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Chapter 12 Marketing Channels  and Supply Chain Management
Learning Goals <ul><li>Know why companies use distribution channels and understand the functions that these channels perfo...
Case Study Caterpillar <ul><li>Dominates world’s markets for heavy construction and mining equipment. </li></ul><ul><li>In...
Learning Goals <ul><li>Know why companies use distribution channels and understand the functions that these channels perfo...
Definitions <ul><li>Value Delivery Network </li></ul><ul><ul><li>The network made up of the company, suppliers, distributo...
<ul><li>This ad from Home Depot </li></ul><ul><li>communicates the company’s dedication to diversification in its value de...
Nature & Importance of Marketing Channels <ul><li>Channel choices affect other decisions in the marketing mix </li></ul><u...
Strong Distribution as a Competitive Threat <ul><li>FedEx improved its distribution by acquiring Kinko’s in 2004  </li></u...
Nature & Importance of Marketing Channels   <ul><li>How Channel Members Add Value </li></ul><ul><ul><li>Fewer contacts. </...
Key Functions Performed  by Channel Members <ul><li>Information </li></ul><ul><li>Promotion </li></ul><ul><li>Contact </li...
Nature & Importance of Marketing Channels <ul><li>Number of Channel Levels </li></ul><ul><ul><li>The number of intermediar...
Customer and Business Marketing Channels Figure 12.2 12 -
Channel Members are Connected Via a  Variety of Flows <ul><li>Physical Flow </li></ul><ul><li>Payment Flow </li></ul><ul><...
Learning Goals <ul><li>Know why companies use distribution channels and understand the functions that these channels perfo...
Channel Behavior and Organization <ul><li>Channel Conflict </li></ul><ul><ul><li>Occurs when channel members disagree on r...
Channel Behavior and Organization <ul><li>Conventional Distribution Channels </li></ul><ul><ul><li>Consist of one or more ...
Conventional vs. Vertical Marketing Channel  Figure 12.3 12 -
Channel Behavior and Organization <ul><li>Corporate VMS </li></ul><ul><li>Contractual VMS </li></ul><ul><li>Administered V...
Channel Behavior and Organization <ul><li>Corporate VMS </li></ul><ul><li>Contractual VMS </li></ul><ul><li>Administered V...
Channel Behavior and Organization <ul><li>Corporate VMS </li></ul><ul><li>Contractual VMS </li></ul><ul><li>Administered V...
Channel Behavior and Organization <ul><li>Horizontal Marketing Systems </li></ul><ul><ul><li>Companies at the same level w...
Multichannel  Distribution System Figure 12.4 12 -
<ul><li>Reebok uses a multi- channel distribution system which includes a direct channel. </li></ul>Multichannel  Distribu...
Learning Goals <ul><li>Know why companies use distribution channels and understand the functions that these channels perfo...
Channel Design  Decisions <ul><li>Step 1: Analyzing Consumer Needs </li></ul><ul><ul><li>Cost and feasibility of meeting n...
Channel Design  Decisions <ul><li>Step 3: Identifying Major Alternatives </li></ul><ul><ul><li>Types of intermediaries </l...
Channel Design  Decisions <ul><li>Step 4: Evaluating Major Alternatives </li></ul><ul><ul><li>Economic criteria </li></ul>...
Channel Design  Decisions <ul><li>Designing International Distribution Channels </li></ul><ul><ul><li>Global marketers usu...
Learning Goals <ul><li>Know why companies use distribution channels and understand the functions that these channels perfo...
Channel Management Decisions <ul><li>Selecting channel members </li></ul><ul><li>Managing and motivating channel members <...
Discussion Questions  Selecting Channels <ul><li>iRobot’s Roomba is a robotic vacuum which travels the floor and vacuums d...
Channel Management Decisions <ul><li>Selecting channel members </li></ul><ul><li>Managing and motivating channel members <...
Channel Management Decisions <ul><li>Selecting channel members </li></ul><ul><li>Managing and motivating channel members <...
<ul><li>Exclusive distribution </li></ul><ul><ul><li>Only certain outlets are allowed to carry a firm’s products </li></ul...
