1. Chapter 12 - slide 1 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Chapter Twelve Marketing Channels and Supply Chain Management

2. Chapter 12 - slide 2 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Marketing Channels and Supply Chain Management Supply Chains and the Value Delivery Network The Nature and Importance of Marketing Channels Channel Behavior and Organization Channel Design Decisions Channel Management Decisions Public Policy and Distribution Decisions Marketing Logistics and Supply Chain Management Topic Outline

3. Chapter 12 - slide 3 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Supply Chains and the Value Delivery Network Upstream partners include raw material suppliers, components, parts, information, finances, and expertise to create a product or service Downstream partners include the marketing channels or distribution channels that look toward the customer Supply Chain Partners

4. Chapter 12 - slide 4 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Supply chain management managing complex and dynamic supply and demand networks. [1] (cf. Wieland/Wallenburg, 2011) [1]

5. Chapter 12 - slide 5 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Supply Chains and the Value Delivery Network Value delivery network is the firm’s suppliers, distributors, and ultimately customers who partner with each other to improve the performance of the entire system Value Delivery Network

6. Chapter 12 - slide 6 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall The Nature and Importance of Marketing Channels Intermediaries offer producers greater efficiency in making goods available to target markets. Through their contacts, experience, specialization, and scale of operations, intermediaries usually offer the firm more than it can achieve on its own. How Channel Members Add Value

7. Chapter 12 - slide 7 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall The Nature and Importance of Marketing Channels From an economic view, intermediaries transform the assortment of products into assortments wanted by consumers Channel members add value by bridging the major time, place, and possession gaps that separate goods and services from those who would use them How Channel Members Add Value

8. Chapter 12 - slide 8 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall The Nature and Importance of Marketing Channels How Channel Members Add Value

9. Chapter 12 - slide 9 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall The Nature and Importance of Marketing Channels How Channel Members Add Value InformationPromotionContact MatchingNegotiation Physical distribution Financing

10. Chapter 12 - slide 10 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall The Nature and Importance of Marketing Channels Number of Channel Members

11. Chapter 12 - slide 11 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Channel Behavior and Organization Marketing channel consists of firms that have partnered for their common good with each member playing a specialized role Channel conflict refers to disagreement over goals, roles, and rewards by channel members Horizontal conflict Vertical conflict Channel Behavior

12. Chapter 12 - slide 12 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Channel Behavior and Organization Conventional distribution systems consist of one or more independent producers, wholesalers, and retailers. Each seeks to maximize its own profits, and there is little control over the other members and no formal means for assigning roles and resolving conflict. Conventional Distributions Systems

13. Chapter 12 - slide 13 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Channel Behavior and Organization Vertical marketing systems (VMSs) provide channel leadership and consist of producers, wholesalers, and retailers acting as a unified system and consist of: Corporate marketing systems Contractual marketing systems Administered marketing systems Vertical Marketing Systems

14. Chapter 12 - slide 14 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Channel Behavior and Organization Corporate vertical marketing system integrates successive stages of production and distribution under single ownership Vertical Marketing Systems

15. Chapter 12 - slide 15 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Channel Behavior and Organization Contractual vertical marketing system consists of independent firms at different levels of production and distribution who join together through contracts to obtain more economies or sales impact than each could achieve alone. The most common form is the franchise organization. Vertical Marketing Systems

16. Chapter 12 - slide 16 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Channel Behavior and Organization Administered vertical marketing system has a few dominant channel members without common ownership. Leadership comes from size and power. Vertical Marketing Systems

17. Chapter 12 - slide 17 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Channel Behavior and Organization Horizontal marketing systems are when two or more companies at one level join together to follow a new marketing opportunity. Companies combine financial, production, or marketing resources to accomplish more than any one company could alone. Horizontal Marketing Systems

18. Chapter 12 - slide 18 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Apple and Starbucks Announce Music Partnership Wirelessly Find and Buy Music at Starbucks “Getting free access to the iTunes Wi-Fi Music Store and the ‘Now Playing’ service at Starbucks is a great way for customers to discover new music,” said Steve Jobs, Apple’s CEO. “Imagine walking into a participating Starbucks, hearing a great song, and being able to instantly download it onto your iPod or iPhone. We think this is very cool.” “With this partnership, we’re bringing Apple’s leadership in digital music together with not only our retail footprint, but the unique Starbucks experience, to offer customers a world-class digital music experience,” said Howard Schultz, chairman, Starbucks Coffee Company. “Introducing this new service is a natural extension of our music strategy which only enhances the retail coffee experience for customers by helping them discover and acquire new music instantly.”

