Class 16 - Marketing Channels: Delivering Customer Value - Chapter 12
Summary
TLDRProfessor Ahern introduces Chapter 12 on marketing channels, focusing on delivering customer value. The lecture covers upstream and downstream partners in supply chains, the roles of supply and demand chains, and the concept of marketing channels. Examples are provided, such as gum distribution and grocery stores as intermediaries. The lecture also discusses the bullwhip effect, channel conflict, franchises, and distribution intensity, including intensive, exclusive, and selective distribution.
Takeaways
- 📚 Chapter 12 focuses on marketing channels and their role in delivering customer value from the manufacturer to the end user.
- 🔄 The concept of supply chains involves both upstream partners (suppliers of raw materials and components) and downstream partners (retailers and wholesalers).
- 🛒 Downstream partners are crucial for the distribution and marketing of products to end customers.
- 🔑 Understanding supply and demand chains is fundamental to marketing and supply chain management.
- 🏬 Marketing channels can be a set of independent organizations that facilitate the availability of products or services to consumers.
- 🌐 Examples of marketing channels include retailers, wholesalers, and online platforms like Amazon.
- 📈 The 'bullwhip effect' describes the phenomenon where demand fluctuations are magnified at different stages of the supply chain.
- 💬 Channel conflict can arise from disagreements among channel members over goals, roles, and rewards.
- 🔄 Horizontal conflict occurs between firms at the same level of the channel, while vertical conflict happens between different levels.
- 🏢 Franchises are a type of contractual vertical marketing system where a franchisor links different stages of production and distribution.
- 📊 Companies can use multi-channel distribution systems to reach consumers, including direct sales and sales through intermediaries.
- 📦 Distribution intensity refers to the exclusivity and saturation level of a product in the market, with options like intensive, exclusive, and selective distribution.
Q & A
What is the main focus of Chapter 12 in the Principles of Marketing course?
-Chapter 12 focuses on 'Marketing Channels Delivering Customer Value', discussing the concept of channels and channels of distribution from a marketing perspective, particularly how products are distributed and marketed from the manufacturer to the end user.
What is the role of upstream partners in a supply chain?
-Upstream partners are firms that supply raw materials, components, parts, information, finances, and expertise needed to create a product or service. They contribute to the production and supply of the product or service before it reaches the marketplace.
Can you explain the concept of downstream partners as mentioned in the script?
-Downstream partners include marketing channels or distribution channels that look towards the customer. They consist of retailers and wholesalers and are involved after the product or service is completely set, helping to distribute and market the product to end-users.
What is the difference between supply chain and demand chain?
-The supply chain refers to how a firm makes and sells products, including raw materials, productive units, and factory capacity. The demand chain, on the other hand, starts with the need of the target customer and responds by supplying products to fulfill that demand.
How does the concept of marketing channels differ from distribution channels?
-A marketing channel is a set of independent organizations that help make a product or service available for use or consumption by the end consumer. It includes not only distribution but also involves marketing efforts to make the product accessible to consumers.
What is an example of a marketing channel mentioned in the script?
-An example of a marketing channel is a gum manufacturer using grocery stores, convenience stores, or online platforms like Amazon as intermediaries to distribute their gum to end consumers.
What is the Bullwhip Effect in the context of supply chain management?
-The Bullwhip Effect refers to a phenomenon where orders sent to the manufacturer by retailers create larger demand variances than the sales to the end customer. This can cause inefficiencies and exaggerated fluctuations in the supply chain due to poor communication and demand prediction.
What is channel conflict and what are the two types mentioned in the script?
-Channel conflict refers to disagreements among channel members over goals, roles, and rewards. The two types mentioned are horizontal conflict, which occurs among firms at the same level of the channel, and vertical conflict, which happens between different levels of the same channel or supply chain.
What is a franchise organization as described in the script?
-A franchise organization is a contractual vertical marketing system where a franchisor links between several stages of the production and distribution process, allowing franchisees to distribute a brand's products or services under certain agreements and guidelines.
What are the three levels of distribution intensity discussed in the script?
