MKTG ch. 10 Place/channels
"every company for themselves can be sub-optimal for the system"
"every company for themselves can be sub-optimal for the system"
conventional marketing systems/channel
"every company for themselves" can be sub-optimal for the system producer → wholesaler → retailer → consumer
Marketing logistics/intermediaries
(physical distribution) planning, implementing, and controlling the physical flow of materials, final goods, and related information from points of origin to points of consumption to meet customer requirements at a profit Getting the right product to the right customer in the right place at the right time
major logistics functions include:
- warehousing - inventory management - transportation - logistics information management
types of marketing channel decisions:
1. marketing channel design 2. marketing channel management 3. marketing logostics
major logistics functions - warehousing
Companies must store their goods while they wait to be sold Not a distribution center, which is meant to move goods too
marketing channel management - selecting channel members
Like when Toyota first started Lexus, they had to turn down car dealerships because there were so many that wanted to sell the cars However, Timex (cheap watches) had trouble finding jewelry stores that would sell their watches
major logistics functions - inventory management
Managers must maintain enough inventory but not too much
left digit effect
We encode a price like $7.99 as $7...it's called the left digit effect...we encode it in our mind before we read all the digits.
vertical marketing systems
a channel structure in which producers, wholesalers, and retailers act as a unified system..... One channel member either owns the others, has contracts with them, or has so much power that they all cooperate 3 types: - corporate VMS - contractual VMS - administered VMS
franchise organization
a contractual vertical marketing system in which a channel member, called a franchisor, links several stages in the production-distribution process - the franchise owner must follow certain rules set by the parent company
value delivery network
a network composed of the company, suppliers, distributors, and, ultimately, customers who partner to help the entire system deliver better customer value enables the system to deliver better customer value producer/wholesaler/retailer (all agree to partner together) => consumer
multichannel distribution system
a single firm sets up two or more marketing channels to reach one or more customer segments
corporate vertical marketing system
a vertical marketing system that combines successive stages of production and distribution under single ownership—channel leadership is established through COMMON OWNERSHIP Example - American Apparel makes all of its clothing domestically from raw materials until it reaches the consumer; high quality, not a sweatshop; vertical integration is faster, more flexible, and more efficient Apple iPad is sold through a corporate VMS
key trends in retailing:
a. Growth of non-store retailing b. Retail convergence/rise of mega-retailers - Walmart contains everything c. Global expansion of major retailers d. Increased importance of technology e. Retail stores as communities and places to hangout; importance of experiential retailing - The video about what crazy stuff you can get away with at the Apple Store
green supply chain
choosing your supply chain in a manner that reduces the company's environmental footprints - being environmentally responsible
marketing channel management
choosing, managing, and motivating individual channel members and evaluating channel member performance over time - selecting channel members - managing and motivating
marketing channel management - managing and motivating
company must convince distributors that they can succeed better by working together as a part of a cohesive value delivery system
conventional distribution channel
consists of one or more independent producers, wholesalers, and retailers each is a separate business seeking to maximize its own profits
marketing channel design
designing effective marketing channels by analyzing customer needs, setting channel alternatives, and evaluating channel alternatives
channel conflict
disagreement among channel members regarding goals, roles, or rewards
disintermediation
eliminating marketing intermediaries from a channel Example - Blockbuster is gone because of Netflix Example: Best Buy - fewer people are buying items in the store → must change target segment and leverage service product Black & Decker refuses to get rid of their intermediaries because their products are segmented so retailers help them target a certain audience
integrated logistics management
emphasizes teamwork, both inside the organization and between the marketing channel organizations, to maximize the distribution system performance
this often results in dealers searching for less competition between other dealers holding the same product
exclusive territorial agreements
third-party logistics (3PL) provider
expert logistics provider that performs any or all of the functions that get a client's product to market separate company providers include: Fedex, Ryder, Transplace,
exclusive distribution
giving a limited number of dealers the exclusive right to distribute the company's products in their territories when producers develop exclusive channels for their products; allows a closer relationship; often used with luxury goods - Often found in the distribution of luxury brands - Bentley's are only sold by a few dealerships in Pittsburgh
why we need channels
improves efficiency intermediaries help specializes the selling process "good distribution strategies can contribute strongly to customer value and create competitive advantage for a firm"
marketing channel decisions
include channel design, channel management, and marketing logistics (physical distribution)
contractual vertical marketing systems
individual firms join together through extensive contracts... Includes franchise organizations Hertz is a retailer, but works with Ford, which is a manufacturer; Westin hotels is a retailer, but works with Serta mattresses, which is a manufacturer Fast food restaurants like BK or McD's
distribution center
large, highly-automated warehouse that receives goods from various plants and suppliers - it takes orders, efficiently fills orders, and delivers products to the consumer in a timely manner
channel level
layer of intermediaries that helps bring the product and its ownership closer to a final buyer
administered vertical marketing systems
leadership is established based on the size and power of the dominant channel members (known as channel captains) one major controller making decisions Example - both Home Depot and Barnes & Noble have accumulated a lot of trust in their supply chain - Channel captains have a lot of control in the 4Ps; they are the leader in the voting process
supply chain management
managing upstream and downstream value-added flows of material, finals goods, and related information among suppliers, the company, final consumers, and resellers
indirect marketing channel
marketing channel that contains one or more intermediary levels
direct marketing channel
marketing channel with no intermediary levels
major logistics functions - transportation
moving your stuff from one place to another, including moving it to your customers or a retail location This choice affects the pricing of products, delivery performance, and the condition of goods when they arrive
what is the flow of the conventional marketing channel?
produce → wholesaler → retailer → consumer
traditional marketing channel (arrows)
producer → wholesaler → retailer → consumer
vertical marketing system (arrows)
producer, wholesaler, retailer → consumer
benefits of corporate VSM
quality assurance, fewer transformation costs, creative control, communication enhancements
types of marketing logistics/intermediaries
selective distribution exclusive distribution intensive distribution
marketing channel (distribution channel)
set of interdependent organizations that work together to make a product of service available for use by the consumer or a business user
intensive distribution
stocking the product in as many outlets as possible often used with convenience products like toothpaste, soap, and candy Like how you can get a Coke at a grocery store, diner, restaurant, gas station, vending machine in Pattee, etc.
major logistics functions - logistics information management
the IT/computer systems that help you keep track of your supply chain Transactions, billing, shipment and inventory levels, customer data, etc.
exclusive territorial agreements
the producer may agree not to sell to other dealers in a given area - this often results in dealers searching for less competition between other dealers holding the same product
The goal of horizontal marketing system is to match ___________ and ___________
to match supply and chain
horizontal marketing system
two or more companies at one level join together to follow a new marketing opportunity The goal of horizontal marketing system is to match supply and chain a subway inside a Wal-Mart; there are loads of foot traffic for Subway and Wal-Mart benefits are that the people spend more time there, which increases purchasing General Mills had no brand equity in foreign countries, so they partnered with Nestle to sell Cheerios in other countries
selective distribution
using more than one but fewer than all of the intermediaries who are willing to carry the company's products we do this to maintain a proper image of the brand and to have closer relationships with fewer, more selective dealers Like how Samsung TV's are sold in Best Buy, Walmart, and a few other retailers/small dealerships, but that's it
vertical marketing systems bring cross coordination and value to the system - less conflict
vertical marketing systems bring cross coordination and value to the system - less conflict
full-line forcing
when the producers only sell to dealers if the dealer will take some or all of the line as well
exclusive dealing
when the seller requires that dealers not handle competitors' products
intermodal transportation
when you combine two or more modes of transportation