chapter 10 marketing channels and supply chain management
TRANSCRIPT
Chapter 10
Marketing Channels and Supply Chain Management
Copyright 2007, Prentice Hall, Inc. 10-2
Roadmap: Previewing the Concepts
1. Explain why companies use distribution channels and discuss the functions these channels perform.
2. Discuss how channel members interact and how they organize to perform the work of the channel.
3. Identify the major channel alternatives open to a company.
4. Explain how companies select, motivate, and evaluate channel members.
5. Discuss the nature & importance of marketing logistics and supply chain management.
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Background Caterpillar dominates the
world’s markets for heavy construction and mining equipment.
Independent dealers are key to success, providing customer service, market intelligence, and more.
Distribution system is a competitive advantage.
Caterpillar – The Vital Role of Caterpillar – The Vital Role of DealersDealers
Case StudyCase Study
Building Partnerships Distribution system is built
on a base of mutual trust and shared dreams.
Caterpillar stresses dealer profitability, extraordinary dealer support, personal relationships, dealer performance, and full, honest, and frequent communications.
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Supply Chains
Producing and making products available to buyers requires building relationships with “upstream” and “downstream” partners.– Upstream: firms that supply the raw
materials, components, parts, and other elements necessary to create a good.
– Downstream: marketing channel partners that link the firm to the customer.
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Marketing Channel or Distribution Channel
A set of interdependent organizations involved in the process of making a product or service available for use or consumption by the consumer or business user.– Wholesalers– Distributors– Dealerships– Retailers
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How Channel Members Add Value
The use of intermediaries results from their greater efficiency in making goods available to target markets.
Offers the firm more than it can achieve on its own through the intermediaries:– Contacts– Experience– Specialization– Scale of operation
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Key Channel Functions
Transaction Fulfilling:– Physical
distribution– Financing– Risk taking
Transaction Completing:– Information– Promotion– Contact– Matching– Negotiation
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Number of Channel Levels
Number of intermediary levels indicates the length of a channel.– Direct marketing channels
• Have no intermediary levels between the manufacturer and the customer.
– Indirect marketing channels• Contains one or more intermediaries.
All channel institutions are connected by several types of flows.
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Channel Behavior
The channel will be most effective when:– Each member is assigned tasks it can do best.– All members cooperate to attain overall channel
goals.
If this does not happen, conflict occurs:– Horizontal Conflict occurs among firms at the
same level of the channel (e.g., retailer to retailer).– Vertical Conflict occurs between different levels
of the same channel (e.g., wholesaler to retailer).
Some conflict can be healthy competition.
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Vertical Marketing System
A distribution channel structure in which producers, wholesalers, and retailers act as a unified system.
One channel member owns the other, has contracts with them, or has so much power that they all cooperate.
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Types of Vertical Marketing Systems
Corporate VMS Contractual VMS Franchise organization Administered VMS
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Franchise Organizations
Manufacturer-Sponsored Retailer Franchise– Ford and its independent franchised dealers
Manufacturer-Sponsored Wholesaler Franchise– Coca-Cola’s licensed bottlers
Service-Firm Sponsored Retailer Franchise– McDonald’s, Avis, and Holiday Inn
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Innovations in Marketing Systems
Horizontal Marketing System– Two or more companies at one level join
together to follow a new marketing opportunity.
Multichannel Distribution System– Occurs when a single firm sets up two or
more marketing channels to reach one or more customer segments.
– Also called hybrid marketing system.
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Changing Channel Organization
Disintermediation: – Occurs when product and service
producers cut out intermediaries and go directly to final buyers, or when radically new types of channel intermediaries displace traditional ones.
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Channel Design Decisions
Analyzing Consumer Needs Setting Channel Objectives Identifying Major Alternatives Evaluating the Major Alternatives
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Analyzing Consumer Needs
Answering key questions helps to determine customer needs:– Do consumers want to buy from nearby
locations or are they willing to travel?– Do they value breadth of assortment or do
they prefer specialization?– Do consumers want many add-on services?
Firm must balance needs against costs and consumer price preferences.
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Setting Channel Objectives
State objectives in terms of targeted levels of customer service.
Channel objectives are influenced by:– Cost– Nature of the company– The firm’s products– Marketing intermediaries– Competitors– Environment
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Identifying Major Alternatives
Types of Intermediaries– Company sales force– Manufacturer’s agency– Industrial distributors
Number of intermediaries– Intensive distribution– Exclusive distribution– Selective distribution
Responsibilities of intermediaries
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Evaluating the Major Alternatives
Economic Criteria:– A company compares the likely sales,
costs, and profitability of different channel alternatives.
Control Issues:– How and to whom should control be
given? Adaptive Criteria:
– Consider long-term commitment vs. flexibility.
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Channel Management Decisions
Selecting channel members Managing and motivating channel
members– Partner relationship management
Evaluating channel members
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Public Policy and Distribution Decisions
Exclusive distribution Exclusive dealing Exclusive territorial agreements Tying agreements
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Marketing Logistics
Planning, implementing, and controlling the physical flow of goods, services, and related information from points of origin to points of consumption to meet customer requirements at a profit.
Includes:– Outbound distribution– Inbound distribution– Reverse distribution
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Goals of the Logistics System & Major Logistics Functions
Goals of the Logistics System:– Deliver a targeted level of customer
service at the least cost.
Major Logistics Functions:– Warehousing– Inventory management – Transportation– Logistics information management
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Warehousing
How many, what types, and where? Storage warehouses Distribution centers Automated warehouses
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Inventory Management
Must balance between too much and too little inventory.
Just-in-time logistics systems RFID or Smart Tag technology
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Transportation
Trucks Railroads Water carriers Pipelines Air Internet Intermodal transportation
– Piggyback, fishyback, trainship
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Integrated Logistics Management
The logistics concept that emphasizes teamwork, both inside the company and among all the marketing channel organizations, to maximize the performance of the entire distribution system.
Involves:– Cross-functional teamwork inside the company– Building logistics partnerships– Third-party logistics
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Rest Stop: Reviewing the Concepts
1. Explain why companies use distribution channels and discuss the functions these channels perform.
2. Discuss how channel members interact and how they organize to perform the work of the channel.
3. Identify the major channel alternatives open to a company.
4. Explain how companies select, motivate, and evaluate channel members.
5. Discuss the nature & importance of marketing logistics and supply chain management.