-The three levels of distribution intensity are intensive distribution, where many channels are used to saturate the market; exclusive distribution, where only certain selected distributors are allowed to sell the product; and selective distribution, where a subset of agreed-upon distributors is chosen to sell the product.
How does a multi-channel distribution system work as explained in the script?
-A multi-channel distribution system involves a producer using more than one channel to distribute products to customers. For example, a technology company like Apple might sell directly to customers, through retailers, or through distributors to business segments, using various channels like stores, online platforms, and dealer networks.
Outlines
📚 Introduction to Marketing Channels
Professor Ahern begins the lecture by welcoming students to Marketing 3336, focusing on Chapter 12: Marketing Channels Delivering Customer Value. The chapter discusses the concept of marketing channels and distribution from a marketing and supply chain perspective. It covers the journey of a product from the manufacturer to the end user. The lecture introduces the idea of supply chains and value delivery networks, distinguishing between upstream partners, who supply raw materials and components, and downstream partners, which include retailers and wholesalers. The importance of understanding these concepts for both marketing and supply chain management is emphasized, suggesting that students consider focusing on supply chain management if interested.
🛒 Understanding Supply Chains and Distribution
The lecture continues with a discussion on supply chains and value networks, explaining the roles of upstream and downstream partners in the production and distribution of products. The concept of supply and demand chains is introduced, with supply chains focusing on production and materials sourcing, and demand chains starting with customer needs and working backwards to production. Marketing channels are defined as a set of independent organizations that help make products available to consumers, using examples like gum manufacturers and grocery stores to illustrate how products reach the end consumer through various distribution channels.
💼 The Role of Intermediaries in Distribution
This section delves into the role of intermediaries, such as distributors and retailers, in the distribution process. Intermediaries add value by providing information, promotions, and physical distribution of products. They match customers with products and can negotiate deals on behalf of consumers. The lecture uses the example of a grocery store like HEB, which sources products from various suppliers and manufacturers, making shopping convenient for customers. The importance of intermediaries in simplifying the shopping process and adding value to both producers and consumers is highlighted.
🚚 Levels of Distribution Channels
The lecture discusses the different levels of distribution channels, distinguishing between business-to-business (B2B) and business-to-consumer (B2C) markets. It explains how products move from producers to consumers through various intermediaries, such as wholesalers and retailers. The concept of the bullwhip effect is introduced, which occurs when there are multiple layers of intermediaries between the producer and the consumer, leading to inefficiencies and miscommunications in demand forecasting. A video example is mentioned to further illustrate the bullwhip effect.
🤝 Channel Conflict and Franchise Organizations
This part of the lecture addresses channel conflict, which arises when there are disagreements among channel members over goals, roles, and rewards. Examples of horizontal conflict, where firms at the same level compete, and vertical conflict, where different levels of the supply chain have disputes, are provided. The lecture also covers franchise organizations, which are contractual vertical marketing systems, and how they function. The difference between horizontal and vertical marketing systems is explained, with examples given for each.
📈 Multi-Channel Distribution and Intensity of Distribution
The final section of the lecture discusses multi-channel distribution systems, where producers use more than one channel to reach customers, such as direct sales and sales through intermediaries. The concept of distribution intensity is introduced, with examples of intensive, exclusive, and selective distribution. The lecture concludes by emphasizing the importance of understanding channels for careers in supply chain management and encourages interested students to explore related programs.
