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Chapter 10 Marketing Channels  and Supply Chain Management
<ul><li>Explain why companies use distribution channels and discuss the functions these channels perform. </li></ul><ul><l...
<ul><li>Background </li></ul><ul><li>Caterpillar dominates the world’s markets for heavy construction and mining equipment...
Supply Chains <ul><li>Producing and making products available to buyers requires building relationships with “upstream” an...
Marketing Channel  or Distribution Channel <ul><li>A set of interdependent organizations involved in the process of making...
How Channel Members Add Value <ul><li>The use of intermediaries results from their greater efficiency in making goods avai...
Key Channel Functions <ul><li>Transaction Fulfilling: </li></ul><ul><ul><li>Physical distribution </li></ul></ul><ul><ul><...
Number of Channel Levels <ul><li>Number of intermediary levels indicates the length of a channel. </li></ul><ul><ul><li>Di...
Channel Behavior <ul><li>The channel will be most effective when: </li></ul><ul><ul><li>Each member is assigned tasks it c...
Vertical Marketing System <ul><li>A distribution channel structure in which producers, wholesalers, and retailers act as a...
Types of Vertical Marketing Systems <ul><li>Corporate VMS </li></ul><ul><li>Contractual VMS </li></ul><ul><li>Franchise or...
Franchise Organizations <ul><li>Manufacturer-Sponsored Retailer Franchise </li></ul><ul><ul><li>Ford and its independent f...
Innovations in Marketing Systems <ul><li>Horizontal Marketing System </li></ul><ul><ul><li>Two or more companies at one le...
Changing Channel Organization <ul><li>Disintermediation:  </li></ul><ul><ul><li>Occurs when product and service producers ...
Channel Design Decisions <ul><li>Analyzing Consumer Needs </li></ul><ul><li>Setting Channel Objectives </li></ul><ul><li>I...
Analyzing Consumer Needs <ul><li>Answering key questions helps to determine customer needs: </li></ul><ul><ul><li>Do consu...
Setting Channel Objectives <ul><li>State objectives in terms of targeted levels of customer service. </li></ul><ul><li>Cha...
Identifying Major Alternatives <ul><li>Types of Intermediaries </li></ul><ul><ul><li>Company sales force </li></ul></ul><u...
Evaluating the Major Alternatives <ul><li>Economic Criteria: </li></ul><ul><ul><li>A company compares the likely sales, co...
Channel Management Decisions <ul><li>Selecting channel members </li></ul><ul><li>Managing and motivating channel members <...
Public Policy and Distribution Decisions <ul><li>Exclusive distribution </li></ul><ul><li>Exclusive dealing </li></ul><ul>...
Marketing Logistics <ul><li>Planning, implementing, and controlling the physical flow of goods, services, and related info...
Goals of the Logistics System & Major Logistics Functions <ul><li>Goals of the Logistics System: </li></ul><ul><ul><li>Del...
Warehousing <ul><li>How many, what types, and where? </li></ul><ul><li>Storage warehouses </li></ul><ul><li>Distribution c...
Inventory Management <ul><li>Must balance between too much and too little inventory. </li></ul><ul><li>Just-in-time logist...
Transportation <ul><li>Trucks </li></ul><ul><li>Railroads </li></ul><ul><li>Water carriers </li></ul><ul><li>Pipelines </l...
Integrated Logistics Management <ul><li>The logistics concept that emphasizes teamwork, both inside the company and among ...
<ul><li>Explain why companies use distribution channels and discuss the functions these channels perform. </li></ul><ul><l...
