Marketing Chapter 11 (Managing Marketing Channels & the Supply Chain)

Manufacturers' Agent

Agent that usually operates on an extended contract, often sells within an exclusive territory, handles noncompeting but related lines of goods, and has limited authority to price and create terms of sales

Supply Chain

All organizations in supplying a firm, the members of its channels of distribution, and its end user consumers and business users.

Retailing

Any business activity that creates value in the delivery of goods and services to consumers for their personal, non-business consumption and is ann essential component of the supply chain

Market Research

Because intermediaries are closer to end-user consumers and business users than manufacturers, they are in an ideal position to gather information about the market and consumer trends. Collecting and sharing market and competitive information helps members of the channel continue to offer the right product mix at the right prices.

Buying

Both wholesalers and retailers perform an important function by evaluating products and ultimately simplifying purchase decisions by creating assortments.

Physical Distribution Functions...

Breaking bulk, accumulating bulk and sorting, creating assortments, etc.

Agent

Business entity that negotiates purchases, sales, or both but does not take title to the goods involved.

Channel Conflict

Can occur in which channel members experience disagreements and their relationship can become strained or even fall apart.

Channel Distribution

Consists of interdependent entities that are aligned for the purpose of transferring possession of a product from producer to consumer or business user.

Vertical Marketing System (VMS)

Consists of vertically aligned networks behaving and performing as a unified system.

Breaking Bulk

In many industries, such as consumer health products, when finished goods come off a firm's production line, the manufacturer packages the individual pieces into large cartons for shipping into the channel of distribution. This is a convenient way for manufacturers to ship out the product. However, consumers shopping in a drugstore, whether a national chain such as Walgreens or an independent pharmacy in your hometown, don't need to see 144 units of a shampoo or deodorant on a store shelf. The function of breaking bulk occurs within a channel to better match quantities needed to space constraints and inventory turnover requirements.

Middleman

Independent business entity that links producers and end-user consumers or organizational buyers

Creating Assortments

Intermediaries engage in creating assortments when they accumulate products from several sources and then make those products available down the channel as a convenient assortment for consumers.

Marketing Communications

Intermediaries frequently receive incentives from manufacturers to participate in helping promote products in the channel.

Value Network

Is an overarching system of formal and informal relationships within which the firm participates to procure, transform, ad enhance , and ultimately supply its offerings in final form within a market space.

Supply Chain Management

Is the coordination of these value -adding flows among the entities that maximizes overall value delivered and profit realized

Legitimate Power

Legitimate power results from contracts such as franchise agreements or other formal agreements

Jobber

Middleman that buys from manufacturers and sells to retailers.

Merchant Middleman

Middleman that buys goods outright, taking title to them.

Major Types of Intermediaries

Middleman, merchant middleman, wholesaler, etc.

Expert Power

Often, channel members adopt an approach of utilizing their unique competencies to influence others in the channel. Expert power might take the form of sharing important product knowledge, such as a representative from Clinique setting up a demonstration for cosmetic consultants in a Nordstrom store to stimulate sales expertise.

Selling

Often, intermediaries provide a sales force to represent a manufacturer's product line. This could take the form of manufacturers' representatives, or brokers, that represent a product line down the channel. Alternatively, the salespeople might work for a wholesaler or retailer.

Value Chain

Portrays a synthesis of primary and support activities utilized by an organization design, produce, market, deliver, and support its products.

Electronic Commerce

Refers to any action using electronic media to communicate with customers to facilitate the inventory, exchange, and distribution of goods and services, or facilitate payment.

Transportation and Storage

Relatively few producers operate their own transportation networks or provide warehousing facilities. Producers make money by pushing finished goods out the door and into the channel of distribution. As such, transportation and storage functions are among the most commonly provided channel intermediary activities.

Transaction and Communication Functions...

Selling, Buying, and Marketing Communication

Other Services

Services performed by intermediaries run a gamut of activities such as training others in the channel on how to display or sell the products, repair and maintenance of products after a sale, and providing customized software for inventory management, accounting and billing, and other opera- tional processes.