Mindmap
Keywords
💡Marketing Channels
💡Channels of Distribution
💡Upstream Partners
💡Downstream Partners
💡Supply Chain
💡Demand Chain
💡Intermediaries
💡Bullwhip Effect
💡Channel Conflict
💡Franchises
💡Distribution Intensity
Highlights
Introduction to Chapter 12: Marketing Channels Delivering Customer Value
Importance of understanding marketing and supply chain management concepts
The role of upstream partners in supplying raw materials and components
Downstream partners' function in marketing and distributing products to end users
The significance of marketing channels in making products available to consumers
Supply chain versus demand chain dynamics
Examples of marketing channels using gum distribution
The role of intermediaries in simplifying the purchasing process for consumers
Value added by intermediaries in distribution and marketing
Different levels of distribution channels from producer to consumer
The Bullwhip Effect and its impact on supply chain management
Channel conflict: Horizontal and vertical conflicts among channel members
Franchising as a contractual vertical marketing system
Horizontal marketing systems and their collaboration opportunities
Multi-channel distribution systems used by companies like Apple
Intensity of distribution: Intensive, exclusive, and selective distribution
Career opportunities in supply chain management
Transcripts
hi students welcome to uh principles of
marketing uh marketing 3336
uh this is professor ahern and today
we're going to be covering uh
chapter 12. uh the title of chapter 12
is marketing channels delivering
customer value
so today we're going to be talking about
the concept of channels
and channels of distribution in
particular we're going to be thinking
about it from a marketing perspective
and the way the product is distributed
and marketed downstream
uh from the manufacturer all the way to
the end user
so um this is actually quite an
important chapter for us to understand
the foundations or fundamentals of
of the concepts within marketing and
supply chain management
um we actually have an entire major in
focus and supply chain in the bower
college of business so if this is
something of interest to you
i recommend that you pursue that or look
more into taking courses in this
particular area
let's start off by talking a little bit
about the idea of
supply chains and the value delivery
network
so when we think about supply chains and
this is the way products are supplied
and the value that can be brought
to the marketplace on products we have
what we call
upstream partners and downstream
partners
upstream partners are firms that supply
raw materials
components parts information finances
and expertise
needed to create a product or service so
what that is is think about
everything that goes into that product
or service from the raw materials to
every component of that product in order
to actually produce
manufacture or supply that product
downstream to the marketplace
these are what's called upstream
partners that happen within a
marketplace
recognize that the markets and the way
we sell products is far more complex
than simply a customer going to a retail
store and that's really what we're going
to be talking about today
when we talk about these supply chains
and value networks
so we have our upstream partners and
then we have our downstream partners
downstream partners include marketing
channel or distribution channels
that look towards the customer so they
include retailers and wholesalers
so this is after we have the product or
service completely set
and we're looking to get that product or
service out to customers
and have them use that end product or
service
we look to downstream partners as a
mechanism to get that product out and
sell that product
and supply it to downstream partners so
upstream partners help in the production
and supply
of information and products and services
to get that product or service ready for
the market
and downstream partners help in the
distribution
and marketing of that information
downstream to end
users and customers in those
marketplaces
so it's important for us to know these
two terms
next we'll talk about two important
terms that we'll use
quite a bit the first is what we call
supply chain and then demand chain
the supply chain is how we make and sell
this is this view includes the firm's
raw materials productive units
and factory capacity so this really
comes at the concept of how do we supply
the materials and the chain of materials
that go into the actual production
and manufacturing of our products the
demand chain
just like the when we think about up and
down the demand chain
is the sense of uh and respond element
so this this view suggests that planning
starts with the need to the target
customer
so the demand chain thinks about the
fact that customers demand
products and as a result of those
product and service demand
upstream we we then supply those
products
and produce those products to fulfill
that demand that's what we call the
demand chain
so if a supply chain where that
information and products are supplied
and demand chain downstream where the
demand is produced for those products to
be able to fulfill that demand
these are two viewpoints we look at from
the supply
and value delivery network
so we think about marketing channels as
opposed to fully a
distribution channel a marketing channel
is a set of in
independent organizations that help make
a product
or service available for use or
consumption by the consumer or business
user so what we're talking about is the
