BUS106 Marketing

Principles
Marketing Mix: Place
Lecture 8
Copyright Notice
 This Topic’s Big Idea

“A marketing channel…. is a group of

organisations that agree to distribute a
product.”
 Learning Objectives
1. Explain marketing channels and the need
for intermediaries.
2. Identify issues that influence channel
strategy.
3. Discuss logistics and supply chain
management and their evolution into
distribution practice.
4. Discuss new technology and emerging
trends in supply chain management.
 Marketing Channels
Marketing channel
(channel of distribution)
A set of interdependent
organisations that facilitate
the transfer of ownership as
products move from
producer to business user
or consumer
Channel members
All parties in the marketing
channel who negotiate with
one another, buy and sell
products, and facilitate the
change of ownership
between buyer and seller in
the course of moving the
product from the
manufacturer into the hands
of the final consumer
 How marketing channels reduce
the number of required transactions
 Channel Intermediaries
Merchant Agents and
Retailer
wholesaler brokers
A channel intermediary Buys goods from Wholesaling
that sells mainly to manufacturers and intermediaries who
consumers resells them to facilitate the sale of a
businesses, government product to end user by
agencies and other representing retailers,
wholesalers or retailers; wholesalers or
and that receives and manufacturers
takes title to goods,
stores them in its own
warehouse and later
ships them
Channel Intermediaries
Channel functions performed
by intermediaries

Contacting/promotion

Transactional
Negotiating
functions

Risk-taking
Channel functions performed
by intermediaries

Physically distributing

Logistical
Storing
functions

Sorting
Channel functions performed
by intermediaries

Researching
Facilitating
function
Financing
Marketing Channels for
Consumer Products
 Direct Marketing
Tupperware has long
used direct marketing
as its primary method of
driving sales.

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 Channels for
Business and Industrial Products
 Retail Channels
The Internet has had a drastic impact on
retail channels in many industries, including
the car industry.

Would you buy a car via the Internet?

 Alternative
Channel Arrangements
 Alternative
Channel Arrangements
Walt Disney Company utilises dual
distribution when it releases first-run
animated films to movie theatres and then
releases a sequel directly to the home-video
market.
 Factors Affecting
Channel Choice
• Market factors
– Who are the potential customers?
– What/where/when/how do they buy?
• Product factors
– Standardised vs. customised issues
– product’s life cycle
– delicacy (perishable, fragile)
• Producer factors
– Direct distribution and control
 Levels of
Distribution Intensity
 Selective Distribution
Hugo Boss clothing is sold only in select
retail outlets. Because only a few retailers
are chosen, the consumer must seek out the
product.
 Channel Partnering

The joint effort of all channel members to

create a supply chain that serves customers
and creates a competitive advantage

• Speed up stock replenishment

• Improve customer service
• Reduction of channel’s total costs
Types of channel relationships
 Channel Power, Control and
Leadership

Channel leader
Channel power Channel control
(captain)
The capacity of a A situation that One member of a
particular marketing occurs when one marketing channel
channel member to marketing channel who exercises
control or influence member intentionally authority and power
the behaviour of affects another over the activities of
other channel member’s behaviour other members
members
 Channel Conflict
A clash of goals and methods between
distribution channel members

Horizontal conflict: occurs among channel

members on the same level

Vertical conflict: occurs among channel

members at different levels
 Supply chains and
logistics management
Logistics - The process of strategically managing
the efficient flow and storage of raw materials, in-
process stock and finished goods from point of origin
to point of consumption
Supply chain - The connected chain of all the
business entities, both internal and external to the
company, that perform or support the logistics function
Supply chain management - A management
system that coordinates all of the activities performed
by supply chain members from source, to the point of
consumption, which results in enhanced customer and
economic value
 Logistics Service
Interrelated activities performed by a
member of the supply chain to ensure that
the right product is in the right place at the
right time
• Customers want…
– Availability, timeliness, quality, undamaged
goods, minimal order effort, consistent
delivery…balanced with costs
Integrated functions
of the Supply Chain
 Sourcing & Procurement
Role of purchasing departments:
• Plan purchasing strategies
• Develop specifications
• Select suppliers
• Negotiate price
• Negotiate service levels
 Production Scheduling
Mass customisation (build-to-order) - Production
method whereby products are not made until an order is
placed by the customer; products are made according to
customer specifications
Just-in-time production - A process that redefines and
simplifies manufacturing by reducing inventory levels and
delivering raw materials just when they are needed on
the production line

Benefits: Reduces raw material inventories, shortens

lead times; creates better supplier relationships; reduces
production and storeroom costs; reduces paperwork
 Order Processing
Order processing system – a system whereby
orders are entered into the supply chain and filled
Electronic data interchange - information
technology that replaces paper documents, which
accompany business transactions
• Includes: purchase orders and invoices, with
electronic transmission of the needed information
to reduce stock levels, improve cash flow,
streamline operations, and increase the speed and
accuracy of information transmission
 Inventory Control
Inventory control system - A method of developing
and maintaining an adequate assortment of
materials or products, to meet customer demand
Materials requirement planning (MRP) - Stock
control system that manages the replenishment of
raw materials, supplies and components from the
supplier to the manufacturer
Distribution resource planning (DRP) - Stock
control system that manages the replenishment of
goods from the manufacturer to the final consumer
 Warehouse &
Materials Handling
• Method of moving stock into, within and
out of the warehouse
• Functions of materials handling:
– Receive goods into warehouse
– Identify, sort and label goods
– Dispatch the goods to temporary storage
– Recall, select or pick the goods for shipment
 Transportation
Criteria for transportation mode choice:
Relative Cost - the total amount
a specific carrier charges to move
the product from the point of
origin to the destination
Transit time - the total time a
carrier has possession of goods,
including the time required for
pick-up and delivery, handling and
movement between the point of
origin and the destination
Reliability - the consistency with
which the carrier delivers goods
on time and in acceptable
condition
Capability - the ability of the
carrier to provide the appropriate
equipment and conditions for
moving specific kinds of goods,
such as those that must be
transported in a controlled
environment (for example, under
refrigeration).
Accessibility - the carrier’s ability
to move goods over a specific
route or network.
Traceability - the relative ease
with which a shipment can be
located and transferred
 Trends in Logistics
Advances in computer technology
Outsourcing of logistics functions
– Use of an independent third party
Electronic distribution
• Over traditional forms such as fibre-optic cable or
through satellite transmission of electronic signals
Green supply chain management
• Involves the integration of environmentally
conscious thinking into all phases of key supply
chain management processes
 Marketing Channels and Logistics
Converse Automated Distribution Center

Logo adopted from: Converse Logo, 2016, viewed 25th of October 2016 http://logos-download.com/650-converse-logo-
download.html

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 Next Week

Marketing Mix: Promotion and Integrated

Marketing Communication.