Chapter 10 10/18/ :45 PM1

Supply Chains And The Value Delivery Network Supply chain Downstream Marketing channels or distribution channels, such as wholesalers and retailers who form a vital connection between the firm and its customers Upstream The set of firms that supply the raw materials, components, parts, information, finance, and expertise needed to create a product or service 10/18/ :45 PM2

Supply Chains And The Value Delivery Network Supply chain (Make-and- sell) Demand chain (Sense-and- respond) Planning starts with the needs of target customer to which the company responds by organizing a chain of resources and activities with the goal of creating customer value 10/18/ :45 PM3

Supply Chains And The Value Delivery Network  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 (distribution 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 10/18/ :45 PM4

13- 5  Channel choices affect other decisions in the marketing mix Pricing, Marketing communications, new products…etc  A strong distribution system can be a competitive advantage  Channel decisions involve long- term commitments to other firms Nature & Importance of Marketing Channels 10/18/ :45 PM

Nature & Importance of Marketing Channels Q. Why do producers give some of the selling job to channel partners?? A. Producers use intermediaries because they create greater efficiency in making goods available to target market 10/18/ :45 PM6

Nature & Importance of Marketing Channels A. Number of contacts without a distributor B. Number of contacts with a distributor = Manufacturer = Customer = Distributor 10/18/ :45 PM7

Nature & Importance of Marketing Channels  How Channel Members Add Value Intermediaries require fewer contacts to move the product to the final purchaser. Intermediaries help match product assortment demand with supply. Intermediaries help bridge major time, place, and possession gaps that separate products from those who would use them. 10/18/ :45 PM8

Key Functions Performed by Channel Members Nature & Importance of Marketing Channels  Information: marketing research and information intelligence  Promotion: developing a persuasive communications to stimulate purchasing.  Contact: finding prospective buyers  Matching: fitting the offer to the buyer’s needs  Negotiation: reaching an agreement on price.  Physical Distribution: transporting and storing goods  Financing: acquiring funds to cover the cost of the channel work  Risk taking: carrying out thee channel work 10/18/ :45 PM9

Nature & Importance of Marketing Channels Consumer and business marketing channel levels Consumer producer Channel 1 Channel 2 Channel 3 Consumer Retailer producer Consumer Retailer producer wholesaler A. Customer marketing channels BusinessConsumer producer Channel 1 Channel 2 Channel 3 BusinessConsumer producer BusinessConsumer Business distributor producer Manufacture r’s representati ves or sales branch Business distributor B. Business marketing channels 10/18/ :45 PM10

Nature & Importance of Marketing Channels  Number of Channel Levels “A layer of intermediaries that performs some work in bringing the product and its ownership closer to the final buyer” The number of intermediary levels indicates the length of a marketing channel. ○ Direct Channels: a marketing channel that has no intermediary. ○ Indirect Channels: channel containing one or more intermediary levels. Producers lose more control and face greater channel complexity as additional channel levels are added. 10/18/ :45 PM11

Channel Members Are Connected Via A Variety of Flows Nature & Importance of Marketing Channels  Physical Flow  Payment Flow  Information Flow  Promotion Flow  Flow of Ownership 10/18/ :45 PM12

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 ○ The nature of the company, its products, its competitors, and the environment 10/18/ :45 PM13

Channel Design Decisions  Step 3: Identifying Major Alternatives Types of intermediaries ○ Company sales force, manufacturer’s agency, industrial distributors Number of marketing intermediaries ○ Intensive, selective, and exclusive distribution Responsibilities of channel members 10/18/ :45 PM14

Channel Design Decisions  Step 4: Evaluating Major Alternatives Economic criteria Control issues Adaptive criteria 10/18/ :45 PM15

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 10/18/ :45 PM16