Transcript chapter #13.ppt
Marketing Channels and Supply Chain Management
Chapter 13
Objectives Know why companies use distribution channels and understand the functions that these channels perform.
Learn how channel members interact and how they organize to perform the work of the channel.
Know the major channel alternatives that are open to a company.
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Objectives Comprehend how companies select, motivate, and evaluate channel members.
Understand the nature and importance of marketing logistics and integrated supply chain management.
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Dominates world’s markets for heavy construction and mining equipment.
Independent dealers are key to success Dealer network is linked via computers Caterpillar stresses dealer profitability, extraordinary dealer support, personal relationships, dealer performance and full, honest, and frequent communications 13- 3
Definition Value Delivery Network
The network made up of the company, suppliers, distributors, and ultimately customers who “partner” with each other to improve the performance of the entire system.
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In building its value delivery network, Palm manages a whole community of suppliers, assemblers, resellers and complementors who must work effectively together.
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Nature & Importance of Marketing Channels Channel choices affect other decisions in the marketing mix A strong distribution system can be a competitive advantage Channel decisions involve long-term commitments to other firms 13- 6
Figure 13-1:
How Channel Members Add Value 13- 7
Nature & Importance of Marketing Channels How Channel Members Add Value
Intermediaries
Require fewer contacts to move the product to the final purchaser.
Help match product assortment demand with supply.
Help bridge major time, place, and possession gaps 13- 8
Nature & Importance of Marketing Channels Key Functions Performed by Channel Members Information Promotion Contact Matching Negotiation Physical Distribution Financing Risk taking 13- 9
Figure 13-2a:
Consumer Marketing Channels 13- 10
Figure 13-2b:
Business Marketing Channels 13- 11
Nature & Importance of Marketing Channels Number of Channel Levels
The number of intermediary levels indicates the length of a marketing channel.
Direct Channels
Indirect Channels
Producers lose more control and face greater channel complexity as additional channel levels are added.
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L.L. Bean sells direct via the Internet, telephone, and mail catalogs
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Nature & Importance of Marketing Channels Channel Members Are Connected Via A Variety of Flows Physical Flow Information Flow Payment Flow Promotion Flow Flow of Ownership 13- 14
Channel Behavior and Organization Channel Conflict
Occurs when channel members disagree on roles, activities, or rewards.
Types of Conflict:
Horizontal conflict:
occurs among firms at the same channel level
Vertical conflict:
occurs among firms at different channel levels 13- 15
Figure 13-3:
Conventional Versus Vertical Marketing System 13- 16
Channel Behavior and Organization Vertical Marketing Systems
Corporate VMS Contractual VMS
Manufacturer-sponsored retailer franchise system Manufacturer-sponsored wholesaler franchise system
Service-firm-sponsored retailer franchise system Administered VMS 13- 17
Channel Behavior and Organization
Nestle and General Mills work together to market cereal outside of North America
Horizontal Marketing Systems
Two or more companies at one level join together to follow a new marketing opportunity.
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Figure 13-4:
Multichannel Distribution System 13- 19
Channel Behavior and Organization Multichannel Distribution Systems
Also called hybrid marketing channels
Occurs when a firm uses two or more marketing channels
Hybrid marketing has many advantages 13- 20
Channel Behavior and Organization Changing Channel Organization
Disintermediation has hurt many established companies 13- 21
Channel Behavior and Organization Disintermediation : Traditional brick and mortar travel agencies face competition from online travel agencies, airlines, and reverse auction web sites such as Priceline.
See how Sunflower Travel has tried to adapt
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Channel Design Decisions Step 1: Analyzing Consumer Needs
Cost and feasibility of meeting needs must be considered 13- 23
Channel Design Decisions
Step 2:
Setting Channel Objectives
Set channel objectives in terms of targeted level of customer service
Many factors influence channel objectives 13- 24
GEICO’s channel objectives led them to sell direct via telephone and the Web in order to serve those who are looking to save money.
Geico
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Channel Design Decisions
Step 3:
Identifying Major Alternatives
Types of Intermediaries
Company sales force Manufacturer’s agency
Industrial distributors 13- 26
Discussion Question What are the key disadvantages that a producer firm might face when relying on manufacturer’s agents?
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Channel Design Decisions
Step 3:
Identifying Major Alternatives
Number of marketing intermediaries
Intensive distribution
Selective distribution
Exclusive distribution
Responsibilities of channel members 13- 28
Channel Design Decisions Step 4: Evaluating Major Alternatives
Economic criteria
Sales, costs, profitability
Control issues
Adaptive criteria 13- 29
Channel Design Decisions Designing International Distribution Channels
Global marketers usually adapt their channel strategies to structures that exist within foreign countries
Key challenges:
Channels may be complex or hard to penetrate
Channels may be scattered, inefficient, or totally lacking 13- 30
Channel Management Decisions Selecting Channel Members
Identify characteristics that distinguish the best channel members Managing and Motivating Channel Members
Partner relationship management (PRM) is key 13- 31
Channel Management Decisions Evaluating Channel Members
Performance should be checked against standards
Channel members should be rewarded or replaced as dictated by performance 13- 32
Public Policy and Distribution Decisions Exclusive distribution
Only certain outlets are allowed to carry a firm’s products (grey marketing) Exclusive dealing
Exclusive territorial agreements
Tying agreements 13- 33
Marketing Logistics and Supply Chain Management Marketing Logistics
Outbound distribution
Inbound distribution
Reverse distribution
Involves the entire supply chain management system 13- 34
Figure 13-5:
Supply Chain Management 13- 35
Marketing Logistics and Supply Chain Management Why Greater Emphasis is Being Placed on Logistics:
Offers firms a competitive advantage Can yield cost savings Greater product variety requires improved logistics
Improvements in distribution efficiency are possible due to information technology 13- 36
Marketing Logistics and Supply Chain Management Goals of the Logistics System
No system can both maximize customer service and minimize costs.
Firms must first weigh the benefits of higher service against the costs.
State goals in terms of a targeted level of customer service at the least cost.
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Marketing Logistics and Supply Chain Management Major Logistics Functions
Warehousing
Inventory Management Transportation
Logistics Information Management 13- 38
EOQ
Costs of Ordering/Setup
Costs of Holding in Inventory JIT
One touch
Partnership relationships 13- 39
Marketing Logistics and Supply Chain Management Transportation Carrier Options Truck Rail Water Pipeline Air Internet
Intermodal transportation is becoming more common
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BusinessNow Celarix Video Clip
Click the picture above to play video
Arranging transportation for goods can be challenging 13- 41
Marketing Logistics and Supply Chain Management Integrated Logistics Management
Cross-functional teamwork inside the company is critical
Logistics partnerships are also built through shared projects 13- 42
Many companies use sophisticated, system-wide supply chain management software, such as that which is available from Oracle and other software providers.
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Discussion Question Western Publishing Group partnered with Toys “R” Us to create mini-bookstore sections within each store.
Can you think of other examples of similar logistics partnerships?
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Marketing Logistics and Supply Chain Management
Outsourcing of logistic firms to third party firms is becoming more common 13- 45