MARKETING STRATEGY

O.C. FERRELL MICHAEL D. HARTLINE

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.
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Graphical Depiction of a Supply Chain

Exhibit 9.1

9-3

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?

9-4

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.
9-5

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

9-6

Discussion Question
Describe the characteristics of a product that
represent something you would go to great
lengths to acquire, thus supporting a
manufacturers 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?
9-7

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?

9-8

Maximizing Profit Margin Performance

Exhibit 9.2

9-9

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

9-10

Factors in Successful
Supply Chain Collaboration

Exhibit 9.3

9-11

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

9-12

Major Components of
Category Management

Exhibit 9.4

9-13

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, Lowes, Office Depot, AutoZone,
Best Buy

and

Outsourcing Channel Functions

Outsourcing is growing rapidly

9-14

Category Killers - AutoZone

9-15

The Trend in Outsourcing

Exhibit 9.5

9-16

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

9-17

Discussion Question
What are the major differences you have
experienced in buying a product through a
physical retail store, a manufacturers
physical store, a catalog, and an online
merchant? What have some retailers in
your area done to justify their ongoing
presence in the channel?
9-18

Legal and Ethical Issues

in the Supply Chain

Dual Distribution
Exclusive Channel Arrangements
Tying Arrangements
Counterfeit Products

9-19

FDA Against Counterfeit Drugs

9-20