p. 368
PPT 12-28
p. 369
PPT 12-29
p. 369
PPT 12-30
PPT 12-31
p. 369
PPT 12-32
p. 370
p. 370
PPT 12-33
PPT 12-34
Identify the major channel alternatives open to a
company.
CHANNEL DESIGN DECISIONS
Marketing channel design calls for analyzing consumer
needs, setting channel objectives, identifying major channel
alternatives, and evaluating them.
Analyzing Consumer Needs
The company must balance consumer needs not only
against the feasibility and costs of meeting these needs but
also against customer price preferences.
Setting Channel Objectives
Companies should state their marketing channel objectives
in terms of targeted levels of customer service.
The company should decide which segments to serve and
the best channels to use in each case.
The company’s channel objectives are influenced by the
nature of the company, its products, its marketing
intermediaries, its competitors, and the environment.
Environmental factors such as economic conditions and
legal constraints may affect channel objectives and design.
Identifying Major Alternatives
Types of Intermediaries
A firm should identify the types of channel members
available to carry out its channel work.
Number of Marketing Intermediaries
Companies must also determine the number of channel
members to use at each level.
Three strategies are available:
1. Intensive distribution is ideal for producers of
convenience products and common raw materials. It
is a strategy in which they stock their products in as
Learning Objective
3
p. 369
Key Term:
Marketing channel
design
p. 369
Photo: Customer
channel service
needs; Wegmans
p. 370
Key Term: Intensive
distribution
p. 371
Photo: Selective
distribution; Stihl
p. 371
PPT 12-35
p. 371
PPT 12-36
p. 371
PPT 12-37
many outlets as possible.
2. Exclusive distribution is when producers purposely
limit the number of intermediaries handling their
products. The producer gives only a limited number
of dealers the exclusive right to distribute its
products in their territories.
3. Selective distribution involves the use of more than
one, but fewer than all, of the intermediaries who are
willing to carry a company’s products.
Responsibilities of Channel Members
The producer and intermediaries need to agree on the terms
and responsibilities of each channel member.
They should agree on price policies, conditions of sale,
territorial rights, and specific services to be performed by
each party.
Evaluating the Major Alternatives
Using economic criteria, a company compares the likely
sales, costs, and profitability of different channel
alternatives.
Control issues must be considered. Using intermediaries
means giving them some control over the marketing of the
product, and some intermediaries take more control than
others.
Adaptability criteria must be applied. Companies want to
keep the channel flexible so that they can adapt to
environmental changes.
Designing International Distribution Channels
In some markets, the distribution system is complex and
hard to penetrate, consisting of many layers and large
numbers of intermediaries.
At the other extreme, distribution systems in developing
countries may be scattered, inefficient, or altogether
lacking.
p. 371
Key Term:
Exclusive
distribution,
Selective
distribution
p. 372
Photo: KFC
Sometimes customs or government regulation can greatly
restrict how a company distributes products in global
markets.
Review Learning Objective 3: Identify the major channel
alternatives open to a company.
Assignments, Resources
Use Video Case here
Use Discussion Question 12-3 and 12-4 here
Use Critical Thinking Exercise 12-6 here
Use Additional Projects 3, 4, and 5 here
Use Think-Pair-Share 4 and 5 here
p. 372
PPT 12-38
p. 372
PPT 12-39
p. 373
p. 375
Explain how companies select, motivate, and evaluate
channel members.
CHANNEL MANAGEMENT DECISIONS
Marketing channel management calls for selecting,
managing, and motivating individual channel members and
evaluating their performance over time.
Selecting Channel Members
When selecting intermediaries, the company should
determine which characteristics distinguish the better ones.
Managing and Motivating Channel Members
The company must sell not only through the intermediaries
but to and with them.
Most companies practice strong partner relationship
management (PRM) to forge long-term partnerships with
channel members.
