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Work with these documents and activities to master chapter learning objectives.
Chapter 14: Marketing Channels And Supply Chain Management
- Describe the nature and functions of marketing channels.
A marketing channel, or channel of distribution, is a group of individuals and organizations that directs the flow of products from producers to customers. The major role of marketing channels is to make products available at the right time, at the right place, and in the right amounts. In most channels of distribution, producers and consumers are linked by marketing intermediaries, usually wholesalers and/or retailers. Marketing channels also form a supply chain, which refers to long-term partnerships among channel members working together to reduce inefficiencies, costs, and redundancies. Marketing channels create time, place, and possession utility by making products available when and where customers want them and providing customers with access to product use through sale or rental. Marketing intermediaries facilitate exchange efficiencies by reducing the total number of transactions that otherwise would be required to move products from producer to ultimate users.
- Identify the types of marketing channels.
Marketing channels are broadly classified as channels for consumer products and channels for business products. Although consumer goods can move directly from producer to consumers, consumer product channels that include wholesalers and retailers are usually more economical and efficient. For business products, direct distribution channels are common. Business channels often include industrial distributors, manufacturers’ agents, or a combination of agents and distributors. Most producers employ multiple or dual channels so that they can adapt the distribution system for various target markets. To determine which channel is most appropriate, managers must think about customer characteristics, product attributes, the type of organization, competition, environmental forces, and the availability and characteristics of intermediaries.
- Explore the concepts of leadership, cooperation, and conflict in channel relationships.
Each channel member performs a different role in the supply chain and agrees to accept certain rights, responsibilities, and rewards, as well as sanctions for nonconformance. Although marketing channels may be determined by consensus, many are organized and controlled by a single leader, or channel captain. A channel leader may be a producer, wholesaler, or retailer. Channels function most effectively when members cooperate; when they deviate from their roles, channel conflict can arise.
- Recognize common strategies for integrating marketing channels.
Vertical integration combines two or more stages of the marketing channel under one management. The vertical marketing system (VMS) is managed centrally for the mutual benefit of all channel members. Vertical marketing systems may be corporate, administered, or contractual. Horizontal integration combines institutions at the same level of channel operation under a single management.
- Examine the major levels of marketing coverage.
A marketing channel is managed so that products receive appropriate market coverage. Intensive distribution makes a product available to all possible dealers. In selective distribution, only some outlets in an area are chosen to distribute a product. Exclusive distribution usually gives one dealer exclusive right to sell a product in a large geographic area.
- Recognize the importance of the role of physical distribution activities in supply-chain management and overall marketing strategies.
Physical distribution, or logistics, refers to the activities used to move products from producers to customers and other end users. These activities include order processing, inventory management, materials handling, warehousing, and transportation. An efficient physical distribution system is an important component of an overall marketing strategy because it can decrease costs and increase customer satisfaction. Within the marketing channel, physical distribution activities are often performed by a wholesaler, but they also may be performed by a producer or retailer or outsourced to a third party. Efficient physical distribution systems can decrease costs and transit time while increasing customer service.
- Examine the major physical distribution functions of order processing, inventory management, materials handling, warehousing, and transportation.
Order processing is the receipt and transmission of sales-order information. It consists of three main tasks—order entry, order handling, and order delivery—which may be done manually but are more often handled through electronic data interchange systems. Inventory management involves developing and maintaining adequate assortments of products to meet customers’ needs. Logistics managers must strive to find the optimal level of inventory to satisfy customer needs while keeping costs down. Materials handling, the physical handling of products, is a crucial element in warehousing and transporting products. Warehousing involves the design and operation of facilities for storing and moving goods; such facilities may be privately owned or public. Transportation, the movement of products from where they are made to where they are purchased and used, is the most expensive physical distribution function. The basic modes of transporting goods include railroads, trucks, waterways, airways, and pipelines.