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Marketing Channels and Supply Chain Management

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Chapter 12 Marketing Channels and Supply Chain Management Learning Goals Know why companies use distribution channels and understand the functions that these channels ... – PowerPoint PPT presentation

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Title: Marketing Channels and Supply Chain Management


1
Chapter 12
  • Marketing Channels and Supply Chain Management

2
Learning Goals
  • 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.
  • Comprehend how companies select, motivate, and
    evaluate channel members.
  • Understand the nature and importance of marketing
    logistics and integrated supply chain management.

3
Case StudyCaterpillar
  • Caterpillar stresses dealer profitability,
    extraordinary dealer support, personal
    relationships, dealer performance and full,
    honest, and frequent communications
  • Dominates worlds markets for heavy construction
    and mining equipment.
  • Independent dealers are key to success
  • Dealer network is linked via computers

4
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5
Learning Goals
  • 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.
  • Comprehend how companies select, motivate, and
    evaluate channel members.
  • Understand the nature and importance of marketing
    logistics and integrated supply chain management.

6
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7
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8
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9
Definitions
  • 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.
  • Marketing channel
  • 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.

10
  • This ad from Home Depot
  • communicates the companys dedication to
    diversification in its value delivery network

11
Nature Importance of Marketing Channels
  • Channel choices affect other decisions in the
    marketing mix
  • Pricing, marketing communications
  • A strong distribution system can be a competitive
    advantage
  • Channel decisions involve long-term commitments
    to other firms

12
Strong Distribution as a Competitive Threat
  • FedEx improved its distribution by acquiring
    Kinkos in 2004

12 - 12
13
Nature Importance of Marketing Channels
Figure 12.1
  • How Channel Members Add Value
  • Fewer contacts.
  • Match product assortment demand with supply.
  • Bridge, time, place, and possession gaps that
    separate products from users.

14
Key Functions Performed by Channel Members
  • Information
  • Promotion
  • Contact
  • Matching
  • Negotiation
  • Physical Distribution
  • Financing
  • Risk taking

15
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.

16
Customer and Business Marketing ChannelsFigure
12.2
17
Channel Members are Connected Via a Variety of
Flows
  • Information Flow
  • Promotion Flow
  • Flow of Ownership
  • Physical Flow
  • Payment Flow

18
Learning Goals
  • 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.
  • Comprehend how companies select, motivate, and
    evaluate channel members.
  • Understand the nature and importance of marketing
    logistics and integrated supply chain management.

19
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

20
Channel Behavior and Organization
  • Conventional Distribution Channels
  • Consist of one or more independent channel
    members
  • Lack leadership and power
  • Often result in poor performance
  • Vertical Marketing Systems
  • Consist of members acting as a unified system
  • Use contracts, ownership or power

21
Conventional vs. VerticalMarketing Channel
Figure 12.3
22
Channel Behavior and Organization
  • Corporation owns production and distribution
  • Coordination and conflict through regular
    organizational channels

Vertical Marketing Systems
  • Corporate VMS
  • Contractual VMS
  • Administered VMS

23
Channel Behavior and Organization
  • Individual firms who join through contracts
  • Franchise organizations
  • Manufacturer-sponsored retailer franchise system
  • Manufacturer-sponsored wholesaler franchise
    system
  • Service-firm-sponsored retailer franchise system

Vertical Marketing Systems
  • Corporate VMS
  • Contractual VMS
  • Administered VMS

24
Channel Behavior and Organization
  • Leadership through the size and power of dominant
    channel members
  • Leadership could be manufacturer or retailer

Vertical Marketing Systems
  • Corporate VMS
  • Contractual VMS
  • Administered VMS

25
Channel Behavior and Organization
  • Horizontal Marketing Systems
  • Companies at the same level work together with
    channel members
  • Multichannel Distribution Systems
  • Also called hybrid marketing channels
  • Occurs when a firm uses two or more marketing
    channels
  • Changing Channel Organization
  • Disintermediation

26
Multichannel Distribution SystemFigure 12.4
27
Multichannel Distribution System
  • Reebok uses a multi- channel distribution system
    which includes a direct channel.

