Channel Management Decisions by nza31084

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									Marketing Channels
 and Supply Chain
   Management

     Chapter 12
         Learning Goals
1.   Know why companies use distribution
     channels and understand the functions that
     these channels perform.
2.   Learn how channel members interact and
     how they organize to perform the work of
     the channel.
3.   Know the major channel alternatives that
     are open to a company.
4.   Comprehend how companies select,
     motivate, and evaluate channel members.
5.   Understand the nature and importance of
     marketing logistics and integrated supply
     chain management.
                                              12 - 1
              Case Study
              Caterpillar
• Dominates world’s      • Caterpillar stresses
  markets for heavy        dealer profitability,
  construction and         extraordinary dealer
  mining equipment.        support, personal
• Independent dealers      relationships, dealer
  are key to success       performance and
• Dealer network is        full, honest, and
  linked via computers     frequent
                           communications


                                               12 - 2
                    Definitions
   • Value Delivery Network
        The network made up of the company,
         suppliers, distributors, and ultimately
         customers who “partner” with each other
         to improve the performance of the entire
         system.
   • Marketing channel
        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
                                                                12 - 3
Goal 1: Know why companies use channels and understand their functions
   Nature & Importance of
    Marketing Channels
   • Channel choices affect other
     decisions in the marketing mix
        Pricing, Marketing communications
   • A strong distribution system can
     be a competitive advantage
   • Channel decisions involve long-
     term commitments to other firms

                                                                12 - 4
Goal 1: Know why companies use channels and understand their functions
   Nature & Importance of
    Marketing Channels
   • How Channel Members Add Value
        Intermediaries require fewer contacts to
         move the product to the final purchaser.
        Intermediaries help match product
         assortment demand with supply.
        Intermediaries help bridge major time,
         place, and possession gaps that separate
         products from those who would use them.



                                                                12 - 5
Goal 1: Know why companies use channels and understand their functions
   Nature & Importance of
    Marketing Channels




                                                                12 - 6
Goal 1: Know why companies use channels and understand their functions
 Nature & Importance of
  Marketing Channels
       Risk Taking   Information

 Financing                  Promotion

 Physical
                                Contact
Distribution


       Negotiation   Matching
                                          12 - 7
   Nature & Importance of
    Marketing Channels
   • Number of Channel Levels
        The number of intermediary levels
         indicates the length of a marketing
         channel.
           • Direct Channels
           • Indirect Channels
        Producers lose more control and face
         greater channel complexity as
         additional channel levels are added.
                                                                12 - 8
Goal 1: Know why companies use channels and understand their functions
   Nature & Importance of
    Marketing Channels




                                                                12 - 9
Goal 1: Know why companies use channels and understand their functions
    Nature & Importance of
     Marketing Channels

  Channel Members Are Connected
      Via A Variety of Flows

     • Physical Flow             • Information Flow
     • Payment Flow              • Promotion Flow

                   • Flow of Ownership
                                                               12 - 10
Goal 1: Know why companies use channels and understand their functions
      Channel Behavior and
          Organization
   • Channel Conflict
        Occurs when channel members
         disagree on roles, activities, or
         rewards.
        Types of Conflict:
           • Horizontal conflict: occurs among firms
             at the same channel level
           • Vertical conflict: occurs among firms at
             different channel levels
                                                               12 - 11
Goal 1: Know why companies use channels and understand their functions
      Channel Behavior and
          Organization
   • Conventional Distribution Channels
        Consists of one or more independent
         channel members
        Lack leadership and power
        Often result in poor performance
   • Vertical Marketing Systems
        Consists of members acting as a unified
         system
        Use contracts, ownership or power

