a Marketing Channels Marketing Channels Sets of interdependent

８ a Marketing Channels

Marketing Channels Sets of interdependent organizations involved in the process of making a product or service available for use or consumption. Professor Takada 8 a-2

Channels and Marketing Decisions Push Strategy Pull Strategy Professor Takada 8 a-3

Categories of Buyers Habitual shoppers High value deal seekers Variety-loving shoppers High-involvement shoppers Professor Takada 8 a-4

Buyer Expectations for Channel Integration • Ability to order a product • • online and pick it up at a convenient retail location Ability to return an onlineordered product to a nearby store Right to receive discounts based on total online and offline purchases Professor Takada 8 a-5

e-Commerce Marketing Practices • Pure-click • Brick-and-mortar Professor Takada 8 a-6

Should the 4 P’s be replaced? • Solutions • Information • Value • Access Professor Takada 8 a-7

ROAD MAP: • Why do companies use distribution channels? The functions these channels perform. • How do channel members interact and organize to perform the work of the channel? • Identify the major channel alternatives open to a company. • How do companies select, motivate, and evaluate channel members? • Marketing logistics and supply chain management. Professor Takada 8 a-8

ROAD MAP: • Why do companies use distribution channels? The functions these channels perform. • How do channel members interact and organize to • • • perform the work of the channel? Identify the major channel alternatives open to a company. How do companies select, motivate, and evaluate channel members? Marketing logistics and supply chain management. Professor Takada 8 a-9

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. 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 Professor Takada 8 a-10

A Distributor Reduces the Number of Channel Transactions Professor Takada 8 a-11

Channel Member Functions • Gather information • Develop and disseminate persuasive • • • communications Reach agreements on price and terms Acquire funds to finance inventories Assume risks Provide for storage Provide for buyers’ payment of their bills Oversee actual transfer of ownership Professor Takada 8 a-12

Marketing Channel Flows Professor Takada 8 a-13

Consumer Marketing Channels Professor Takada 8 a-14

Industrial Marketing Channels Professor Takada 8 a-15

ROAD MAP: • Why do companies use distribution channels? The functions these channels perform. • How do channel members interact and organize to perform the work of the channel? – Channel Behavior – Vertical Marketing Systems (VMS) • Corporate VMS • Contractual VMS-Franchise Organization • Administered VMS – Horizontal Marketing Systems • • • Identify the major channel alternatives open to a company. How do companies select, motivate, and evaluate channel members? Marketing logistics and supply chain management. Professor Takada 8 a-16

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 – (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. Professor Takada 8 a-17

Conventional vs. Vertical Marketing System Professor Takada 8 a-18

Types of Vertical Marketing Systems Corporate VMS Common Ownership at Different Levels of the Channel (Sears) High Contractual VMS Contractual Agreements Among Channel Members (ACE Hardware) Administered VMS Leadership Assumed by One ora Few Dominant Members (Kraft) Professor Takada Control Low 8 a-19

Franchise Organization • Manufacturer-Sponsored Retailer Franchise System – Ford and its independent franchised dealers • Manufacturer-Sponsored Wholesaler Franchise System – Coca-Cola’s licensed bottlers • Service-Firm Sponsored Retailer Franchise System – Mc. Donald’s, Avis, and Holiday Inn Professor Takada 8 a-20

Innovations in Marketing Systems Horizontal Marketing System Hybrid Marketing System Two or more companies at one channel level join together to follow a new marketing opportunity. Example: Banks in grocery stores Professor Takada A single firm sets up two or more marketing channels to reach one or more customer segments. Example: Retailers and catalogs 8 a-21

Changing Channel Organization • Disintermediation – Product and service producers are bypassing intermediaries and going directly to final buyers – Radically new types of channel intermediaries are emerging to displace traditional ones. Expedia, Travelocity, Priceline, Hotels. com, and Orbitz versus traditional travel agents. Professor Takada 8 a-22

ROAD MAP: • Why do companies use distribution channels? The functions • these channels perform. How do channel members interact and organize to perform the work of the channel? • Identify the major channel alternatives open to a company. – Channel Design Decisions: • Analyze consumer needs, set channel objectives, identify major alternatives, and evaluate the major alternatives. • How do companies select, motivate, and evaluate channel • members? Marketing logistics and supply chain management. Professor Takada 8 a-23

Channel Design Decisions • Analyze Consumer Needs • Set Channel Objectives • Identify Major Alternatives – Types of intermediaries • Company sales force • Manufacturer’s agency • Industrial distributors – Number of intermediaries • Intensive distribution • Exclusive distribution • Selective distribution • Evaluate 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: • Consider long-term commitment vs. flexibility. Professor Takada 8 a-24

Identifying Channel Alternatives Types of intermediaries Number of intermediaries Terms and responsibilities Professor Takada 8 a-25

Number of Intermediaries Exclusive Selective Intensive Professor Takada 8 a-26

The Value-Adds Versus Costs of Different Channels Professor Takada 8 a-27

Break-Even Chart for the Choice Between A Company Sales Force and Manufacturer’s Sales Agency Professor Takada 8 a-28

ROAD MAP: • Why do companies use distribution channels? The • • functions these channels perform. How do channel members interact and organize to perform the work of the channel? Identify the major channel alternatives open to a company. • How do companies select, motivate, and evaluate channel members? – Channel Management Decisions • Marketing logistics and supply chain management. Professor Takada 8 a-29

Channel Management Decisions Selecting Channel Members Managing & Motivating Channel Members Evaluating Channel Members Professor Takada 8 a-30

Channel Power • • • Coercive Reward Legitimate Expert Referent Professor Takada 8 a-31

Managing Channel Conflict • Adoption of • • superordinate goals Cooptation Diplomacy Mediation Arbitration Professor Takada 8 a-32

Public Policy and Distribution Decisions • Exclusive distribution • Exclusive dealing • Exclusive territorial agreements • Tying agreements Professor Takada 8 a-33

ROAD MAP: • Why do companies use distribution channels? The functions • • • these channels perform. How do channel members interact and organize to perform the work of the channel? Identify the major channel alternatives open to a company. How do companies select, motivate, and evaluate channel members? • Marketing logistics and supply chain management. Professor Takada 8 a-34

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 – Reverse distribution Professor Takada 8 a-35

Major Logistics Functions • Warehousing – – How many, what types, and where? Storage warehouses Distribution centers Automated warehouses • Inventory management – Must balance between too much and too little inventory. – Just-in-time logistics systems – RFID, Auto. ID, or Smart Tag technology • Transportation – Trucks, railroads, water carriers, pipelines, air, Internet, intermodal transportation • Logistics information management Professor Takada 8 a-36

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 – Third-party logistics • Ryder Integrated Logistics Professor Takada 8 a-37

Rest Stop: Reviewing the Concepts 1. Explain why companies use distribution channels 2. 3. 4. 5. and discuss the functions these channels perform. Discuss how channel members interact and how they organize to perform the work of the channel. Identify the major channel alternatives open to a company. Explain how companies select, motivate, and evaluate channel members. Discuss the nature and importance of marketing logistics and integrated supply chain management. Professor Takada 8 a-38