1 1 Chapter 10 Marketing Channels: Delivering Customer Value

Supply Chains and the Value Delivery Network Producing and making products available to buyers requires building relationships with “upstream” and “downstream” supply chain 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.

Nature and Importance of Marketing Channels Marketing channel:  A set of interdependent organizations that help make a product or service available for use or consumptions by the consumer or business users.

How channel members add value:  The use of intermediaries results from their greater efficiency in making goods available to target markets.  Channel members offer the firm more than it can achieve on its own in terms of: Contacts Experience Specialization Scale of operation Nature and Importance of Marketing Channels

Transaction fulfilling:  Physical distribution  Financing  Risk taking Transaction completing:  Information  Promotion  Contact  Matching  Negotiation Key functions performed by channel members:

Number of channel levels:  The 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. Nature and Importance of Marketing Channels

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. Channel Behavior and Organization

Greater emphasis has been placed on logistics recently because:  Firms can gain a competitive advantage when logistics result in better service or lower prices.  Improved logistics can lower costs.  Increased product variety has created a need for improved logistics management.  Improvements in information technology have created the means for major gains in distribution efficiency. Marketing Logistics and Supply Chain Management

Major logistics functions:  Warehousing  Inventory management  Transportation  Logistics information management Goals of the logistics system:  Deliver a targeted level of customer service at the least cost. Marketing Logistics and Supply Chain Management

Trucks Railroads Water carriers Pipelines Air Transportation alternatives:

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. Requires:  Cross-functional teamwork inside the company  Building logistics partnerships  Third-party logistics Integrated Logistics Management