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Strategic marketing 9edi.chapter10


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  • 1. Strategic Marketing 1. Imperatives for Market-Driven Strategy 2. Markets and Competitive Space 3. Strategic Market Segmentation 4. Strategic Customer Relationship Management 5. Capabilities for Learning about Customers and Markets 6. Market Targeting and Strategic Positioning 7. Strategic Relationships 8. Innovation and New Product Strategy 9. Strategic Brand Management 10. Value Chain Strategy 11. Pricing Strategy 12. Promotion, Advertising and Sales Promotion Strategies 13. Sales Force, Internet, and Direct Marketing Strategies 14. Designing Market-Driven Organizations 15. Marketing Strategy Implementation And Control
  • 2. Chapter 10 Value Chain StrategyMcGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
  • 3. Value Chain Strategy* Strategic role of value chain* Channel strategy* Managing the channel* International channels 10-3
  • 4. Dell’s dilemma* Business built around powerful direct business model* Direct model poor fit with customer preferences in new target markets and weak on service* Dell is braodening business model * Targeting computer re-sellers * Global retail strategy (including Wal-Mart, Dell- branded stores, kiosks in malls)* Redesigning value chain is critical strategic move 10-4
  • 5. Strategic role of value chain (1)Distribution functions * Buying and selling * Assembly * Transportation * Financing * Processing and storage * Advertising and sales promotion * Pricing * Reduction of risk * Personal selling * Communications * Servicing and repairs 10-5
  • 6. Value chain structures - consumer products Consumer Products Producers Supply Chains Sales Agents Direct Wholesalers Wholesalers Channel Retailers Retailers Retailers Consumers 10-6
  • 7. Value chain structures - organizational products Organizational Products Producers Supply Chains Sales Sales Agents Agents Direct Distributors Distributors Distributors Channel Re-sellers Organizational Customers 10-7
  • 8. Strategic role of value chain (2)* Channels for services* Direct distribution by manufacturers * Buyer considerations * Competitive considerations * Product characteristics * Financial and control considerations 10-8
  • 9. Factors Favoring Distribution by ManufacturerProfit margins Opportunity foradequate to support competitive Rapidly changingdistribution advantage market environmentorganization Complete line Early stages of of products Distribution product life cycle by the manufacturer Purchases are Complex product large and application infrequent Extensive Small number of purchasing geographically Supporting process concentrated services are buyers required 10-9
  • 10. Branded manufacturers enter retail* Nespresso (Nestle) “coffee boutiques” to establish lifestyle brand* Heineken branded beer bars in airports and retail* Strategic logic is to avoid control of third- party retailers over brand* Move from selling “A product in a box” to offering a superior service experience for the brand 10-10
  • 11. Channel strategy (1)* Types of channel * Conventional channel * Vertical marketing systems * Ownership VMS * Contractual VMS * Administered VMS * Relationship VMS * Horizontal marketing systems * Digital channels * Product digitization * Channel digitization 10-11
  • 12. Channel strategy selection 1. Type of distribution channelConventional Vertical marketing system Horizontal marketing system Administered/ Ownership Contractual Relationship 2. Intensity of distribution Intensive Selective Exclusive 3. Channel configuration 10-12
  • 13. Channel strategy (2)* Distribution intensity * Intensive * Exclusive * Selective* Channel configuration * End-user considerations * Product characteristics * Manufacturers capabilities and resources * Required functions * Availability and skills of intermediaries 10-13
  • 14. Channel strategy (3)* Channel maps* Selecting the channel strategy * Market access * Value-added competencies * Financial considerations * Flexibility and control considerations * Channel strategy evaluation 10-14
  • 15. Illustrative channel map for heating unitsProduction = Consumption =100,000 units Direct sales = 10,000 units 100,000 units Commercial Construction Construction 84,000 units Independent 42,000 units 75,000 units Companies Sub- Distributors (85,000 units) Contractors 42,000 units 7,000 Production Small 40,000 units Of Central Hardware units Heating Retailers 2,000 Boilers units Large 5,000 units 5,000 units Hardware Domestic Retailers Customers Direct sales = 1,000 units (15,000 units) 10-15
  • 16. Channel strategy (4)* Changing channel strategy * Channel strategy modification * Channel migration * Channel audit 10-16
