MARKETING STRATEGY O C FERRELL MICHAEL D

MARKETING STRATEGY O. C. FERRELL • MICHAEL D. HARTLINE 9 Distribution and Supply Chain Management

Distribution and Supply Chain Concepts • Marketing Channels – “An organized system of marketing institutions through which products, resources, information, funds, and/or product ownership flow from the point of production to the final user. ” • Physical Distribution – “Coordinating the flow of information and products among members of the channel to ensure that products are available in the right places, in the right quantities, at the right times, and in a cost-efficient manner. ” 2

Graphical Depiction of a Supply Chain Exhibit 9. 1 3

Marketing Channel Functions • Channel Function Specializations – Sorting – Breaking Bulk – Maintaining Inventories – Maintaining Convenient Locations – Providing Services • Channel Effectiveness and Efficiency – Distribution Decision Criteria • (1) Is the channel effective? • (2) Is the channel efficient? 4

Discussion Question • Some manufacturers and retailers advertise that customers should buy from them because they “eliminate the middleman. ” Evaluate this comment in light of the functions that must be performed in a marketing channel. Does a channel with fewer members always deliver products to customers at lower prices? Defend your position. 5

Strategic Issues in Distribution and Supply Chain Management • Marketing Channel Structure – Exclusive Distribution – Selective Distribution – Intensive Distribution • Channel Integration (three key factors) – Connectivity – Community – Collaboration • Creating and Enhancing Value in the Supply Chain 6

Discussion Question • Describe the characteristics of a product that represent something you would go to great lengths to acquire, thus supporting a manufacturer’s use of an exclusive distribution strategy. How much more knowledgeable are the salespeople at an exclusive distribution location versus those at an intensive distribution location? Why is this so? 7

Marketing Strategy in Action • Clinique cosmetics uses a selective distribution strategy as their primary marketing channel structure. • What is the motivation for using this strategy for this type of product line? What are the apparent benefits that Clinique receives from this strategy? 8

Maximizing Profit Margin Performance Exhibit 9. 2 9

Conflict and Collaboration in the Supply Chain (1 of 2) • The Basis of Conflict in the Supply Chain – Five basic sources of power: • • • Legitimate Power Reward Power Coercive Power Information Power Referent Power 10

Factors in Successful Supply Chain Collaboration Exhibit 9. 3 11

Conflict and Collaboration in the Supply Chain (2 of 2) • Collaborative Supply Chains – Category management must be: • • • Customer driven Strategically driven Multifunctional Financially based Systems dependent Focused on immediate consumer response 12

Major Components of Category Management Exhibit 9. 4 13

Trends in Marketing Channels (1 of 2) • Advancing Technology – Growth of Internet and e-commerce – Radio frequency identification (RFID) • Shifting Power in the Channel – Discount mass merchandise retailers • Wal-Mart, Kmart, and Target – Category focused retailers (category killers) • Toys “R” Us, Lowe’s, Office Depot, Auto. Zone, and Best Buy • Outsourcing Channel Functions – Outsourcing is growing rapidly 14

Category Killers - Auto. Zone 15

The Trend in Outsourcing Exhibit 9. 5 16

Trends in Marketing Channels (2 of 2) • The Growth of Direct Distribution and Nonstore Retailing – Examples of Nonstore Channels • • • Catalog and Direct Marketing Direct Selling E-Commerce Home Shopping Networks Vending Direct Response Advertising • The Growth of Dual Distribution 17

Discussion Question • What are the major differences you have experienced in buying a product through a physical retail store, a manufacturer’s physical store, a catalog, and an online merchant? What have some retailers in your area done to justify their ongoing presence in the channel? 18

Legal and Ethical Issues in the Supply Chain • • Dual Distribution Exclusive Channel Arrangements Tying Arrangements Counterfeit Products 19

FDA Against Counterfeit Drugs 20