Learning Goals <ul><li>Know why companies use distribution channels and understand the functions that these channels perfo...
<ul><li>Marketing Logistics  </li></ul><ul><ul><li>Outbound distribution </li></ul></ul><ul><ul><li>Inbound distribution <...
Supply Chain Management Figure 12.5 12 -
<ul><li>Why Greater Emphasis is Being Placed on Logistics: </li></ul><ul><ul><li>Offers firms a competitive advantage </li...
<ul><li>Goals of the Logistics System </li></ul><ul><ul><li>No system can both maximize customer service and minimize cost...
<ul><li>Major Logistics Functions </li></ul><ul><ul><li>Warehousing </li></ul></ul><ul><ul><li>Inventory Management </li><...
Marketing Logistics and Supply Chain Management <ul><li>Truck </li></ul><ul><li>Rail </li></ul><ul><li>Water </li></ul><ul...
<ul><li>Integrated Logistics Management </li></ul><ul><ul><li>Cross-functional teamwork inside the company is critical </l...
Learning Goals <ul><li>Know why companies use distribution channels and understand the functions that these channels perfo...
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  • Transcript of "Chap 12 e161"

    1. 1. Chapter 12 Marketing Channels and Supply Chain Management
    2. 2. Learning Goals <ul><li>Know why companies use distribution channels and understand the functions that these channels perform. </li></ul><ul><li>Learn how channel members interact and how they organize to perform the work of the channel. </li></ul><ul><li>Know the major channel alternatives that are open to a company. </li></ul><ul><li>Comprehend how companies select, motivate, and evaluate channel members. </li></ul><ul><li>Understand the nature and importance of marketing logistics and integrated supply chain management. </li></ul>
    3. 3. Case Study Caterpillar <ul><li>Dominates world’s markets for heavy construction and mining equipment. </li></ul><ul><li>Independent dealers are key to success </li></ul><ul><li>Dealer network is linked via computers </li></ul><ul><li>Caterpillar stresses dealer profitability, extraordinary dealer support, personal relationships, dealer performance and full, honest, and frequent communications </li></ul>12 -
    4. 4. Learning Goals <ul><li>Know why companies use distribution channels and understand the functions that these channels perform. </li></ul><ul><li>Learn how channel members interact and how they organize to perform the work of the channel. </li></ul><ul><li>Know the major channel alternatives that are open to a company. </li></ul><ul><li>Comprehend how companies select, motivate, and evaluate channel members. </li></ul><ul><li>Understand the nature and importance of marketing logistics and integrated supply chain management. </li></ul>
    5. 5. Definitions <ul><li>Value Delivery Network </li></ul><ul><ul><li>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. </li></ul></ul><ul><li>Marketing channel </li></ul><ul><ul><li>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>
    6. 6. <ul><li>This ad from Home Depot </li></ul><ul><li>communicates the company’s dedication to diversification in its value delivery network </li></ul>Marketing in Action 12 -
    7. 7. Nature & Importance of Marketing Channels <ul><li>Channel choices affect other decisions in the marketing mix </li></ul><ul><ul><li>Pricing, marketing communications </li></ul></ul><ul><li>A strong distribution system can be a competitive advantage </li></ul><ul><li>Channel decisions involve long-term commitments to other firms </li></ul>
    8. 8. Strong Distribution as a Competitive Threat <ul><li>FedEx improved its distribution by acquiring Kinko’s in 2004 </li></ul>Marketing in Action 12 -
    9. 9. Nature & Importance of Marketing Channels <ul><li>How Channel Members Add Value </li></ul><ul><ul><li>Fewer contacts. </li></ul></ul><ul><ul><li>Match product assortment demand with supply. </li></ul></ul><ul><ul><li>Bridge, time, place, and possession gaps that separate products from users. </li></ul></ul>Figure 12.1 12 -