  • 17. Illustrative Channel Strategy EvaluationEvaluation Manufacturer’s CompanyCriteria Representatives SalesforceMarket access Rapid 1 to 3 year developmentValue-added competencies Medium HighSales forecast (2 years) $20 million $30 millionForecast accuracy High Medium to lowEstimated costs $2 million* $3.6 million**Selling Expense (cost/sales) 10% 12%Flexibility Good LimitedControl Limited Good* Includes 8% commission plus management time for recruiting and training representatives.** Includes $150,000 for 10 salespeople, plus management time. 10-17
  • 18. Managing the Channel (1)* Channel leadership* Management structure and systems* Physical distribution management * Supply chain strategy * The impact of supply chain management on marketing * E-procurement 10-18
  • 19. Efficient Consumer Response Traditional channel problems * Forward buying and diverting * Excessive inventories * Damages and unsaleable goods * Complex deals and deductions * Too many promotions and coupons * Too many new products Efficient Consumer Response * Category management * “Value” pricing replaces promotions * Continuous replenishment and cross-docking * Electronic data interchange * New performance measures * New organizational processes and structures * Internet-based network for supplier-buyer trading 10-19
  • 20. Lean Supply Chain Elements 1. Definition of Value 2. Identification of Value Streams and Removal of Muda (Waste) 3. Organizing Around Flow, Instead of “Batch and Queue” 4. Responding to Pull Through the Supply Chain 5. The Pursuit of Perfection 10-20
  • 21. Marketing/supply chain relationship* Focus on real drivers of customer value not just technical* Do not create inflexibility and inability to respond to change* Protect brands and competitive strength over short-term cost savings* Do not confuse supply chain strategy with competitive advantage 10-21
  • 22. Managing the channel (2)* Channel relationships * Degree of collaboration * Commitment and trust among channel members * Power and dependence* Channel globalization* Multichanneling* Conflict resolution* Channel performance* Legal and ethical considerations 10-22
  • 23. Channel metricsPerformance Possible Measures Applicable Product andObjective Channel LevelPRODUCT AVAILABILITYCoverage of relevant Percent of effective Consumer products atretailers distribution retail levelIn-store positioning Percent of shelf Consumer products at facings or display retail level space gained by product, weighted by store importanceCoverage of Frequency of sales Industrial products;geographic markets calls by customer consumer goods at type; average wholesale level delivery time 10-23
  • 24. Channel metricsPerformance Possible Measures Applicable Product andObjective Channel LevelPROMOTIONAL EFFORTEffective point-of- Percent of stores Consumer productspurchase (POP) using special at retail levelpromotion displays and POP materials, weighted by importance of storeEffective personal Percent of Industrial products;selling support salespeople’s time consumer durables at all devoted to product; channel levels; consumer number of salespeople convenience goods at receiving training on wholesale level product’s characteristics and applications 10-24
  • 25. Channel metricsPerformance Possible Measures Applicable Product andObjective Channel LevelCUSTOMER SERVICEInstallation,Number of service Industrial products,training and technicians receiving particularly those involvingrepair technical training; high technology; consumer monitoring of durables at retail level customer complaintsMARKET INFORM,ATIONMonitoring sales Quality and All levels oftrends, inventory timeliness of distributionlevels, competitors’ informationactions obtainedCOST-EFFECTIVENESSCost of channel Middleman margins All levels ofFunctions relative and marketing costs distrbutionTo sales volume as percent of sales 10-25
  • 26. Value chain ethics* Retailers’ Global Social Compliance Program* Growing “green consumer” pressure* B2B suppliers increasingly mandated to meet customer’s values in employment practices, environmental standards, ethical behavior 10-26
  • 27. International channels* Examining international distribution patterns* Factors affecting global channel selection* Global issues regarding multichannel strategies 10-27
  • 28. International Channel of Distribution Alternatives Home country Foreign country The foreign marketer or producer sells to or through Domestic Open Exporter Importer Foreign Foreign Foreign producer or distribution agent or retailer consumer marketer sells via domestic merchant to or through wholesale wholesalers middlemen Export management company or company sales forceSource: Philip R. Cateora, International Marketing, 7th ed., Homewood, Ill.: Richard D. Irwin, Inc., 1990, 572. 10-28