marketing principles
BUS106 Marketing
Principles Marketing Mix: Place
Lecture 8
Copyright Notice
This Topic’s Big Idea
“A marketing channel…. is a group of
organisations that agree to distribute a
product.”
Learning Objectives
1. Explain marketing channels and the need for intermediaries.
2. Identify issues that influence channel strategy.
3. Discuss logistics and supply chain management and their evolution into distribution practice.
4. Discuss new technology and emerging trends in supply chain management.
Marketing Channels
Marketing channel
(channel of distribution)
A set of interdependent
organisations that facilitate
the transfer of ownership as
products move from
producer to business user
or consumer
Channel members
All parties in the marketing
channel who negotiate with
one another, buy and sell
products, and facilitate the
change of ownership
between buyer and seller in
the course of moving the
product from the
manufacturer into the hands
of the final consumer
How marketing channels reduce
the number of required transactions
Channel Intermediaries
Retailer
A channel intermediary
that sells mainly to
consumers
Merchant
wholesaler
Buys goods from
manufacturers and
resells them to
businesses, government
agencies and other
wholesalers or retailers;
and that receives and
takes title to goods,
stores them in its own
warehouse and later
ships them
Agents and
brokers
Wholesaling
intermediaries who
facilitate the sale of a
product to end user by
representing retailers,
wholesalers or
manufacturers
Channel Intermediaries
Channel functions performed
by intermediaries
Contacting/promotion
Negotiating
Risk-taking
Transactional
functions
Channel functions performed
by intermediaries
Logistical
functions
Physically distributing
Storing
Sorting
Channel functions performed
by intermediaries
Facilitating
function
Researching
Financing
Marketing Channels for
Consumer Products
Direct Marketing
Tupperware has long
used direct marketing
as its primary method of
driving sales.
Watch Me: https://www.youtube.com/watch?v
=p8a7iavx3OY
Channels for
Business and Industrial Products
Retail Channels
The Internet has had a drastic impact on
retail channels in many industries, including
the car industry.
Would you buy a car via the Internet?
Alternative
Channel Arrangements
Alternative
Channel Arrangements
Walt Disney Company utilises dual
distribution when it releases first-run
animated films to movie theatres and then
releases a sequel directly to the home-video
market.
Factors Affecting
Channel Choice
• Market factors
– Who are the potential customers?
– What/where/when/how do they buy?
• Product factors
– Standardised vs. customised issues
– product’s life cycle
– delicacy (perishable, fragile)
• Producer factors
– Direct distribution and control
Levels of
Distribution Intensity
Selective Distribution
Hugo Boss clothing is sold only in select
retail outlets. Because only a few retailers
are chosen, the consumer must seek out the
product.
Channel Partnering
• Speed up stock replenishment
• Improve customer service
• Reduction of channel’s total costs
The joint effort of all channel members to
create a supply chain that serves customers
and creates a competitive advantage
Types of channel relationships
Channel Power, Control and
Leadership
Channel power
The capacity of a
particular marketing
channel member to
control or influence
the behaviour of
other channel
members
Channel control
A situation that
occurs when one
marketing channel
member intentionally
affects another
member’s behaviour
Channel leader
(captain)
One member of a
marketing channel
who exercises
authority and power
over the activities of
other members
Channel Conflict
A clash of goals and methods between distribution channel members
Horizontal conflict: occurs among channel members on the same level
Vertical conflict: occurs among channel members at different levels
Supply chains and
logistics management
Logistics - The process of strategically managing the efficient flow and storage of raw materials, in- process stock and finished goods from point of origin to point of consumption
Supply chain - The connected chain of all the business entities, both internal and external to the company, that perform or support the logistics function
Supply chain management - A management system that coordinates all of the activities performed by supply chain members from source, to the point of consumption, which results in enhanced customer and economic value
Logistics Service
Interrelated activities performed by a
member of the supply chain to ensure that
the right product is in the right place at the
right time
• Customers want…
– Availability, timeliness, quality, undamaged
goods, minimal order effort, consistent
delivery…balanced with costs
Integrated functions
of the Supply Chain
Sourcing & Procurement
Role of purchasing departments:
• Plan purchasing strategies
• Develop specifications
• Select suppliers
• Negotiate price
• Negotiate service levels
Production Scheduling
Mass customisation (build-to-order) - Production method whereby products are not made until an order is placed by the customer; products are made according to customer specifications
Just-in-time production - A process that redefines and simplifies manufacturing by reducing inventory levels and delivering raw materials just when they are needed on the production line
Benefits: Reduces raw material inventories, shortens lead times; creates better supplier relationships; reduces production and storeroom costs; reduces paperwork
Order Processing
Order processing system – a system whereby orders are entered into the supply chain and filled
Electronic data interchange - information technology that replaces paper documents, which accompany business transactions
• Includes: purchase orders and invoices, with electronic transmission of the needed information to reduce stock levels, improve cash flow, streamline operations, and increase the speed and accuracy of information transmission
Inventory Control
Inventory control system - A method of developing and maintaining an adequate assortment of materials or products, to meet customer demand
Materials requirement planning (MRP) - Stock control system that manages the replenishment of raw materials, supplies and components from the supplier to the manufacturer
Distribution resource planning (DRP) - Stock control system that manages the replenishment of goods from the manufacturer to the final consumer
Warehouse &
Materials Handling
• Method of moving stock into, within and
out of the warehouse
• Functions of materials handling:
– Receive goods into warehouse
– Identify, sort and label goods
– Dispatch the goods to temporary storage
– Recall, select or pick the goods for shipment
Transportation
Criteria for transportation mode choice:
Relative Cost - the total amount a specific carrier charges to move the product from the point of origin to the destination
Transit time - the total time a carrier has possession of goods, including the time required for pick-up and delivery, handling and movement between the point of origin and the destination
Reliability - the consistency with which the carrier delivers goods on time and in acceptable condition
Capability - the ability of the carrier to provide the appropriate equipment and conditions for moving specific kinds of goods, such as those that must be transported in a controlled environment (for example, under refrigeration).
Accessibility - the carrier’s ability to move goods over a specific route or network.
Traceability - the relative ease with which a shipment can be located and transferred
Trends in Logistics
Advances in computer technology
Outsourcing of logistics functions
– Use of an independent third party
Electronic distribution
• Over traditional forms such as fibre-optic cable or through satellite transmission of electronic signals
Green supply chain management
• Involves the integration of environmentally conscious thinking into all phases of key supply chain management processes
Marketing Channels and Logistics
Converse Automated Distribution Center
Watch Me: https://www.youtube.com/watch?v=q1-mzwOjkaU
Logo adopted from: Converse Logo, 2016, viewed 25th of October 2016 http://logos-download.com/650-converse-logo-
download.html
Next Week
Marketing Mix: Promotion and Integrated
Marketing Communication.