1. 1 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

2. A value delivery network is made up of the company, suppliers, distributors, and ultimately customers who “partner” with each other to improve the performance of the entire system.

3. Marketing channel is a set of interdependent organizations that help make a product or service available for use by the business user.

4. Channels Can Create Efficiency V1 V2 V3 V4 C1 C2 C3 C4 C1 C2 C3 C4 V1 V2 V3 V4 RS Direct: V x C transactions Via Reseller: V + C transactions V = Vendors; C=Customers; RS=Reseller Rationale for Channel Design 4 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

5. InformationPromotionContact MatchingNegotiation Physical distribution FinancingRisk taking

6.  Form  Time  Place  Possession 6 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

7.  The usable quantity or mode of the product most preferred by the customer 7 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

8.  The availability of the product when the customer needs it 8 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

9.  “Locational Convenience” — the availability of the product where the customer needs it 9 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

10.  Methodology by which the customer obtains ownership or the right to use of the product or service 10 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

11. 11

12. Seller Benefits  Buy and hold inventory  Combine supplier outputs (reduce discrepancy of assortment)  Share credit risk  Share selling risk  Forecast market needs  Provide market information Buyer Benefits  Provide fast delivery  Provide market segment-based product assortment  Provide local credit  Provide product information  Assist in buying decisions  Anticipate needs Seller Benefits  Buy and hold inventory  Combine supplier outputs (reduce discrepancy of assortment)  Share credit risk  Share selling risk  Forecast market needs  Provide market information Buyer Benefits  Provide fast delivery  Provide market segment-based product assortment  Provide local credit  Provide product information  Assist in buying decisions  Anticipate needs Exhibit 14-4 12 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

13.  Henry Ford developed his own iron ore mining operation, steel mills, glass factories, tire manufacturing, etc. 13 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

14.  Apple owns its own retail channels 14 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

15. Advantages  Economies of Scale  Complete Control  Reliability and Availability Disadvantages  Lack of Flexibility  Significant Investment  Slow to Innovate (Myopia) 15 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

16.  “Fast Vertical Integration” creates a lot of the advantages without the disadvantages o Greater flexibility o Lower initial investment o Fast response to market 16 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

17. Marketing channel design includes designing effective marketing channels by analyzing customer needs, setting channel objectives, identifying major channel alternatives, and evaluating them.

18. Marketing channel management involves s electing, managing, and motivating channel members and evaluating their performance over time.

19.  The management of movement, sorting, and storage of goods—an important tactical function 19 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

20.  Creation of value for customers through effective and efficient flow of materials, components, finished goods and services  Extends from raw materials to end use customers 20 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

21. System design aimed at minimizing costs while maintaining a given level of customer service through the simultaneous management of three elements  Inventory management  Transportation  Warehousing 21 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

22.  Largest cost is often associated with logistics system  Inventory implies carrying/finance charges, costs of storage and creating assortment  Lower inventory quantities lead to lower costs but result in more costly transportation or stockouts 22 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

23.  Tradeoff of speed versus cost  Slower transportation implies larger safety stocks  If transportation costs are minimized without regarding necessary inventory levels, carrying costs increase 23 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

24. Two primary functions of warehousing:  Product flow/movement- associated with the creation of assortment (Distribution Centers)  Product storage (Warehouses) 24 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

25.  As technology and product advantages become more fleeting, efficient supply chains have become a competitive advantage  Best designs match “the way a customer buys” in that the marketing channel is differentially invisible to the customer 25 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

26.  Customer should not be required to adapt to the vendor o The process should be invisible 26 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

27.  Different market segments require different channel design Manufacturer Multi-brand Distributor Logistics Provider Large Customer – Direct Channel Integrated Retailers Independent Retailers Auto Manufacturers – GM, Ford, Honda, etc. Goodyear Sponsored/ Franchised Dealers Sears, Wheel Works, etc. Example: Goodyear Tires Goodyear may or may not use the same distributor/logistics provider as the independent stores. 27 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

28.  Customers within a segment with similar needs will expect locational convenience Manufacturer Dealer/ Retailer Example: Honda Automobiles Dealer/ Retailer Number of dealers with same channel design relates to the desired intensity of distribution. 28 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

29.  Channels convert manufacturers’ product lines to product assortments desired by particular market segments 29 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

30. Favoring Product requires local stock. Product line is small, unable to support direct sales. Product is somewhat generic. Product has low unit value. Product is near end of PLC. Customers are widely dispersed. Local repackaging, sizing, or fabrication is required. Market has many small-volume buyers. Product requires extensive sales effort directed at buying professionals. Start-up venture or established company is entering a new market. Competition uses distributors. Customers prefer distributors. Not Favoring Product is highly customized. Product is new or innovative. Product is technically sophisticated. Significant missionary selling is required. Manufacturer requires control over product application. Large buyers are geographically concentrated. Favoring Product requires local stock. Product line is small, unable to support direct sales. Product is somewhat generic. Product has low unit value. Product is near end of PLC. Customers are widely dispersed. Local repackaging, sizing, or fabrication is required. Market has many small-volume buyers. Product requires extensive sales effort directed at buying professionals. Start-up venture or established company is entering a new market. Competition uses distributors. Customers prefer distributors. Not Favoring Product is highly customized. Product is new or innovative. Product is technically sophisticated. Significant missionary selling is required. Manufacturer requires control over product application. Large buyers are geographically concentrated. Exhibit 14-6 30 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

31.  Determine right distributor for your marketing plan  Ask customers who they recommend  Train and support them well, at both your facilities and theirs  Make calls on them  Make calls with them 31 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

32.  Better and faster channel flows—market data more readily available  Faster communications provide rapid ordering and order tracking  Reduced transaction costs through online processing and tracking  Product information available at the customers’ convenience 32 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

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