    10. 10. Key Functions Performed by Channel Members <ul><li>Information </li></ul><ul><li>Promotion </li></ul><ul><li>Contact </li></ul><ul><li>Matching </li></ul><ul><li>Negotiation </li></ul><ul><li>Physical Distribution </li></ul><ul><li>Financing </li></ul><ul><li>Risk taking </li></ul>
    11. 11. Nature & Importance of Marketing Channels <ul><li>Number of Channel Levels </li></ul><ul><ul><li>The number of intermediary levels indicates the length of a marketing channel. </li></ul></ul><ul><ul><ul><li>Direct Channels </li></ul></ul></ul><ul><ul><ul><li>Indirect Channels </li></ul></ul></ul><ul><ul><li>Producers lose more control and face greater channel complexity as additional channel levels are added. </li></ul></ul>
    12. 12. Customer and Business Marketing Channels Figure 12.2 12 -
    13. 13. Channel Members are Connected Via a Variety of Flows <ul><li>Physical Flow </li></ul><ul><li>Payment Flow </li></ul><ul><li>Information Flow </li></ul><ul><li>Promotion Flow </li></ul><ul><li>Flow of Ownership </li></ul>
    14. 14. Learning Goals <ul><li>Know why companies use distribution channels and understand the functions that these channels perform. </li></ul><ul><li>Learn how channel members interact and how they organize to perform the work of the channel. </li></ul><ul><li>Know the major channel alternatives that are open to a company. </li></ul><ul><li>Comprehend how companies select, motivate, and evaluate channel members. </li></ul><ul><li>Understand the nature and importance of marketing logistics and integrated supply chain management. </li></ul>
    15. 15. Channel Behavior and Organization <ul><li>Channel Conflict </li></ul><ul><ul><li>Occurs when channel members disagree on roles, activities, or rewards. </li></ul></ul><ul><ul><li>Types of Conflict: </li></ul></ul><ul><ul><ul><li>Horizontal conflict: occurs among firms at the same channel level </li></ul></ul></ul><ul><ul><ul><li>Vertical conflict: occurs among firms at different channel levels </li></ul></ul></ul>
    16. 16. Channel Behavior and Organization <ul><li>Conventional Distribution Channels </li></ul><ul><ul><li>Consist of one or more independent channel members </li></ul></ul><ul><ul><li>Lack leadership and power </li></ul></ul><ul><ul><li>Often result in poor performance </li></ul></ul><ul><li>Vertical Marketing Systems </li></ul><ul><ul><li>Consist of members acting as a unified system </li></ul></ul><ul><ul><li>Use contracts, ownership or power </li></ul></ul>
    17. 17. Conventional vs. Vertical Marketing Channel Figure 12.3 12 -
    18. 18. Channel Behavior and Organization <ul><li>Corporate VMS </li></ul><ul><li>Contractual VMS </li></ul><ul><li>Administered VMS </li></ul><ul><li>Corporation owns production and distribution </li></ul><ul><li>Coordination and conflict through regular organizational channels </li></ul>Vertical Marketing Systems
    19. 19. Channel Behavior and Organization <ul><li>Corporate VMS </li></ul><ul><li>Contractual VMS </li></ul><ul><li>Administered VMS </li></ul><ul><li>Individual firms who join through contracts </li></ul><ul><li>Franchise organizations </li></ul><ul><ul><li>Manufacturer-sponsored retailer franchise system </li></ul></ul><ul><ul><li>Manufacturer-sponsored wholesaler franchise system </li></ul></ul><ul><ul><li>Service-firm-sponsored retailer franchise system </li></ul></ul>Vertical Marketing Systems
    20. 20. Channel Behavior and Organization <ul><li>Corporate VMS </li></ul><ul><li>Contractual VMS </li></ul><ul><li>Administered VMS </li></ul><ul><li>Leadership through the size and power of dominant channel members </li></ul><ul><li>Leadership could be manufacturer or retailer </li></ul>Vertical Marketing Systems
    21. 21. Channel Behavior and Organization <ul><li>Horizontal Marketing Systems </li></ul><ul><ul><li>Companies at the same level work together with channel members </li></ul></ul><ul><li>Multichannel Distribution Systems </li></ul><ul><ul><li>Also called hybrid marketing channels </li></ul></ul><ul><ul><li>Occurs when a firm uses two or more marketing channels </li></ul></ul><ul><li>Changing Channel Organization </li></ul><ul><ul><li>Disintermediation </li></ul></ul>