                                                               12 - 12
Goal 1: Know why companies use channels and understand their functions
      Channel Behavior and
          Organization
Vertical Marketing                 • Corporation owns
     Systems                         production and
                                     distribution
   • Corporate VMS
                                   • Coordination and
   • Contractual VMS
   • Administered                    conflict
     VMS                             management
                                     through regular
                                     organizational
                                     channels
                                                               12 - 13
Goal 2: Learn how channel members interact and how they organize
      Channel Behavior and
          Organization
Vertical Marketing                 • Individual firms who
     Systems                         join through contracts
                                   • Franchise
   • Corporate VMS                   organizations
   • Contractual VMS                    Manufacturer-sponsored
                                         retailer franchise system
   • Administered                       Manufacturer-
     VMS                                 sponsored wholesaler
                                         franchise system
                                        Service-firm-sponsored
                                         retailer franchise system

                                                               12 - 14
Goal 2: Learn how channel members interact and how they organize
      Channel Behavior and
          Organization
Vertical Marketing                 • Leadership
     Systems                         through the size
                                     and power of
   • Corporate VMS                   dominant
   • Contractual VMS
                                     channel members
   • Administered
     VMS                           • Leadership could
                                     be manufacturer
                                     or retailer

                                                               12 - 15
Goal 2: Learn how channel members interact and how they organize
      Channel Behavior and
          Organization
   • Horizontal Marketing Systems
        Companies at the same level work together
         with channel members ie: Bank in store
   • Multichannel Distribution Systems
        Also called hybrid marketing channels
        Occurs when a firm uses two or more
         marketing channels ie: web sales & retailers
   • Changing Channel Organization
        Disintermediation ie: airlines vs Travel Agency

                                                               12 - 16
Goal 2: Learn how channel members interact and how they organize
      Channel Behavior and
          Organization




                                                               12 - 17
Goal 2: Learn how channel members interact and how they organize
           Channel Design
             Decisions
 • Step 1: Analyzing Consumer
   Needs
      Cost and feasibility of meeting needs
       must be considered
 • Step 2: Setting Channel Objectives
      Set channel objectives in terms of
       targeted level of customer service
      Many factors influence channel
       objectives
                                                                12 - 18
Goal 3: Know the major channel alternatives open to a company
           Channel Design
             Decisions
 • Step 3: Identifying Major
   Alternatives
      Types of intermediaries
        • Company sales force, manufacturer’s
          agency, industrial distributors
      Number of marketing intermediaries
        • Intensive, selective, and exclusive
          distribution
      Responsibilities of channel members
                                                                12 - 19
Goal 3: Know the major channel alternatives open to a company
• Decide which distribution strategy-
  -intensive, selective, or exclusive--
  is used for the following products,
  and why:
    Piaget watches,
    Acura automobiles,
    Snickers candy bars.

                                                                12 - 20
Goal 3: Know the major channel alternatives open to a company
           Channel Design
             Decisions
 • Step 4: Evaluating Major
   Alternatives
      Economic criteria
      Control issues
      Adaptive criteria




                                                                12 - 21
Goal 3: Know the major channel alternatives open to a company
           Channel Design
             Decisions
 • Designing International
   Distribution Channels
      Global marketers usually adapt their
       channel strategies to structures that
       exist within foreign countries
      Key challenges:
        • May be complex or hard to penetrate
        • May be scattered, inefficient, or totally
          lacking
                                                                12 - 22
Goal 3: Know the major channel alternatives open to a company
        Channel Management
             Decisions
     • Selecting Channel             • Evaluating Channel
       Members                         Members
         Identify                       Performance should
          characteristics that            be checked against
          distinguish the best            standards
          channel members                Channel members
     • Managing and                       should be rewarded
       Motivating Channel                 or replaced as
       Members                            dictated by
         Partner relationship            performance
          management (PRM)
          is key

                                                                12 - 23
Goal 4: Comprehend how companies select, motivate and evaluate channels
        Channel Management
             Decisions
        Decisions                   • Which characteristics
                                      are important?
   • Selecting channel                   Years in business
     members                             Lines carried
   • Managing and                        Growth and profit
                                          record
     motivating channel
                                         Cooperativeness and
     members
                                          reputation
   • Evaluating channel                  Type of customer
     members                             location

