Chapter 13: Supply Chain Management and Marketing Channels

Intensive distribution

A form of distribution aimed at maximum market coverage. *Aimed at having a product available in every outlet where target customers might want to buy it. *Products such as gums, candies, snacks.

CHANNEL STRUCTURE-CONSUMER PRODUCTS

A product can take any of several possible routes to reach the final consumer. Direct channel Retailer channel Wholesaler channel

Which of the following is a function of marketing channel members? a. They attain economies of scale for producers through specialization and division of labor. b. They attain economies of scale through minimum interaction with suppliers. c. They aid retailers in creating time, place, and exchange utility for customers. d. They aid downstream producers in marketing.

A. They attain economies of scale for producers through specialization and division of labor.

According to the concepts of specialization and division of labor, breaking down a complex task into smaller ones and assigning these to specialists creates _______. a. greater efficiency and lower average production costs b. lower efficiency and higher average production costs c. greater efficiency but higher average production costs d. lower efficiency but lower average production costs

A. greater efficiency and lower average production costs

Selective distribution

Achieved by screening dealers and retailers to eliminate all but a few in any single area. * Because only a few are chosen, the consumer must seek out the product. *Products such Louis Vuitton, Tory Burch.

Intermediaries that do not take title to goods and services they market.

Agents and Brokers

Time utility and place utility

Are created by channel members.

Merchant wholesalers

Are organizations that facilitate the movement of products and services from the manufacturer to producers, resellers, governments, institutions, and retailers. *All merchant wholesalers take title to the goods they sell, and most of them operate one or more warehouses where they receive finished goods, store them, and later reship them to retailers, manufacturers, and institutional clients. *Wholesalers do not dramatically alter the form of a good or sell it directly to the consumer. *Their value hinges on their providing time and place utility and contact efficiency to retailers.

Intermediaries that take title to products in the marketing channel and resell them.

Retailers and merchant wholesalers

Dual or multiple distribution

Select two or more channels, to distribute the exact same product to target markets. * Multiple distribution channels must be organized and managed as a group * As consumers increasingly embrace online shopping, more retailers are employing a multiple distribution strategy.

Merchant wholesalers and retailers take title to products in the marketing channel and resell them.

TRUE

Form Utility

The elements of the composition and appearance of a product that make it desirable. * Producers, who sit at the top of the supply chain * Example: The farmer sells wheat to the miller, who sells flour to the baker, who sells bread to the consumers.

Time utility

The increase in customer satisfaction gained by making a good or service available at the appropriate time. *Example: 2 days amazon shipping or buying produce when it ripe.

Exchange Utility

The increased value of a product that is created as its ownership is transferred. * The retailer, who is often the closest channel member to the customer, provides a desired product for some reasonable amount of money that we are willing to give.

Place utility

The usefulness of a good or service as a function of the location (physical and online) at which it is made available. *Example: Where produce at? Nearby home market or at healthy markets.

Advantage/Disadvantage of Dual or multiple distribution

This arrangement allows retailers to reach a wider customer base but may also lead to competition between distribution channels through cannibalization (whereby one channel takes sales away from another).

A marketing channel

(also called a channel of distribution) A business structure of interdependent organizations that reaches from the point of production to the consumer and facilitates the downstream physical movement of goods through the supply chain. *Channels represent the "place" or "distribution" element of the marketing mix (product, price, promotion, and place) * They provide a route for company products and services to flow to the customer.

Channel members

(also called intermediaries, resellers, and middlemen): Negotiate with one another, buy and sell products, and facilitate the change of ownership between buyer and seller in the course of moving finished goods from the manufacturer into the hands of the final consumer.

DISTRIBUTION INTENSITY

- Organizations have three options for intensity of distribution: intensive, selective, and exclusive.

ALTERNATIVE CHANNEL ARRANGEMENTS

- Rarely does a producer use just one type of channel to move its product. - It usually employs several different strategies, which include the use of multiple distribution, nontraditional channels, and strategic channel alliances.

Retailers

Are the firms in the channel whose primary function is to sell directly to consumers. *A critical role fulfilled by retailers within the marketing channel: They provide contact efficiency for consumer *Retailers simplify distribution by reducing the number of transactions required by consumers and by making an assortment of goods available in one location.

A _____ enables consumers to send products back to the retailer or manufacturer in the event of a product defect or at the end of the product's useful life to the consumer. a. gray marketing channel b. reverse channel c. nontraditional channel d. digital channel

B. reverse channel

_______ functions, performed by intermediaries, involve contacting and communicating with prospective buyers to make them aware of existing products and to explain their features, advantages, and benefits. a. Facilitating b. Transactional c. Logistical d. Retailing

B. Transactional

Specialization and division of labor

Breaking down a complex task into smaller, simpler ones and assigning these tasks to specialists create greater efficiency and lower average production costs via economies of scale.

______ is the increased value of a product that is created as its ownership is transferred. a. Place utility b. Time utility c. Exchange utility d. Form utility

C. Exchange utility

Wholesaler channel

Commonly used for low-cost items that are frequently purchased, such as candy, cigarettes, and magazines. * Producers who sells to wholesalers, who then sells to retailers, who then sells to the consumers. * Used when retailers do not own warehouses and cannot store their own products. * Example: Consumer Package Goods, Candy, Snacks, Gum.

