Page 423 - Foundations of Marketing

390 Part 5 | Distribution Decisions

Chapter Review

1. Describe the foundations of supply-chain in the marketing channel must be performed. As such, elimi-
management. nating intermediaries results in other organizations in the
channel having to perform those functions. Because inter-
The distribution component of the marketing mix focuses
mediaries serve both producers and buyers, they reduce the
on the decisions and activities involved in making products
total number of transactions that otherwise would be needed
available to customers when and where they want to purchase
to move products from producer to the end customer.
them. An important function of distribution is the joint effort
Channels of distribution are broadly classified as chan-
of all involved organizations to be part of creating an effec-
nels for consumer products and for business products. Within
tive supply chain, which refers to all the activities associated
these two broad categories, different products require differ-
with the flow and transformation of products from raw mate-
ent channels. Although consumer goods can move directly
rials through to the end customer. Operations management is
from producer to consumers, consumer channels that include
the total set of managerial activities used by an organization
wholesalers and retailers are more economical for many
to transform resource inputs into goods, services, or both.
goods. Distribution of business products differs from that of
Logistics management involves planning, implementing,
consumer products in the types of channels used. A direct
and controlling the efficient and effective flow and storage
distribution channel is most common in business market-
of goods, services, and information from the point of ori-
ing. Also used are channels containing industrial distribu-
gin to consumption in order to meet customers’ needs and
tors, manufacturers’ agents, and a combination of agents and
wants. Supply management in its broadest form refers to the
distributors. Most producers have multiple or dual channels
processes that enable the progress of value from raw mate-
so the distribution system can be adjusted for various target
rial to final customer and back to redesign and final dispo-
markets.
sition. Supply-chain management, therefore, refers to a set
Selecting an appropriate marketing channel is a crucial
of approaches used to integrate the functions of operations
decision for supply-chain managers. To determine which
management, logistics management, supply management,
channel is most appropriate, managers must think about cus-
and marketing-channel management so that goods and ser-
tomer characteristics, the type of organization, product attri-
vices are produced and distributed in the right quantities, to
butes, competition, environmental forces, and the availability
the right locations, and at the right time. The supply chain
and characteristics of intermediaries. Careful consideration
includes all entities—shippers and other firms that facilitate
of these factors will assist a supply-chain manager in select-
distribution, producers, wholesalers, and retailers—that dis-
ing the correct channel.
tribute products and benefit from cooperative efforts.
3. Identify the intensity of market coverage.
2. Explore the role and significance of marketing
An effective marketing channel is managed such that prod-
channels and supply chains.
ucts receive appropriate market coverage. There are three
A marketing channel, or channel of distribution, is a group of levels of market coverage: intensive, selective, and exclusive.
individuals and organizations that direct the flow of products Different types of products are best handled using different
from producers to customers. The major role of marketing intensities of market coverage. In choosing intensive distribu-
channels is to make products available at the right time, at tion, producers strive to make a product available to all pos-
the right price, in the right place, and in the right amounts. sible dealers. In selective distribution, only some outlets in
In most channels of distribution, producers and consumers an area are chosen to distribute a product that requires more
are linked by marketing intermediaries. The two major types consideration and effort on the part of the consumer before
of intermediaries are retailers, which purchase products and purchase. Exclusive distribution is used for more expensive
resell them to ultimate consumers, and wholesalers, which items and usually gives a single dealer rights to sell a product
buy and resell products to other wholesalers, retailers, and in a large geographic area.
business customers.
Marketing channels serve many functions. They cre- 4. Examine strategic issues in marketing
ate time, place, and possession utilities by making products channels, including leadership, cooperation,
available when, where, and at the price customers want and and conflict.
providing customers with access to product use through sale
Each channel member performs a different role in the system
or rental. Marketing intermediaries facilitate exchange effi-
and agrees to accept certain rights, responsibilities, rewards,
ciencies, often reducing the costs of exchanges by performing
and sanctions for nonconformity. Although many marketing
certain services and functions. Although some critics suggest
channels are determined by consensus, some are organized
eliminating wholesalers, the functions of the intermediaries
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