2011.12 marketing principles
- 1. MarketingStephan Langdon, MBA, M Ed
- 3. Marketing Channels: Delivering Customer ValueSupply Chains and the Value Delivery NetworkThe Nature and Importance of Marketing ChannelsChannel Behavior and OrganizationChannel Design DecisionsChannel Management DecisionsPublic Policy and Distribution DecisionsMarketing Logistics and Supply Chain ManagementTopic Outline
- 4. Supply Chains and the Value Delivery NetworkUpstream partners include raw material suppliers, components, parts, information, finances, and expertise to create a product or serviceDownstream partners include the marketing channels or distribution channels that look toward the customerSupply Chain Partners
- 5. Supply Chains and the Value Delivery NetworkSupply chain “make and sell” view includes the firm’s raw materials, productive inputs, and factory capacityDemand chain “sense and respond” view suggests that planning starts with the needs of the target customer, and the firm responds to these needs by organizing a chain of resources and activities with the goal of creating customer valueSupply Chain Views
- 6. Supply Chains and the Value Delivery NetworkValue delivery network is the firm’s suppliers, distributors, and ultimately customers who partner with each other to improve the performance of the entire systemValue Delivery Network
- 7. The Nature and Importance of Marketing ChannelsIntermediaries offer producers greater efficiency in making goods available to target markets. Through their contacts, experience, specialization, and scale of operations, intermediaries usually offer the firm more than it can achieve on its own.How Channel Members Add Value
- 8. The Nature and Importance of Marketing ChannelsFrom an economic view, intermediaries transform the assortment of products into assortments wanted by consumersChannel members add value by bridging the major time, place, and possession gaps that separate goods and services from those who would use themHow Channel Members Add Value
- 9. The Nature and Importance of Marketing ChannelsHow Channel Members Add Value
- 10. The Nature and Importance of Marketing ChannelsHow Channel Members Add Value
- 11. The Nature and Importance of Marketing ChannelsNumber of Channel Members
- 12. The Nature and Importance of Marketing ChannelsConnected by types of flows:Physical flow of productsFlow of ownershipPayment flowInformation flowPromotion flowNumber of Channel Members
- 13. Channel Behavior and OrganizationMarketing channel consists of firms that have partnered for their common good with each member playing a specialized roleChannel conflict refers to disagreement over goals, roles, and rewards by channel membersHorizontal conflictVertical conflictChannel Behavior
- 14. Channel Behavior and OrganizationConventional distribution systems consist of one or more independent producers, wholesalers, and retailers. Each seeks to maximize its own profits, and there is little control over the other members and no formal means for assigning roles and resolving conflict.Conventional Distributions Systems
- 15. Channel Behavior and OrganizationVertical marketing systems (VMSs) provide channel leadership and consist of producers, wholesalers, and retailers acting as a unified system and consist of:Corporate marketing systemsContractual marketing systemsAdministered marketing systemsVertical Marketing Systems
- 16. Channel Behavior and OrganizationVertical Marketing SystemsCorporate vertical marketing system integrates successive stages of production and distribution under single ownership
- 17. Channel Behavior and OrganizationContractual vertical marketing system consists of independent firms at different levels of production and distribution who join together through contracts to obtain more economies or sales impact than each could achieve alone. The most common form is the franchise organization.Vertical Marketing Systems
- 18. Channel Behavior and OrganizationFranchise organization links several stages in the production distribution processManufacturer-sponsored retailer franchise systemManufacturer-sponsored wholesaler franchise systemService firm-sponsored retailer franchise systemVertical Marketing Systems
- 19. Channel Behavior and OrganizationAdministered vertical marketingsystem has a few dominant channel members without common ownership. Leadership comes from size and power.Vertical Marketing Systems
- 20. Channel Behavior and OrganizationHorizontal marketing systems are when two or more companies at one level join together to follow a new marketing opportunity. Companies combine financial, production, or marketing resources to accomplish more than any one company could alone.Horizontal Marketing Systems
- 21. Channel Behavior and OrganizationMultichannel Distribution systems (Hybrid marketing channels) are when a single firm sets up two or more marketing channels to reach one or more customer segmentsMultichannel Distribution Systems Hybrid Marketing Channels
- 22. Channel Behavior and OrganizationMultichannel Distribution Systems
- 23. Channel Behavior and OrganizationDisintermediation occurs when product or service producers cut out intermediaries and go directly to final buyers, or when radically new types of channel intermediaries displace traditional onesChanging Channel Organization
