Marketing

Service-sponsored franchise systems

exist when franchisors license individuals or firms to dispense a service under a trade name and according to specific guidelines.

strategic channel alliances

whereby one firm's marketing channel is used to sell another firm's products. Strategic alliances are popular in global marketing, where the creation of marketing channel relationships is expensive and time-consuming.

Wholesaler-sponsored voluntary chains

wholesaler that develops a contractual relationship with small, independent retailers to standardize and coordinate buying practices, merchandising programs, and inventory management efforts.

Manufacturer-sponsored wholesale franchise systems

exist in the soft-drink industry.

transactional function

Intermediaries perform a transactional function when they buy and sell products or services. But an intermediary such as a wholesaler Page 409also performs the function of sharing risk with the producer when it stocks merchandise in anticipation of sales. If the stock is unsold for any reason, the intermediary—not the producer—suffers the loss.

Dual Distribution

An arrangement whereby a firm reaches different buyers by employing two or more different types of channels for the same basic product. For example, GE sells its large appliances directly to home and apartment builders but uses retail stores, including Lowe's home centers, to sell to consumers.

Verticle Marketing Systems

Are professionally managed and centrally coordinated marketing channels designed to achieve channel economies and maximum marketing impact

logistical functions

Gathering, sorting, and dispersing products

corporate vertical marketing system

The combination of successive stages of production and distribution under a single ownership

administered vertical marketing systems

achieve coordination at successive stages of production and distribution by the size and influence of one channel member rather than through ownership.

Direct Marketing Channels

allow consumers to buy products by interacting with various advertising media without a face-to-face meeting with a salesperson. Direct marketing channels include mail-order selling, direct-mail sales, catalog sales, telemarketing, interactive media, and televised home shopping (the Home Shopping Network).

Manufacturer-sponsored retail franchise systems

are prominent in the automobile industry, where a manufacturer such as Ford licenses dealers to sell its cars subject to various sales and service conditions.

Service-sponsored retail franchise systems

are used by firms that have designed a unique approach for performing a service and wish Page 416to profit by selling the franchise to others.

Channel Conflict

arises when one channel member believes another channel member is engaged in behavior that prevents it from achieving its goals. Two types of conflict occur in marketing channels: vertical conflict and horizontal conflict.

Horizontal Conflict

between intermediaries at the same level in a marketing channel, such as between two or more retailers (Target and Kmart) or two or more wholesalers that handle the same manufacturer's brands. Two sources of horizontal conflict are common.10 First, horizontal conflict arises when a manufacturer increases its distribution coverage in a geographical area. For example, a franchised Cadillac dealer in Chicago might complain to General Motors that another franchised Cadillac dealer has located too close to its dealership. Second, dual distribution causes conflict when different types of retailers carry the same brands. For instance, independent Goodyear tire dealers became irate when Goodyear Tire Company decided to sell its brands through Sears, Walmart, and Sam's Club. Many switched to competing tire makers.

disintermediation

conflict arises when a channel member bypasses another member and sells or buys products direct,

Forward and backward integration

forward integration, is exemplified by Ralph Lauren, which manufactures clothing and also owns apparel shops. Other examples of forward integration include Goodyear, Apple, and Sherwin-Williams. Alternatively, a retailer might own a manufacturing operation, a practice called backward integration. For example, Kroger supermarkets operate manufacturing facilities that produce everything from aspirin to cottage cheese for sale under the Kroger label. Tiffany & Co., the exclusive jewelry retailer, manufactures about half of the fine jewelry items for sale through its over 250 specialty stores and boutiques worldwide. Companies seeking to reduce distribution costs and gain greater control over supply sources or resale of their products pursue forward and backward integration. However, both types of integration increase a company's capital investment and fixed costs. For this reason, many companies favor contractual vertical marketing systems to achieve channel efficiencies and marketing effectiveness.

Total logistic costs

includes expenses associated with transportation, materials handling and warehousing, inventory, stockouts (being out of inventory), order processing, and return products handling.

Contractural verticle marketing systems

independent production and distribution firms integrate their efforts on a contractual basis to obtain greater functional economies and marketing impact than they could achieve alone. Contractual systems are the most popular among the three types of vertical marketing systems.

Marketing Channel

individuals and firms involved in the process of making a product or service available for use or consumption by consumers or industrial users. Marketing channels make possible the flow of products and services from a producer, through intermediaries, to a buyer.

Indirect Channel

intermediaries are inserted between the producer and consumers and perform numerous channel functions. Channel B, with a retailer added, is most common when a retailer is large and can buy in large quantities from a producer or when the cost of inventory makes it too expensive to use a wholesaler. Ex. Automobile manufacturers Adding a wholesaler in Channel C is most common for low-cost, low-unit value items that are frequently purchased by consumers, such as candy, confectionary items, and magazines. For example, Mars sells case quantities of its line of candies to wholesalers, who then break down (sort) the cases so that individual retailers can order in boxes or much smaller quantities. Channel D, the most indirect channel, is employed when there are many small manufacturers and many small retailers; in this type of channel, an agent is used to help coordinate a large supply of the product. Mansar Products, Ltd. is a Belgian producer of specialty jewelry that uses agents to sell to wholesalers in the United States, who then sell to many small independent jewelry retailers.

Logistics

involves those activities that focus on getting the right amount of the right products to the right place at the right time at the lowest possible cost. The performance of these activities is logistics management, the practice of organizing the cost-effective flow of raw materials, in-process inventory, finished goods, and related information from point of origin to point of consumption to satisfy customer requirements.

Franchising

is a contractual arrangement between a parent company (a franchisor) and an individual or firm (a franchisee) that allows the franchisee to operate a certain type of business under an established name and according to specific rules.

Reverse Logistics

is a process of reclaiming recyclable and reusable materials, returns, and reworks from the point of consumption or use for repair, remanufacturing, redistribution, or disposal. The effect of reverse logistics can be seen in the reduced waste in landfills and lowered operating costs for companies.

Customer Service

is the ability of logistics management to satisfy users in terms of time, dependability, communication, and convenience. As suggested by Figure 15-10, a supply chain manager's key task is to balance these four customer service factors against total logistics cost factors.

Exclusive Distribution

is the extreme opposite of intensive distribution because only one retailer in a specific geographical area carries the firm's products. Exclusive distribution is typically chosen for specialty products or services, such as some women's fragrances and men's and women's apparel and accessories.

Supply Chain management

is the integration and organization of information and logistics activities across firms in a supply chain for the purpose of creating and delivering products and services that provide value to consumers.

Selective Distribution

lies between these two extremes and means that a firm selects a few retailers in a specific geographical area to carry its products. Selective distribution weds some of the market coverage benefits of intensive distribution to the control over resale evident with exclusive distribution

facilitating functions

make a transaction easier for buyers

Internet Marketing Channels

make products and services available for consumption or use by consumers or organizational buyers. A unique feature of these channels is that they combine electronic and traditional intermediaries to create time, place, form, and possession utility for buyers.

Intensive Distribution

means that a firm tries to place its products and services in as many outlets as possible. Intensive distribution is usually chosen for convenience products or services such as candy, fast food, newspapers, and soft drinks.

Direct Channel

producer and the ultimate consumers deal directly with each other. Ex: insurance companies

Supply Chain

refers to the various firms involved in performing the activities required to create and deliver a product or service to consumers or industrial users

Multichannel Marketing

sometimes called omnichannel marketing, is the blending of different communication and delivery channels that are mutually reinforcing in attracting, retaining, and building relationships with consumers who shop and buy in traditional intermediaries and online. Multichannel marketing seeks to integrate a firm's electronic marketing and delivery channels