10 Marketing Channels and Supply Chain Management Marketing

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10 Marketing Channels and Supply Chain Management

10 Marketing Channels and Supply Chain Management

Marketing or Distribution Channel • A set of interdependent organizations involved in the process

Marketing or Distribution Channel • A 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 -2

How Channel Members Add Value • The use of intermediaries results from their greater

How Channel Members Add Value • The use of intermediaries results from their greater efficiency in making goods available to target markets. • Offers the firm more than it can achieve on its own through the intermediaries: – Contacts – Experience – Specialization – Scale of operation 10 -3

How a Distributor Reduces the Number of Channel Transactions 10 -4

How a Distributor Reduces the Number of Channel Transactions 10 -4

Channel Functions These functions should be assigned to the channel member who can add

Channel Functions These functions should be assigned to the channel member who can add the most value for the cost Information Promotion Physical Distribution Matching Risk Taking 10 -5

Consumer and Business Channels 10 -6

Consumer and Business Channels 10 -6

Channel Behavior • The channel will be most effective when: – each member is

Channel Behavior • 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. – Vertical Conflict occurs between different levels of the same channel • Some conflict can be healthy competition. 10 -7

Conventional vs. Vertical Marketing System 10 -8

Conventional vs. Vertical Marketing System 10 -8

Vertical Marketing System (VMS) • A distribution channel structure in which producers, wholesalers, and

Vertical Marketing System (VMS) • A distribution channel structure in which producers, wholesalers, and retailers act as a unified system • One channel member owns the other, has contracts with them, or has so much power that they all cooperate. 10 -9

Types of Vertical Marketing Systems Corporate VMS Common Ownership at Different Levels of the

Types of Vertical Marketing Systems Corporate VMS Common Ownership at Different Levels of the Channel High Contractual VMS Contractual Agreements Among Channel Members Control Administered VMS Leadership is Assumed by One or a Few Dominant Members Low 10 -10

Franchise Organization • Manufacturer-Sponsored Retailer Franchise System – Ford and its independent franchised dealers

Franchise Organization • Manufacturer-Sponsored Retailer Franchise System – Ford and its independent franchised dealers • Manufacturer-Sponsored Wholesaler Franchise System • Service-Firm Sponsored Retailer Franchise System 10 -11

Innovations in Marketing Systems Horizontal Marketing System Two or more companies at one channel

Innovations in Marketing Systems Horizontal Marketing System Two or more companies at one channel level join together to follow a new marketing opportunity. Hybrid Marketing System A single firm sets up two or more marketing channels to reach one or more customer segments. 10 -12

Hybrid Marketing Channel 10 -13

Hybrid Marketing Channel 10 -13

Changing Channel Organization • Disintermediation means that more and more, product and service producers

Changing Channel Organization • Disintermediation means that more and more, product and service producers are bypassing intermediaries and going directly to final buyers, or that radically new types of channel intermediaries are emerging to displace traditional ones. 10 -14

Channel Design Decisions • Analyzing Consumer Needs • Setting Channel Objectives • Identifying Major

Channel Design Decisions • Analyzing Consumer Needs • Setting Channel Objectives • Identifying Major Alternatives – Types of intermediaries – Number of intermediaries – Responsibilities of intermediaries 10 -15

Types of Intermediaries • Company sales force • Manufacturer’s agency • Industrial distributors 10

Types of Intermediaries • Company sales force • Manufacturer’s agency • Industrial distributors 10 -16

Number of Intermediaries • Intensive distribution • Exclusive distribution • Selective distribution 10 -17

Number of Intermediaries • Intensive distribution • Exclusive distribution • Selective distribution 10 -17

Evaluating the Major Alternatives • Economic Criteria: – A company compares the likely sales,

Evaluating the Major Alternatives • Economic Criteria: – A company compares the likely sales, costs, and profitability of different channel alternatives. • Control Issues: – How and to whom should control be given? • Adaptive Criteria: 10 -18

Channel Management Decisions Selecting Channel Members Managing & Motivating Channel Members Evaluating Channel Members

Channel Management Decisions Selecting Channel Members Managing & Motivating Channel Members Evaluating Channel Members 10 -19

Public Policy and Distribution Decisions • Exclusive distribution • Exclusive dealing • Exclusive territorial

Public Policy and Distribution Decisions • Exclusive distribution • Exclusive dealing • Exclusive territorial agreements • Tying agreements 10 -20

Logistics and Supply Chain Management • Planning, implementing, and controlling the physical flow of

Logistics and Supply Chain Management • Planning, implementing, and controlling the physical flow of goods, services, and related information from points of origin to points of consumption to meet customer requirements at a profit. • Includes: – Outbound distribution – Inbound distribution 10 -21

Supply Chain Management 10 -22

Supply Chain Management 10 -22

Major Logistics Functions • Warehousing • Inventory management • Transportation • Logistics information management

Major Logistics Functions • Warehousing • Inventory management • Transportation • Logistics information management 10 -23

Warehousing • How many, what types, and where? • Storage warehouses • Distribution centers

Warehousing • How many, what types, and where? • Storage warehouses • Distribution centers • Automated warehouses 10 -24

Inventory Management • Must balance between too much and too little inventory. • Just-in-time

Inventory Management • Must balance between too much and too little inventory. • Just-in-time logistics systems • RFID, Auto. ID, or Smart Tag technology 10 -25

Transportation • Trucks • Railroads • Water carriers • Pipelines • Air • Internet

Transportation • Trucks • Railroads • Water carriers • Pipelines • Air • Internet • Intermodal transportation 10 -26

Transportation Modes Rail Nation’s second largest carrier, cost-effective for shipping bulk products, Largest carrier

Transportation Modes Rail Nation’s second largest carrier, cost-effective for shipping bulk products, Largest carrier Flexible in routing & time schedules, Efficient for short-hauls of high value goods Water Low cost for shipping bulky, low-value, non-perishable goods, slowest form Pipeline Ship petroleum, natural gas, and chemicals from sources to markets High cost, ideal when speed is needed or distance markets have to be reached 10 -27

Intermodal Transportation 10 -28

Intermodal Transportation 10 -28

Intermodal Transportation 10 -29

Intermodal Transportation 10 -29

Intermodal Transportation 10 -30

Intermodal Transportation 10 -30

Intermodal Transportation 10 -31

Intermodal Transportation 10 -31

Intermodal Transportation 10 -32

Intermodal Transportation 10 -32

Integrated Logistics Management • The logistics concept that emphasizes teamwork, both inside the company

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. • Involves: – Cross-functional teamwork inside the company – Building logistics partnerships 10 -33

Third Party Logistics Many companies are now outsourcing logistics tasks to companies like Ryder

Third Party Logistics Many companies are now outsourcing logistics tasks to companies like Ryder Integrated Logistics. Here, Ryder describes a system it designed to keep Friendly’s refrigerated trucks on the road. “Thanks to Ryder, Friendly’s doesn’t have to worry about breakdowns. Or meltdowns. ” 10 -34