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Chapter 10 Marketing Channels and Supply Chain Management

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Transcript of "Chapter 10 Marketing Channels and Supply Chain Management"

  1. 1. Chapter 10 Marketing Channels and Supply Chain Management
  2. 2. <ul><li>Explain why companies use distribution channels and discuss the functions these channels perform. </li></ul><ul><li>Discuss how channel members interact and how they organize to perform the work of the channel. </li></ul><ul><li>Identify the major channel alternatives open to a company. </li></ul><ul><li>Explain how companies select, motivate, and evaluate channel members. </li></ul><ul><li>Discuss the nature & importance of marketing logistics and supply chain management. </li></ul>
  3. 3. <ul><li>Background </li></ul><ul><li>Caterpillar dominates the world’s markets for heavy construction and mining equipment. </li></ul><ul><li>Independent dealers are key to success, providing customer service, market intelligence, and more. </li></ul><ul><li>Distribution system is a competitive advantage. </li></ul>Case Study <ul><li>Building Partnerships </li></ul><ul><li>Distribution system is built on a base of mutual trust and shared dreams. </li></ul><ul><li>Caterpillar stresses dealer profitability, extraordinary dealer support, personal relationships, dealer performance, and full, honest, and frequent communications. </li></ul>Caterpillar – The Vital Role of Dealers
  4. 4. Supply Chains <ul><li>Producing and making products available to buyers requires building relationships with “upstream” and “downstream” partners. </li></ul><ul><ul><li>Upstream: firms that supply the raw materials, components, parts, and other elements necessary to create a good. </li></ul></ul><ul><ul><li>Downstream: marketing channel partners that link the firm to the customer. </li></ul></ul>
  5. 5. Marketing Channel or Distribution Channel <ul><li>A 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. </li></ul><ul><ul><li>Wholesalers </li></ul></ul><ul><ul><li>Distributors </li></ul></ul><ul><ul><li>Dealerships </li></ul></ul><ul><ul><li>Retailers </li></ul></ul>
  6. 6. How Channel Members Add Value <ul><li>The use of intermediaries results from their greater efficiency in making goods available to target markets. </li></ul><ul><li>Offers the firm more than it can achieve on its own through the intermediaries: </li></ul><ul><ul><li>Contacts </li></ul></ul><ul><ul><li>Experience </li></ul></ul><ul><ul><li>Specialization </li></ul></ul><ul><ul><li>Scale of operation </li></ul></ul>
  7. 7. Key Channel Functions <ul><li>Transaction Fulfilling: </li></ul><ul><ul><li>Physical distribution </li></ul></ul><ul><ul><li>Financing </li></ul></ul><ul><ul><li>Risk taking </li></ul></ul><ul><li>Transaction Completing: </li></ul><ul><ul><li>Information </li></ul></ul><ul><ul><li>Promotion </li></ul></ul><ul><ul><li>Contact </li></ul></ul><ul><ul><li>Matching </li></ul></ul><ul><ul><li>Negotiation </li></ul></ul>
  8. 8. Number of Channel Levels <ul><li>Number of intermediary levels indicates the length of a channel. </li></ul><ul><ul><li>Direct marketing channels </li></ul></ul><ul><ul><ul><li>Have no intermediary levels between the manufacturer and the customer. </li></ul></ul></ul><ul><ul><li>Indirect marketing channels </li></ul></ul><ul><ul><ul><li>Contains one or more intermediaries. </li></ul></ul></ul><ul><li>All channel institutions are connected by several types of flows. </li></ul>
  9. 9. Channel Behavior <ul><li>The channel will be most effective when: </li></ul><ul><ul><li>Each member is assigned tasks it can do best. </li></ul></ul><ul><ul><li>All members cooperate to attain overall channel goals. </li></ul></ul><ul><li>If this does not happen, conflict occurs: </li></ul><ul><ul><li>Horizontal Conflict occurs among firms at the same level of the channel (e.g., retailer to retailer). </li></ul></ul><ul><ul><li>Vertical Conflict occurs between different levels of the same channel (e.g., wholesaler to retailer). </li></ul></ul><ul><li>Some conflict can be healthy competition. </li></ul>
  10. 10. Vertical Marketing System <ul><li>A distribution channel structure in which producers, wholesalers, and retailers act as a unified system. </li></ul><ul><li>One channel member owns the other, has contracts with them, or has so much power that they all cooperate. </li></ul>
  11. 11. Types of Vertical Marketing Systems <ul><li>Corporate VMS </li></ul><ul><li>Contractual VMS </li></ul><ul><li>Franchise organization </li></ul><ul><li>Administered VMS </li></ul>
  12. 12. Franchise Organizations <ul><li>Manufacturer-Sponsored Retailer Franchise </li></ul><ul><ul><li>Ford and its independent franchised dealers </li></ul></ul><ul><li>Manufacturer-Sponsored Wholesaler Franchise </li></ul><ul><ul><li>Coca-Cola’s licensed bottlers </li></ul></ul><ul><li>Service-Firm Sponsored Retailer Franchise </li></ul><ul><ul><li>McDonald’s, Avis, and Holiday Inn </li></ul></ul>
  13. 13. Innovations in Marketing Systems <ul><li>Horizontal Marketing System </li></ul><ul><ul><li>Two or more companies at one level join together to follow a new marketing opportunity. </li></ul></ul><ul><li>Multichannel Distribution System </li></ul><ul><ul><li>Occurs when a single firm sets up two or more marketing channels to reach one or more customer segments. </li></ul></ul><ul><ul><li>Also called hybrid marketing system. </li></ul></ul>
