marketing strategy O C Ferrell Michael D Hartline

marketing strategy O. C. Ferrell Michael D. Hartline Distribution and Supply Chain Management 9 C H A P T E R

Distribution and Supply Chain Management • Among the most important strategic decisions • Were the forgotten elements of marketing strategy throughout most of the 20 th century • Have remained essentially invisible to the customer • Rank at the top of the list in achieving a sustainable competitive advantage • Are important to providing time, place, and possession utility for buyers • Are expensive – must balance the needs of the customer with the needs of the firm 2

Breakdown of Total Distribution Costs Exhibit 9. 1 3

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. ” 4

Graphical Depiction of a Supply Chain Exhibit 9. 2 5

Marketing Channel Functions • Channel Functions – – – Sorting Breaking Bulk Maintaining Inventories Maintaining Convenient Locations Provide Services • Channel Effectiveness and Efficiency – Distribution decision criteria: • Is the channel effective? • Is the channel efficient? 6

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. 7

Strategic Issues in Distribution and Supply Chain Management • Marketing Channel Structure – Exclusive Distribution – Selective Distribution – Intensive Distribution • Channel Integration (key factors) – Connectivity – Community – Collaboration • Creating and Enhancing Value in the Supply Chain 8

Discussion Question • Describe the characteristics of a product that represents something you would go to great lengths to acquire, thus supporting a manufacturer’s use of an exclusive distribution strategy. Why is the service better and the salespeople more knowledgeable at an exclusive distribution location versus an intensive distribution location? 9

Maximizing Profit Margin Performance Exhibit 9. 3 10

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? What are the apparent benefits that Clinique receives from this strategy? 11

Conflict and Collaboration in the Supply Chain (1 of 2) • The Basis of Conflict in the Supply Chain – – – Legitimate Power Reward Power Coercive Power Information Power Referent Power 12

Factors in Successful Supply Chain Collaboration Exhibit 9. 4 13

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 14

Major Components of Category Management Exhibit 9. 5 15

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 16

The Trend in Outsourcing Exhibit 9. 6 17

Category Killers - CARQUEST 18

Trends in Marketing Channels (2 of 2) • The Growth of Direct Distribution and Nonstore Retailing – – – Catalog and Direct Marketing Direct Selling Home Shopping Networks Vending Direct Response Advertising • The Growth of Dual Distribution 19

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? 20

Legal and Ethical Issues in the Supply Chain • • Dual Distribution Exclusive Channel Arrangements Tying Arrangements Counterfeit Products 21

Common Examples of Supply Chain Misconduct Exhibit 9. 7 22

FDA Against Counterfeit Drugs 23

Barnes & Noble’s Supply Chain • Barnes & Noble is the largest bookstore chain in the world with more than 799 stores featuring more than 4 million book titles. Their distribution strategy includes both brick and mortar stores as well as a powerful online presence. • How are the distribution challenges presented by a brick and mortar store different from that of a large online operation? Beyond the Pages 9. 1 24