ArmstrongKotler 11e Ch10 Class

8/13/2019 ArmstrongKotler 11e Ch10 Class

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Marketing Channels:

Delivering Customer ValueChapter 10


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Marketing Channels

Set of interdependent organizations that help

make a product or service available for use or

consumption by the consumer or business

users

Marketing channel decisions:

Affect other marketing decisions, such as pricing

or product design

Can lead to competitive advantage

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Figure 10.1 - How Adding a DistributorReduces the Number of Channel Transactions

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How Channel Members Add Value

The use of intermediaries results from their

greater efficiency in making goods available

to target markets

Channel members can offer

Contacts and experience

Specialization

Scale of operation

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Key Functions Performed by ChannelMembers

Transaction

completion:

Information

Promotion

Contact

Matching

Negotiation

Transaction

fulfillment:

Physical distribution

Financing

Risk taking

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Economic Role of Intermediaries

Transforms the assortment of products made

by producers into assortments wanted by

consumers.

Break bulk and reassemble


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A layer of intermediaries that performs some work inbringing the product and its ownership closer to the

final buyer

Channel level

A marketing channel that has no intermediary levels

Direct marketing channel

A marketing channel containing one or more

intermediary levels

Indirect marketing channel

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Figure 10.2 - Customer and BusinessMarketing Channels

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Channel Behavior and Organization

The channel will be most effective when:

Each member is assigned tasks it can do best

All members cooperate to attain overall channel

goals

The success of individual channel members

depends on the overall channels success

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Channel Behavior and Organization

Horizontal conflict occurs among firms at the

same level of the channel (e.g., between

different dealers of the same brand)

Vertical conflict occurs between different

levels of the same channel (e.g., between a

brand and its franchisee)

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Channel Conflict

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In recent years, Burger King has had a

steady stream of conflicts with its

franchised dealers over everything

from advertising content to the price

of its cheeseburgers

Disagreements

among marketing

channel members on

goals, roles, and

rewardswho

should do what and

for what rewards


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A channel consisting of one or moreindependent producers, wholesalers, and

retailers, each a separate business seeking to

maximize its own profits, perhaps even at the

expense of profits for the system as a whole

Conventional distribution channel


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A channel structure in which producers,

wholesalers, and retailers act as a unifiedsystem. One channel member owns the

others, has contracts with them, or has so

much power that they all cooperate

Vertical marketing system (VMS)


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Figure 10.3 - Comparison of ConventionalDistribution Channel with Vertical Marketing

System

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Types of Vertical Marketing Systems

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A vertical marketing system that combines successive stages of productionand distribution under single ownershipchannel leadership is established

through common ownership

Corporate VMS

A vertical marketing system in which independent firms at different levels of

production and distribution jointogether through contracts

Contractual VMS

A vertical marketing system that coordinates successive stages of productionand distribution through the size and power of one of the parties

Administered VMS


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Horizontal Marketing Systems

(Symbiotic Marketing Systems)

Two or more

companies at one

level join together to

follow a new

marketing

opportunity

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McDonalds now placesexpress versions of their storesin Walmart stores


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Figure 10.4 - Multichannel DistributionSystem (Hybrid Systems)

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Multichannel Distribution Systems

A single firm sets up two or more marketing

channels to reach one or more customer

segments

Each new channel expands sales and

marketing coverage

Helps tailor its products and services to

specific needs of diverse customer segments

Hard to control; can generate conflicts

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Disintermediation

Occurs when

product and service

producers cut out

intermediaries or

displace traditional

resellers with radical

new types ofintermediaries

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Avoiding disintermediation problems:Fenders Web site provides detailed

product information refers them to its

resellers Web sites and stores


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Marketing Channel Design

Designing effective

marketing channels

by analyzing

consumer needs,

setting channel

objectives,

identifying majoralternatives, and

evaluating them

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Meeting customers channel service

needs: A local hardware store probably

provides more personalized service, a

more convenient location, and less

hassle than a huge Home Depot. But it

may also charge higher prices


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Channel Design Decisions

1. Analyzing consumer needs

Finding out what target consumers want from

the channel

Balance needs against costs and consumer price

preferences

2. Setting channel objectives

Stated in terms of targeted levels of customerservice

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3. Identifying major alternatives:

Types of intermediaries: Retailers, value-added

retailers, independent distributors, dealers

Number of marketing intermediaries: Intensive,

exclusive, and selective distribution

Responsibilities of channel members: Price

policies, conditions of sale, territory rights andspecific services to be performed

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Number of Marketing Intermediaries

Stocking the product in as many outlets as possible

Intensive distribution

Giving a limited number of dealers the exclusive right to

distribute the companys products in their territories

Exclusive distribution

The use of more than one but fewer than all of the

intermediaries who are willing to carry the companys products

Selective distribution


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4. Evaluating the major alternatives involves

comparing each alternative to:

Economic criteria

Control issues

Adaptive criteria

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Channel Management Decisions

5. Selecting channel

members

Managing and

motivating channel

members:

Partner relationship

management

Evaluating channel

members

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Caterpillar works closely with itsworldwide network of independentdealers to find better ways to bring valueto customers


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Public Policy and DistributionDecisions

Laws affecting channels seek to prevent the

exclusionary tactics of some firms that might

keep another from using a desired channel

Some dealing contracts may come under the

Clayton Act, if they lessen competition

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Planning, implementing, and controlling the

physical flow of materials, final goods, andrelated information from points of origin to

points of consumption to meet customer

requirements at a profit

Marketing logistics

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Figure 10.5 - Supply ChainManagement

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Managing upstream and downstreamvalue-added flows of materials, final

goods, and related information among

suppliers, the company, resellers, and final

consumers

Supply chain management

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Marketing Logistics and Supply ChainManagement

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

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Marketing Logistics and Supply ChainManagement

Warehousing:

How many,

what types,

and where?

Storage warehouses

Distribution centers

Inventory

management:

Balance between too

much and too littleinventory

Just-in-time logistics

systems RFID or smart tag

technology

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Distribution Center

Staples employs a team of

super-retrieversin day-glo

orangeto keep its

warehouse humming

An automated

warehouse that

receives goods from

various suppliers,takes orders, fills

them, and delivers

goods to customersas quickly as

possible


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Transportation

Trucks

Railroads

Water carriers

Pipelines

Air carriers

Internet Intermodal transportation

Piggyback, fishyback, trainship, airtruck

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Logistics Information Management

Channel partners often link up to share

information and make better joint logistics

decisions

Information can be shared and managed

through

Electronic data interchange (EDI)

Vendor-managed inventory (VMI) systems

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Integrated Logistics Management

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

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Integrated Logistics Management

Requires:

Cross-functional

teamwork inside the

company

Building logistics

partnerships

Outsourcing tothird-party logistics

providers

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Many companies now

employ sophisticated,

system-wide supply chainmanagement software,

available from companies

such as Logility


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An independent logistics provider thatperforms any or all of the functions required

to get a clients product to market

Third-party logistics (3PL) provider

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ArmstrongKotler 11e Ch10 Class