    22. 22. Multichannel Distribution System Figure 12.4 12 -
    23. 23. <ul><li>Reebok uses a multi- channel distribution system which includes a direct channel. </li></ul>Multichannel Distribution System Marketing in Action Click on screenshot for website 12 -
    24. 24. Learning Goals <ul><li>Know why companies use distribution channels and understand the functions that these channels perform. </li></ul><ul><li>Learn how channel members interact and how they organize to perform the work of the channel. </li></ul><ul><li>Know the major channel alternatives that are open to a company. </li></ul><ul><li>Comprehend how companies select, motivate, and evaluate channel members. </li></ul><ul><li>Understand the nature and importance of marketing logistics and integrated supply chain management. </li></ul>
    25. 25. Channel Design Decisions <ul><li>Step 1: Analyzing Consumer Needs </li></ul><ul><ul><li>Cost and feasibility of meeting needs must be considered </li></ul></ul><ul><li>Step 2: Setting Channel Objectives </li></ul><ul><ul><li>Set channel objectives in terms of targeted level of customer service </li></ul></ul><ul><ul><li>Many factors influence channel objectives </li></ul></ul>Video Snippet Hasbro targets consumers through channels
    26. 26. Channel Design Decisions <ul><li>Step 3: Identifying Major Alternatives </li></ul><ul><ul><li>Types of intermediaries </li></ul></ul><ul><ul><ul><li>Company sales force, manufacturer’s agency, industrial distributors </li></ul></ul></ul><ul><ul><li>Number of marketing intermediaries </li></ul></ul><ul><ul><ul><li>Intensive, selective, and exclusive distribution </li></ul></ul></ul><ul><ul><li>Responsibilities of channel members </li></ul></ul>
    27. 27. Channel Design Decisions <ul><li>Step 4: Evaluating Major Alternatives </li></ul><ul><ul><li>Economic criteria </li></ul></ul><ul><ul><li>Control issues </li></ul></ul><ul><ul><li>Adaptive criteria </li></ul></ul>
    28. 28. Channel Design Decisions <ul><li>Designing International Distribution Channels </li></ul><ul><ul><li>Global marketers usually adapt their channel strategies to structures that exist within foreign countries </li></ul></ul><ul><ul><li>Key challenges: </li></ul></ul><ul><ul><ul><li>May be complex or hard to penetrate </li></ul></ul></ul><ul><ul><ul><li>May be scattered, inefficient, or totally lacking </li></ul></ul></ul>
    29. 29. Learning Goals <ul><li>Know why companies use distribution channels and understand the functions that these channels perform. </li></ul><ul><li>Learn how channel members interact and how they organize to perform the work of the channel. </li></ul><ul><li>Know the major channel alternatives that are open to a company. </li></ul><ul><li>Comprehend how companies select, motivate, and evaluate channel members. </li></ul><ul><li>Understand the nature and importance of marketing logistics and integrated supply chain management. </li></ul>
    30. 30. Channel Management Decisions <ul><li>Selecting channel members </li></ul><ul><li>Managing and motivating channel members </li></ul><ul><li>Evaluating channel members </li></ul><ul><li>Which characteristics are important? </li></ul><ul><ul><li>Years in business </li></ul></ul><ul><ul><li>Lines carried </li></ul></ul><ul><ul><li>Growth and profit record </li></ul></ul><ul><ul><li>Cooperativeness and reputation </li></ul></ul><ul><ul><li>Type of customer </li></ul></ul><ul><ul><li>Location </li></ul></ul>Decisions
    31. 31. Discussion Questions Selecting Channels <ul><li>iRobot’s Roomba is a robotic vacuum which travels the floor and vacuums dirt. Its price is about $150. </li></ul><ul><li>What characteristics are import when choosing channel members? </li></ul><ul><li>What retailers would you choose? </li></ul>Marketing in Action Click on picture for website 12 -