19. Chapter 12 - slide 19 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Channel Behavior and Organization Multichannel Distribution systems (Hybrid marketing channels) are when a single firm sets up two or more marketing channels to reach one or more customer segments Multichannel Distribution Systems Hybrid Marketing Channels

20. Chapter 12 - slide 20 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Channel Behavior and Organization Multichannel Distribution Systems

21. Chapter 12 - slide 21 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Channel Behavior and Organization Disintermediation occurs when product or service producers cut out intermediaries and go directly to final buyers, or when radically new types of channel intermediaries displace traditional ones Changing Channel Organization

22. Chapter 12 - slide 22 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Channel Design Decisions Analyzing consumer needs Setting channel objectives Identifying major channel alternatives Evaluation

23. Chapter 12 - slide 23 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Channel Design Decisions Targeted levels of customer service What segments to serve Best channels to use Minimizing the cost of meeting customer service requirements Setting Channel Objectives

24. Chapter 12 - slide 24 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Channel Design Decisions Types of intermediaries Number of intermediaries Responsibilities of each channel member Identifying Major Alternatives

25. Chapter 12 - slide 25 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Channel Design Decisions Identifying Major Alternatives Intensive distribution Candy and toothpaste Exclusive distribution Luxury automobiles and prestige clothing Selective distribution Television and home appliance

26. Chapter 12 - slide 26 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Channel Design Decisions Each alternative should be evaluated against: –Economic criteria –Control –Adaptive criteria Evaluating the Major Alternatives

27. Chapter 12 - slide 27 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Channel Design Decisions Channel systems can vary from country to country Must be able to adapt channel strategies to the existing structures within each country Designing International Distribution Channels

28. Chapter 12 - slide 28 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Channel Management Decisions Selecting Channel Members Evaluate each channel member’s years in business, other lines carried, growth and profit record, cooperativeness and reputation. Managing and Motivating Channel Members Partner Relationship Management Evaluating Channel Members Check performance against standards such as sales quotas, average inventory levels, customer delivery time, treatment of damaged and lost goods, cooperation in company promotion and training programs, and services to the customer.

29. Chapter 12 - slide 29 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Marketing Logistics and Supply Chain Management Marketing logistics (physical distribution) involves planning, implementing, and controlling the physical flow of goods, services, and related information from points of origin to points of consumption to meet consumer requirements at a profit Nature and Importance of Marketing Logistics

30. Chapter 12 - slide 30 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Marketing Logistics and Supply Chain Management Nature and Importance of Marketing Logistics

31. Chapter 12 - slide 31 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Marketing Logistics and Supply Chain Management Supply chain management is the process of managing upstream and downstream value-added flows of materials, final goods, and related information among suppliers, the company, resellers, and final consumers Nature and Importance of Marketing Logistics

32. Chapter 12 - slide 32 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Marketing Logistics and Supply Chain Management Major Logistics Functions Warehousing Inventory management Transportation Logistics information management

33. Chapter 12 - slide 33 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Marketing Logistics and Supply Chain Management How many What types Location Distribution centers Warehousing Decisions

34. Chapter 12 - slide 34 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Marketing Logistics and Supply Chain Management Just-in-time systems RFID or smart tag technology –Knowing exact product location Smart shelves –Placing orders automatically Inventory Management

35. Chapter 12 - slide 35 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

36. Chapter 12 - slide 36 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Marketing Logistics and Supply Chain Management Major Logistics Functions Transportation affects the pricing of products, delivery performance, and condition of the goods when they arrive TruckRailWater PipelineAirInternet

37. Chapter 12 - slide 37 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Marketing Logistics and Supply Chain Management Integrated logistics management is the recognition that providing customer service and trimming distribution costs requires teamwork internally and externally Integrated Logistics Management

38. Chapter 12 - slide 38 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Marketing Logistics and Supply Chain Management Third-party logistics is the outsourcing of logistics functions to third-party logistics providers (3PLs) Integrated Logistics Management

39. Chapter 12 - slide 39 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall DHL Order processing Order processing, with the support of various procedures, forms the basis of all logistics activities at a company. This makes it a crucial factor in logistics operations. Warehouse Warehouses serve as vital hubs in the flow of goods within a logistics system. They are responsible for efficient storage and supply as well as rerouting of goods. Inventories A warehouse is a valuable facility for a company only when it is put to effective use. This requirement leads to the question about the optimal level of inventories in a warehouse. Packaging Optimal packaging of a product is a critically important factor in logistics. It serves as a protective layer, a source of information and a prerequisite for efficient and safe storage and rapid transport. Transport Goods should be moved from Point A to Point B as efficiently as possible. The specific strengths and weaknesses of each means of transportation within a freight-transport system must be weighed and possibly linked.

40. Chapter 12 - slide 40 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Retailing includes all the activities in selling products or services directly to final consumers for their personal, non-business use Retailers are businesses whose sales come primarily from retailing Retailing

41. Chapter 12 - slide 41 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Retailing Product Line Specialty stores Narrow product line with deep assortment Department stores Wide variety of product lines Convenience stores Limited line of high-turnover goods SuperstoresCategory killers Deep in category with sales staff Department stores

42. Chapter 12 - slide 42 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Selling and promotingBuying assortment buildingBulk breakingWarehousingTransportationFinancingRisk bearingMarket informationManagement services and advice Wholesaling Wholesaling includes all activities involved in selling goods and services to those buying for resale or business use