28
Learning Goals
  • 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.
  • Comprehend how companies select, motivate, and
    evaluate channel members.
  • Understand the nature and importance of marketing
    logistics and integrated supply chain management.

29
Channel Design Decisions
  • Step 1 Analyzing Consumer Needs
  • Cost and feasibility of meeting needs must be
    considered
  • Step 2 Setting Channel Objectives
  • Set channel objectives in terms of targeted level
    of customer service
  • Many factors influence channel objectives

30
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31
Channel Design Decisions
  • Step 3 Identifying Major Alternatives
  • Types of intermediaries
  • Company sales force, manufacturers agency,
    industrial distributors
  • Number of marketing intermediaries
  • Intensive, selective, and exclusive distribution
  • Responsibilities of channel members

32
Channel Design Decisions
  • Step 4 Evaluating Major Alternatives
  • Economic criteria
  • Control issues
  • Adaptive criteria

33
Channel Design Decisions
  • Designing International Distribution Channels
  • Global marketers usually adapt their channel
    strategies to structures that exist within
    foreign countries
  • Key challenges
  • May be complex or hard to penetrate
  • May be scattered, inefficient, or totally
    lacking

34
Learning Goals
  • 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.
  • Comprehend how companies select, motivate, and
    evaluate channel members.
  • Understand the nature and importance of marketing
    logistics and integrated supply chain management.

35
Channel Management Decisions
  • Which characteristics are important?
  • Years in business
  • Lines carried
  • Growth and profit record
  • Cooperativeness and reputation
  • Type of customer
  • Location

Decisions
  • Selecting channel members
  • Managing and motivating channel members
  • Evaluating channel members

36
Discussion Questions Selecting Channels
  • iRobots Roomba is a robotic vacuum which travels
    the floor and vacuums dirt. Its price is about
    150.
  • What characteristics are important when choosing
    channel members?
  • What retailers would you choose?

12 - 36
37
Channel Management Decisions
Decisions
  • Partner relationship management (PRM) for
    long-term partnerships
  • Software available to coordinate members
  • Selecting channel members
  • Managing and motivating channel members
  • Evaluating channel members

38
Channel Management Decisions
Decisions
  • Check channel performance of
  • Sales
  • Inventory
  • Customer delivery
  • Promotion and training
  • Customer service
  • Selecting channel members
  • Managing and motivating channel members
  • Evaluating channel members

39
Public Policy and Distribution Decisions
  • Exclusive distribution
  • Only certain outlets are allowed to carry a
    firms products
  • Exclusive dealing
  • Exclusive territorial agreements
  • Tying agreements

40
Learning Goals
  • 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.
  • Comprehend how companies select, motivate, and
    evaluate channel members.
  • Understand the nature and importance of marketing
    logistics and integrated supply chain management.

41
How Does Supply Chain Management Relate to
Marketing?
Product
Promotion
Price
Place
  • The ultimate challenge is making service happen

42
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43
Marketing Logistics and Supply Chain Management
  • Marketing Logistics
  • Outbound distribution
  • Inbound distribution
  • Reverse distribution
  • Involves the entire supply chain management
    system

44
Supply Chain ManagementFigure 12.5
45
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46
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

47
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.

48
Marketing Logistics and Supply Chain Management
  • Major Logistics Functions
  • Warehousing
  • Inventory Management
  • Transportation
  • Logistics Information Management

49
Marketing Logistics and Supply Chain Management
Transportation Carrier Options
  • Truck
  • Rail
  • Water
  • Pipeline
  • Air
  • Internet

Intermodal transportation is becoming more
common
50
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
  • Outsourcing of logistics firms to third-party
    firms is becoming more common

51
Logistics managers balance total logistics cost
factors against customer service factors
Communication
Speed
Materials handling and warehousing costs
Transportation costs
Reliability
Order processing costs
Convenience
Inventory holding costs
Stockout costs
Total logistics cost factors
Customer service factors
52
Learning Goals
  • 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.
  • 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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