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1 MARKETING CHANNELS (Place) Distribution Channels and Logistics Management.

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Presentation on theme: "1 MARKETING CHANNELS (Place) Distribution Channels and Logistics Management."— Presentation transcript:

1 1 MARKETING CHANNELS (Place) Distribution Channels and Logistics Management

2 2 What is the Nature Of Distribution Channels? What is the Nature Of Distribution Channels? How do Channel Firms Interact and Organize to do the Work of the Channel? How do Channel Firms Interact and Organize to do the Work of the Channel? Issues Concerning Distribution Channels What Problems do Companies Face in Designing and Managing Their Channels? What Problems do Companies Face in Designing and Managing Their Channels? What Role Does Physical Distribution Play in Attracting and Satisfying Customers? What Role Does Physical Distribution Play in Attracting and Satisfying Customers?

3 3 What is a Distribution Channel? A set of interdependent organizations (intermediaries) involved in the process of making a product or service available for use or consumption by the consumer or business user. Marketing Channel decisions are among the most important decisions that management faces and will directly affect every other marketing decision.

4 4 Why are Marketing Intermediaries Used? The use of intermediaries results from their greater efficiency in making goods available to target markets. Offer the firm more than it can achieve on its own through the intermediaries: Contacts, Experience, Specialization, Scale of operation. Purpose: match supply from producers to demand from consumers.

5 5 How a Marketing Intermediary Reduces the Number of Channel Transactions

6 6 Contact Financing Information Risk Taking Promotion Matching Negotiation Physical Distribution Physical Distribution These Functions Should be Assigned to the Channel Member Who Can Perform Them Most Efficiently and Effectively to Provide Satisfactory Assortments of Goods and Services to Target Customers. Distribution Channel Functions

7 7 M M W W J J R R C C M M W W R R C C M M R R C C M M C C Channel 1 Channel 2 Channel 3 Channel 4 Channel Level - Each Layer of Marketing Intermediaries that Perform Some Work in Bringing the Product and its Ownership Closer to the Final Buyer. Number of Channel Levels Direct Channel Indirect Channel

8 8 Channel Behavior & Conflict The channel will be most effective when: each member is assigned tasks it can do best. all members cooperate to attain overall channel goals and satisfy the target market. When this doesnt happen, conflict occurs: Horizontal Conflict occurs among firms at the same level of the channel, i.e retailer to retailer. Vertical Conflict occurs between different levels of the same channel, i.e. wholesaler to retailer. For the channel to perform well, each channel members role must be specified and conflict must be managed.

9 9 Conventional Marketing Channel Vs. a Vertical Marketing System Conventional Marketing Channel Vertical Marketing System Manufacturer Retailer Manufacturer Retailer Wholesaler Manufacturer Wholesaler Retailer Consumer

10 10 Corporate Common Ownership at Different Levels of the Channel i.e. Sears Contractual Contractual Agreements Among Channel Members Administered Leadership is Assumed by One or a Few Dominant Members i.e. Kraft Degree of Direct Control Types of Vertical Marketing Systems

11 11 Contractual VMS Contractual VMS Retailer Cooperatives Retailer Cooperatives Franchise Organizations Franchise Organizations Wholesaler Sponsored Voluntary Chain Wholesaler Sponsored Voluntary Chain Service-Firm- Sponsored Franchise System Service-Firm- Sponsored Franchise System Manufacturer- Sponsored Wholesaler Franchise System Manufacturer- Sponsored Wholesaler Franchise System Manufacturer- Sponsored Retailer Franchise System Manufacturer- Sponsored Retailer Franchise System Vertical Marketing Systems (VMS) Vertical Marketing Systems (VMS) Corporate VMS Corporate VMS Administered VMS Administered VMS Types of Vertical Marketing Systems

12 12 Innovations in Marketing Systems Horizontal Marketing System Two or More Companies at One Channel Level Join Together to Follow a New Marketing Opportunity. Example: Banks in Grocery Stores Horizontal Marketing System Two or More Companies at One Channel Level Join Together to Follow a New Marketing Opportunity. Example: Banks in Grocery Stores Hybrid Marketing System A Single Firm Sets Up Two or More Marketing Channels to Reach One or More Customer Segments. Example: Retailers, Catalogs, and Sales Force Hybrid Marketing System A Single Firm Sets Up Two or More Marketing Channels to Reach One or More Customer Segments. Example: Retailers, Catalogs, and Sales Force

13 13 To Discuss… Describe the kinds of horizontal and vertical channel conflict that might occur in one of the following: Personal computer industry, Automobile industry, Music industry, Clothing industry. How would you remedy the problems you have just described?

14 14 Changing Channel Organization A Major Trend is Toward Disintermediation Which Means that Product and Service Producers are Bypassing Intermediaries and Going Directly to Final Buyers or That New Types of Channel Intermediaries are Emerging to Displace Traditional Ones.

15 15 Analyzing Consumer Service Needs Setting Channel Objectives & Constraints Exclusive Distribution Selective Distribution Intensive Distribution Identifying Major Alternatives Evaluating the Major Alternatives Designing International Distribution Channels Channel Design Decisions

16 16 Selecting Channel Members Motivating Channel Members Evaluating Channel Members FEEDBACK Channel Management Decisions

17 17 Nature and Importance of Marketing Logistics Involves getting the right product to the right customers in the right place at the right time. Companies today place greater emphasis on logistics because: customer service and satisfaction have become the cornerstone of marketing strategy. logistics is a major cost element for most companies. the explosion in product variety has created a need for improved logistics management. Improvements in information technology has created opportunities for major gains in distribution efficiency.

18 18 Goals of the Logistics System Lower Distribution Costs; Lower Customer Service Levels Higher Distribution Costs; Higher Customer Service Levels Goal: To Provide a Targeted Level of Customer Service at the Least Cost.

19 19 Inventory When to order How much to order Just-in-time Inventory When to order How much to order Just-in-time Costs Minimize Costs of Attaining Logistics Objectives Costs Minimize Costs of Attaining Logistics Objectives Warehousing Storage Distribution Automated Warehousing Storage Distribution Automated Order Processing Received Processed Shipped Order Processing Received Processed Shipped Logistics Functions Transportation Rail, Truck, Water, Pipeline, Air, Intermodal Major Logistics Functions

20 20 Rail Nations largest carrier, cost-effective for shipping bulk products, piggyback Rail Nations largest carrier, cost-effective for shipping bulk products, piggyback Truck Flexible in routing & time schedules, efficient for short-hauls of high value goods Truck 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 Water Low cost for shipping bulky, low-value, non perishable goods, slowest form Pipeline Ship petroleum, natural gas, and chemicals from sources to markets Pipeline Ship petroleum, natural gas, and chemicals from sources to markets Air High cost, ideal when speed is needed or distance markets have to be reached Air High cost, ideal when speed is needed or distance markets have to be reached Transportation Modes

21 21 1. Speed 2. Dependability 3. Availability 4. Costs 5. Others Checklist for Choosing Transportation Modes Choosing Transportation Modes

22 22 Teamwork Concept Recognizes that Providing Better Customer Service and Trimming Distribution Costs Requires Teamwork, Both Inside the Company and Among All the Marketing Channel Organizations. Cross-Functional Teamwork inside the Company Building Channel Partnerships Third-Party Logistics Integrated Logistics Management


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