Marketing Channels and

Supply Chain Management

dilip.khilrani@gmail.com
Marketing or Distribution
Channel

• A set of interdependent organizations

involved in the process of making a
product or service available for use
or consumption by the consumer or
business user.

10-2
 Channel Functions
These functions should be assigned to the
channel member who can add the most value for
the cost
Information Negotiation

Physical
Promotion
Distribution

Contact Financing

Matching Risk Taking

10-3
Consumer and Business Channels

10-4
 Channel Behavior
• The channel will be most effective when:
– each member is assigned tasks it can do best.
– all members cooperate to attain overall channel goals.
• If this does not happen, conflict occurs:
– Horizontal Conflict occurs among firms at the same
level of the channel (e.g., retailer to retailer).
– Vertical Conflict occurs between different levels of the
same channel (e.g., wholesaler to retailer).
• Some conflict can be healthy competition.

10-5
 Channel Conflict

When it decided to sell its familiar containers at retail through Target

stores, Tupperware avoided conflicts with its army of in-home sales
consultants by inviting them into the stores to demonstrate the products.10-6
Conventional vs. Vertical Marketing System

10-7
Types of Vertical Marketing Systems
Corporate VMS
Common Ownership at Different High
Levels of the Channel

Contractual VMS
Contractual Agreements Among Control
Channel Members

Administered VMS
Low
Leadership is Assumed by One or
a Few Dominant Members
10-8
Innovations in Marketing Systems
Horizontal Marketing Hybrid Marketing
System
System

Two or more A single firm sets up

companies at one two or more marketing
channel level join channels to reach one
together to follow a or more customer
new marketing segments.
opportunity. Example: Retailers,
Demo Stores and
Example: Banks in catalogs
grocery stores

10-9
Number of Intermediaries

• Intensive distribution

• Exclusive distribution

• Selective distribution

10-10
Distribution-Scope Strategies
• Exclusive Distribution
– Limiting the distribution to only one
intermediary in the territory
• Intensive distribution
– Distribute from as many outlets as possible
to provide location convenience
• Selective distribution
– Appoint several but not all retailers

10-11
Channel
Channel Design
Design Decisions
Decisions

Analyzing
Analyzing Consumer
Consumer Service
Service Needs
Needs

Setting
Setting Channel
Channel Objectives
Objectives &
& Constraints
Constraints

Identifying
Identifying Major
Major Alternatives
Alternatives

Intensive
Intensive Selective
Selective Exclusive
Exclusive
Distribution
Distribution Distribution
Distribution Distribution
Distribution

Evaluating
Evaluating the
the Major
Major Alternatives
Alternatives

10-12
Channel
Channel Management
Management
Decisions
Decisions
Selecting
Selecting

FEEDBACK
Motivating
Motivating

Evaluating
Evaluating
10-13
 Logistics
Logistics
• Involves entire supply chain
• Increasing importance of logistics
– effective logistics is becoming a key to
winning and keeping customers.
– logistics is a major cost element for
most companies.
– the explosion in product variety has
created a need for improved logistics
management.
– information technology has created
opportunities for major gains in
distribution efficiency. 10-14
Goals
Goals of of Logistics
Logistics
system
system
• Provide a Targeted Level of Customer Service at
the Least Cost.
• Maximize Profits, Not Sales.

Higher Distribution Costs/ Higher

Customer Service Levels

Lower Distribution Costs/ Lower

Customer Service Levels

10-15
 Logistics
Logistics Functions
Functions

• Order Processing
• Warehousing
• Inventory Management
• Transportation
• Design system to minimize costs of
attaining objectives

10-16
Transportation
Transportation Modes
Modes
Rail
Rail
Nation’s
Nation’slargest
largestcarrier,
carrier,cost-effective
cost-effective
for
forshipping
shippingbulk
bulkproducts,
products,piggyback
piggyback
Truck
Truck
Flexible
Flexiblein
inrouting
routing&&time
timeschedules,
schedules,efficient
efficient
for
forshort-hauls
short-haulsof
ofhigh
highvalue
valuegoods
goods
Water
Water
Low
Lowcost
costfor
forshipping
shippingbulky,
bulky,low-value
low-value
goods,
goods,slowest
slowestform
form
Pipeline
Pipeline
Ship
Shippetroleum,
petroleum,natural
naturalgas,
gas,and
andchemicals
chemicals
from
fromsources
sourcestotomarkets
markets
Air
Air
High
Highcost,
cost,ideal
idealwhen
whenspeed
speedis
isneeded
neededor
orto
to
ship
shiphigh-value,
high-value,low-bulk
low-bulkitems
items
10-17
Integrated
Integrated Logistics
Logistics
Management
Management
Concept Recognizes that Providing Better Customer
Service and Trimming Distribution Costs Requires
Teamwork,
Teamwork Both Inside the Company and Among All
the Marketing Channel Organizations.

Cross-Functional
Cross-Functional Teamwork
Teamwork inside
inside
the
the Company
Company

Building
Building Channel
Channel Partnerships
Partnerships

Third-Party
Third-Party Logistics
Logistics

10-18