Ch 10

See 10.2 A and B

10.2 A (see quote bubbles) Figure 10.2B 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, which in turn sell to these customers. From the producer's point of view, a greater number of levels means less control and greater channel complexity.

horizontal marketing system

A channel arrangement in which two or more companies at one level join together to follow a new marketing opportunity ex: Walmart partners with noncompetitor McDonald's to place "express" versions of McDonald's restaurants in Walmart stores. McDonald's benefits from Walmart's heavy store traffic, and Walmart keeps hungry shoppers from needing to go else-where to eat.

conventional distribution channel

A channel consisting of one or more independent 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 (poor)

Vertical marketing system (VMs)

A channel structure in which producers, wholesalers, and retailers act as a unified system. One channel member owns the others, has contracts with them, or has so much power that they all cooperate (see 10.3)

franchise organization

A contractual vertical marketing system in which a channel member, called a franchisor, links several stages in the production-distribution process. manufacturer-sponsored retailer franchise system—for example, Ford and its network of independent franchised dealers. manufacturer-sponsored whole-saler franchise system—Coca-Cola licenses bottlers (wholesalers) in various world markets that buy Coca-Cola syrup concentrate and then bottle and sell the finished product to retailers locally. service-firm-sponsored retailer franchise system—for example, Burger King and its nearly 12,100 franchisee-operated restaurants around the world.

Multichannel distribution system

A distribution system in which a single firm sets up two or more marketing channels to reach one or more customer segments. see 10.4

Distribution center

A large, highly automated warehouse designed to receive goods from various plants and suppliers, take orders, fill them efficiently, and deliver goods to customers as quickly as possible.

channel level

A layer of intermediaries that performs some work in bringing the product and its ownership closer to the final buyer.

Indirect marketing channel

A marketing channel containing one or more intermediary levels.

Direct marketing channel

A marketing channel that has no intermediary levels.

Value delivery network

A network composed of the company, suppliers, distributors, and, ultimately, customers who partner with each other to improve the performance of the entire system in delivering customer value.

Marketing channel (distribution channel)

A set of interdependent organizations that help make a product or service available for use or consumption by the consumer or business user.

contractual VMs

A vertical marketing system in which independent firms at different levels of production and distribution join together through contracts. (i.e. franchises)

corporate VMs

A vertical marketing system that combines successive stages of production and distribution under single ownership—channel leadership is established through common ownership For example, Sherwin-Williams, the largest U.S. coatings manufacturer, sells its Sherwin-Williams-branded products exclusively through more than 4,000 company-owned retail paint stores.

administered VMs

A vertical marketing system that coordinates successive stages of production and distribution through the size and power of one of the parties. For example, GE, P&G, and Apple can command unusual cooperation from many resellers regarding displays, shelf space, promotions, and price policies. In turn, large retailers such as Walmart, Home Depot, Kroger, and Walgreens can exert strong influence on the many manufacturers that supply the products they sell.

third-party logistics (3Pl) provider

An independent logistics provider that performs any or all of the functions required to get a client's product to market. (i.e. UPS)

Multimodal transportation

Combining two or more modes of transportation

logistics emphasis

Companies today are placing greater emphasis on logistics for several reasons. First, companies can gain a powerful competitive advantage by using improved logistics to give customers better service or lower prices. Second, improved logistics can yield tremendous cost savings to both a company and its customers. Third, the explosion in product variety has created a need logistics.

Marketing channel design

Designing effective marketing channels by analyzing customer needs (where should it be sold, price, add-ons, breadth, specialization?) setting channel objectives--The company should decide which segments to serve and the best channels to use in each case. Influenced by the nature of the company, its products, its marketing intermediaries, its competitors, and the environment. identifying major channel alternatives-- it should identify its major channel alternatives in terms of the types of intermediaries, the number of intermediaries, and the responsibilities of each channel member. and evaluating those alternative-- evaluated against economic, control, and adaptability criteria. Using economic criteria, a company compares the likely sales, costs, and profitability. The company must also consider control issues. Other things being equal, the company prefers to keep as much control as possible. Finally, adaptability criteria. Channels often involve long-term commitments, yet the company wants to keep the channel flexible so that it can adapt to environmental changes..

channel conflict

Disagreements among marketing channel members on goals, roles, and rewards—who should do what and for what rewards.

cross-company teams.

