Marketing exam 3

channel conflict

when one channel member believes another channel member is engaged in behavior that prevents it from achieving its goals

two broad categories of channel members (intermediaries/middlemen)

wholesalers and retailers

2 forms of intermediaries

(1) agent: essentially the sales force for the producer (2) industrial distributor: performs a variety of marketing channel functions, including selling, stocking, and delivering a full product assortment, as well as financing

3 types of vertical marketing systems

(1) corporate vertical marketing systems (2) contractual vertical marketing systems (3) administered vertical marketing systems

advantages of franchising

(1) franchisor usually received both an initial franchise fee and royalties on all of the franchisee's sales (2) franchisor's business expands rapidly (3) franchisee is more likely to succeed operating as a franchise than operating as an independent business because it gets to "piggy back" off of the franchisor's brand equity -- brings the new business's chance of success from 5% to 65% (4) there are often training and setup functions that the parent company will provide to a franchisee; the franchisee is buying in to the system, which helps it select, train, and manage employees, and allows it to use its well-refined software

two types of channel conflict

(1) horizontal conflict (2) vertical conflict

3 types of wholesalers

(1) merchant wholesalers (2) agents (3) manufacturer-owned wholesalers

disadvantages of franchising

(1) the franchisor loses control over its business when it takes on franchisees (2) the franchisee also loses control over his or her business, as he or she must run the business in line with the decisions of the franchisor -- can lead to channel conflict (3) it costs a lot to open a franchise

3 functions of intermediaries

(1) transactional function (2) logistical function (3) facilitating function not every intermediary performs all three, but they are all performed somewhere in the marketing channel

things marketers do to develop an effective supply chain

(1) understand the customer: this tells the company how efficient or responsive the supply chain must be (2) understand the supply chain: company must know what the supply chain does well (i.e. customer responsiveness or efficiency) (3) harmonize the supply chain with the marketing strategy: company must make sure that the supply chain works well with both the customers' needs and the company's overall marketing strategy

3 questions marketers ask when choosing a marketing channel

(1) which channel and intermediaries provide the best coverage of the target market? (2) which channel and intermediaries best satisfy the target market's buying requirements? (3) which channel and intermediaries will generate the most profits?

which channel and intermediaries provide the best coverage of the target market?

3 types of distribution intensities that describe intermediaries: (1) intensive distribution (2) exclusive distribution (3) selective distribution

jobs for people who work in channel-related areas

30 million Americans work in channel-related area 20 million American businesses are buyers in marketing channels Of those 20 million, 3 million are traditional retailers this demonstrates that many types of organizations make up the overall channel of distribution

conflict resulting in legal action

6 practices that the Federal Trade Commission has scrutinized carefully under the Sherman Act (1890) and the Clayton Act (1914) dual distribution, vertical integration, exclusive dealing, tying arrangements, refusal to deal, resale restrictions

BOPUS

Buy Online and Pick Up in Store

BORIS

Buy Online and Return In Store

ex of how a company develops an effective supply chain

Dell's supply chain is more responsive to customers' needs even though it is more expensive Walmart's supply chain focuses on efficiency no single supply chain is always "best"; it depends largely on the customer segment and marketing strategy tradeoff between efficiency and responsiveness to customers

ex of disintermediation

Disney pulled its content from Netflix, Hulu, and other streaming platforms and began distributing its content itself via Disney Plus

forward vertical integration

a channel member moves down the channel, toward the consumer ex: Pepsi acquired all of its North American bottlers in 2009

backward vertical integration

a channel member moves up the channel, toward the manufacturer ex: Netflix began as a distributor, but it later decided to produce its own original series and movies in addition to distributing content

channel captain

a channel member who coordinates, directs, and supports other channel members most important channel member a way to facilitate cooperation usually the firm that has the most power to influence other channel members could be the manufacturer, the wholesaler, or the retailer 4 forms of influence: 1) economic influence (e.g. Walmart, which is a big buyer from many companies) (2) expertise (e.g. a knowledgeable hospital supply company) (3) identification (e.g. Ralph Lauren) (4) legitimate influence (e.g. franchisor/franchisee relationship)

franchising

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 most popular type: quick-service restaurants like McDonalds 4 types: (1) manufacturer-sponsored retail franchise systems (e.g. car manufacturers and car dealerships) (2) manufacturer-sponsored wholesale systems (e.g. soft drink producers and soft drink bottlers) (3) service-sponsored retail franchise systems (e.g. Holiday Inn) (4) service-sponsored franchise systems (e.g. H&R Block tax services)

selective distribution

a firm selects a few retail outlets in a specific geographical area to carry its products lies between the two extremes of intensive and exclusive distribution the most popular form of distribution chosen based on the type of product a firm is selling, and its target customers; therefore, firms choose areas that have a high population of a particular market segment ex: Dell, beauty brands

intensive distribution

a firm tries to place its products and services in as many outlets as possible (e.g. Coca-Cola) these products tend to be low-cost products that customers purchase frequently but will not go out of their way to get, such as vending machine snacks goal: achieve a sense of convenience, so the firm positions products in many different places, including supermarkets, gas stations, and vending machines

distributor (general merchandise wholesaler)

a full-function wholesaler the wholesaler performs all of the functions we would expect a channel to perform, including stocking merchandise, carrying inventory, providing service after the sale, offering credit, doing market research, training employees, and offering a catalog

dual distribution

a manufacturer distributes a product through its own vertically integrated channel, while competing with independent wholesales or retailers that also sell its products

channel strategy

what marketing channels are guided by creates utility for customers - particularly time and place utilities

tying arrangements

a producer requires an intermediary to buy other goods to purchase products full-line forcing: a kind of tying arrangement in which the producer requires an intermediary that wants to carry one product to buy its entire line of products as well

exclusive dealing

a producer tells an intermediary that it must sell only the producer's products

resale restrictions

a producer tries to stipulate where and to whom items may be resold

vertical integration

a producer uses either forward or backward integration to gain more control over the channel

supply chain

a sequence of firms that perform activities to create and deliver goods or services to consumers or industrial users

cross-docking

a setup in which a warehouse has loading docks for trucks to bring in products from manufacturers on one side on the other side, it has loading docks for products to be put on trucks to go to stores, with a separate loading dock for each store in the middle are conveyor belts and computer systems; they take the products from the manufacturer's side, split the products up accurately for each store, and send them to the trucks on the other side for delivery to each of the stores

jobber (limited merchandise wholesaler)

a wholesaler that does not perform all of the functions we expect from a channel the jobber performs a subset of these functions, but physical possession and ownership are always involved functions: racking shelves, delivering raw materials or commodity goods, sales calls, cataloging, maintaining inventory, and offering open account privileges

wholesaler-sponsored voluntary chains

achieve economies of scale and volume discounts through a contractual relationship with small, independent retailers and a wholesaler

direct to consumer marketing channels

allow the consumer to buy products by interacting with various advertising media without a face-to-face meeting with a salesperson ex of direct marketing channels: mail orders, direct mail, catalogs, telemarketing, home shopping

dual distribution

an arrangement wherein a firm reaches different buyers by employing two or more different types of channels for the same basic product a firm uses direct and indirect channels to deliver a particular product often used when a firm is using different channels to sell to different customer segments (e.g. selling to one customer segment through a direct channel and selling to another customer segment through an indirect channel) ex: GE uses both retail stores and direct sales to reach home builders

importance of supply chain management

becoming more important in a global economy products can get its parts from many different places

what is shorter: business channels or channels for consumer goods?

business channels are usually shorter than channels for consumer goods

transactional function

buying, selling, and assuming risk by taking on a stock of merchandise selling: manufacturers sell to wholesalers, who sell to retailers, who sell to consumers -- a salesperson in a retail store sells products directly to customers risk taking: retailers assume risk when they buy products with the intent to sell them. there is no way that the retailer can be absolutely sure that it will sell all of the products it acquires for resale

place utility

by providing convenience and prestige of location convenience of location means that the store is easily accessible -- ex: Tyson Foods selling its chicken in convenience stores -- ex: drive thru fast food restaurants prestige of location: how exclusive or upscale a location is -- ex: Brunello Cucinelli sells its clothing in only a handful of boutiques

time utility

by providing convenience and speed convenience: having the product available for consumption when customers want to buy it -- ex: McDonald's all day breakfast menu -- ex: Tyson Foods sold prepared chicken next to cash registers in convenience stores and minimarts speed: getting the product to the consumer in a timely manner -- ex: Amazon

indirect channels

channels in which intermediaries perform some of the channel functions between the producer and the ultimate consumer rely on marketing intermediaries (such as wholesalers and retailers) to reach the ultimate consumer ex: General Motors has local car dealerships that perform channel functions and sell cars. Ultimate consumer and General Motors have no interaction

direct channels

channels in which the producer and the ultimate consumer deal directly with each other no intermediaries, so the producer must perform all of the functions of the channel ex: direct mail, website and telephone sales Dell used to use this as you could order your computer over the phone or online, and Dell would custom-make it and send it to you

corporate vertical marketing systems

combine stages of production and distribution under a single ownership a single company owns more than one channel member can be done through forward integration (e.g. a producer buying retail shops) or backward integration (e.g. a producer buying industrial suppliers) increases capital investment and fixed costs, so it is risky gives a company increased control over its channels of distribution; there is no negotiation between channel members, so there is no channel conflict disadvantage: requires a significant investment

retailer

companies that sell, rent, or provide goods and services to ultimate consumers for personal, family, or household use types: specialty stores, department stores, power retailers, and discounters, vending machines, door-to-door sales, e-retailers

marketing channel

consists of individuals and firms involved in the process of making a product or service available for use or consumption by consumers or industrial users allows organizations to reach buyers, and they also serve as value-creating mechanisms marketing channels make the flow of goods, from a producer, through intermediaries, and to buyers, possible

merchant wholesalers

constitute the vast majority of wholesalers not owned by the manufacturer, and they take title and physical possession of the products they distribute

third-party logistics

contracts with outside vendors (such as FedEx or UPS) to physically move products transportation involves this

warehousing and materials handling

deals with storing and maintaining goods after they are purchased materials handling: moving goods over short distances into, within, and out of warehouses and manufacturing plants -- a key part of warehouse operations

business channels

direct business channel: channel from a producer to an industrial user indirect business channel: have an intermediary between the producer and the industrial user

types of merchant wholesalers

distributor (general merchandise wholesaler) jobber (limited merchandise wholesaler)

relationship marketing

emphasizes long-term relationships with suppliers, distributors, and customers

total logistics cost

expenses associated with transportation, materials handling, warehousing, inventory, stock-outs, order processing, and return goods handling many of these costs are interrelated important to form an in-depth study of each of them to see how they will respond to changes in other costs reducing total logistics cost can improve a company's bottom line

retailer-sponsored cooperatives

formed by small, independent retailers who cooperatively operate a wholesale facility

logistical function

gathering, storing, and distributing products the physical movement and storage of goods ex: (1) assorting: channel members deliberately decide on the selection of goods the channel will offer -- they build an assortment that will be of maximum value and convenience for customers -- "sorting" in marketing involves breaking bulk, or separating a large pallet of a product into smaller units (2) transporting: channel members use trucks, trains, boats, etc. to move products from one place to another -- cross docking creates value by increasing efficiency because fewer trucks have to go out on the road

facilitating function

helping producers make goods and attract more buyers with finance and market research financing: channel members sometimes offer consumers financing -- ex: department stores off their own credit cards market research: market research feeds information through the channel about how things can be done better, what modifications would be useful, and which new products should be introduced -- can be provided by an industry alliance group or contracted to another company

channel dynamics

in the past, channel dynamics had a lot of power struggles and conflict now the members realize that cooperation would be more effective than competition firms began to emphasize the importance of long-term relationships between manufacturers and retailers

contractual vertical marketing systems

integrate the efforts of independent production and distribution firms to obtain greater efficiency and marketing impact than they could achieve by operating alone a legal agreement (i.e. contract) binds the parties to certain obligations and functions most popular version of the vertical marketing system 3 types: (1) wholesaler-sponsored voluntary chains (2) retailer-sponsored cooperatives (3) franchising

how do intermediaries improve sales?

intermediaries improve the efficiency of the sale of goods and services because they reduce the number of transactions between business contacts

wholesalers

intermediaries that sell to other businesses

which channel and intermediaries best satisfy the target market's buying requirements?

intermediary and channel must fulfill some of the buyer's interests, which include information, convenience, variety, and pre- or post-sale services information: in-store displays, personal selling, and demonstrations convenience: physical proximity, low time requirements, easy to find variety: breadth and depth of products and brands pre- or post-sale services: installation, delivery, and credit services

logisitics

involves activities that focus on getting the right amount of the right product to the right place, at the right time, and at the lowest possible cost

key trade-off in choosing a channel type

it is between cost and control if a company is willing to pay enough money, it can completely control its channel less costly options require the company to surrender some control over its business

vertical conflict

occurs between intermediaries at different levels in a marketing channel e.g. a wholesaler and a retailer makes the marketing channel less efficient reasons: (1) disintermediation: a channel member bypasses another members and sells or buys products directly (2) disagreements over the distribution of profit margins (3) a manufacturer's belief that retailers are not giving its products enough attention

horizontal conflict

occurs between intermediaries at the same level in a marketing channel e.g. Kmart and Target reasons: (1) a manufacturer increases its distribution coverage in an area (2) different kinds of retailers carry the same brands

exclusive distribution

only one retail outlet in a specified geographical area carries a firm's products (e.g. some Gucci goods) ex: Trek Bicycles only has one store per geographic location typically used with luxury products when the manufacturer wants to add an element of prestige

tradeoff between convenience and prestige

products that are only sold in one location are typically perceived as more prestigious or luxurious, but they are inconvenient for customers to access

vertical marketing systems

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

old view of channels

represented as a pipeline that moved goods from the manufacturer to the consumer this view implies that the product comes out of the channel in the same condition it went it

conflict between retailers and manufacturers to be the channel captain

retailers have increasingly gained channel leadership because of the introduction of Walmart and other power retailers

supply chain example

supply chain can be viewed as a series of customers that are, in turn, suppliers to other customers until the finished product reaches the consumer ex: in the auto industry, the supplier network may start with raw material providers (steel, rubber, etc.), who sell their products to the component producers (transmissions, brakes, etc.), who sell their products to the subassembly producers (suspension, chassis, etc.). The subassemblies are sent to the auto manufacturer, which assembles the car and sends it to the marketing channel - the dealer network that sells the car to the ultimate consumer

chart for different types of wholesalers

take possession and hold inventory: YES manufacturer owned: YES (1) manufacturers sales branch take possession and hold inventory: NO manufacturer owned: YES (2) manufacturers sales office take possession and hold inventory: YES manufacturer owned: NO (3) merchant wholesaler take possession and hold inventory: NO manufacturer owned: NO (4) agent

multichannel marketing (omnichannel marketing)

the blending of different communication and delivery channels that mutually reinforce attracting, retaining, and building relationships with customers who shop and buy in traditional intermediaries and online allows firms to take advantage of the marketspace's value-creating possibilities ex: BOPUS and BORIS

alternatives to traditional channel arrangements

vertical marketing systems and channel partnerships they are established to increase efficiency and effectiveness in channel distribution

new view of channels

the channel is a value-added chain this view implies that every step in the channel adds value to the product for customers the product that comes out of the marketing channel is different from the product that enters it

downside of disintermediation

the company may not cover the immediate function as efficiently or effectively as its channel partners would

transportation

the heart and soul of logistics the physical movement from the point where they are manufactured to the point where consumers purchase them can be provided by railroads, motor carriers, air carriers, and freight forwarders

supply chain management

the integration and organization of information and logistics activities across firms in a supply chain for the purpose of creating and delivering goods and services that provide value to customers commonly utilizes sophisticated information technology it recognizes that channel partners at all levels are important to a firm's ability to provide value to the supply chain as a whole and ultimately to customers focuses primarily on the flow of information that goes along with goods

benefit of disintermediation

the manufacturer has more control and has more access to knowledge about the customer. Also, the manufacturer doesn't have to worry about conflict with intermediaries

manufacturers sales branch

the manufacturer-owned equivalent of a distributor, as it carries inventory and performs all the functions of a channel

manufacturers sales office

the manufacturer-owned equivalent of an agent, as it doesn't carry any inventory

logistical functions

the physical movement of products from the manufacturer to consumers

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 it describes the flow of the product from raw materials to consumption it describes decisions that must be made in a cost-effective manner all of these things must be done while still delivering customer service and meeting customer requirements

refusal to deal

the producer refuses to deal with with existing channel members to reduce competition

supply chain vs marketing channel

the supply chain includes the suppliers who provide the producer with raw materials and parts the marketing channel is focused solely on the flow of the finished product from the producer to the consumers

how do consumers benefit from marketing channels?

they get what they want, when they want it, where they want, and in the form they want marketing channels provides time, place, form, and possession utility to consumers

supply chain managers role in car example

they help translate customer requirements into actual orders, and they work with dealers to make sure they have the right mix of cars and parts for repairs complex process

advantages of using intermediaries

they make markets more efficient by reducing the number if transactions required to match supply with demand intermediaries add value to the product or service along the way

what types of supply chains are most vulnerable to high-risk crisises?

those that use JIT and hold minimal inventory COVID has caused businesses to recognize the importance of balancing the tradeoff between having an efficient supply chain and having a resilient one

which channel and intermediaries will generate the most profits?

to determine profitability, marketers look to the margins that each channel member earns as well as to the margins as a whole critical aspect is channel cost, which includes the costs of advertising, selling, and distributing

reasons to distinguish between direct and indirect channels

to determine when one is more appropriate the channel members a firm works with often also work with the firm's competitors, creating complicated relationships and sources of potential channel conflict

two concepts of logistics management in a supply chain

total logistics cost and the customer service concept

transaction marketing vs relationship marketing

transaction marketing: - short term - emphasis on price - product quality - "arm's length" (manufacturers and retailers not sharing information that could improve their efficiency and profits) relationship marketing: - long term - emphasis on mutual satisfaction - interaction quality - interdependent (opposite of arm's length)

T or F: a company's supply chain management strategy and its marketing strategy are interrelated

true

manufacturer-owned wholesalers

two categories: (1) manufacturers sales branch (2) manufacturers sales office manufacturers may want to own wholesalers in order to exert more direct control

strategic channel alliances

use one firm's marketing channel to sell another firm's products ex: Cereal Partners Worldwide (CPW) is a strategic alliance between U.S.-based General Mills and Swiss-based Nestle

administered vertical marketing systems

use the size and influence of one channel member to coordinate successive stages of production and distribution operate informally and casually, based on nothing more than a handshake less popular more power to large firms ex: Walmart can get its manufacturers to cooperate because it is such a large buyer

agents (aka brokers)

wholesalers that look more like salespeople than wholesalers they don't take title of the goods, nor do they take physical possession of them, so they never see or touch the goods they represent the company, take orders, negotiate transactions, and transfer the orders back to the manufacturer

marketing channels as a pipeline

you can think of marketing channels as a pipeline products flow through the marketing channel from the manufacturer to the consumer