marketing channel
is is and we'll give you some really
good examples here today and we'll talk
about this
is is a set of organizations downstream
that we work with
uh to be able to make our product
service available
so that the end consumer can access it
and buy it and consume it simple example
of this
a manufacturer may uh makes
gum we produce different kinds of gum
think about
any gum manufacturer those gum
manufacturers don't simply just take
that gum and sell it to end users
usually
what they do do is they use what's
called an intermediary or a channel to
get that gum out to people
so where might you buy gum you might buy
gum in a grocery store
a convenience store you might buy gum
through the internet through
amazon but there's all kinds of ways in
which we can get gum and these are
called distribution channels
and and these channels help us to market
and supply those products
to the end customer that's what we're
talking about when we talk about a
marketing channel
or a distribution channel in this case
so we can have these distributors
actually provide
a really helpful resource for us
so let me give you an example of this
and let's just think of a grocery store
as an example let's think of heb
as a mechanism of distribution so heb
obviously does not make and produce
every product that you can buy at heb
they supply they get this these products
that they fill their shelves with at heb
when you go grocery shopping
from many different suppliers and
manufacturers
upstream so all of these people supply
to them
and they take that they make it
available to you so you can go in and
shop and have this big inventory of
product
that then you choose from so that you
can then
bring those home in a shopping basket
and use those in your grocery shopping
think about if we didn't have an
intermediary like this so we had milk
manufacturers
we had um uh we had beef and meat
manufacturers
we have bread manufacturers we have all
the different ones
out there that are out there and let's
say they had to communicate and work
with
every single customer for them to be
able to get products and if you as a
customer had to work with
all these different manufacturers to get
your supply
of all the products you need in order to
make your grocery basket full
that would cause a tremendous amount of
complexity and difficulty for you
to be able to shop and get all that but
what that's distributor does is they
actually take in
all of that stuff they package it put it
on the shelves help to market it
and get it out to that end consumer and
as a result of that
the number of contacts that that
distributor takes and consolidates
really makes it much better for that
customer now this is true for all kinds
of distributors
we're talking about retail but these are
all kinds of distributors
that take on this function of helping
companies get their products and
services to market
more efficiently so that that market can
leverage what we call these
intermediaries in the marketplace
so what are some of the value that we
talked about that value of helping them
distribute but there's lots of different
things
that intermediaries can do they can help
to provide
additional information about those
products and services to the end user
they can help you promote things they
can you know put promotions in place for
your products and services
put so for example when you go into a
grocery store to shop you would see
maybe your product
on an end aisle cap when you're walking
there you see a big promotion for it
maybe somebody's giving tests out
things like that promoting your product
maybe there's things going on to bring
attention to our products
on the shelf this is a promotion element
um they can make contacts for us to be
able to get people
in there and get them looking at or
shopping for our products
they can match people to our products
help them
people are searching for things they can
fulfill that
that that need for somebody for their
search giving an example
their distributors are intermediaries
we're not talking about groceries it
could be insurance
there are these independent agents that
work with lots of different insurance
companies to bring in insurance products
and you as a customer might go in and
say i want life insurance
so what they do is they go out and shop
lots of different
um agencies or lots of different um
life insurance companies to find the one
that works best for you
gives you the best price gives you the
best information
gives you the best deal and as a result
of that they've worked as an
intermediary to add value but they've
also added value to all these
different insurance companies by helping
to shop and match you
up with the insurance company that works
best for you
they help negotiate deals for you they
work in the physical distribution of
products think about the retail stores
we talked about
they often will help in financing for
example um
so maybe they have an expensive product
on the shelf and you can't afford it
they'll provide a finance plan for you
to get it
um this is true with automobiles for
example um so um
so we have let's say you're you're going
out there and shopping
for a new toyota so toyotas uh
gets their cars out to the retail
distribution
network these retail distributors you
shop at are independent of toyota
but what they do is you go in and shop
for your toyota and then they develop a
financing plan for you
they can add their own financing plan to
make it possible for you to have that
toyota
they take risks on they bear risk by
having products and services
