Marketing Channels and Supply Chain Management Marketing : An Introduction An Asian Perspective
Marketing 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>
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>
How a Distributor Reduces the Number of Channel Transactions
Channel Functions Contact Financing Information Risk Taking Promotion Matching Negotiation Physical Distribution These functions should be assigned to the channel member who can add the most value for the cost
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>
Changing Channel Organization <ul><li>Disintermediation means that more and more, product and service producers are bypassing intermediaries and going directly to final buyers, or that radically new types of channel intermediaries are emerging to displace traditional ones. </li></ul>
Disintermediation Travel supersites such as Expedia, Travelocity, Priceline, Hotels.com, and Orbitz have threatened the very existence of traditional travel agents.
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><ul><li>Types of intermediaries </li></ul></ul><ul><ul><li>Number of intermediaries </li></ul></ul><ul><ul><li>Responsibilities of intermediaries </li></ul></ul>
Channel Design Dimensions Channel Length= Number of Levels in the Channel Channel Intensity = Number of middlemen at each stage in the channel of distribution (e.g. retailing): One ……… Or ………Many?
Marketers in Asia must pay special attention to the shopping preferences of their target customers in order to design distribution channels. Are customers buying from their local markets, up-market malls or even on the Internet?
Types of Intermediaries <ul><li>Company sales force </li></ul><ul><li>Manufacturer’s agency </li></ul><ul><li>Industrial distributors </li></ul>
Patterns of Distribution-Exclusive, Selective and Intensive
The nature of the product will determine the types of distribution coverage- exclusive, selective or intensive Exclusive Intensive Selective
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>
Channel Management Decisions Selecting Channel Members Managing & Motivating Channel Members Evaluating Channel Members
What is Retailing? <ul><li>Retailing includes all the activities involved in selling products or services directly to final consumers for their personal, non-business use. </li></ul>
Types of Retailers Retailers are classified based on : Amount of Service They Offer Breadth & Depth of Product Lines Relative Prices Charged How They Are Organized
Amount of Service <ul><li>Self-Service Retailers: </li></ul><ul><ul><li>Serve customers who are willing to perform their own “locate-compare-select” process to save money. </li></ul></ul><ul><li>Limited-Service Retailers: </li></ul><ul><ul><li>Provide more sales assistance because they carry more shopping goods about which customers need information. </li></ul></ul><ul><li>Full-Service Retailers: </li></ul><ul><ul><li>Usually carry more specialty goods for which customers like to be “waited on.” </li></ul></ul>
Product Line Classification Specialty Stores: Carry narrow product lines with deep assortments within those lines . Department Stores: Carry a wide variety of product lines—typically clothing, home furnishings, and household goods. Each line is operated as a separate department managed by specialist buyers or merchandisers.
Product Line Classification Supermarket: Large, low-cost, low-margin, high-volume, self-service store that carries a wide variety of food, laundry, and household products. Convenience Stores: Small stores located near residential areas that are open long hours 7 days a week and carry a limited line of high-turnover convenience goods.
Product Line Classification Superstores: Much larger than regular supermarkets and offer a large assortment of routinely purchased food products, nonfood items, and services. Category Killers: Giant specialty stores that carry a very deep assortment of a particular line and is staffed by knowledgeable employees.
Relative Prices Classification Discount Store: A retail institution that sells standard merchandise at lower prices by accepting lower margins and selling at higher volume. Off-Price Retailer: Retailer that buys at less-than-regular wholesale prices and sells at less than retail. Examples are factory outlets, independents, and warehouse clubs.
Relative Prices Classification Factory Outlet: Off-price retailing operation that is owned and operated by a manufacturer and that normally carries the manufacturer’s surplus, discontinued, or irregular goods. Independent Off-Price Retailer: Off-price retailer that is either owned and run by entrepreneurs or is a division of a larger retail operation.
Relative Prices Classification Warehouse Club: Off-price retailer that sells a limited selection of brand-name grocery items, appliances, clothing, and a hodgepodge of other goods at deep discounts to members who pay annual membership fees.
Organizational Classification Chain Stores: Two or more outlets that are owned and controlled, have central buying and merchandising, and sell similar lines of merchandise. Voluntary Chain: A wholesaler-sponsored group of independent retailers that engages in bulk buying and common merchandising.
Organizational Classification Retailer Cooperative: A group of independent retailers that bands together to set up a jointly owned, central wholesale operation and conducts joint merchandising and promotion efforts. Franchise: A contractual association between a manufacturer, wholesaler, or service organization (a franchiser) and independent businesspeople (franchisees) who buy the right to own and operate one or more units in the franchise system.
Franchising is a popular method of retailing organization (a 7-Eleven store in Japan)
Organizational Classification Merchandising Conglomerates: A free-form corporation that combines several diversified retailing lines and forms under central ownership, along with some integration of their distribution and management functions.
Retail stores communicate the brand’s positioning strategy . Here we see the entrance to a Louis Vuitton store exuding every bit of opulence to complement the prestige of the product
Assortment and Services Decisions Product Assortment: Brand of merchandise Merchandising events Services Mix: Different numbers and types of services are key to non-price store differentiation Store Atmosphere: Physical layout and “feel” of the store
Price, Promotion, & Place Decisions Price policy must fit its target market and positioning, product and service assortment, and competition Can use any or all of the promotion tools—advertising, personal selling, sales promotion, public relations, and direct marketing—to reach consumers Retailers can locate in CBDs, various types of shopping centers, strip malls, or power centers Location, Location, Location!
The Future of Retailing <ul><li>New Retail Forms and Shortening Retail Life Cycles </li></ul><ul><li>Growth of Nonstore Retailing </li></ul><ul><li>Retail Convergence </li></ul><ul><li>Rise of the Mega-retailers </li></ul><ul><li>Growing Importance of Retail Technology </li></ul><ul><li>Global Expansion of Major Retailers </li></ul><ul><li>Retail Stores as “Communities” or “Hangouts” </li></ul>
Many retail outlets such as Starbucks have become places for customer hangouts