Contemporary Marketing: Principles of

Principles of
Contemporary Marketing
Kurtz & Boone
Chapter 13
Marketing Channels and
Supply Chain Management
CHAPTER 13 Marketing Channels and Supply Chain Management
Chapter Objectives
1. Describe the types of marketing channels and

the roles they play in marketing strategy.
2. Outline the major channel strategy decisions.
3. Describe the concepts of channel management,
conflict, and cooperation.
4. Identify and describe the different vertical
marketing systems.
Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.
Chapter Objectives
5. Explain the roles of logistics and supply chain

management in an overall distribution strategy.
6. Identify the major components of a physical
distribution system.
7. Compare the major modes of transportation.
8. Discuss the role of transportation intermediaries,
combined transportation modes, and
warehousing in improving physical distribution.
The Role of Marketing Channels in

Marketing Strategy
o 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 buyers and
sellers
Direct Selling
o Direct channel - Carries goods directly

from a producer to the business purchaser
or ultimate user
o Direct selling - Strategy designed to
establish direct sales contact between
producer and final user
Channels Using Marketing

Intermediaries
o Producer to wholesaler to retailer to
consumer
o Producer to wholesaler to business user
o Producer to agent to wholesaler to retailer
to consumer
o Producer to agent to wholesaler to
business user
o Producer to agent to business user
Dual Distribution and Reverse

Channels
o Dual distribution - Network that moves
products to a firm’s target market through
more than one marketing channel
o Reverse channel - Channel designed to
return goods to their producers
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 - Distribution of a
product through a single wholesaler or
retailer in a specific geographic region
Channel Conflict
o Horizontal conflict
o Vertical conflict
o The gray market
Vertical Marketing Systems
o Planned channel system designed to

improve distribution efficiency and cost-
effectiveness by integrating various
functions throughout the distribution chain
o Rely on forward or backward integration
o Forward integration - Firm attempts to
control downstream distribution
o Backward integration - Manufacturer
attempts to gain greater control over inputs
to production process
Vertical Marketing Systems
o Three categories of VMSs

o Corporate systems
o Administered systems
o Contractual systems
Radio Frequency Identification (RFID)
o Technology that uses a tiny chip with

identification information that can be read
by a scanner using radio waves from a
distance
o Can be used to grant access to restricted
areas or to speed delivery processing
Enterprise Resource Planning
o Software system that consolidates data

from among a firm’s various business units
o ERP and its related software aren’t always
perfect
Physical Distribution
o A physical distribution system contains

these elements:
o Customer service
o Transportation
o Inventory control
o Protective packaging and materials handling
o Order processing
o Warehousing
The Problem of Suboptimization
o Results when the managers of individual

physical distribution functions attempt to
minimize costs, but the impact of one task
on the others leads to less than optimal
results
o Occurs when a firm introduces a new
product that may not fit easily into its
current physical distribution system
o Effective management of physical
distribution requires cost trade-offs
Intermodal Coordination
o Piggyback - Most widely used form of

intermodal coordination
o Birdyback service - Sends motor carriers to
pick up a shipment locally and deliver that
shipment to local destinations
o Fishyback service - Intermodal
coordination system between motor
carriers and water carriers
Warehousing
o Storage warehouse - Holds goods for

moderate to long periods in an attempt to
balance supply and demand for producers
and purchasers
o Distribution warehouse - Assembles and
redistributes goods, keeping them moving
as much as possible

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Principles of

1. Describe the types of marketing channels and

5. Explain the roles of logistics and supply chain

The Role of Marketing Channels in

o Direct channel - Carries goods directly

Channels Using Marketing

Dual Distribution and Reverse

Determining Distribution Intensity

o Intensive distribution - Distribution of a

Vertical Marketing Systems

o Planned channel system designed to

Vertical Marketing Systems

o Three categories of VMSs

Radio Frequency Identification (RFID)

o Technology that uses a tiny chip with

Enterprise Resource Planning

o Software system that consolidates data

o A physical distribution system contains

The Problem of Suboptimization

o Results when the managers of individual

o Piggyback - Most widely used form of

o Storage warehouse - Holds goods for

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