uh to distribute uh in their stores so
there's a lot of things that they do to
add value
on top of simply just making an
opportunity
for somebody to just buy from them
so let me give you some examples there's
lots of different variants of
channels of distribution there's a
number of levels of what we call
channels of distribution so we see the
most simple one
is where we have and we're going to talk
about b to b versus b to c
over over on this side of the picture
here
this is what we call the consumer
markets so if we think about uh
consumer markets these are where an end
consumer
is shopping and utilizing our product
okay so that's a consumer market so you
see here consumer marketing channels
here are business marketing channels
this is where a business
end user ends up consuming our product
or using it
so i'll give you an example for both of
these what we see is
there are intermediaries that take place
between the producer and the consumer in
both of these situations
so we have situations where the producer
produces the product and they sell it
directly to the consumer
so that often would happen through
internet sales or actually people just
going in and making
shopping right at that producer's uh
site
so an example of this is a geico
for example geico goes direct
so if you want to shop for insurance
through geico
you go directly to geico and they go to
the consumer
okay so um so that's a that's an example
sorry about that flipping back and forth
the next we have as an example
is uh is when we have a retailer or
intermediary between that
so the producer produces the product
the producer produces the product and
they sell it through a retailer and then
it goes to a consumer
this is what we've talked about as a as
a classic example
of a retailer this could be at heb this
could be
uh any of those different best buy or
any of those so the producer
produces their product they give it to
the retailer it goes to the end consumer
we also have many situations where a
producer
goes to a wholesaler and the wholesaler
goes to the retailer
and then the retailer goes to the end
consumer so we have different
layers of of channel distributors
that the more complex distribution
channels have multiple layers within
them
this whole kind of thing happens also
within the business markets as well
with companies or business customers
down here
making the same types of consumption
decisions
as the consumer and using these
intermediaries to help them
distribute their products and services
downstream
now what happens i want to talk about
this there's a classic
uh thing that happens when you have
multiple layers within your system so
you have a producer
that's producing a product they sell it
to a wholesaler
the wholesaler sells their products to a
retailer and then the retailer sells it
to the consumer
the more intermediaries you have the
less communication you have between
this producer and this end consumer
as a result of that you have a
communication that takes place here
one that's here and one that's here that
causes something
called the bulwick of bullwhip effect
and that's when
information does not make its way
efficiently downstream
from the producer to the consumer we're
going to watch a little video to learn
more about what we call the bullwhip
effect here
today is bull whip effect the ball whip
effect refers to a frustrating
phenomenon that frequently starts with
falling customer demand
although it could start with the reverse
a previously unanticipated rapid rise in
customer demand
this fall in customer demand prompts
retailers to under order
so as to reduce their inventories the
ball whip effect can be explained as an
occurrence detected by the supply chain
where orders sent to the manufacturer
and supplier create
larger variants than the sales to the
end customer
these irregular orders in the lower part
of the supply chain develop to be more
distinct higher up in the supply chain
this variance can interrupt the
smoothness of the supply chain process
as each link in the supply chain will
over or underestimate the product demand
resulting in exaggerated fluctuations
through the numerous stages of a supply
chain key factors such as time
and supply of order decisions demand for
the supply
lack of communication and
disorganization can result in one of the
most common problems
in supply chain management this common
problem is known as the bull whip effect
also sometimes the whiplash effect in
this blog post we will explain this
concept
and outline some of the contributing
factors to this issue
okay so that's a little bit of
information about what we call one of
the most common phenomenas
of when these intermediaries don't speak
to each other and give each other detail
downstream
they just place orders and it causes a
lack of communication
it causes this element or thing called
the bullet effect
so for example you may have downstream
somebody making a bigger order than
usual
and then what we see is that order gets
exaggerated as it goes upstream because
people see a variant
or a shock in the system this is what's
called the bullet effect
[Music]
so next let's talk about something that
happens out there when we have
channel members uh in the marketplace so
we have more than one
channel member in the marketplace we
have and then you have
channel players or partners working out
there in the marketplace
we have different channel kinds of
conflict than it could occur
so channel conflict refers to a
disagreement among
channel members over goals roles and
rewards
