12-1 12-1 PRINCIPLES OF MARKETING Chapter Chapter 12 12 Distribution

12-1 12-1 PRINCIPLES OF MARKETING Chapter Chapter 12 12 Distribution Channels and Logistics Management

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

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

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

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

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

12-7 12-7 Vertical Vertical Marketing Marketing Systems 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 Innovations in in Marketing Marketing Systems Systems Horizontal HorizontalMarketing Marketing System System Hybrid HybridMarketing Marketing System System Two or more companies at one channel level join together to increase coverage A single firm sets up two or more marketing channels to increase coverage Example:Banks in Grocery Stores Example:Retailers, Catalogs, and Sales Force

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 Distribution Distribution Selective Selective Distribution Distribution Exclusive Exclusive Distribution Distribution Evaluating Evaluating the the Major Major Alternatives Alternatives 12-9 12-9

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

Logistics Logistics 12-11 12-11 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.

Goals Goals of of Logistics Logistics system system 12-12 12-12 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

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

12-14 12-14 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 sourcesto tomarkets markets Air Air High Highcost, cost,ideal idealwhen whenspeed speedis isneeded neededor orto to ship shiphigh-value, high-value,low-bulk low-bulkitems items

Integrated Integrated Logistics Logistics Management Management 12-15 12-15 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