Value Cocreation

The aim of the value chain network

Electronic Retailing

The communication and sale of products or services to consumers over the internet

Physical Distribution / Logistics

The integrated process of moving input materials to the product in-process inventory through the firm, and finish goods out of the firm through the channel of distribution.

Disintermediation

The shortening of collapsing of marketing channels due to the elimination of one or more intermediaries, is common in the electronic channel.

Referent Power

When a channel member is respected, admired, or revered based on one or more attributes, that member enjoys referent power within the channel. Only the best of the best brands can rely on this power source

Distributor

Wholesale middleman, found especially when selective or exclusive distribution is common and strong promotional support is needed. Sometimes used synonymously for a wholesales.

Financing

Without readily available credit at various stages in the distribution process many channels could not operate. In any given channel, when credit is required by one channel member it may be facilitated by another channel member such as a producer, wholesaler, or retailer, depending on the situation. Alternatively, credit may be facilitated by outside sources such as banks and credit card providers.

Coercive power

involves an explicit or implicit threat that a channel captain will invoke negative consequences on a channel member if it does not comply with the leader's request or expectations.

Channel Power

is the degree to which any member of a marketing channel can exercise influence over the other members of the channel.

Push strategy

means that much of the intensive promotional activities take place from the manufacturer downward through the channel of distribution

Disadvantages of E-Retailing

- Customers walk away easily - reduce ability to sell features and benefits - security of personal data

Advantages of E- Retailing

- extensive selection - build product communities

Intensive Distribution

- max exposure - convenience and impulse goods

Exclusive Distribution

- prestige positioning

Selective Distribution

- shopping goods- fashion and furniture

Channel controls- marketing managers must take into account...

- type of products - cost issues - accuracy of the sales forecast - likelihood of major changes

Risk - Taking

A big part of how an intermediary can add value is by reducing the risk of others in the channel. Any of the major physical distribution functions described above that are assumed by a channel member comes with potential risks and liabilities.

Retailer

Entity primarily engaged in selling to end-user consumers.

Wholesaler

Entity primarily in buying, taking title to, strong (usually), and physically handling goods in large quantities. Also resell the goods to retailers or to organizational buyers.

Facilitating Agent

Entity that assists in the performance of distribution tasks other than buying, selling, and transferring title. (examples include trucking companies, warehouses, importers)

Reducing Transactions

Even one intermediary into a channel can contribute to greatly reducing transactions necessary to complete an exchange. While it might seem counterintuitive to those who are not studying marketing management, channels with intermediaries actually tend to save end-user consumers money over what most direct producer to consumer distribution approaches would cost, given the same product. Manufacturers' costs would skyrocket if they held the responsibility for interfacing with and delivering product to every one of their end users.

Facilitating Functions

Financing, Market Research, Risk-Taking, Other Services

Pull Strategy

Focuses much of its promotional investment on the end-user consumer

Accumulating Bulk & Sorting

n many industries, such as consumer health products, when finished goods come off a firm's production line, the manufacturer packages the individual pieces into large cartons for shipping into the channel of distribution. This is a convenient way for manufacturers to ship out the product. However, consumers shopping in a drugstore, whether a national chain such as Walgreens or an independent pharmacy in your hometown, don't need to see 144 units of a shampoo or deodorant on a store shelf. The function of breaking bulk occurs within a channel to better match quantities needed to space constraints and inventory turnover requirements. Accumulating Bulk and Sorting Intermediaries perform a process of accumulating bulk—that is, they take in product from multiple sources and transform it, often through sorting it into different classifications for sales through the channel. Eggs, for example, might come into a processing house from individual farm operators for sorting by grade and size, then to be packaged and sent on their way to retailers.

Reward power

occurs when a firm cannot bypass a channel even though there may be conflict. Most manufacturers want to have their products in Walmart even though it is very rigid in the vendor requirements.