Marketing Channels Overview

Marketing Channels

• Marketing channels are sets of interconnected organizations that make a company's products or services available for consumers or business users. They are also known as distribution channels.
• Companies' channel decisions impact every other marketing decision and can provide a competitive advantage requiring long-term commitments to other firms.
• Supply chains involve relationships with key suppliers and resellers to make products and services available to buyers.
  • Upstream partners supply raw materials, components, and information needed in creating a product/service.
  • Downstream partners distribute/market products/services.
• A value delivery network connects the company with its suppliers, distributors, and ultimately, the customer to improve performance.

Conventional Distribution Channel

• Composed of independent producers, wholesalers, and retailers.
• Each member prioritizes its own profits, potentially at the expense of the overall channel.
• No formal control structure or mechanisms exist for conflict resolution amongst channel members meaning the channel members have little sway over each other.

Vertical Marketing System (VMS)

• A unified system created by producers, wholesalers, and retailers.
• One channel member controls or has contracts with the other members through ownership or significant power.
• This unified system often leads to greater cooperation.
• The VMS can be controlled by any one of the involved members (producer, wholesaler, or retailer).

Zara's Competitive Advantage

• Zara has a vertically integrated supply chain, owning their production facilities and controlling the design, production, and labeling of their clothing.
• This vertical integration allows efficient flow of merchandise throughout the entire production and distribution process.
• It allows Zara to have tight control over production and supply of raw materials.

Horizontal Marketing System

• Two or more companies at one or more levels join to create a marketing opportunity, typically companies that aren't competitors.
• These partnerships often have complementary products/services which maximize selling space and often maximize the availability to sell these products at a wider market/consumer base.
• Examples include Chapters bookstores teaming up with Starbucks.

Effective Channel Management

• Effective channel management ensures sufficient goods are available at the right time and location.
• Functions may include transporting goods from vendors to intermediate points/distributors and stores, warehousing products, and taking on financial risks during transportation.
• Businesses aim to bridge gaps in time, possession, and place to ensure goods and services reach their intended consumers.

Multichannel Distribution Systems

• Systems where a single company uses multiple channels to reach various customer segments, including consumer, business segments, and other retailer channels (e.g. catalogs and online).
• Benefits include expanded sales and market coverage, and tailored products/services.
• Disadvantages are difficulties in controlling multiple channels and potential conflict between these channels.

Marketing Logistics

• The process of planning, implementing, and controlling the physical flow of goods, services, and related information to profitably match the right product with the right customer in the right location and at the right time.
• Logistics involve inventory management, transportation, warehousing, and information management.

Returned Merchandise

• Returned goods are often either damaged, out-of-season, or overstock that are either sold at a discount or returned to the vendor.
• Companies often sell damaged goods to outlets like Winners, TJ Maxx and Marshalls.
• Undamaged merchandise is often returned to the main store's stock for resale.

Warehousing

• Warehouses store goods and products for a short period to facilitate distribution.
• Distributed points (distribution centers) are high-throughput, automated warehouses that efficiently handle order fulfillment and delivery.

Transportation

• Companies can use various transportation methods, including trucks (most common), railroads, and water carriers, to move goods.

Logistics Information Management

• Businesses utilize technologies such as Electronic Data Interchange (EDI), Vendor-Managed Inventory (VMI) to share product information and improve supply chain efficiency.

Distribution Strategy Group Work

• The task of evaluating current distribution methods and exploring opportunities to expand or refine distribution channels.
• Questions include how the product can be distributed via additional channels or increase the sales through existing channels (e.g. retailer kind (niche, big box, supermarket), online or multi-channel selling).