If you see a train of coal going by: That’s marketing!

Marketing Channel A marketing channel: consists of individuals and firms involved in the process of making a product or service available for use or consumption by consumers or industrial users. 12-3

A Transaction has not occurred until a transaction has occurred!

The variety of terms are used for intermediaries that vary in specificity and use in different markets 12-5

Marketing channel intermediaries perform three functions: 12-6

1. Consumer Products Channels Direct Channel Indirect Channel Retailers WholesalersRetailers AgentsWholesalersRetailers 12-7

Common marketing channels for consumer products and services 12-8

2. Business Products Channels Direct Channel Indirect Channel Industrial Distributor Agents AgentsIndustrial Distributors 12-9

Common marketing channels for business products and services 12-10

Electronic Marketing Channels 3. Other Channels Electronic Marketing Channels Direct Marketing Channels Multichannel Marketing 12-11

Consumer electronic marketing channels are similar to those for consumer products and services http://www.expedia.com/ 12-12

Multichannel Marketing Multichannel marketing: involves the blending of communication and delivery channels that are mutually reinforcing in attracting, retaining, and building relationships with consumers who shop and buy in traditional intermediaries and online. 12-13

Dual Distribution Dual distribution: involves an arrangement whereby a firm reaches different buyers by employing two or more different types of channels for the same basic product. 12-14

Dual Distribution 12-15

Strategic Channel Alliances An agreement between two or more parties to pursue a set of agreed upon objectives need while remaining independent organizations. http://www.slideshare.net/akolaa/managing-strategic-alliances-and-channel-partners 12-16

Some other definitions: Merchant wholesalers: Independent owned business with title of goods and assumes all roles. Full-service wholesalers: Perform all services General-merchandise: Carry width but not depth of products Limited-merchandise: Carry depth but not width

Some other definitions: Merchant wholesalers: Independent owned business with title of goods and assumes all roles. Specialty-line: Single product line Rack jobbers: Own and maintain display racks in stores

Limited-service wholesalers: Some definitions: Limited-service wholesalers: Independent owned business with title of goods and specializes in a few roles. Cash-and-carry: Limited… whose customers pay cash and furnish their own transportation

Limited-service wholesalers: Some definitions: Limited-service wholesalers: Independent owned business with title of goods and specializes in a few roles. Truck: Limited… transport goods directly to customers Drop shippers: Limited…is a supply chain management technique in which the retailer does not keep goods in stock, but instead transfers customer orders and shipment details to either the manufacturer or a wholesaler, who then ships the goods directly to the customer. The majority of retailers make their profit on the difference between the wholesale and retail price or the retailers earn an agreed percentage of the sales in commission, paid by the wholesaler to the retailer.

Some definitions: Middle agents: Agents: Represent buyers or sellers on a permanent basis Brokers: Represent buyers or sellers on a temporary basis Manufacturing agents: Represent more than one seller and offers a complete product line Selling agents: Market a complete product line for a manufacture

Vertical Marketing Systems Vertical marketing systems: are professionally managed and centrally coordinated marketing channels designed to achieve channel economies and maximum marketing impact. 12-22

Three types of vertical marketing systems: 1) corporate, 2) contractual (most popular), and 3) administered 12-23

VERICAL MARKETING SYSTEMS 1. Corporate Systems Forward Integration Backward Integration 2. Contractual Systems Wholesaler-Sponsored Voluntary Chains Retailer-Sponsored Cooperatives 12-24

VERICAL MARKETING SYSTEMS Contractual Systems Franchising 12-25

VERICAL MARKETING SYSTEMS 3. Administrated Systems A coordinated system of distribution channel organization controlled by the power and size of one member of the channel system rather than by common ownership or contractual ties. 12-26

CHANNEL MANAGEMENT CHANNEL CHOICE CONSIDERATIONS Target Market Coverage (Density) Intensive Distribution Exclusive Distribution Gucci Selective Distribution 12-27

Intensive Distribution is a level of distribution density whereby a firm tries to place its products and services in as many outlets as possible. 12-28

Exclusive Distribution is a level of distribution density whereby only one retailer in a specific geographical area carries the firm’s products. 12-29

Selective Distribution is a level of distribution density whereby a firm selects a few retailers in a specific geographical area to carry its products. 12-30

Two important terms Logistics Supply Chain 12-31

Logistics Logistics: consists of those activities that focus on getting the right amount of the right products to the right place at the right time at the lowest possible cost. 12-32

Supply Chain A supply chain: consists of a sequence of firms that perform activities required to create and deliver a product or service to ultimate consumers or industrial users. 12-33

Relating logistics management and supply chain management to networks and channels 12-34

The automotive supply chain includes thousands of firms that provide the 5,000 or so parts in a typical car 12-35

