Objectives Know why companies use distribution channels and understand the functions that these channels perform. Learn how channel members interact and.
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0 Marketing Channels and Supply Chain Management Chapter 13
1 ObjectivesKnow why companies use distribution channels and understand the functions that these channels perform.Learn how channel members interact and how they organize to perform the work of the channel.Know the major channel alternatives that are open to a company.
2 ObjectivesComprehend how companies select, motivate, and evaluate channel members.Understand the nature and importance of marketing logistics and integrated supply chain management.
3 cCaterpillarDominates world’s markets for heavy construction and mining equipment.Independent dealers are key to successDealer network is linked via computersCaterpillar stresses dealer profitability, extraordinary dealer support, personal relationships, dealer performance and full, honest, and frequent communications
4 Definition Value Delivery Network The network made up of the company, suppliers, distributors, and ultimately customers who “partner” with each other to improve the performance of the entire system.
5 In building its value delivery network, Palm manages a whole community of suppliers, assemblers, resellers and complementors who must work effectively together.
6 Nature & Importance of Marketing Channels Channel choices affect other decisions in the marketing mixA strong distribution system can be a competitive advantageChannel decisions involve long-term commitments to other firms
7 How Channel Members Add Value Figure 13-1:How Channel Members Add Value
8 Nature & Importance of Marketing Channels How Channel Members Add ValueIntermediariesRequire fewer contacts to move the product to the final purchaser.Help match product assortment demand with supply.Help bridge major time, place, and possession gaps
9 Nature & Importance of Marketing Channels Key Functions Performed by Channel MembersInformationPromotionContactMatchingNegotiationPhysical DistributionFinancingRisk taking
11 Business Marketing Channels Figure 13-2b:Business Marketing Channels
12 Nature & Importance of Marketing Channels Number of Channel LevelsThe number of intermediary levels indicates the length of a marketing channel.Direct ChannelsIndirect ChannelsProducers lose more control and face greater channel complexity as additional channel levels are added.
13 L.L. Bean sells direct via the Internet, telephone, and mail catalogs
14 Nature & Importance of Marketing Channels Channel Members Are Connected Via A Variety of FlowsPhysical FlowPayment FlowInformation FlowPromotion FlowFlow of Ownership
15 Channel Behavior and Organization Channel ConflictOccurs when channel members disagree on roles, activities, or rewards.Types of Conflict:Horizontal conflict: occurs among firms at the same channel levelVertical conflict: occurs among firms at different channel levels
16 Conventional Versus Vertical Marketing System Figure 13-3:Conventional Versus Vertical Marketing System
18 Channel Behavior and Organization Horizontal Marketing SystemsTwo or more companies at one level join together to follow a new marketing opportunity.Nestle and General Mills work together to market cereal outside of North America
19 Multichannel Distribution System Figure 13-4:Multichannel Distribution System
20 Channel Behavior and Organization Multichannel Distribution SystemsAlso called hybrid marketing channelsOccurs when a firm uses two or more marketing channelsHybrid marketing has many advantages
21 Channel Behavior and Organization Changing Channel OrganizationDisintermediation has hurt many established companies
22 Channel Behavior and Organization Disintermediation: Traditional brick and mortar travel agencies face competition from online travel agencies, airlines, and reverse auction web sites such as Priceline.Clicking the WWW icon will open your web browser and link to the web site pictured in the screen shot.See how Sunflower Travel has tried to adapt
23 Channel Design Decisions Step 1: Analyzing Consumer NeedsCost and feasibility of meeting needs must be considered
24 Channel Design Decisions Step 2: Setting Channel ObjectivesSet channel objectives in terms of targeted level of customer serviceMany factors influence channel objectives
25 GEICO’s channel objectives led them to sell direct via telephone and the Web in order to serve those who are looking to save money.Geico
26 Channel Design Decisions Step 3: Identifying Major AlternativesTypes of IntermediariesCompany sales forceManufacturer’s agencyIndustrial distributors
27 Manufacturer’s Agencies In-Depth Manufacturer’s Agents: Also called reps, agents, manufacturers’ representatives, sales agencies or even brokers.What Do They Do? Act as outsourced providers of field sales services to multiple manufacturers of complementary products.Compensation: Work on commission and pay their own expenses.Employment Terms: Contractual agreement to be the exclusive “agent” of the manufacturers they represent in a given territory, market, or for specific accounts.For more information, see
28 Manufacturer’s Agencies In-Depth Benefits: Reps’ ViewManufacturer’s agents can leverage their time so that sales for multiple manufacturers can be made to the same customer, often during the same sales call.Multiple products means reps can offer the best product to suit needsBenefits: Firm’s ViewSales costs vary predictably with salesLower sales, turnover, and training costsIncreased sales; experienced sales forceFlexibility; immediate access to marketsEnables systems salesFor more information, see
29 Discussion QuestionWhat are the key disadvantages that a producer firm might face when relying on manufacturer’s agents?
30 Channel Design Decisions Step 3: Identifying Major AlternativesNumber of marketing intermediariesIntensive distributionSelective distributionExclusive distributionResponsibilities of channel members
32 Channel Design Decisions Designing International Distribution ChannelsGlobal marketers usually adapt their channel strategies to structures that exist within foreign countriesKey challenges:Channels may be complex or hard to penetrateChannels may be scattered, inefficient, or totally lacking
33 Channel Management Decisions Selecting Channel MembersIdentify characteristics that distinguish the best channel membersManaging and Motivating Channel MembersPartner relationship management (PRM) is key
34 Channel Management Decisions Evaluating Channel MembersPerformance should be checked against standardsChannel members should be rewarded or replaced as dictated by performance
35 Public Policy and Distribution Decisions Exclusive distributionOnly certain outlets are allowed to carry a firm’s productsExclusive dealingExclusive territorial agreementsTying agreements
36 Marketing Logistics and Supply Chain Management Outbound distributionInbound distributionReverse distributionInvolves the entire supply chain management system
38 Marketing Logistics and Supply Chain Management Why Greater Emphasis is Being Placed on Logistics:Offers firms a competitive advantageCan yield cost savingsGreater product variety requires improved logisticsImprovements in distribution efficiency are possible due to information technology
39 Marketing Logistics and Supply Chain Management Goals of the Logistics SystemNo system can both maximize customer service and minimize costs.Firms must first weigh the benefits of higher service against the costs.State goals in terms of a targeted level of customer service at the least cost.
40 Marketing Logistics and Supply Chain Management Major Logistics FunctionsWarehousingInventory ManagementTransportationLogistics Information Management
41 Marketing Logistics and Supply Chain Management Transportation Carrier OptionsTruckRailWaterPipelineAirInternetIntermodal transportation is becoming more common
42 BusinessNow Celarix Video Clip Arranging transportation for goods can be challengingClick the picture above to play video
43 Marketing Logistics and Supply Chain Management Integrated Logistics ManagementCross-functional teamwork inside the company is criticalLogistics partnerships are also built through shared projects
44 Many companies use sophisticated, system-wide supply chain management software, such as that which is available from Oracle and other software providers.
45 Discussion QuestionWestern Publishing Group partnered with Toys “R” Us to create mini-bookstore sections within each store.Can you think of other examples of similar logistics partnerships?
46 Marketing Logistics and Supply Chain Management Outsourcing of logistic firms to third party firms is becoming more common