  14. 14. Changing Channel Organization <ul><li>Disintermediation: </li></ul><ul><ul><li>Occurs when product and service producers cut out intermediaries and go directly to final buyers, or when radically new types of channel intermediaries displace traditional ones. </li></ul></ul>
  15. 15. Channel Design Decisions <ul><li>Analyzing Consumer Needs </li></ul><ul><li>Setting Channel Objectives </li></ul><ul><li>Identifying Major Alternatives </li></ul><ul><li>Evaluating the Major Alternatives </li></ul>
  16. 16. Analyzing Consumer Needs <ul><li>Answering key questions helps to determine customer needs: </li></ul><ul><ul><li>Do consumers want to buy from nearby locations or are they willing to travel? </li></ul></ul><ul><ul><li>Do they value breadth of assortment or do they prefer specialization? </li></ul></ul><ul><ul><li>Do consumers want many add-on services? </li></ul></ul><ul><li>Firm must balance needs against costs and consumer price preferences. </li></ul>
  17. 17. Setting Channel Objectives <ul><li>State objectives in terms of targeted levels of customer service. </li></ul><ul><li>Channel objectives are influenced by: </li></ul><ul><ul><li>Cost </li></ul></ul><ul><ul><li>Nature of the company </li></ul></ul><ul><ul><li>The firm’s products </li></ul></ul><ul><ul><li>Marketing intermediaries </li></ul></ul><ul><ul><li>Competitors </li></ul></ul><ul><ul><li>Environment </li></ul></ul>
  18. 18. Identifying Major Alternatives <ul><li>Types of Intermediaries </li></ul><ul><ul><li>Company sales force </li></ul></ul><ul><ul><li>Manufacturer’s agency </li></ul></ul><ul><ul><li>Industrial distributors </li></ul></ul><ul><li>Number of intermediaries </li></ul><ul><ul><li>Intensive distribution </li></ul></ul><ul><ul><li>Exclusive distribution </li></ul></ul><ul><ul><li>Selective distribution </li></ul></ul><ul><li>Responsibilities of intermediaries </li></ul>
  19. 19. Evaluating the Major Alternatives <ul><li>Economic Criteria: </li></ul><ul><ul><li>A company compares the likely sales, costs, and profitability of different channel alternatives. </li></ul></ul><ul><li>Control Issues: </li></ul><ul><ul><li>How and to whom should control be given? </li></ul></ul><ul><li>Adaptive Criteria: </li></ul><ul><ul><li>Consider long-term commitment vs. flexibility. </li></ul></ul>
  20. 20. Channel Management Decisions <ul><li>Selecting channel members </li></ul><ul><li>Managing and motivating channel members </li></ul><ul><ul><li>Partner relationship management </li></ul></ul><ul><li>Evaluating channel members </li></ul>
  21. 21. Public Policy and Distribution Decisions <ul><li>Exclusive distribution </li></ul><ul><li>Exclusive dealing </li></ul><ul><li>Exclusive territorial agreements </li></ul><ul><li>Tying agreements </li></ul>
  22. 22. Marketing Logistics <ul><li>Planning, implementing, and controlling the physical flow of goods, services, and related information from points of origin to points of consumption to meet customer requirements at a profit. </li></ul><ul><li>Includes: </li></ul><ul><ul><li>Outbound distribution </li></ul></ul><ul><ul><li>Inbound distribution </li></ul></ul><ul><ul><li>Reverse distribution </li></ul></ul>
  23. 23. Goals of the Logistics System & Major Logistics Functions <ul><li>Goals of the Logistics System: </li></ul><ul><ul><li>Deliver a targeted level of customer service at the least cost. </li></ul></ul><ul><li>Major Logistics Functions: </li></ul><ul><ul><li>Warehousing </li></ul></ul><ul><ul><li>Inventory management </li></ul></ul><ul><ul><li>Transportation </li></ul></ul><ul><ul><li>Logistics information management </li></ul></ul>
  24. 24. Warehousing <ul><li>How many, what types, and where? </li></ul><ul><li>Storage warehouses </li></ul><ul><li>Distribution centers </li></ul><ul><li>Automated warehouses </li></ul>
  25. 25. Inventory Management <ul><li>Must balance between too much and too little inventory. </li></ul><ul><li>Just-in-time logistics systems </li></ul><ul><li>RFID or Smart Tag technology </li></ul>
  26. 26. Transportation <ul><li>Trucks </li></ul><ul><li>Railroads </li></ul><ul><li>Water carriers </li></ul><ul><li>Pipelines </li></ul><ul><li>Air </li></ul><ul><li>Internet </li></ul><ul><li>Intermodal transportation </li></ul><ul><ul><li>Piggyback, fishyback, trainship </li></ul></ul>
  27. 27. Integrated Logistics Management <ul><li>The logistics concept that emphasizes teamwork, both inside the company and among all the marketing channel organizations, to maximize the performance of the entire distribution system. </li></ul><ul><li>Involves: </li></ul><ul><ul><li>Cross-functional teamwork inside the company </li></ul></ul><ul><ul><li>Building logistics partnerships </li></ul></ul><ul><ul><li>Third-party logistics </li></ul></ul>
  28. 28. <ul><li>Explain why companies use distribution channels and discuss the functions these channels perform. </li></ul><ul><li>Discuss how channel members interact and how they organize to perform the work of the channel. </li></ul><ul><li>Identify the major channel alternatives open to a company. </li></ul><ul><li>Explain how companies select, motivate, and evaluate channel members. </li></ul><ul><li>Discuss the nature & importance of marketing logistics and supply chain management. </li></ul>
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