For example, Nestlé's Purina pet food unit has a team of dozens of people working in Bentonville, Arkansas, the home base of Walmart. The Purina Walmart team members work jointly with their counterparts at Walmart to find ways to squeeze costs out of their distribution system.

shared projects.

For example, many large retailers conduct joint in-store programs with suppliers. Home Depot allows key suppliers to use its stores as a testing ground for new merchandising programs.

Members of the marketing channel perform many key func-tions. Some help to complete transactions:

Information--Gathering and distributing information about consumers, producers, and other 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 engaging customers and prospective buyers. Matching--Shaping offers to meet the buyer's needs, including activities such as manufacturing, grading, assembling, and packaging. Negotiation--Reaching an agreement on price and other terms so that ownership or possession can be transferred.

supply chain management

Managing upstream and downstream value-added flows of materials, final goods, and related information among suppliers, the company, resellers, and final consumers see 10.5 reverse logistics (reusing, recycling, refurbishing, or disposing of broken, unwanted, or excess products returned by consumers or resellers)

Members of the marketing channel perform many key func-tions. Some help to fulfill completed transactions

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

Marketing logistics (physical distribution)

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. In short, it involves getting the right product to the right customer in the right place at the right time profitably.

full-line forcing

Producers of a strong brand sometimes sell it to dealers only if the dealers will take some or all of the rest of its line. Such tying agreements are not necessarily illegal, but they violate the Clayton Act if they tend to lessen competition substantially.

Marketing channel management

Selecting, managing, and motivating individual channel members and evaluating their performance over time.

Disintermediation

The cutting out of marketing channel intermediaries by product or service producers or the displacement of traditional resellers by radical new types of intermediaries. (i.e. iTunes got rid of music stores)

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.

exclusive territorial agreements

The producer may agree not to sell to other dealers in a given area, or the buyer may agree to sell only in its own territory. The first practice is normal under franchise systems as a way to increase dealer enthusiasm and commitment. It is also perfectly legal—a seller has no legal obliga-tion to sell through more outlets than it wishes. The second practice, whereby the producer tries to keep a dealer from selling outside its territory, has become a major legal issue.

exclusive distribution and exclusive dealing

When the seller allows only certain outlets to carry its products, this strategy is called exclusive distribution. When the seller requires that these dealers not handle competitors' products, its strategy is called exclusive dealing.

Vertical conflict

conflict between different levels of the same channel, is even more common. ex: McDonald's franchise vs McDonalds

Companies must also determine the number of channel members to use at each level. Three strategies are available:

intensive distribution--Stocking the product in as many outlets as possible (candy, toothpaste) exclusive distribution--giving a limited number of dealers the exclusive right to distribute the company's products in their territories. (luxury brands) Selective distribution--The use of more than one but fewer than all of the intermediaries that are willing to carry the company's products. (electronics, home appliances)

Horizontal conflict

occurs among firms at the same level of the channel. For instance, some Ford dealers in Chicago might complain that other dealers in the city steal sales from them by pricing too low or advertising outside their assigned territories.

The major logistics functions are

warehousing (storage or distribution) inventory management (some use just-in-time) transportation (five main transportation modes: truck, rail, water, pipeline, and air, along with an alternative mode for digital products—the Internet.) and logistics information management (most use electronic data interchange (EDI), the digital exchange of data between organizations or vendor-managed inventory (VMI) the customer shares real-time data on sales and current inventory levels with the supplier. Generates orders and delivery.)