Chapter 12 Flashcards
(22 cards)
Upstream channel (or supply chain)
Inbound
The businesses and services that supply a company with the raw materials it needs to manufacture and move a product into customer’s hands
Downstream (or distribution) channel
Outbound
A set of interdependent organizations (channel members) involved in making a product or service available for use or consumption by the consumer or business user.
Importance of distribution and channel members
provide value to consumers
provide insights
increase efficiency (especially for large firms)
Types of channel partners
Distributor – distributes goods to other channel members
Wholesaler – buys in large quantities to sell products to those who resale to the channel (and not to end-customers)
Retailer – sells products directly to customers
Logistical Function of channel partners
- physical distribution
- risk taking (protecting goods)
Transactional Function of channel partners
- promotion
- buying
- risk taking (with inventory)
- selling and servicing (transact with potential customers)
Facilitating Function of channel partners
- gathering information
- financing
Considerations in designing distribution channels
- Distribution channel structure
- Distribution channel forces
- Distribution intensity
Channel structure
Direct: manufacturer customer
Indirect – manufacturer wholesaler retailer customer (2 intermediaries)
Multi-channel: e.g., most companies
Channel forces
Push marketing = designed to increase demand by focusing on wholesalers, distributors, or salespeople, who push the product to consumers via distribution channels.
- manufacturer wholesaler/retailer consumer
Pull marketing = designed to get consumers to pull the product into the supply chain by demanding that retailers carry it.
- consumer needs wholesaler/retailer gets manufacturer produces
Distribution intensity
intensive distribution = A strategy designed to get products into as many outlets as possible.
selective distribution = Lies between the intensive and exclusive distribution strategies; uses a few selected customers in a territory.
exclusive distribution = Strategy of granting exclusive rights to sell to one or very few retail customers so no other customers can sell a particular brand.
Channel conflict
Vertical conflict = Conflict between firms on different levels. E.g., between the manufacturer and the channel intermediary
Horizontal conflict = Conflict between firms on the same level. E.g., between two dealers of Ford
Disintermediation = Displacement of a traditional member from the marketing channel.
E.g., Netflix replacing BlockBuster in the distribution of content
Indirect channel organization
Vertical marketing system (VMS)
Horizontal marketing system (HMS)
Hybrid or Multi-channel
Vertical marketing systems
A distribution channel structure in which producers, wholesalers, and retailers act as a unified system.
Corporate VMS (the primary firm owns other channel members) – Tesla, Zara, Luxottica, etc.
Contractual VMS (the primary firm has contracts with other channel members) – most franchising systems
Administered VMS (the primary firm have so much power that other channel members have to cooperate) – P&G, Nestle, Walmart, etc.
Horizontal marketing systems
A channel arrangement in which two or more companies at the same level join together to follow a new marketing opportunity
- Might combine capital, production capabilities, or marketing resources to follow a market opportunity
- With competitors or non-competitors
Example: Two Canadian wineries merging to get the resources necessary to compete in the US
Components of strategic partnerships with channel members:
Mutual trust
Open communication
Common goals
Credible commitment
electronic data interchange (EDI)
The computer-to-computer exchange of business documents from a retailer to a vendor and back.
vendor-managed inventory (VMI)
An approach in which the manufacturer is responsible for replenishing inventory to meet retailers’ needs.
Data Warehousing
Process of collecting, storing, and analyzing (often live) information related to sales and distribution of company products.
Vendor Managed Inventory
An approach to inventory management in which the manufacturer is responsible for replenishing inventory to meet retailer needs.
Stock Turnover Ratio
One of the most critical indicators of retailing/distribution success. Ratio of sales to average inventory
Just-In-Time Inventory Management or QR (quick-response)
An approach to inventory management in which goods (or raw materials) are sourced just-in-time to be replenished – no sooner, no later. The goal is to reduce lead time.
