Topic nine: delivery the customer value

Objectives Work Performed by Marketing Channels Channel-Design Decisions Channel-Management Decisions Channel Dynamics Wholesale and retail

How a Distributor Reduces the Number of Channel Transactions = Customer = Manufacturer A. Number of contacts without a distributor M x C = 3 X 3 =

How a Distributor Reduces the Number of Channel Transactions = Distributor = Customer = Manufacturer B. Number of contacts with a distributor M x C = = 6 Store

Ordering Payments Communication Transfer Negotiation Financing Risk Taking Physical Distribution Physical Distribution Information Distribution channel function

Wholesaler Jobber Retailer Consumer  Retailer Consumer  Manufacturer 0-level channel Wholesaler Retailer Consumer  Mfg 2-level channel Mfg 3-level channel 1-level channel Manufacturer Consumer market channels

Industrial distributors Manufacturer Consumer Manufacturer’s representative Manufacturer’s sales branch Industrial Marketing Channels

Customers’ Desired Service Levels Lot size Waiting time Spatial convenience Product variety Service backup

Channel Management Decisions Selecting FEEDBACK Motivating Training Evaluating

Types of Vertical Marketing Systems Corporate Common Ownership at Different Levels of the Channel Corporate Common Ownership at Different Levels of the Channel Contractual Contractual Agreement Among Channel Members Contractual Contractual Agreement Among Channel Members Administered Leadership is Assumed by One or a Few Dominant Members Administered Leadership is Assumed by One or a Few Dominant Members

Conventional Distribution Channel vs. Vertical Marketing Systems Verticalmarketingchannel Manufacturer Retailer Conventionalmarketingchannel Consumer Manufacturer ConsumerRetailer Wholesaler

Causes of Channel Conflict Incompatibility Difference in Perception Dependence Legal & Ethical Issues in Channel Relations ä Exclusive Dealing ä Exclusive Territories ä Tying Agreements ä Dealers’ Rights

Four Levels of Retail Service Self-service Self-selection Limited-service Full-service

Retail Positioning Map Bloomingdale’s Kinney Shoe Wal-Mart TiffanyBroadNarrow Breadth of product line Value added Low High

Classification Of Retailer Types Specialty Stores Department Stores Supermarkets Convenience Stores Off-Price Retailer Superstores Catalog Showroom Wide Variety of Product Lines i.e. Clothing, Home Furnishings, & Household Items Wide Variety of Food, Laundry, & Household Products Limited Line of High-Turnover Convenience Goods Inexpensive, Overruns, Irregulars, and Leftover Goods Large Assortment of Routinely Purchased Food & Nonfood Products, Plus Services Broad Selection, Fast Turnover, Discount Prices Narrow Product Line, Deep Assortment Store TypeLength and Breadth of Product Assortment Discount Stores Broad Product Line, Low Margin, High Volume

Types of NonStore Retailing Direct Selling Direct Marketing Buying Services NonStore Retailing Accounts for More Than 12% of All Consumer Purchases, and is trending up. Automatic Vending

Low Price Low Status Low Margin Mid Price Mid Status Mid Margin High Price High Status High Margin Wheel of Retailing

Wholesaler Functions ManagementServices & Advice ManagementServices & Advice Selling andPromoting Selling andPromoting MarketInformation MarketInformation Buying andAssortment Building Buying andAssortment Building Risk Bearing Bulk Breaking Transporting Financing Warehousing Why use wholesaler?

Provide a Targeted Level of Customer Service at the Least Cost. Maximize Profits, Not Sales. Higher Distribution Costs/ Higher Customer Service Levels Lower Distribution Costs/ Lower Customer Service Levels Goals of the logistic system

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 Warehousing Storage Distribution Order Processing Submitted Processed Shipped Order Processing Submitted Processed Shipped Logistics Functions Transportation Water, Truck, Rail, Pipeline & Air Logistics Systems

Rail Nation’s largest carrier, cost-effective for shipping bulk products, piggyback Rail Nation’s 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 goods, slowest form Water Low cost for shipping bulky, low-value 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 to ship high-value, low-bulk items Air High cost, ideal when speed is needed or to ship high-value, low-bulk items Transportation Modes

1. Speed. 2. Dependability. 3. Capability. 4. Availability. Checklist for Choosing Transportation Modes