1. Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall i t ’s good and good for you 12 - 1 Copyright © 2012 Pearson Education. Chapter Twelve Marketing Channels Delivering Customer Value

2. Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 12 - 2 Copyright © 2012 Pearson Education. Supply Chain Partners The supply chain consists of two types of partners: 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

3. Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 12 - 3 Copyright © 2012 Pearson Education. Supply Chains and the Value Delivery Network From supply chain to demand chain… Supply chain “make and sell” view includes the firm’s raw materials, productive inputs, and factory capacity Demand chain “sense and respond” view suggests that planning starts with the needs of the target customer, and the firm responds to these needs by organizing a chain of resources and activities with the goal of creating customer value Supply Chain Views

4. Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 12 - 4 Copyright © 2012 Pearson Education. 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

5. Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 12 - 5 Copyright © 2012 Pearson Education. 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

6. Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 12 - 6 Copyright © 2012 Pearson Education. The Nature and Importance of Marketing Channels From an economic view, intermediaries transform the assortment(variety) of products into assortments(variety) wanted by consumers Channel members add value by bridging the major time, place, and possession(ownership) gaps that separate goods and services from those who would use them How Channel Members Add Value

7. Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 12 - 7 Copyright © 2012 Pearson Education. The Nature and Importance of Marketing Channels How Channel Members Add Value InformationPromotionContact MatchingNegotiation Physical distribution FinancingRisk Taking

8. Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 12 - 8 Copyright © 2012 Pearson Education. 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(clash) refers to disagreement over goals, roles, and rewards by channel members Horizontal conflict Vertical conflict Channel Behavior

9. Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 12 - 9 Copyright © 2012 Pearson Education. 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

10. Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 12 - 10 Copyright © 2012 Pearson Education. Channel Behavior and Organization Vertical marketing systems (VMS) is one in which the main members of a distribution channel—producer, wholesaler, and retailer—work together as a unified group in order to meet consumer needs. or 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

11. Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 12 - 11 Copyright © 2012 Pearson Education. Channel Behavior and Organization Corporate vertical marketing system integrates successive stages of production and distribution under single ownership Vertical Marketing Systems

12. Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 12 - 12 Copyright © 2012 Pearson Education. 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

13. Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 12 - 13 Copyright © 2012 Pearson Education. Channel Behavior and Organization Franchise organization links several stages in the production distribution process –Manufacturer-sponsored retailer franchise system –Manufacturer-sponsored wholesaler franchise system –Service firm-sponsored retailer franchise system Vertical Marketing Systems

14. Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 12 - 14 Copyright © 2012 Pearson Education. Channel Behavior and Organization Administered vertical marketing system has a few dominant channel members without common ownership. Leadership comes from size and power. or A co-ordinated system of distribution channel organization in which the flow of products from producer to end-user is controlled by the power and size of one member of the channel system rather than by common ownership or contractual ties Vertical Marketing Systems

15. Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 12 - 15 Copyright © 2012 Pearson Education. 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. E.g. Med-Gulf Horizontal Marketing Systems

16. Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 12 - 16 Copyright © 2012 Pearson Education. 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 e.g. some companies are using electronic channels and some are using physical channels Multichannel Distribution Systems Hybrid Marketing Channels

17. Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 12 - 17 Copyright © 2012 Pearson Education. 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 Or reduction in the use of intermediaries between producers and consumers, for example by investing directly in the securities market rather than through a bank Changing Channel Organization

18. Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 12 - 18 Copyright © 2012 Pearson Education. Channel Design Decisions Analyzing consumer needs Setting channel objectives Identifying major channel alternatives Evaluation

19. Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 12 - 19 Copyright © 2012 Pearson Education. 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

20. Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 12 - 20 Copyright © 2012 Pearson Education. Channel Design Decisions Types of intermediaries Number of intermediaries Responsibilities of each channel member Identifying Major Alternatives

21. Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 12 - 21 Copyright © 2012 Pearson Education. Channel Design Decisions Identifying Major Alternatives Intensive distribution Candy and toothpaste Exclusive distribution Luxury automobiles and prestige clothing Selective distribution Television and home appliance

22. Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 12 - 22 Copyright © 2012 Pearson Education. Channel Design Decisions Each alternative should be evaluated against: Economic criteria Control and command Adaptive criteria Evaluating the Major Alternatives

23. Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 12 - 23 Copyright © 2012 Pearson Education. 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

24. Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 12 - 24 Copyright © 2012 Pearson Education. Channel Management Decisions Selecting channel members Managing channel members Motivating channel members Evaluating channel members

25. Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 12 - 25 Copyright © 2012 Pearson Education. Public Policy and Distribution Decisions Exclusive distribution is when the seller allows only certain outlets to carry its products. For example, Apple had an exclusive distribution deal with AT&T to provide the iPhone to consumers. Exclusive dealing is when the seller requires that the sellers not handle competitor’s products, e.g. Fast food restaurants, gas stations that are required to get their supplies from a particular company. Exclusive territorial agreements is when producer or seller limit territory Tying agreements are agreements where the dealer must take most or all of the line or A tying arrangement is defined as "an agreement by a party to sell one product but only on the condition that the buyer also purchases a different product, or at least agrees he will not purchase the product from any other supplier."

26. Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 12 - 26 Copyright © 2012 Pearson Education. 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

27. Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 12 - 27 Copyright © 2012 Pearson Education. Marketing Logistics and Supply Chain Management Major Logistics Functions Warehousing Inventory management Transportation Logistics information management

28. Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 12 - 28 Copyright © 2012 Pearson Education. Marketing Logistics and Supply Chain Management How many What types Location Distribution centers Warehousing Decisions

29. Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 12 - 29 Copyright © 2012 Pearson Education. Marketing Logistics and Supply Chain Management Just-in-time systems RFID (radio frequency identification) –Knowing exact product location Smart shelves –Placing orders automatically Inventory Management

30. Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 12 - 30 Copyright © 2012 Pearson Education. Marketing Logistics and Supply Chain Management Transportation affects the pricing of products, delivery performance, and condition of the goods when they arrive Major Logistics Functions TruckRailWater PipelineAirInternet

31. Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 12 - 31 Copyright © 2012 Pearson Education. Marketing Logistics and Supply Chain Management Logistics information management is the management of the flow of information, including customer orders, billing, inventory levels, and customer data EDI (electronic data interchange) two different companies, even in two different countries, can electronically exchange documents (such as purchase orders, invoices, shipping notices, and many others VMI (vendor-managed inventory) Vendor-managed inventory is a family of business models in which the buyer of a product provides certain information to a vendor supplier of that product and the supplier takes full responsibility for maintaining an agreed inventory of the material, usually at the buyer's consumption location Logistics Information Management

32. Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 12 - 32 Copyright © 2012 Pearson Education. Marketing Logistics and Supply Chain Management Third-party logistics is the outsourcing of logistics functions to third-party logistics providers (3PLs). or A third-party logistics provider (abbreviated 3PL, or sometimes TPL) is a firm that provides service to its customers of outsourced (or "third party") logistics services for part, or all of their supply chain management functions. Integrated Logistics Management