Evaluating Channel Members
The company must check channel member performance
against standards such as sales quotas, average inventory
levels, customer delivery time, cooperation in company
promotion and training programs, and service to the
customer.
The company should recognize and reward intermediaries
who are performing well and adding good value for
consumers.
Learning Objective
4
p. 372
Key Term:
Marketing channel
management
p. 349
Ad: CVS
p. 374
Photo: Partner
relationship
management:
Amazon and P&G
Those who are performing poorly should be assisted or, as a
last resort, replaced.
Assignments, Resources
Use Online, Mobile, and Social Media Marketing
here
Use Real Marketing 12.2 here
Use Small Group Assignment 2 here
p. 375
PPT 12-40
p. 376
PUBLIC POLICY AND DISTRIBUTION DECISIONS
Exclusive distribution occurs when the seller allows only
certain outlets to carry its products.
Exclusive dealing occurs when the seller requires that these
dealers not handle competitors’ products.
Exclusive arrangements exclude other producers from
selling to these dealers. This brings exclusive dealing
contracts under the scope of the Clayton Act of 1914.
Exclusive territorial agreements occur when the producer
agrees not to sell to other dealers in a given area, or the
buyer may agree to sell only in its own territory.
Full-line forcing occurs when producers of a strong brand
sell only to dealers if they agree to take some or all of the
rest of the line. This is also known as a tying agreement.
In general, sellers can drop dealers “for cause.”
Review Learning Objective 4: Explain how companies
select, motivate, and evaluate channel members.
Assignments, Resources
Use Marketing Ethics here
p. 376
PPT 12-41
PPT 12-42
Discuss the nature and importance of marketing
logistics and integrated supply chain management.
MARKETING LOGISTICS AND SUPPLY CHAIN
MANAGEMENT
Nature and Importance of Marketing Logistics
Marketing logistics (also called physical distribution)
involves planning, implementing, and controlling the
Learning Objective
5
p. 376
Key Terms:
Marketing logistics
(physical
distribution),
PPT 12-43
PPT 12-44
p. 377
p. 377
p. 378
physical flow of goods, services, and related information
from points of origin to points of consumption to meet
customer requirements at a profit.
Marketing logistics involves outbound distribution (moving
products from the factory to resellers and ultimately to
customers), inbound distribution (moving products and
materials from suppliers to the factory), and reverse
distribution (moving broken, unwanted, or excess products
returned by consumers or resellers).
Marketing logistics involves the entirety of supply chain
management—managing upstream and downstream
value-added flows of materials, final goods, and related
information among suppliers, the company, resellers, and
final consumers (Figure 12.5).
Companies today are placing greater emphasis on logistics
for several reasons:
1. Companies can gain a powerful competitive
advantage by using improved logistics to give
customers better service or lower prices.
2. Improved logistics can yield tremendous cost
savings to both the company and its customers.
3. The explosion in product variety has created a need
for improved logistics management.
4. Improvements in information technology have
created opportunities for major gains in distribution
efficiency.
5. More than almost any other marketing function,
logistics affects the environment and a firm’s
environmental sustainability efforts.
Sustainable Supply Chains
Companies have many reasons for reducing the
environmental impact of their supply chains. Many large
customers are demanding it. Consumers are demanding it.
It’s also the right thing to do. And they are good for a
company’s bottom line.
Goals of the Logistics System
The goal of marketing logistics should be to provide a
targeted level of customer service at the least cost.
Supply chain
management
p. 376
Figure 12.5: Supply
Chain Management
p. 377
Photo: Logistics
PPT 12-45
p. 379
p. 380
Major Logistics Functions
Warehousing
A company must decide on how many and what types of
warehouses it needs and where they will be located.
Storage warehouses store goods for moderate to long
periods. Distribution centers are designed to move goods
rather than just store them.
Inventory Management
Just-in-time logistics systems: Producers and retailers carry
only small inventories of parts or merchandise, often only
enough for a few days of operations.