CHANNEL MANAGEMENT CHANNEL CHOICE CONSIDERATIONS Buyer Requirements Information Variety Convenience Pre- or Post-Sale Service 12-36

Jiffy Lube and Petco What buyer requirements have been satisfied? 12-37

CHANNEL MANAGEMENT CHANNEL CHOICE CONSIDERATIONS Profitability 12-38

Channel Conflict Channel conflict: arises when one channel member believes another channel member is engaged in behavior that prevents it from achieving its goals. 12-39

CHANNEL MANAGEMENT CHANNEL RELATIONSHIPS Sources of Channel Conflict Vertical Conflict Horizontal Conflict Disintermediation 12-40

Disintermediation Disintermediation: involves channel conflict that arises when a channel member bypasses another member and sells or buys products direct. 12-41

Supply Chain Management The Institute for Supply Management “the design and management of seamless (aka supply chain integration), value-added processes across organizational boundaries to meet needs of end customers”. Council of Supply Chain Management Professionals (Council of Logistics Management until Dec 2004): “integration of key business processes from end user through original suppliers that provides products, services, and information, that add value for customers and other stakeholders”.

CHANNEL MANAGEMENT CHANNEL RELATIONSHIPS Channel Captain Like a marriage! 12-43

CHANNEL MANAGEMENT CHANNEL RELATIONSHIPS Channel Influence Economic Who has the power? Expertise Identification Legitimate Right 12-44

CHANNEL MANAGEMENT CHANNEL RELATIONSHIPS Legal Considerations Dual Distribution Tying Arrangements Vertical Integration Full-Line Forcing Exclusive Dealing Refusal to Deal Resale Restrictions 12-45

The Clayton Act and Sherman Act place legal restrictions on specific marketing channel strategies and practices 12-46

….SCM Objectives: Importance: Value Profitability Complexity Efficiencies Competencies

Distribution Connection between individuals/firms that contributes to the occurrence of an exchange Basic function: create customer value/add value to customer by reducing spacial separation – physical and time distance – between point of production and point of consumption Place and time utility

Value Addition Contactual efficiency Routinization Categorizing Assembly/assortment Breaking bulk/accumulating bulk Transportation Processing/storage Risk reduction Service/repairs Reverse logistics

Distribution Design Decisions Level 1(governance structure): direct distribution v/s conventional v/s vertical marketing systems. Corporate Contractual Administered

..design decisions: Level 2-Intensity of Distribution

Distribution Strategies Two fundamental distribution strategies: Items can be directly shipped from the supplier or manufacturer to end customer Use intermediate points

Direct Shipment Distribution Strategies Advantages: expenses of operating a distribution center Lead times. Disadvantages: Risk-pooling effects Manufacturer and distributor transportation costs

Intermediate Inventory Storage Point Strategies Traditional warehousing strategy Cross-docking strategy Centralized pooling and transshipment strategies

Traditional Facilities factors Centralized vs. Decentralized Management Central vs. Local Facilities

Central vs. Local Facilities Centralized facilities Employ both fewer warehouses and distribution centers Facilities are located further from customers. Other factors: Safety stock. Overhead. Economies of scale Lead time. Service. Transportation costs.

Cross-Docking Popularized by Wal-Mart Warehouses function as inventory coordination points rather than as inventory storage points. Goods spend very little time in storage at the warehouse

Target Distribution Center

Transshipment Shipment of items between different facilities at the same level in the demand chain to meet some immediate need Occurs mostly at the retail level advanced information systems Reasonable shipping costs Integrated supply chain

Distribution-system Performance and customer-facing capabilities Performance evaluation on two dimensions: Level of customer service Cost of providing customer service Capabilities Responsiveness efficiency

Supply Chain strategy should be aligned with Marketing Strategy Understand the Customer Understand the Supply Chain Harmonize the Supply Chain with the Marketing Strategy 12-61

1. Total Logistics Cost Concept 2. Customer Service Concept These must be balanced! 12-62

Supply chain managers balance five total logistics cost factors against four customer service factors 12-63

TRANSPORTATION MODES Railroads Unit Train Intermodal Transportation Piggyback or Trailer on Flat Car Containers 12-64

Motor Carriers (Trucks) TRANSPORTATION MODES Motor Carriers (Trucks) Air Carriers and Express Companies Freight Forwarders 12-65

TRANSPORTATION MODES Pipelines Water Carriers 12-66

Advantages and disadvantages of five transportation modes 12-67

WAREHOUSING AND MATERIALS HANDLING Storage Warehouses Distribution Centers Materials Handling 12-68

CLOSING THE LOOP: Reverse Logistics 12-69

Reverse Logistics Reverse logistics: is a process of reclaiming recyclable and reusable materials, returns, and reworks from the point of consumption or use for repair, remanufacturing, redistribution,or disposal. 12-70