- 25. Channel Design DecisionsTargeted levels of customer serviceWhat segments to serveBest channels to useMinimizing the cost of meeting customer service requirementsSetting Channel Objectives
- 26. Channel Design DecisionsTypes of intermediariesNumber of intermediariesResponsibilities of each channel memberIdentifying Major Alternatives
- 27. Channel Design DecisionsIdentifying Major Alternatives
- 28. Channel Design DecisionsEach alternative should be evaluated against:Economic criteriaControlAdaptive criteriaEvaluating the Major Alternatives
- 29. Channel Design DecisionsDesigning International Distribution ChannelsChannel systems can vary from country to countryMust be able to adapt channel strategies to the existing structures within each country
- 31. Public Policy and Distribution DecisionsExclusive distribution is when the seller allows only certain outlets to carry its productsExclusive dealing is when the seller requires that the sellers not handle competitor’s productsExclusive territorial agreements are where producer or seller limit territoryTying agreements are agreements where the dealer must take most or all of the line
- 32. Marketing Logistics and Supply Chain ManagementMarketing logistics (physical distribution) involves planning, implementing, and controlling the physical flow of goods, services, and related information from points of origin to points of consumption to meet consumer requirements at a profitNature and Importance of Marketing Logistics
- 33. Marketing Logistics and Supply Chain ManagementNature and Importance of Marketing Logistics
- 34. Marketing Logistics and Supply Chain ManagementSupply chain management is the process of managing upstream and downstream value-added flows of materials, final goods, and related information among suppliers, the company, resellers, and final consumersNature and Importance of Marketing Logistics
- 35. Marketing Logistics and Supply Chain ManagementMajor Logistics Functions
- 36. Marketing Logistics and Supply Chain ManagementJust-in-time systemsRFIDKnowing exact product locationSmart shelvesPlacing orders automaticallyInventory Management
- 37. Marketing Logistics and Supply Chain ManagementMajor Logistics FunctionsTransportation affects the pricing of products, delivery performance, and condition of the goods when they arrive
- 38. Marketing Logistics and Supply Chain ManagementLogistics information management is the management of the flow of information, including customer orders, billing, inventory levels, and customer dataEDI (electronic data interchange)VMI (vendor-managed inventory)Logistics Information Management
- 39. Marketing Logistics and Supply Chain ManagementIntegrated logistics management is the recognition that providing customer service and trimming distribution costs requires teamwork internally and externallyIntegrated Logistics Management
- 40. Marketing Logistics and Supply Chain ManagementThird-party logistics is the outsourcing of logistics functions to third-party logistics providers (3PLs)Integrated Logistics Management
- 41. MarketingStephan Langdon, MBA, M Ed
Editor's Notes
- #9: Note to InstructorThe text gives the example of soap:Unilever makes millions of bars of Lever 2000 hand soap each day, but you want to buy only a few bars at a time. So big food, drug, and discount retailers, such as Kroger, Walgreens, and Wal-Mart, buy Lever 2000 by the truckload and stock it on their store’s shelves. In turn, you can buy a single bar of Lever 2000, along with a shopping cart full of small quantities of toothpaste, shampoo, and other related products as you need them.
- #11: Note to InstructorChannels perform the following functions:Information:Gathering and distributing marketing research and intelligence information about actors and forces in the marketing environment needed for planning and aiding exchange.Promotion:Developing and spreading persuasive communications about an offer.Contact:Finding and communicating with prospective buyers.Matching:Shaping and fitting the offer to the buyer’s needs, including activities such as manufacturing, grading, assembling, and packaging.Negotiation:Reaching an agreement on price and other terms of the offer so that ownership or possession can be transferred.Physical distribution: Transporting and storing goods.Financing: Acquiring and using funds to cover the costs of the channel work.Risk taking: Assuming the risks of carrying out the channel work
- #12: Note to InstructorThe remaining channels in Figure 12.2A are indirect marketing channels, containing one or more intermediaries. Figure 12.2B shows some common business distribution channels. The business marketer can use its own sales force to sell directly to business customers. Or it can sell to various types of intermediaries, who in turn sell to these customers. Channel 1, called a direct marketing channel, has no intermediary levels; the company sells directly to consumers.
- #14: Note to InstructorHorizontal conflict is conflict among members at the same channel level whereas vertical conflict is conflict between different levels of the same channel.
