Marketing: An Introduction

Fourteenth Edition
Marketing Channels: Delivering
Chapter 10
Customer Value
Objectives Outline
10.1 Explain why companies use marketing
channels and discuss the functions these
channels perform.
10.2 Discuss how channel members interact and
how they organize to perform the work of the
channel.
10.3 Identify the major channel alternatives
open to a company.
10.4 Explain how companies select, motivate,
and evaluate channel members.
10.5 Discuss the nature and importance of
marketing logistics and integrated supply
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chain management.
Supply Chains
• Upstream partners supply the raw materials, components, parts,
information, finances, and expertise needed to create a product
or service.
• Downstream partners serve as distribution channels that link the
firm and its customers.

Value Delivery Network Toyota manages a

A network composed of the company, huge network to
suppliers, distributors, and, ultimately, create customer
customers who partner with each other value and establish
to improve the performance of the entire the brand’s “Let’s Go
system in delivering customer value Places” promise.

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Marketing Channels (Distribution
Channels)
• Interdependent organizations that help
make a product or service available for use
or consumption
• Channel decisions
– Affect every other marketing decision
– Can lead to competitive advantage Netflix revolutionizes
– May involve long-term commitments to distribution.
other firms

How a distributor
reduces the
number of channel
transactions.

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Channel Members Add Value
 Create greater efficiency in making goods available to target
markets.
 Transform the assortments of products made by producers into
the assortments wanted by consumers.
 Bridge the major time, place, and possession gaps that
separate goods and services from users.

Key Functions of Channel Members

Help to complete transactions
– Information, Promotion, Contact, Matching, Negotiation
Help to fulfill the completed transactions
– Physical distribution, Financing, Risk taking

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Channel Levels
• Channel level: A layer of intermediaries that performs
work in bringing the product and its ownership closer to the
final buyer
– Direct marketing channel: No intermediary levels
– Indirect marketing channels: One or more intermediary levels
• Types of flows that connect the institutions in the channel:
– Physical flow of products
– Flow of ownership
– Payment flow
– Information flow
– Promotion flow

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Figure 10.2 Consumer and Business
Marketing Channels

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Disintermediation
• Occurs when product or service producers cut out
marketing channel intermediaries or when radically
new types of channel intermediaries displace
traditional ones
Toys “R” Us pioneered the superstore format
that once made it the go-to place for buying
toys. Competition has forced the retail giants to
close down operations and shutter its stores.

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Channel Design Decisions
• Marketing channel design involves designing effective
marketing channels by:
1. Analyzing customer needs
2. Setting channel objectives
3. Identifying major channel alternatives
- Intensive
- Selective
- Exclusive
4. Evaluating the alternatives

International Channels
• Should adapt to the structures of each country.
• Many layers and intermediaries.
• Customs & government regulations restrict distribution in global markets.
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Marketing Logistics (Physical
Distribution)
• Planning, implementing, and controlling the physical flow
of materials, final goods, and related information from
points of origin to consumption
• Customer-centered logistics: Marketplace backwards to
the factory or sources of supply
– Outbound logistics, Inbound logistics, Reverse logistics

Marketing logistics involves the entirety of supply chain management -

coordinate the activities of suppliers, purchasing agents, marketers,
channel members, and customers.
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 Marketing Logistics & Supply Chain
Management
• The goal of marketing logistics is to deliver a targeted level of
customer service at the least cost.
• Logistics functions include
– Warehousing
– Inventory management
– Transportation
– Logistics information management

Warehousing
• Storage warehouses store Amazon employs
goods for moderate to long teams of super-
periods. retrievers—Day-
• Distribution centers are large, Glo-orange Kiva
highly automated warehouses robots.
that receive goods, take orders,
fill them, and deliver goods to
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Inventory Management
• Should be done in a cost effective and profitable manner
– Just-in-time logistics systems
– Radio frequency identification (RFID), smart tag
technology, gives the physical location of a product.

Transportation
Companies can choose among many
transportation modes, including truck,
rail, water, pipeline, and air.

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Exercise
1. What are the functions of channel members?
2. What are the types of flows that connect the institutions
in the channel?
3. What are the functions of logistic?

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