    32. 32. Channel Management Decisions <ul><li>Selecting channel members </li></ul><ul><li>Managing and motivating channel members </li></ul><ul><li>Evaluating channel members </li></ul><ul><li>Partner relationship management (PRM) for long-term partnerships </li></ul><ul><li>Software available to coordinate members </li></ul>Decisions
    33. 33. Channel Management Decisions <ul><li>Selecting channel members </li></ul><ul><li>Managing and motivating channel members </li></ul><ul><li>Evaluating channel members </li></ul><ul><li>Check channel performance of: </li></ul><ul><ul><li>Sales </li></ul></ul><ul><ul><li>Inventory </li></ul></ul><ul><ul><li>Customer delivery </li></ul></ul><ul><ul><li>Promotion and training </li></ul></ul><ul><ul><li>Customer service </li></ul></ul>Decisions
    34. 34. <ul><li>Exclusive distribution </li></ul><ul><ul><li>Only certain outlets are allowed to carry a firm’s products </li></ul></ul><ul><li>Exclusive dealing </li></ul><ul><ul><li>Exclusive territorial agreements </li></ul></ul><ul><ul><li>Tying agreements </li></ul></ul>Public Policy and Distribution Decisions
    35. 35. Learning Goals <ul><li>Know why companies use distribution channels and understand the functions that these channels perform. </li></ul><ul><li>Learn how channel members interact and how they organize to perform the work of the channel. </li></ul><ul><li>Know the major channel alternatives that are open to a company. </li></ul><ul><li>Comprehend how companies select, motivate, and evaluate channel members. </li></ul><ul><li>Understand the nature and importance of marketing logistics and integrated supply chain management. </li></ul>
    36. 36. <ul><li>Marketing Logistics </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><ul><ul><li>Involves the entire supply chain management system </li></ul></ul>Marketing Logistics and Supply Chain Management
    37. 37. Supply Chain Management Figure 12.5 12 -
    38. 38. <ul><li>Why Greater Emphasis is Being Placed on Logistics: </li></ul><ul><ul><li>Offers firms a competitive advantage </li></ul></ul><ul><ul><li>Can yield cost savings </li></ul></ul><ul><ul><li>Greater product variety requires improved logistics </li></ul></ul><ul><ul><li>Improvements in distribution efficiency are possible due to information technology </li></ul></ul>Marketing Logistics and Supply Chain Management
    39. 39. <ul><li>Goals of the Logistics System </li></ul><ul><ul><li>No system can both maximize customer service and minimize costs. </li></ul></ul><ul><ul><li>Firms must first weigh the benefits of higher service against the costs. </li></ul></ul><ul><ul><li>State goals in terms of a targeted level of customer service at the least cost. </li></ul></ul>Marketing Logistics and Supply Chain Management
    40. 40. <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>Marketing Logistics and Supply Chain Management
    41. 41. Marketing Logistics and Supply Chain Management <ul><li>Truck </li></ul><ul><li>Rail </li></ul><ul><li>Water </li></ul><ul><li>Pipeline </li></ul><ul><li>Air </li></ul><ul><li>Internet </li></ul>Transportation Carrier Options Intermodal transportation is becoming more common
    42. 42. <ul><li>Integrated Logistics Management </li></ul><ul><ul><li>Cross-functional teamwork inside the company is critical </li></ul></ul><ul><ul><li>Logistics partnerships are also built through shared projects </li></ul></ul><ul><ul><li>Outsourcing of logistics firms to third-party firms is becoming more common </li></ul></ul>Marketing Logistics and Supply Chain Management
    43. 43. Learning Goals <ul><li>Know why companies use distribution channels and understand the functions that these channels perform. </li></ul><ul><li>Learn how channel members interact and how they organize to perform the work of the channel. </li></ul><ul><li>Know the major channel alternatives that are open to a company. </li></ul><ul><li>Comprehend how companies select, motivate, and evaluate channel members. </li></ul><ul><li>Understand the nature and importance of marketing logistics and integrated supply chain management. </li></ul>
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