12-1

12-1

PRINCIPLES OF MARKETING

Chapter
Chapter 12
12

Distribution Channels
and
Logistics Management

12-2
12-2

Distribution 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

Order Processing
Warehousing
Inventory Management
Transportation

Design system to minimize costs of attaining

objectives

12-13
12-13

12-14
12-14

Transportation
Transportation Modes
Modes
Rail
Rail

Nations
Nationslargest
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