- #17: Note to InstructorThe text gives Zara as an example:Zara has control over almost every aspect of the supply chain, from design and production to its own worldwide distribution network. Zara makes 40 percent of its own fabrics and produces more than half of its own clothes, rather than relying on a hodgepodge of slow-moving suppliers. New designs feed into Zara manufacturing centers, which ship finished products directly to 1,161 Zara stores in 68 countries, saving time, eliminating the need for warehouses, and keeping inventories low. Effective vertical integration makes Zara faster, more flexible, and more efficient than international competitors such as Gap, Benetton, and H&M.
- #19: Note to InstructorEvery year entrepreneur.com lists the top franchises. This link brings you to their Web site. The top 10 Franchises for 2008 are, in order:7-Eleven Inc.SubwayDunkin' DonutsPizza HutMcDonald'sSonic Drive In RestaurantsKFC Corp.InterContinental Hotels GroupDomino's Pizza LLCRE/MAX Int'l. Inc.
- #21: Note to InstructorDiscussion QuestionCan you think of an example where two companies join for a horizontal marketing system. Students might notice that McDonald’s is in Wal-Mart or their gas station also has a coffee franchise.
- #22: Note to InstructorMany major grocers have partnered with Peapod for home delivery of groceries. This link brings you to the Peapod site. Many students may have tried this service.
- #23: Note to InstructorPrompt students to point out the advantages and challenges of multichannel systems:AdvantagesIncreased sales and market coverageNew opportunities to tailor products and services to specific needs of diverse customer segmentsChallengesHard to controlCreate channel conflict
- #24: Note to InstructorThe link is to eBay. No doubt students are familiar with this site. Ask them how it might have displaced other channels like classified ads, yard sales, non-virtual auctions, etc.
- #25: Note to InstructorDiscussion QuestionsHow might customer needs differ? Ask them how their needs on purchasing a book might differ from their parents? How does this translate to channel issues? It will come down to analyzing customer needs in terms of:Distance to travelIn person versus onlineBreadth of assortmentCustomer service
- #26: Note to InstructorObjectives are influenced by the nature of the company, marketing intermediaries, competitors, and the environment.
- #27: Note to InstructorTypes of intermediaries refers to channel members available to carry out channel work. Examples include the company sales force, manufacturer’s agency, and industrial distributors.
- #28: Note to InstructorIn any channel producers and intermediaries need to agree on price policies, conditions of sale, territorial rights, and services provided by each party.
- #29: Note to InstructorUsing economic criteria, a company compares the likely sales, costs, and profitability of different channel alternatives. The company must also consider control issues. Using intermediaries usually means giving them some control over the marketing of the product, and some intermediaries take more control than others. Other things being equal, the company prefers to keep as much control as possible. Finally, the company must apply adaptive criteria. Channels often involve long-term commitments, yet the company wants to keep the channel flexible so that it can adapt to environmental changes.
- #31: Note to InstructorDiscussion QuestionIf you were a manufacturer, how would you select channel members?Most likely they will look at years in business, profitability, and other products served. In managing channel members companies practice Partner relationship management (PRM) and supply chain management (SCM) to develop long term relationships.Discussion QuestionHow do you motivate and evaluate channel members? Some students might have worked in stores where the salespeople were given rewards for excellent sales or service.
- #32: Note to InstructorProducers of a strong brand sometimes sell it to dealers only if the dealers will take some or all of the rest of the line. This is called full-line forcing. Such tying agreements are not necessarily illegal, but they do violate the Clayton Act if they tend to lessen competition substantially. The practice may prevent consumers from freely choosing among competing suppliers of these other brands.
- #33: Note to InstructorMarketing logistics involves:Outbound distribution—moving products from the factory to resellers and consumers.Inbound distribution—moving products and materials from suppliers to the factory.Reverse distribution—moving broken, unwanted, or excess products returned by consumers or resellers.
- #34: Note to InstructorDiscussion QuestionWhat is the importance of logistics? Their responses should include:Competitive advantage by giving customers better service at lower prices.Cost savings to the company and its customers.Product variety requires improved logistics.Information technology has created opportunities for distribution efficiency.
- #37: Note to InstructorWith such systems, producers and retailers carry only small inventories of parts or merchandise, often only enough for a few days of operations. New stock arrives exactly when needed, rather than being stored in inventory until being used. Just-in-time systems require accurate forecasting along with fast, frequent, and flexible delivery so that new supplies will be available when needed.
- #38: Note to InstructorMany companies use intermodal transportation, whichcombines two or more modes of transportation.Piggyback uses rail and truckFishyback uses water and truckAirtruck uses air and truck
- #41: Note to InstructorThird party logistics offers the following:Provide logistics functions more efficiently Provide logistics functions at lower costAllow the company to focus on its core businessAre more knowledgeable of complex logistics