Chapter 8: Developing Channel and Logistics Strategy The Marketing Plan Handbook Fourth Edition Marian Burk Wood 8-1

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall The Value Chain A series of interrelated value-added functions. Inbound: Inputs needed for creating the goods and services. Outbound: Making the product or service available. 8-2

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Major Links in the Value Chain 8-3

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Three Flows in the Value Chain Products: Physical items such as raw materials and finished. Data: Information such as the number of items ordered, customer requirements, and feedback. Money: Refers to payments for supplies, reseller, or customer payments for finished goods, and other money movements between participants. 8-4

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Adding Value Through the Chain Each participant adds value to satisfy the needs of the next link. Price paid reflects the value added by the previous link. Customers ultimately pay for the combined value added by all participants. 8-5

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Services and the Value Chain Service businesses face the same supply chain challenges as those who manage tangible goods. For services, marketers must plan flows to more accurately match supply and demand. 8-6

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Planning Channel Strategy Each organization must make decisions regarding: Which channel functions must be covered by someone other than the organization? Who will handle each function? How many channel levels to use? How many and what type of channel members to choose? 8-7

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Types of Channel Functions Matching volume, amount, or offer to customer needs. Providing intermediaries and customers with product and market information. Contacting and negotiating with customers to maintain relationships and complete sales. Transporting and storing products prior to purchase. 8-8

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Decisions Regarding Channel Functions Determine which functions are best handled by which member of the value chain. Determine who the channel intermediary should be. Determine the compensation for the intermediary. 8-9

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Channel Levels Each channel level adds value in some way. Basic channel level configurations: Zero-level: direct linking of the seller to the buyer. One-level: The seller works with a single type of intermediary. Multiple-level: The seller works with two or three levels of distribution partners. 8-10

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Channel Levels Illustrated 8-11

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Reverse Channels To return products for exchange, repair, or recycling. Can be used to build relationships with customers and the community. Must take into consideration the laws and regulations that may govern their reverse channel strategy. Can also represent profit opportunities for enterprising companies. 8-12

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Channel Members Key considerations include: Customer needs and habits. Financial considerations. Product’s life cycle. Product’s positioning. The target segment. Relations with channel members should be reexamined periodically. 8-13

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Influences on Channel Strategy 8-14 Decisions must be based upon: Rest of marketing mix. A thorough understanding of the targeted segment. An understanding of the environment. The product’s characteristics and its stage in the product life cycle.

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Distribution Intensity Intensive Distribution: In many outlets for maximum market coverage. Selective Distribution: In a number of selected outlets. Exclusive Distribution: In few outlets for exclusivity within each market. 8-15

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Distribution Intensity (cont’d) Distribution Intensity Value to MarketerValue to Customer IntensiveIncrease unit sales. Market impulse items. Cover more of each market. Convenient. Lower prices due to competition. SelectiveReduce dependence on a few outlets. Control costs. See product. Receives sales help. Obtain some services as needed. Exclusive Support product or brand positioning. Better supervise service, etc. Receive personalized attention. Access to delivery, alterations, customizations, etc. 8-16

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Internal Considerations Direction, goals and objectives. Resources and competencies. Marketing mix. Control. 8-17

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall External Considerations Customers Markets Environmental factors Competitors Intermediary availability 8-18

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Planning for Logistics Marketer’s Balancing Act: Being responsive to customers’ needs while still meeting internal financial targets. 8-19

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Logistics Decisions 8-20

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Influences on Logistics Decisions The organization’s approach to social responsibility. Cost constraints and the marketer's logistics budget. 8-21

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall The Logistics Strategy Logistics strategy should contain: A general outline. An explanation of the balance of total costs versus responsiveness. An indication of how logistics functions will support other marketing decisions. 8-22

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. Copyright © 2011 Pearson Education, Inc. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 8-23