Presentation on theme: "Marketing Channels and Supply Chain Management"— Presentation transcript:
1 Marketing Channels and Supply Chain Management Chapter 11Marketing Channels and Supply Chain Management
2 Road Map: Previewing the Concepts Explain why companies use distribution channels and discuss the functions these channels perform.Discuss how channel members interact and how they organize to perform the work of the channel.Identify the major channel alternatives open to a company.Explain how companies select, motivate, and evaluate channel members.Discuss the nature and importance of marketing logistics and supply chain management.
3 What is a Distribution Channel? Set of interdependent organizations involved in the process of making a product or service available for use or consumption by the consumer or business user.
4 Why are Marketing Intermediaries Used? The use of intermediaries results from their greater efficiency in making goods available to target markets.Offers 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 A Distributor Reduces the Number of Channel Transactions (Fig. 11-1)
6 Distribution Channel Functions These Functions Should be Assigned to the Channel Member Who Can Perform Them Most Efficiently and Effectively.Risk TakingInformationFinancingPromotionPhysicalDistributionContactNegotiationMatching
7 Interactive Student Assignments List and briefly discuss the marketing channel functions that are involved in completing and fulfilling transactions.Which functions apply most in each of the following situations?A retailer puts in a rush re-order for a needed Christmas item that is in short supply.An Internet marketer seeks ways to identify and contact its market.The distribution channel moves goods and services from producers to consumers. It overcomes the major time, place, and possession gaps that separate goods and services from those who would use them. Members of the marketing channel perform many key functions.Some help to complete transactions: (a) Information--gathering and distributing marketing research and intelligence information about actors and forces in the marketing environment needed for planning and aiding exchange. (b) Promotion--developing and spreading persuasive communications about an offer. (c) Contact--finding and communicating with prospective buyers. (d) Matching--shaping and fitting the offer to the buyer’s needs, including activities such as manufacturing, grading, assembling, and packaging. (e) Negotiation--reaching an agreement on price and other terms of the offer so that ownership or possession can be transferred.Others help to fulfill the completed transaction: (a) Physical distribution--transporting an storing goods. (b) Financing--acquiring and using funds to cover the costs of the channel work. (c) Risk taking--assuming the risks of carrying out the channel work.Students should analyze the above areas and use them in making choices for the designated problem situations. Suggestions for solution would include (but are not exclusive to): (a) A fulfilling transaction--physical distribution. (b) A completion transaction--information, contact, and matching.
9 Channel Behavior & Organization 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.Each channel member’s role must be specified and conflict must be managed.
10 Conventional Distribution Channel Vs. a Vertical Marketing System (Fig
11 Types of Vertical Marketing Systems Corporate VMSCommon Ownership at DifferentLevels of the Channel i.e. SearsTypes of Vertical Marketing SystemsContractual VMSContractual Agreements AmongChannel Members i.e Western AutoAdministered VMSLeadership is Assumed by One ora Few Dominant Members i.e. KraftDegree of Direct Control
12 Types of Vertical Marketing Systems Systems (VMS)ContractualVMSRetailerCooperativesFranchiseOrganizationsWholesaler SponsoredVoluntary ChainService-Firm-Sponsored RetailerFranchise SystemManufacturer-Sponsored WholesalerAdministeredVMSCorporateVMS
13 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
15 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.
16 Channel Design Decisions Analyzing Consumer Service NeedsSetting Channel Objectives & ConstraintsIdentifying Major AlternativesChannel Design DecisionsEvaluating the Major AlternativesDesigning International Distribution ChannelsResponsibilities ofIntermediariesTypes ofIntermediariesNumber ofIntermediaries
17 Number of Marketing Intermediaries IntensiveDistributionSelectiveDistributionExclusiveDistribution
18 Discussion QuestionDecide which distribution strategy--intensive, selective, or exclusive--is used for the following products, and why:Piaget watches,Acura automobiles,Snickers candy bars.Piaget watches are priced as high as $500,000, so they require exclusive distribution in order to support the image and customer service required. Acura and most other car dealers use selective distribution to ensure that dealers will put a strong effort into selling the car. As a convenience good, Snickers candy bars, the best selling candy bar in America, are available practically everywhere.Distribution channels influence and are influenced by a product's positioning. For example, a Whitman Sampler contains much the same product as a box of Godiva chocolates, but Godiva products are sold at a premium price in selected department stores and at "Godiva Chocolatiers," whereas inexpensive Whitman candies are sold in drugstores and grocery stores everywhere.
20 Marketing Logistics and Supply Chain Management Involves getting the right product to the right customers in the right place at the right time.Marketing logistics addresses:Outbound distribution,Inbound distribution,Reverse distribution,Entire supply chain management.
22 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
23 Major Logistics Functions Order ProcessingReceivedProcessedShippedCostsMinimize Costs ofAttaining LogisticsObjectivesLogisticsFunctionsWarehousingStorageDistributionAutomatedTransportation Rail, Truck, Water, Pipeline, Air, IntermodalInventoryWhen to orderHow much to orderJust-in-time
24 Transportation Modes Rail Nation’s largest carrier, cost-effective for 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
25 Integrated Logistics Management Concept Recognizes that Providing Better Customer Service and Trimming Distribution Costs Requires Teamwork, Both Inside the Company and Among All the Marketing Channel Organizations.Involves:Cross-functional teamwork inside the companyBuilding channel partnershipsThird-party logistics
26 Toys “R” Us PartnerWestern Publishing Group partners with Toys “R” Us to create mini-bookstore sections – called Books “R” Us –within each store.This helps to build channel partnerships that benefit both companies.
27 Rest Stop: Reviewing the Concept Explain why companies use distribution channels and discuss the functions these channels perform.Discuss how channel members interact and how they organize to perform the work of the channel.Identify the major channel alternatives open to a company.Explain how companies select, motivate, and evaluate channel members.Discuss the nature and importance of marketing logistics and supply chain management.