Chapter 12: Marketing Channels: Delivering Customer Value

Vertical marketing system (VMS)

A channel structure in which producers, wholesalers, and retailers act as a unified system. One channel member owns the others, has contracts with them, or has so much power that they all cooperate.

Franchise organization

A contractual vertical marketing system in which channel member, called a franchisor, links several stages in the production-distribution process.

Multichannel distribution system

A distribution system in which a single firm sets up two or more marketing channels to reach one or more customer segments.

Distribution center

A large highly automated warehouse designed to receive goods from various plants and suppliers, take orders, fill them efficiently, and deliver goods to customers as quickly as possible.

Channel level

A layer of intermediaries that performs some work in bringing the products and its ownership close to the final buyer.

Direct marketing channel

A marketing channel containing no intermediary levels.

Indirect marketing channel

A marketing channel containing one or more intermediary levels.

Value delivery network

A network composed of the company, suppliers, distributors, and customers who partner with each other to improve the performance of the entire system in delivering customer value.

Intermodal transportation

Combining two or more modes of transportation.

Exclusive distribution

Giving a limited number of dealers the exclusive right to distribute the company's products in their territories.

Supply chain management

Managing upstream and downstream value-added flows or materials, final goods, and related information among suppliers, the company, resellers, and final consumers.

Marketing channel management

Selecting, managing, and motivating individual channel members and evaluating their performance over time.

Intensive distribution

Stocking the product in as many outlets as possible.

Disintermediation

The cutting out of marketing channel intermediaries by product or service producers of the displacement of traditional resellers by radical new types of intermediaries.

Integrated logistics management

The logistics concepts that emphasizes teamwork - both inside the company and among all the marketing channel organizations - to maximize the performance of the entire distribution system.

Selective distribution

The use of more than one but fewer than all of the intermediaries who are willing to carry the company's products.

Marketing channel

(Distribution channel) A set of interdependent organizations that help make a product or service available for use or consumption by the consumer or business user.

Marketing logistics

(physical distribution) Planning, implementing, and controlling the physical flow of materials, final goods, and related information from points of origin to points of consumption to meet customer requirements at a profit.

Horizontal marketing system

A channel arrangement in which two or more companies at one level join together to follow a new marketing opportunity.

Conventional distribution channel

A channel consisting of one or more independent producers, wholesalers, and retailers, each a separate business seeking to maximize its own profits, perhaps even at the expense of profits for the system as a whole.

Contractual VMS

A vertical marketing system in which independent firms at different levels or production and distribution join together through contracts.

Corporate VMS

A vertical marketing system that combines successive stages of production and distribution under single ownership - channel leadership is established through common ownership.

Administered VMS

A vertical marketing system that coordinates successive stages of production and distribution through the size and power of one of the parties.

Third-party logistics provider

An independent logistics provider that performs any or all the functions required to get a client's product to market.

Marketing channel design

Designing effective marketing channels by analyzing customer needs, setting channel objectives, identifying major channel alternatives, and evaluating those alternatives.

Channel conflict

Disagreements among marketing channel members on goals, roles, and rewards - who should do what and for what awards.