Chapter 10 Marketing Channels and Supply Chain Management

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