Chapter 6 - Marketing Channels and Supply Chains

Upstream partners

Firms that supply raw materials, components, parts, information, finances, and expertise to create a product or service.

Downstream partners

Marketing channel members such as wholesalers and retailers that link the firm to the customer.

Marketing channel (distribution channel)

A set of interdependent organizations that help make a product or service available for use or consumption by consumers or business users.

Channel level

Each layer of marketing intermediaries that performs some work in bringing the product closer to the final buyer.

Direct marketing channel

A channel that has no intermediary levels—the company sells directly to consumers.

Indirect marketing channel

A channel containing one or more intermediary levels.

Channel conflict

Disagreement among channel members over goals, roles, or rewards.

Vertical Marketing System (VMS)

Producers, wholesalers, and retailers acting as a unified system.

Corporate VMS

Combines successive stages of production and distribution under single ownership.

Contractual VMS

Independent firms join together through contracts (e.g., franchise systems).

Administered VMS

Coordination achieved through the size and power of one dominant channel member (e.g., Walmart).

Horizontal marketing system

Two or more companies at one channel level join together to pursue a new marketing opportunity.

Multichannel distribution system

A single firm sets up two or more marketing channels to reach one or more customer segments.

Disintermediation

The elimination of marketing intermediaries or their replacement by radically new types.

Channel design decisions

Analyzing consumer needs, setting channel objectives, identifying alternatives, and evaluating them.

Intensive distribution

Stocking the product in as many outlets as possible.

Exclusive distribution

Giving a limited number of dealers exclusive rights to distribute the company’s products.

Selective distribution

Using more than one but fewer than all intermediaries willing to carry a product.

Marketing logistics (physical distribution)

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

Supply chain management (SCM)

Managing the value-added flows among suppliers, the company, resellers, and consumers.

Warehousing

Storing goods while they await sale or further distribution.

Inventory management

Balancing costs of carrying inventory against benefits of greater product availability.

Transportation

Choosing among shipping alternatives—truck, rail, water, pipeline, air, or digital.

Logistics information management

Managing the flow of information to make better logistics decisions.