so i'm going to give you an example of
what we call a horizontal conflict and a
vertical conflict
so horizontal conflict occurs among
firms at the same level of the channel
so if
two firms are working as intermediaries
at the same level
for instance a firms may complain about
others stealing sales for them
or or or hurting them at that same level
of the channel
so i'll give you an example this um when
there's not enough exclusivity
of uh of distribution uh within a
marketplace and we're going to talk
about that exclusivity so
um in in this in the city of houston
we have three big um uh
audi dealerships so if you want to buy a
car from audi
you can go to any one of the three
dealerships in the city of houston
oftentimes what people will do is they
will
they will work these dealerships against
each other to try to get the best price
for an audi
so you might call audi central audi
north houston and audi
south houston and try to get the best
price on the new audi
q5 uh sedan uh suv
so you might call up and say you know
i'm really looking for this q
q5 suv what's the best you can do then
you call the other one you call the
other one you have them competing
against each other
that causes what we call a horizontal
conflict
those members are competing against each
other that are causing conflict within
that
and as a result you get price erosion
and it hurts the overall image because
they're making each other look bad by
undercutting each other
another example is what we call vertical
now that's horizontal because that means
a cross vertical conflict happens up and
down
where in the channel or the supply chain
there's conflict that happens
so conflict between different levels of
the same channel
is even more common so for example
mcdonald's
recently faced a growing conflict with
its
among 3 000 what we call independent
franchises
so we'll talk about franchises in a
minute but what an independent franchise
is
is that they have paid for the right to
distribute mcdonald's
and they are not officially part of
mcdonald's but they're a franchise that
owns the right to distribute mcdonald's
products
so those mcdonald's that are out there
that are independent they're not store
company owned but they're independent
franchises
in a recent company webcast they
actually went out to these the
mcdonald's went out and they started
complaining that they were getting
information that the cap
the cashiers that these independent
franchises
were not pleasant enough in fact they
recommended that these individuals do
more smiling
because they're not engaging customers
and they're getting a lot of information
the mcdonald's uh service workers are
not
happy or friendly service workers as a
result of that
these service workers and stuff got
pretty upset back at mcdonald's
and mcdonald's and the service workers
were not happy with mcdonald's at the
same time
because the amount of demand for product
at mcdonald's during this period had
reduced too
so there weren't as many people coming
into the mcdonald's stores
and as a result there was some tension
because there wasn't enough
patrons and as a result of that the some
of the people's hours were being cut
they were being their salaries were
being cut so as a result
it caused what we call a vertical
conflict tension
so that's between the independent uh
distributor of a mcdonald's and the
parent company mcdonald's
had a conflict with one another and
that's what we call a vertical conflict
so we have horizontal across vertical up
and down
so we likely talked about with
mcdonald's there are different variants
of what we call
franchise organizations what a franchise
organization is a contractual
vertical marketing system in which a
channel member
called a franchisor links between
several stages of the production and
distribution process i'll give you an
example
um let's look at uh at any of the big
donut manufacturers that are out there
so for those of you who've ever been to
canada or the northeast you would see
tim horton donuts uh you'd also see
dunkin donuts
but there's all kinds of shipley there's
all kinds of other donut companies that
are out there
now these donut companies are typically
set up as what we call
franchisees or franchisers so what
they've done is they paid for the right
to be able to distribute and use the
name of that brand
dunkin donuts so somebody owns the right
for dunkin donuts
and exclusively distribute dunkin donuts
in a particular area
and as a result of that they get
training information
marketing everything of the benefit of
dunkin donuts
so that they can distribute use dunkin
donuts products and sell dunkin donuts
but they
manage their own what we call franchise
so franchises is an important concept
for us to understand i'd like us to all
understand what a franchise is
there are lots of franchise
opportunities out there ranging from
beauty products to
coffee to food to all kinds of things
where people set up their own franchise
and what that is is that an organization
sets up a
specific system for you to be able to
own the rights to to distribute
and they provide you criteria marketing
and other information to be able to make
you more effective
now let me talk about the difference but
really quickly about between
horizontal marketing systems and
vertical a hormone
horizontal marketing system is a channel
arrangement which two or more companies
at one level join together to follow a
new marketing opportunity so sometimes
those companies that are across that we
talked about can partner with one
another so this is an example right here
