Least Cost.

Logistics Functions Logistics Functions 12-13 12-13 • • • • Order Processing Warehousing Inventory Management Transportation • Design system to minimize costs of attaining objectives .

ideal when speed is needed or to ship high-value. cost-effective for shipping bulk products. piggyback for shipping bulk products. piggyback Flexible in routing & time schedules. natural gas. low-bulk items Air Air . low-value Low cost for shipping bulky. efficient Flexible in routing & time schedules. slowest form Ship petroleum.Transportation Modes Transportation Modes Nation’s largest carrier. efficient for short-hauls of high value goods for short-hauls of high value goods Low cost for shipping bulky. cost-effective Nation’s largest carrier. low-bulk items ship high-value. natural gas. ideal when speed is needed or to High cost. slowest form goods. low-value goods. and chemicals Ship petroleum. and chemicals from sources to markets from sources to markets 12-14 12-14 Rail Rail Truck Truck Water Water Pipeline Pipeline High cost.

Cross-Functional Teamwork inside Cross-Functional Teamwork inside the Company the Company Building Channel Partnerships Building Channel Partnerships Third-Party Logistics Third-Party Logistics .Integrated Logistics Management Integrated Logistics Management 12-15 12-15 Concept Recognizes that Providing Better Customer Service and Trimming Distribution Costs Requires Teamwork. Both Inside the Company and Among All Teamwork the Marketing Channel Organizations.

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