                                                                12 - 24
Goal 4: Comprehend how companies select, motivate and evaluate channels
        Channel Management
             Decisions
        Decisions                   • Partner relationship
                                      management (PRM)
   • Selecting channel                for long-term
     members
   • Managing and
                                      partnerships
     motivating channel             • Software available
     members                          to coordinate
   • Evaluating channel               members
     members

                                                                12 - 25
Goal 4: Comprehend how companies select, motivate and evaluate channels
        Channel Management
             Decisions
        Decisions                   • Check channel
                                      performance of:
   • Selecting channel                   Sales
     members
                                         Inventory
   • Managing and
     motivating channel                  Customer delivery
     members                             Promotion and
   • Evaluating channel                   training
     members                             Customer service

                                                                12 - 26
Goal 4: Comprehend how companies select, motivate and evaluate channels
         Public Policy and
       Distribution Decisions
     • Exclusive distribution
          Only certain outlets are allowed to carry a
           firm’s products
     • Exclusive dealing
          Exclusive territorial agreements
          Tying agreements



                                                                12 - 27
Goal 4: Comprehend how companies select, motivate and evaluate channels
      Marketing Logistics and
     Supply Chain Management
      • Marketing Logistics
             Outbound distribution
             Inbound distribution
             Reverse distribution
             Involves the entire supply chain
              management system



                                                                   12 - 28
Goal 5: Understand marketing logistics & integrated supply chain management
      Marketing Logistics and
     Supply Chain Management




                                                                   12 - 29
Goal 5: Understand marketing logistics & integrated supply chain management
      Marketing Logistics and
     Supply Chain Management
      • Why Greater Emphasis is Being Placed
        on Logistics:
           Offers firms a competitive advantage
           Can yield cost savings
           Greater product variety requires improved
            logistics
           Improvements in distribution efficiency
            are possible due to information technology


                                                                   12 - 30
Goal 5: Understand marketing logistics & integrated supply chain management
      Marketing Logistics and
     Supply Chain Management
      • Goals of the Logistics System
           No system can both maximize customer
            service and minimize costs.
           Firms must first weigh the benefits of
            higher service against the costs.
           State goals in terms of a targeted level of
            customer service at the least cost.


                                                                   12 - 31
Goal 5: Understand marketing logistics & integrated supply chain management
                    Major Logistics
                      Functions
                         Costs                           Order Processing
                   Minimize Costs of                         Received
                   Attaining Logistics                      Processed
                       Objectives                            Shipped



                                             Logistics
                                            Functions
        Transportation
           Rail, Truck,                                            Warehousing
         Water, Pipeline,                                            Storage
         Air, Intermodal                                           Distribution
                                                                    Automated
                                       Inventory
                                      When to order
                                    How much to order
                                       Just-in-time


                                                                                  12 - 32
Goal 5: Understand marketing logistics & integrated supply chain management
             Marketing Logistics and
            Supply Chain Management
                            Rail
          Nation’s largest carrier, cost-effective
          for shipping bulk products, piggyback

                                   Truck
              Flexible in routing & time schedules, efficient
                    for short-hauls of high value goods

                                           Water
                         Low cost for shipping bulky, low-value,
                           non-perishable goods, slowest form


                                                 Pipeline
                               Ship petroleum, natural gas, and chemicals
                                        from sources to markets


                                                            Air
                                         High cost, ideal when speed is needed or
                                           distance markets have to be reached
                                                                                    12 - 33
Goal 5: Understand marketing logistics & integrated supply chain management
      Marketing Logistics and
     Supply Chain Management
      • Integrated Logistics Management
           Cross-functional teamwork inside the
            company is critical
           Logistics partnerships are also built
            through shared projects
           Outsourcing of logistics firms to third-
            party firms is becoming more common


                                                                   12 - 34
Goal 5: Understand marketing logistics & integrated supply chain management

								
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