where nestle and cheerios uh uh
partnered with one another in this
situation
to be able to make a specific type of
of cheerio um nestle whole grain
you'll see partnerships by two or more
vertical players
to be able to come together to make
things happen
so um one of the things you'll see is
alexa you know you're seeing now this
whole thing with buick and alexa
so buick and alexa are working together
um
to be able to make things even better to
make an
even better sale of the buick product
with the alexa product
you start to see more advertising with
that
so another so that that's that's a
combination
we'd see the other thing we'll often
often see the most common thing we see
is what we call
multi-channel distribution systems so
oftentimes
producers will use more than one channel
to get their products
out there to customers so think of a
producer that's producing
um in in this case uh
technology so an example of this a
technology company like apple
made sell directly to customers so apple
has apple stores and apple stuff and
they actually go out
and they sell their stuff through
catalogs phones online mobile
they sell directly to customers that's
here what we call
segment one they also may sell their
products
through retailers like for example you
can get
apple products through best buy at a
retailer so they'll go they'll sell to
best buy
and best buy will sell to you another
example
is they'll actually get it through
distributors too
so they'll sell it through a
distribution company that'll go out to
what we call
dealers and those dealers will sell it
to the what we call the business segment
so this is the business side and this is
the consumer side
so on the business side the apple may
make apple
technology products that are sold to big
businesses
and different businesses and they're
sold through
distributors and dealers or they could
actually sell their products directly to
businesses
they can sell servers larger computer
products
they may actually sell it right to a
business segment directly to another
company
so in this case apple may sell their
products
to 3m corporations so that 3m can supply
their computers right at 3m
and they may actually use a sales force
to do this so it's not unusual for the
companies to sell direct
as well as through intermediaries in
both the consumer market
as well as in a business marketplace
the last thing i want to mention today
is a little bit about what we call
intensity of distribution
and i'd like you to become familiar with
this there are three levels of what we
call distribution intensity and this
gets
at the exclusivity as well as the
intensity of the way in which products
are distributed to the marketplace
the first concept is what we call
intensive distribution
this is where we try to use as many
channels as possible to saturate our
products
out in the market get them out as much
as we possibly can
and we don't worry about how they get
out there we just distribute them as
much as possible
things like gum we talked about that
before i don't care
who sells my gum i just want the gum to
get out there
be distributed anybody can sell it and i
intensively distribute the product
think about things that we're not
worried about being exclusive or having
exclusive rights
we just want as many people to get
access to it as possible
that's called intensive distribution the
next is what we call
exclusive distribution this is where we
choose
only certain people are allowed to
distribute our products
so an example of exclusive distribution
is what we talked about
car dealerships they might say that you
have the exclusive rights to distribute
that product in north houston
you have the exclusive distribution to
sell the product in central
in south houston you may actually only
they may actually only allow one
distributor in the entire city
so exclusive distribution makes it
exclusive to a particular
area or marketplace so that we limit the
number of suppliers in that
to be able to limit that the opportunity
to compete against
each other in that marketplace and then
uh and that that exclusive that makes
them exclusive to that area
and then selective distribution is where
we choose only a subset of
of of agreed upon distributors
to be able to sell our product so i'll
give you an example of this often
um often designer products
or often high-end luxury products only
want
certain types of stores to sell their
products they would not want for example
you would not want your coach bag
sold through some sort of low-end store
so what what it does is coach goes out
there
and makes deals with certain types of
stores for the right to be able to
distribute
their product to those stores and they
selectively decide what kind of stores
are allowed to sell a coach product
they approve it they go in there and
check it out and that's what we call
selective distribution
so there are a number of different types
of major uh
intermediaries in the marketplace so
this pretty much
covers the concept of channels i know we
covered it at a fairly high level we're
going to get back to a little bit of
that more as we move forward in the
course
i hope you found this to be interesting
if you did actually find it to be very
interesting
the supply chain is a huge thing in the
city of houston in fact there are a lot
of jobs in supply chain management
so i would look to the supply chain
programs at the university of houston if
you are particularly interested
uh thanks and and have a great day
everybody
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