Which channel members buy products directly from producers or wholesalers and sell directly to consumers? a. Agents or brokers b. Wholesalers c. Producers d. Retailers

D. Retailers

1. Which of the following statements is true about channel members? a. Channel members must take title to the goods they sell. b. They know the paths of raw materials and component parts throughout the global network. c. They have a digital ledger in which transactions are made. d. Channel members negotiate with one another to buy and sell products.

D. Channel members negotiate with one another to buy and sell products.

_______ changes the composition and appearance of a product that makes it desirable for a consumer. a. Place utility b. Exchange utility c. Time utility d. Form utility

D. Form utility

Which channel member makes the product? a. Agents or brokers b. Retailers c. Wholesalers! d. Producers

D. Producers

Reverse channels

Enable consumers to return products to the retailer or manufacturer in the event of a product defect or at the end of the product's useful life to the consumer (Sending items "upstream") * The retailers or manufacturers can then recycle the product and use components to manufacture new products or refurbish & resell the same product in a secondary market. * Several large companies, including Apple, Best Buy, and Walmart, offer opportunities to recycle items ranging from plastic bags and batteries to televisions and Christmas trees.

Intensive distribution is a form of distribution that establishes one dealer or a few dealers within a given area.

FALSE

Retailers have four options for distribution intensity: intensive, selective, perceptive, and exclusive.

FALSE

The marketing channel is the "upstream" portion of the supply chain that is charged with moving component parts or raw materials to the producer.

FALSE

The use of nontraditional channels allows a producer to sell directly to consumers.

FALSE

Agents and Brokers

Facilitate the sales of products downstream by representing the interests of retailers, wholesalers, and manufacturers to potential customers. * Only facilitate sales and generally have little input into the terms of the sale. * They do, however, get a fee or commission based on sales volume.

Nontraditional channels

Facilitate the unique market access of products and services. * Differentiate a firm's product from the competition by providing additional information about products. * Include approaches such as mail-order television or video channels and infomercials, local bulletin broad, social media contest. * Give producers a niche market.

Facilitating

Includes research and financing. * Agents and Brokers would be whose participate in the Facilitating functions. *Research provides: Information about channel members and consumers by getting answers to the key questions - Who are the buyers? Where are they located? Why do they buy? *Financing: Ensure that channel members have the money to keep products moving through the channel to the ultimate consumer.

CHANNEL FUNCTIONS (Value)

Intermediaries in marketing channels perform three essential functions that enable goods to flow between producer and consumer. Transactional functions Logistical functions Facilitating

Transactional functions

Involve contacting and communicating with prospective buyers to make them aware of existing products & To explain their features, advantages, and benefits. * Contacting and communicating with prospective buyers: To created transactions * Wholesalers contact the retailers about new shipment of new products, and information about the new products

Exclusive distribution

Limited to one type of retail outlet, often own or control by the company. *The most restrictive form of market coverage, which entails only one or a few dealers within a given area. *Because buyers may have to search or travel extensively to buy the product, exclusive distribution is usually confined to consumer specialty goods, a few shopping goods, and major industrial equipment. *Products such as Rolls-Royce automobiles, Tiffany &Co.

Advantage/Disadvantage of Nontraditional channels

May limit a brand's coverage. They can give a producer serving a niche market: A way to gain market access and customer attention without having to establish physical channel intermediaries; they can also provide another sales avenue for larger firms.

Taking title

Means they actually own the merchandise and control the terms of the sale (Price and delivery)

Retailer channel

Most common when the retailer is large and can buy in large quantities directly from the manufacturer. * Producers sell directly to the retailers, who sell to the consumers. * Examples of retailers that often bypass a wholesale: Walmart, Target, and Kroger.

Intermediaries in a channel

Negotiate with one another, facilitate transfer of ownership for finished goods between buyers and sellers, and physically move products from the producer toward the final consumer.

Don't take title

Other intermediaries do not take title to goods and services they market, but do facilitate exchanges of ownership between sellers and buyers

Direct channel

Producers sell directly to consumers in order to keep purchase prices low. * Direct marketing activities—including telemarketing, mail order and catalog shopping, and forms of electronic retailing such as online shopping and shop-at-home television networks—are good examples of this type of channel structure. * There are no intermediaries. * Producer-owned stores and factory outlet stores— like Sherwin-Williams, Polo Ralph Lauren, Oneida, and WestPoint Home * Example: Banana Republic

Logistical functions

Typically include transportation and storage of assets, as well as their sorting, accumulation, consolidation, and/or allocation for the purpose of conforming to customer requirements. * Transportation and storage of assets: Physical movement of the products - plane, train, trucks to move products from manufactures to warehouses, from warehouses to retailers.

The marketing channel is the "downstream" portion of the supply chain that

connects a producer with the customer

As products move toward the final consumer, channel members:

facilitate the distribution process by providing specialization and division of labor, overcoming discrepancies, and providing contact efficiency.

While "upstream" supply chain members are charged with

moving component parts or raw materials to the producer

Marketing channels are valuable because

they aid producers in creating time, place, and exchange utility for customers, such that products become aligned with their needs.