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Marketing Channels and Supply Chain Management

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Marketing Logistics and Supply Chain Management Marketing Logistics Outbound distribution Inbound ... Dominates world s markets for heavy construction and ... – PowerPoint PPT presentation

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Title: Marketing Channels and Supply Chain Management


1
Marketing Channels and Supply Chain Management
  • Chapter 13

2
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.

3
Objectives
  • Comprehend how companies manage (select,
    motivate, and evaluate) channel members.
  • Understand the nature and importance of marketing
    logistics and integrated supply chain management.

4
c
Caterpillar
  • Dominates worlds 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

5
What is a Distribution Channel?
  • Your idea of distribution channels
  • A set of interdependent organizations
    (intermediaries) involved in the process of
    making a product or service available for use or
    consumption by the End-User.

6
Why are Marketing Intermediaries Used?
  • Greater efficiency in making goods available to
    target markets.
  • Offer the firm more than it can achieve on its
    own through the intermediaries
  • Contacts
  • Experience
  • Specialization
  • Scale of operation
  • Match supply and demand.

7
Figure 13-1 How Channel Members Add Value
8
Nature Importance of Marketing Channels
  • How Channel Members Add Value to You
  • 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

9
Distribution Channel Functions
  • All Use Up Scarce Resources
  • All May Often Be Performed Better Through
    Specialization
  • All Can Often Be Shifted Among Channel Members

Risk Taking
Information
Financing
Promotion
Contact
Physical Distribution
Matching
Negotiation
10
Distribution Channels
Manufacturer
Flow physical information promotion payment owners
hip
Wholesaler
Jobber
Retailer
Consumer
11
Figure 13-3 Conventional Versus Vertical
Marketing System
12
Types of Vertical Marketing Systems
Corporate Common Ownership at Different Levels
of the Channel
Greater
Contractual Contractual Agreement Among Channel
Members
Degree of Direct Control
Administered Leadership is Assumed by One or a
Few Dominant Members
Lesser
13
Vertical Marketing Systems
Vertical Marketing Systems (VMS)
Administered VMS
Contractual VMS
Corporate VMS
Franchise Organizations
Wholesaler Sponsored Voluntary Chain
Retailer Cooperatives
Manufacturer- Sponsored Retailer Franchise System
Service-Firm- Sponsored Franchise System
Manufacturer- Sponsored Wholesaler Franchise
System
14
Recent Changes
  • Downstream Channel Upstream Channel
  • ? 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.

15
Channel Behavior and Organization
  • Horizontal Marketing Systems
  • Two or more companies at one level join together
    to follow a new marketing opportunity.

Nestle and General Mills work together to market
cereal outside of North America
16
In building its value delivery network, Palm
manages a whole community of suppliers,
assemblers, resellers and complementors who must
work effectively together.
17
Figure 13-4 Multichannel Distribution System
18
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

19
Channel Behavior and Organization
  • Changing Channel Organization
  • Disintermediation has hurt many established
    companies

20
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
21
Analyzing Consumer Service Needs
Setting Channel Objectives Constraints
Channel Design Decisions
Identifying Major Alternatives
Responsibilities of Channel Members
Evaluating the Major Alternatives
Selecting the Best Alternative
22
Three Evaluative Criteria
  • Economic Criteria
  • Control Criteria
  • Adaptability Criteria

23
Types of Middleman
  • Company Salesforce
  • Assign own salespeople to territory
  • Manufacturer's Agency
  • Hire an independent firm with salespeople
  • (Industrial) Distributors
  • find distributors to buy and carry your product

24
  • 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.

25
Figure 13-2a Consumer Marketing Channels
26
Figure 13-2b Business Marketing Channels
27
Intensity of distribution
  • Intensive Distribution
  • stock products in as many outlets as possible
  • Selective Distribution
  • select a number of dealers from those willing to
    carry product
  • Exclusive Distribution
  • give limited number of dealers exclusive rights
    to distribute

many
few
28
Channel Design Decisions
  • Step 1 Analyzing Consumer Needs
  • Cost and feasibility of meeting needs must be
    considered

29
Channel Design Decisions
  • Step 2 Setting Channel Objectives
  • Set channel objectives in terms of targeted level
    of customer service
  • Many factors influence channel objectives

30
GEICOs channel objectives led them to sell
direct via telephone and the Web in order to
serve those who are looking to save money.
Geico
31
Channel Design Decisions
  • Step 3 Identifying Major Alternatives
  • Types of Intermediaries
  • Company sales force
  • Manufacturers agency
  • Industrial distributors

32
Channel Design Decisions
  • Step 3 Identifying Major Alternatives
  • Number of marketing intermediaries
  • Intensive distribution
  • Selective distribution
  • Exclusive distribution
  • Responsibilities of channel members

33
Channel Design Decisions
  • Step 4 Evaluating Major Alternatives
  • Economic criteria
  • Sales, costs, profitability
  • Control issues
  • Adaptive criteria

34
Channel Management Decisions
Selecting
Motivating
FEEDBACK
Evaluating
35
Distributor Selection Criteria
  • Financial Health
  • Sales and Market factors
  • Knowledge of the market
  • Market coverage
  • Number and quality of sales personnel
  • Previous Success (or Enthusiasm for the product)

36
Channel Management Decisions
  • Evaluating Channel Members
  • Performance should be checked against standards
  • Channel members should be rewarded or replaced as
    dictated by performance

37
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

38
Physical Distribution Market Logistics
  • planning, implementing, and controlling the
    physical flow of materials and final goods from
    point of origin to the end user.

39
Marketing Logistics and Supply Chain Management
  • Marketing Logistics
  • Outbound distribution
  • Inbound distribution
  • Reverse distribution
  • Involves the entire supply chain management
    system

40
Figure 13-5 Supply Chain Management
41
Thought for the Day
supply chain distribution accounts for 50 cents
of every dollar spent promotion accounts for
only 2 cents!
42
Goals of the Logistics System
Higher Distribution Costs Higher Customer
Service Levels
  • Goal
  • To Provide a Targeted Level of Customer Service
  • at the Least Cost.

Maximize Profits, Not Sales
Lower Distribution Costs Lower Customer Service
Levels
43
Logistics Systems
Order Processing Submitted Processed Shipped
Costs Minimize Costs of Attaining
Logistics Objectives
Logistics Functions
Warehousing Storage Distribution
Transportation Water, Truck, Rail,
Pipeline Air
Inventory When to order How much to
order Just-in-time
44
Transportation Modes
Rail Nations largest carrier, cost-effective
for shipping bulk products, piggyback
Truck Flexible in routing time schedules,
efficient for short-hauls of high value goods
Water Low cost for shipping bulky, low-value
goods, slowest form
Pipeline Ship petroleum, natural gas, and
chemicals from sources to markets
Air High cost, ideal when speed is needed or to
ship high-value, low-bulk items
45
Choosing Transportation Modes
Checklist for Choosing
Transportation Modes
1. Speed.
2. Dependability.
3. Capability.
4. Availability.
5. Cost.
46
BusinessNow
Celarix Video Clip
Arranging transportation for goods can be
challenging
Click the picture above to play video
47
Integrated Logistics Management
Cross-Functional Teamwork inside the Company
Building Channel Partnerships
Concept Recognizes that Providing Better Customer
Service and Trimming Distribution Costs Requires
Teamwork, Both Inside the Company and Among All
the Marketing Channel Organizations.
Third-Party Logistics
48
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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