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Marketing Channels and

Supply Chain Management
Chapter 13
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Principles of Marketing, Sixth Canadian Edition

Learning Objectives

13.
2

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After studying this chapter, you should be able to:

Explain why companies use distribution channels and discuss
the functions that these channels perform
Discuss how channel members interact and how they organize
to perform the work of the channel
Identify the major channel alternatives open
to a company
Explain how companies select, motivate, and
evaluate channel members
Discuss the nature and importance of physical
distribution

Principles of Marketing, Sixth Canadian

13.
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Important Terminology

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Marketing (distribution) channel: set of interdependent

organizations involved in making a product available for use or
consumption; from the producer down

Supply chain: includes upstream

supplier partners, as well as
downstream channel partners

Make-and-sell view

Value-delivery network: all those

who partner with each other to improve
the performance of the supply chain
system; including the company,
suppliers, distributors, and even,
customers

Sense-and-respond view

Principles of Marketing, Sixth Canadian

Using Marketing Intermediaries

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Intermediaries reduce the number of contacts needed to cover a market

Transform assortments made by producers into assortments desired by
consumers
Help to complete transactions:
Information
Figure 13.1
Promotion
Contact
Matching
Negotiation
Fulfill completed transactions:
Physical distribution
Financing
Risk taking

Principles of Marketing, Sixth Canadian

Consumer Marketing Channels

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Channel level: layer of intermediaries that performs some work in

bringing the product and its ownership closer to the final buyer
Direct: no intermediary levels
Indirect: containing one or more intermediary levels
Figure 13.2

Flows between
levels:

Physical
Ownership
Payment
Information
Promotion

Principles of Marketing, Sixth Canadian

Channel Behaviour

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Channel conflict: disagreements between marketing channel

members on goals and roles-who should do what and for what

rewards
Horizontal conflict: between
firms on the same channel level
Vertical conflict: between firms
on different levels of the channel
Some conflict encourages healthy
competition which produces
innovation and better performance
Too much conflict becomes
dysfunctional

Principles of Marketing, Sixth Canadian

13.
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Types of Marketing Channels

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Conventional distribution channel:

One or more independent producers, wholesalers, and retailers
Each seeking to maximize its own profits

Vertical marketing system

(VMS):

Figure 13.4

Producers, wholesalers, and retailers

Act as a unified system
One channel member owns, has
contracts with, or has so much
power that they all cooperate

Franchise organization
Horizontal marketing system

Principles of Marketing, Sixth Canadian

Hybrid Marketing Channel

13.
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Multichannel distribution system: a single firm sets

up two or more marketing channels to reach one or more
customer segments

Disintermediation:
Displacment of
traditional
resellers by new
types of
intermediaries or
by selling direct

Figure 13.5

Principles of Marketing, Sixth Canadian

Setting Channel Objectives

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Channel objectives influenced by:

Nature of the company (size/financial position) and its products

Marketing intermediaries
Competition
Types of
Marketing environment

intermediaries:

Identifying major
alternatives:
Types of intermediaries
Number of
intermediaries
Responsibilities of each
channel member

Company sales
force
Manufacturers
agency
Industrial
distributors

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13.
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Number of Intermediaries

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Also known as intensity of distribution

Intensive
distribution

As many outlets
as possible

Convenience
goods

Selective
distribution

More than one, but

not all outlets

Shopping
goods

Exclusive
distribution

One outlet per

market area

Specialty
goods

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Channel Management Decisions

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Selecting channel members: companies will vary in their

ability to attract qualified intermediaries
Channel member history, reputation, financial position, location
Other product lines carried, facility
Cooperativeness, future growth potential

Managing & motivating:

Partner relationship
management
Programs, contests, sales
incentives
Cooperative advertising
Product/sales training

Evaluating channel
members:
Performance standards
for sales, market share,
customer service levels,
inventory carried, and
participation in company
programs

Principles of Marketing, Sixth Canadian

Copyright 2005 Pearson Education Inc.

Public Policy and Distribution Decisions

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Exclusive dealing
Exclusive territories
Tying agreements
Dealers rights

Sources of supply
Purchasing and shelving
policies
Slotting allowances

Principles of Marketing, Sixth Canadian

13.
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Supply Chain Management

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Marketing logistics (physical distribution): planning,

implementing, and controlling the physical flow of materials, final
goods and related information

Supply chain management: managing upstream and

downstream value-added flows of materials, final goods, and related
information among suppliers, the company, resellers, and final
consumers
Figure 13.6

Principles of Marketing, Sixth Canadian

Supply Chain Management (continued)

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Goal: provide a targeted level of customer service at the least cost

Major logistics functions:
Warehousing: storage and distribution centres
Inventory management: balance customer needs with cost
Transportation: speed costs money, how fast do you need it?
Rail, trucks, water, pipeline, air, and the Internet

Figure 13.6

Principles of Marketing, Sixth Canadian

In Conclusion

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Copyright 2005 Pearson Education Inc.

The learning objectives for this chapter were:

Explain why companies use distribution channels and discuss
the functions that these channels perform
Discuss how channel members interact and how they organize to
perform the work of the channel
Identify the major channel alternatives
open to a company
Explain how companies select, motivate,
and evaluate channel members
Discuss the nature and importance of
physical distribution

Principles of Marketing, Sixth Canadian