Presentation on theme: "MARKETING CHANNELS (Place)"— Presentation transcript:
1 MARKETING CHANNELS (Place) Distribution Channels and Logistics Management
2 Issues Concerning Distribution Channels What Role DoesPhysical DistributionPlay in Attractingand SatisfyingCustomers?What is the NatureOf DistributionChannels?How do ChannelFirms Interact andOrganize to do theWork of theChannel?What Problems doCompanies Face inDesigning andManaging TheirChannels?
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 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 it’s own through the intermediaries:Contacts,Experience,Specialization,Scale of operation.Purpose: match supply from producers to demand from consumers.
5 How a Marketing Intermediary Reduces the Number of Channel Transactions
6 Distribution Channel Functions 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.Risk TakingInformationFinancingPromotionPhysicalDistributionContactNegotiationMatching
7 Number of Channel Levels Channel Level - Each Layer of Marketing Intermediaries that Perform Some Work in Bringing the Product and its Ownership Closer to the Final Buyer.MCChannel 1Direct ChannelMRCChannel 2Indirect ChannelMWRCChannel 3MWJRCChannel 4
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 doesn’t 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 member’s role must be specified and conflict must be managed.
9 Conventional Marketing Channel Vs. a Vertical Marketing System ManufacturerManufacturerRetailerWholesalerWholesalerRetailerConsumerConsumer
10 Types of Vertical Marketing Systems CorporateCommon Ownership at DifferentLevels of the Channel i.e. SearsTypes of Vertical Marketing SystemsContractualContractual Agreements AmongChannel MembersAdministeredLeadership is Assumed by One ora Few Dominant Members i.e. KraftDegree of Direct Control
11 Types of Vertical Marketing Systems Systems (VMS)ContractualVMSRetailerCooperativesFranchiseOrganizationsWholesaler SponsoredVoluntary ChainService-Firm-SponsoredFranchise SystemManufacturer-Sponsored WholesalerSponsored RetailerCorporateVMSAdministeredVMS
12 Innovations in Marketing Systems Horizontal Marketing SystemTwo or More Companies at One Channel Level Join Together to Follow a New Marketing Opportunity.Example:Banks in Grocery StoresHybrid Marketing SystemA Single Firm Sets Up Two or More Marketing Channels to Reach One or More Customer Segments.Example:Retailers, Catalogs, and Sales Force
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 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 Channel Design Decisions Analyzing Consumer Service NeedsSetting Channel Objectives & ConstraintsIdentifying Major AlternativesChannel Design DecisionsEvaluating the Major AlternativesDesigning International Distribution ChannelsIntensiveDistributionSelectiveDistributionExclusiveDistribution
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 Goals of the Logistics System Higher Distribution Costs;Higher Customer Service LevelsGoal:To Provide a Targeted Level of Customer Serviceat the Least Cost.Maximize Profits, Not SalesLower Distribution Costs;Lower Customer Service Levels
19 Major Logistics Functions Order ProcessingReceivedProcessedShippedCostsMinimize Costs ofAttaining LogisticsObjectivesLogisticsFunctionsWarehousingStorageDistributionAutomatedTransportation Rail, Truck, Water, Pipeline, Air, IntermodalInventoryWhen to orderHow much to orderJust-in-time
20 Transportation Modes Rail Truck Water Pipeline Air Nation’s largest carrier, cost-effectivefor shipping bulk products, piggybackTruckFlexible in routing & time schedules, efficientfor short-hauls of high value goodsWaterLow cost for shipping bulky, low-value,non perishable goods, slowest formPipelineShip petroleum, natural gas, and chemicalsfrom sources to marketsAirHigh cost, ideal when speed is needed ordistance markets have to be reached
22 Integrated Logistics Management Cross-Functional Teamwork inside the CompanyIntegrated Logistics ManagementBuilding Channel PartnershipsConcept Recognizes that Providing Better Customer Service and Trimming Distribution Costs Requires Teamwork, Both Inside the Company and Among All the Marketing Channel Organizations.Third-Party Logistics