basic10_ppt.ppt 202KB Sep 05 2010 10:45:12 PM

Chapter 10

Marketing Channels

Roadmap:

Previewing the Concepts

1. Explain why companies use distribution channels and discuss the functions these channels perform.

2. Discuss how channel members interact and how they organize to perform the work of the channel.

3. Identify the major channel alternatives open to a company.

4. Explain how companies select, motivate, and evaluate channel members.

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}

Caterpillar – The Vital Role of

Caterpillar – The Vital Role of

Dealers

Dealers

Case Study

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

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.

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.

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

Key Channel Functions

 _Transaction

Fulfilling:

– _Physical

distribution

– Financing

– Risk taking  _Transaction

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}

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).

Vertical Marketing System

 _{A distribution channel structure in}

which producers, wholesalers, and retailers act as a unified system.

 _{One channel member owns the other,}

Types of Vertical Marketing

Systems

 _{Corporate VMS}  _{Contractual VMS}

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}

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.

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

Channel Design Decisions

 _{Analyzing Consumer Needs}  _{Setting Channel Objectives}  _{Identifying Major Alternatives}

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}

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

Identifying Major Alternatives

 _{Types of Intermediaries}

– _{Company sales force} – _{Manufacturer’s agency} – _{Industrial distributors}

 _{Number of intermediaries}

– _{Intensive distribution} – _{Exclusive distribution} – _{Selective distribution}

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:}

Channel Management

Decisions

 _{Selecting channel members}

 _{Managing and motivating channel}

members

– _{Partner relationship management}

Public Policy and

Distribution Decisions

 _{Exclusive distribution}  _{Exclusive dealing}

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

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}

Warehousing

 _{How many, what types, and where?}  _{Storage warehouses}

 _{Distribution centers}

Inventory Management

 _{Must balance between too much and}

too little inventory.

Transportation

 _Trucks

 _Railroads

 _{Water carriers}  _Pipelines

 _Air

 _Internet

 _{Intermodal transportation}

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

Rest Stop:

Reviewing the Concepts

1. Explain why companies use distribution channels and discuss the functions these channels perform.

2. Discuss how channel members interact and how they organize to perform the work of the channel.

3. Identify the major channel alternatives open to a company.

4. Explain how companies select, motivate, and evaluate channel members.