Transportation
Trucks have increased their share of transportation steadily
and now account for nearly 40 percent of total cargo
ton-miles in the United States.
Trucks are highly flexible in their routing and time
schedules, and they can usually offer faster service than
railroads.
They are efficient for short hauls of high-value
merchandise.
Railroads account for 37 percent of total cargo ton-miles
moved.
They are one of the most cost-effective modes for shipping
large amounts of bulk products—coal, sand, minerals, and
farm and forest products—over long distances.
Water carriers account for 5 percent of cargo ton-miles and
transport large amounts of goods by ships and barges on
U.S. coastal and inland waterways.
Although the cost of water transportation is very low for
shipping bulky, low-value, nonperishable products, it is the
slowest mode and may be affected by the weather.
p. 379
Key Term:
Distribution center
p. 379
Photo: Amazon
p. 380
Photo:
Transportation
modes
p. 381
p. 381
Pipelines account for about 1 percent of cargo ton-miles.
They are a specialized means of shipping petroleum, natural
gas, and chemicals from sources to markets.
Air carriers transport less than 1 percent of the nation’s
goods. Airfreight rates are much higher than rail or truck
rates.
The Internet carries digital products from producer to
customer via satellite, cable, or phone wire.
Multimodal transportation means combining two or more
modes of transportation.
Piggyback—rail and trucks
Fishyback—water and trucks
Trainship—water and rail
Airtruck—air and trucks
Logistics Information Management
Electronic data interchange (EDI) is the computerized
exchange of data between organizations.
Vendor-managed inventory (VMI) systems or continuous
inventory replenishment systems involve the customer
sharing real-time data on sales and current inventory levels
with the supplier. The supplier then takes full responsibility
for managing inventories and deliveries.
p. 380
Photo: Multimodal
transportation
p. 380
Key Term:
Multimodal
Transportation
Assignments, Resources
Use Critical Thinking Exercise 12-8 here
Use Discussion Question 12-5 here
Troubleshooting Tip
In marketing logistics, the concepts of inbound and
reverse logistics should be fully explained. Most
students, at this point in the chapter, will have no
problems with outbound logistics.
p. 381
PPT 12-46
Integrated Logistics Management
Integrated logistics management is a concept that
recognizes that providing better customer service and
trimming distribution costs require teamwork, both inside
the company and among all the marketing channel
organizations.
p. 381
Key Term:
Integrated logistics
management
p. 382
p. 382
Cross-Functional Teamwork Inside the Company
The goal of integrated supply chain management is to
harmonize all of the company’s logistics decisions.
Close working relationships among departments can be
achieved in several ways.
Permanent logistics committees, made up of
managers responsible for different physical
distribution activities
Supply chain manager positions that link the
logistics activities of functional areas
System-wide supply chain management software
Building Logistics Partnerships
Cross-functional, cross-company teams—for example, P&G
employees work jointly with their counterparts at Walmart
to find ways to squeeze costs out of their distribution
system.
Shared projects—for example, Home Depot allows key
suppliers to use its stores as a testing ground for new
merchandising programs.
Third-Party Logistics
Third-party logistics (3PL) providers help clients tighten
up overstuffed supply chains, slash inventories, and get
products to customers more quickly and reliably. (3PL is
also called outsourced logistics or contract logistics.)
Companies use third-party logistics providers for several
reasons:
1. These providers can often do it more efficiently and
at a lower cost.
2. Outsourcing logistics frees a company to focus more
intensely on its core business.
3. Integrated logistics companies understand
increasingly complex logistics environments.
Review Learning Objective 5: Discuss the nature and
importance of marketing logistics and integrated
p. 382
Photo: Integrated
logistics
management;
Oracle
p. 382
Key Term:
Third-party logistics
(3PL) provider
supply chain management.
Assignments, Resources
Use Company Case here
Use Think-Pair-Share 6 here