MARK1012 Lecture Notes - Lecture 10: Marketing Channel, Strategic Alliance, Management System
Chapter 12 – Supply Chain, Channel Management &
Retail
Wholesalers – firms that buy products from manufacturers and resell to retailers
Marketing channels Add value
• Product becomes more expensive, but more valuable at each stage
Marketing channel management affects other aspects of marketing
• Sales department coordinates delivery promises with factory/distribution centers
• Easy to lose credibility by promising deliveries/ run a promotion and not have
merchandise available when customer expects it
Designing Marketing Channels
Direct Marketing Channel: No intermediaries between buyer and seller
Indirect Marketing Channel: One or more intermediaries work with manufacturers to
provide goods and service to customers
Managing the Marketing Channel & Supply Chain
Vertical Channel Conflict: When supply chain members that buy and sell to one another
are not in agreement about their goals, roles or rewards
Horizontal Channel Conflict: When there is disagreement among members at the same
level of marketing channel (e.g. competing retailers)
Managing Marketing Channel & Supply Chain Through Vertical Marketing Systems:
• Independent (conventional) Marketing Channel:
Several independent members each attempting to satisfy its own objectives &
maximize its profits – often at expense of other members
• Vertical Marketing System:
Members act as a unified system – increasing phases of formality & control
Administered Vertical Marketing System – no common ownership or contractual
relationships, but dominant channel member holds balance of power
Power – when one firm has ability to dictate actions of another at a different
level of distribution
(a) Reward power: Rewards offered for compliance
(b) Coercive power: Threatening or punishing other channel member for not
undertaking certain tasks
(c) Referent power: Desire to be associated with dominant business
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(d) Expertise power: Using expertise as leverage to influence actions of another
channel member
(e) Information power: One party provides or withholds information to influence
actions of another party
(f) Legitimate power: Influencing actions because of contractual agreement
Contractual Vertical Marketing System – independent firms at different levels of
marketing channel join through contracts to obtain economies of scale and
coordination to reduce conflict
(a) Franchising: Contractual agreement between franchisor and a franchisee that
allows franchisee to operate retail outlet retail outlet using a name and
format developed and supported by the franchisor
Corporate Vertical Marketing System – parent company has complete control &
can dictate priorities and objectives of the marketing channel because it owns
multiple segments of the channel
Managing Marketing Channels & Supply Chains Through Strategic Relationships:
• Strategic Relationship: Members committed to maintaining long term, investing in
opportunities that are mutually beneficial (requires trust, communication & goals)
Open communication – to share info, develop sales forecasts & coordinate
deliveries
Common goals – give incentive to pool strengths & exploit opportunities
together
Interdependence – viewing success and ultimate goals as intricately linked
(develop deeper long term relationships)
Credible commitments – to, or tangible investments in, the relationship
Making Merchandise Flow Through Marketing Channels
Distribution centers vs direct store delivery:
• Advantages of using distribution center:
More accurate sales forecasts
Retailer can carry less merchandise in individual stores – lower costs
Easier to avoid running out of stock or having too much stock
Retail space more expensive than distribution center space
The Distribution Center:
• Management of Inbound Transport
Planners – employees responsible for the financial planning and analysis of
merchandise and its allocation to stores
Dispatcher – person who coordinates deliveries to distribution center
• Receiving & Checking Using Universal Product Code and Radiofrequency
Identification Devices
Receiving – process of recording the receipt of merchandise as it arrives at a
distribution center
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Chapter 12 supply chain, channel management & Wholesalers firms that buy products from manufacturers and resell to retailers. Marketing channels add value: product becomes more expensive, but more valuable at each stage. Marketing channel management affects other aspects of marketing: sales department coordinates delivery promises with factory/distribution centers, easy to lose credibility by promising deliveries/ run a promotion and not have merchandise available when customer expects it. Direct marketing channel: no intermediaries between buyer and seller. Indirect marketing channel: one or more intermediaries work with manufacturers to provide goods and service to customers. Vertical channel conflict: when supply chain members that buy and sell to one another are not in agreement about their goals, roles or rewards. Horizontal channel conflict: when there is disagreement among members at the same level of marketing channel (e. g. competing retailers) Managing marketing channel & supply chain through vertical marketing systems:
