Ch.12 MKTG Exam

How Channel Members Add Value

- In making products and services available to consumers, channel members add value by bridging the major time, place and possession gaps that separate goods and services from those who use them Key functions of channel members: - Information: gathering and distributing information about consumers, producers, and other 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 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 - 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

Types of Vertical Marketing Systems

1. Corporate VMS 2. Contractual VMS 3. Administered VMS

vertical marketing system

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. - consists of producers, wholesalers, and retailers acting as a UNIFIED SYSTEM - It's simply a channel in which members at different levels work together in a unified way (hence, system) to accomplish the work of the channel

Channel conflict (horizontal vs vertical)

Horizontal conflict: occurs among firms at the same level of the channel Ex: Holiday Inn franchises might complain about other Holiday Inn operators overcharging guests or giving poor service, hurting the overall Holiday Inn image - Vertical conflict (most common): conflict between different levels of the same channel - vertical conflict is conflict that occurs between organizations that work together to provide the same product to the consumer -Ex: if the toy manufacturer discovers its products are arriving at retail stores later than scheduled Ex: a business selling potatoes might have a conflict with a supermarket that sells the potatoes

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 - To make and market just one of its many lines- say its classic colas- Pepsi manages a huge network of people within the company, from marketing and sales people to folks in finance and operations. - The entire network must function together to crate customer value and establish the brands positioning

Contractual VMS

a vertical marketing system in which independent firms at different levels of production and distribution join together through contracts Ex: franchises- Burger King/ Mcdonalds - consists of independent firms at different levels of production and distribution that join together through contracts to obtain more sales impact than each could achieve alone

Corporate VMS

a vertical marketing system that combines successive stages of production and distribution under single ownership- channel leadership is established through common ownership - Integrates successive stages of production and distribution under single ownership Ex: Firestone manufactures tires and owns the service centers that sell tires to customers Ex: Apple- who is responsible for doing everything related to their products

Administered VMS

a vertical marketing system that coordinates successive stages of production and distribution through the size and power of one of the parties Ex: Large retailers such as Walmart, Home Depot, Kroger, etc can exert strong influence on the many manufactueres that supply the products they sell- Walmart usually gets its way. - For small consumer suppliers maintaining a strong relationship with the giant retailer is crucial or else they easily go to another supplier

conventional distribution channel

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 - conventional distribution channels have lacked leadership and power, often resulting in damaging conflict and poor performance

channel conflict

disagreements among marketing channel members on goals, roles, and rewards - who should do what and for what rewards

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 - occurs when product or service producers cut out intermediaries and go directly to final buyers Ex: If youre a farmer who wants to eliminate the middleman, you may opt to sell your fruits and vegetables at a farmers market where consumers can buy directly from you