Marketing Channels and Supply Chain Management Chapter 10 Marketing Channels and Supply Chain Management

Identify the major channel alternatives open to a company. 4/16/2019 Explain why companies use distribution channels and discuss the functions these channels perform. Discuss how channel members interact and how they organize to perform the work of the channel. Identify the major channel alternatives open to a company. Explain how companies select, motivate, and evaluate channel members. Discuss the nature & importance of marketing logistics and supply chain management. Copyright 2007, Prentice Hall, Inc. Copyright 2005 Brainy Betty, Inc.

Caterpillar – The Vital Role of Dealers Building Partnerships Case Study Caterpillar – The Vital Role of Dealers 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. 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. Copyright 2007, Prentice Hall, Inc.

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. Copyright 2007, Prentice Hall, Inc.

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 Copyright 2007, Prentice Hall, Inc.

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 Copyright 2007, Prentice Hall, Inc.

Key Channel Functions Transaction Completing: Transaction Fulfilling: Information Promotion Contact Matching Negotiation Transaction Fulfilling: Physical distribution Financing Risk taking Copyright 2007, Prentice Hall, Inc.

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. Copyright 2007, Prentice Hall, Inc.

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. Copyright 2007, Prentice Hall, Inc.

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. Copyright 2007, Prentice Hall, Inc.

Types of Vertical Marketing Systems Corporate VMS Contractual VMS Franchise organization Administered VMS Copyright 2007, Prentice Hall, Inc.

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 Copyright 2007, Prentice Hall, Inc.

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. Copyright 2007, Prentice Hall, Inc.

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. Copyright 2007, Prentice Hall, Inc.

Channel Design Decisions Analyzing Consumer Needs Setting Channel Objectives Identifying Major Alternatives Evaluating the Major Alternatives Copyright 2007, Prentice Hall, Inc.

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. Copyright 2007, Prentice Hall, Inc.

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 Copyright 2007, Prentice Hall, Inc.

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 Copyright 2007, Prentice Hall, Inc.

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. Copyright 2007, Prentice Hall, Inc.

Channel Management Decisions Selecting channel members Managing and motivating channel members Partner relationship management Evaluating channel members Copyright 2007, Prentice Hall, Inc.

Public Policy and Distribution Decisions Exclusive distribution Exclusive dealing Exclusive territorial agreements Tying agreements Copyright 2007, Prentice Hall, Inc.

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 Copyright 2007, Prentice Hall, Inc.

Goals of the Logistics System & Major Logistics Functions Deliver a targeted level of customer service at the least cost. Major Logistics Functions: Warehousing Inventory management Transportation Logistics information management Copyright 2007, Prentice Hall, Inc.

Warehousing How many, what types, and where? Storage warehouses Distribution centers Automated warehouses Copyright 2007, Prentice Hall, Inc.

Inventory Management Must balance between too much and too little inventory. Just-in-time logistics systems RFID or Smart Tag technology Copyright 2007, Prentice Hall, Inc.

Transportation Trucks Railroads Water carriers Pipelines Air Internet Intermodal transportation Piggyback, fishyback, trainship Copyright 2007, Prentice Hall, Inc.

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 Copyright 2007, Prentice Hall, Inc.

Identify the major channel alternatives open to a company. 4/16/2019 Explain why companies use distribution channels and discuss the functions these channels perform. Discuss how channel members interact and how they organize to perform the work of the channel. Identify the major channel alternatives open to a company. Explain how companies select, motivate, and evaluate channel members. Discuss the nature & importance of marketing logistics and supply chain management. Copyright 2007, Prentice Hall, Inc. Copyright 2005 Brainy Betty, Inc.