Lecture 10 Principles of Marketing

Value Delivery Network

The system of suppliers, distributors, and customers who partner to improve the performance of the entire value chain.

Upstream Partners

Suppliers who provide raw materials, components, finances, and expertise needed to create a product.

Downstream Partners

Marketing channel members such as wholesalers and retailers who deliver the product to customers.

Marketing Channel

A set of organizations that help make a product available for use or consumption.

Direct Channel

A distribution channel where the producer sells directly to the final consumer.

Indirect Channel

A distribution channel involving intermediaries such as wholesalers or retailers.

Hybrid Channel

A multichannel distribution system using more than one route to reach customers.

Disintermediation

When producers eliminate intermediaries or new intermediaries replace traditional ones.

Intermediaries

Organizations that help producers distribute goods efficiently through specialization and economies of scale.

Risk Taking

Intermediaries purchase goods without guarantee of resale, sharing financial risk with manufacturers.

Physical Distribution

Intermediaries physically move goods so they reach consumers conveniently.

Matching

Intermediaries match manufacturers with their target markets by stocking relevant products.

Assortment/Variety

Intermediaries offer consumers product variety by stocking multiple brands.

Information Function

Intermediaries provide manufacturers with sales data, customer insights, and market research.

Promotion Support

Intermediaries help with in-store advertising, displays, and sampling events.

Financing

Intermediaries offer credit or financing to help customers purchase goods.

Utility Creation

Intermediaries provide time, place, and ownership utility for consumers.

Channel Conflict

Disagreements among channel members due to differing goals and profit motives.

Vertical Conflict

Conflict between different levels of the channel, such as manufacturer and wholesaler.

Horizontal Conflict

Conflict between firms at the same channel level, such as two retailers.

Conventional Distribution System

A system where producers, wholesalers, and retailers operate independently with no unified leadership.

Vertical Marketing System

A coordinated distribution system where producers, wholesalers, and retailers act as one.

Corporate VMS

A VMS where one company owns multiple levels of the distribution channel.

Contractual VMS

A VMS where independent firms join together contractually, often through franchising.

Administered VMS

A VMS led by the power or size of one dominant channel member.

Horizontal Marketing System

When companies at the same channel level collaborate to pursue market opportunities.

Intensive Distribution

Using as many outlets as possible to achieve maximum product availability.

Selective Distribution

Using a limited number of intermediaries to balance coverage and control.

Exclusive Distribution

Granting exclusive rights to a single distributor in a geographic area, used for luxury or specialty items.

Marketing Logistics

Planning, implementing, and controlling the physical flow of goods from origin to consumption.

Inbound Logistics

Moving goods and materials from suppliers into the company.

Outbound Logistics

Moving finished goods from the company to customers or resellers.

Reverse Logistics

Handling product returns, defects, recycling, or excess inventory.

Importance of Logistics

Creates competitive advantage, cost savings, and improved customer service.

Logistics Information Management

Managing orders, inventory, billing, and customer data digitally (e.g., EDI).