Marketing: Chapter 12 (Test 2)

acquire and use funds to cover the costs of the channel work

Financing

the use of more than one but fewer than all of the intermediaries who are willing to carry out the company's products -most television, furniture and home appliance brands are distributed in this manner -this type of distribution gives producers good market coverage with more control and less cost than does intensive distribution

Selective distributin

ex- Burger King and its nearly 12,300 franchisee operated restaurants around the world

Service firm-sponsored retailer franchise system

-has a few dominant channel members without common ownership -leadership comes from size and power ex- Clorox Company vs Walmart

Administered VMS

-transport less than 1% of the cargo ton-miles -airfreight rates are much higher than rail or truck rates but is ideal when speed is needed or distant markets have to be reached -most frequently airfreighted products= perishables and high value, low bulk items (technical instruments, jewelry) -reduces inventory levels, packaging costs and number of warehouses needed

Air carriers

- Physical flow of products - Flow of ownership - Payment flow - Information flow - Promotion flow

All institutions in a channel are connected by flows

-each channel member and level adds value for the customer -the faster the delivery, the greater the assortment provided and the more add on services supplies, the greater the channel's service level -the company must balance consumer needs not only against the feasibility and costs of meeting these needs but also against customer price preferences (the success of discount retailing shows that consumers will often accept lower service levels in exchange for lower prices)

Analyzing consumer needs

-for the channel as a whole to perform well each channel member's role must be specified and channel conflict must be managed--will perform better if it includes a firm, agency or mechanism that provides leadership and has the power to assign roles and manage conflict -2 types of channel arrangement 1) conventional distribution channel 2) vertical marketing system

Background on channels

companies must decide on the best way to store handle and move their products and services so they are available to customers in the right assortments and the right time and in the right place

Background on marketing logistics and supply chain management

-disintermediation- the cutting out of marketing channel intermediaries by product of service producers of the displacement of traditional resellers by radical new types of intermediaries -ex online music download services such as iTunes and Amazon MP3 have pretty much put traditional music store retailers out of business

Changing channel organization

-a marketing channel consists of firms that have partnered for their common good with each member playing a specialized role -ideally because success of individual channel members depends on the overall channel's success, all firms should work together smoothly, however not often the case

Channel behavior

-channel behavior -vertical marketing systems -horizontal marketing systems -multichannel distribution systems -changing channel organization

Channel behavior and organization

-although channel members depend on one another they often act alone in their own short run best interests--> disagree on goals, roles and rewards -2 types of conflict: 1) horizontal conflict 2) vertical conflict

Channel conflict

layer of intermediaries that performs some work in bringing the product and its ownership closer to the final buyer

Channel level

-intermediaries create greater efficiency in making goods available to target markets -through their contacts, experience, specialization and scale of operation offer the firm more than it can achieve on its own -marketing intermediaries transform the assortments of products made by producers into assortments wanted by consumers-->marketing members buy large quantities from many producers and break them down into the smaller quantities and broader assortments desired by consumers -reduce the number of channel transaction

Channel members add value

find and and communicate with prospective buyers

Contact

-independent firms at different levels of production and distribution join together through contracts to obtain more economies of sale impact than each could achieve alone -franchise organization is the most common form

Contractual VMS

a 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 PRODUCER WHOLESALER RETAILER CONSUMER

Conventional distribution channel

integrates successive stages of production and distribution under single ownership ex- Apple - responsible for doing everything related with their products. Apple has a place for designing and making the products. These products are made by the company and are sold in the retailer shops of the company itself. Don't depend on anyone else for the purpose of production or even selling their products

Corporate VMS

-starts with the marketplace and works backwards to the factory or even source of supply

Customer-centered logisitics

-a better term because it suggests a sense and respond view of the market -planning starts with identifying the needs of target customers, to which the company responds by organizing a chain of resources and activities with the goal of creating customer value -although limited view because it takes a step by step linear view of purchase production consumption activities

Demand chain

-global marketers must usually adapt their channel strategies to the existing structures within each country -some markets--distribution system is complex and hard to penetrate, consisting of many layers and large numbers of intermediaries ex Japan -distribution systems in developing markets may be inefficient scattered or altogether lacking ex China and India- huge markets, most companies can profitably access only a small portion of the population located in each country's most affluent cities. Rural markets in both countries are highly decentralized

Designing international distribution channels

the digital exchange of data between organizations, which primarily is transmitted via internet

Electronic data interchange (EDI)

-company identified several channel alternatives and wants to select one that will best satisfy its long run objectives. Evaluate based on 1) economic criteria-compare the likely sales, costs and profitability 2) control issues-keep as much control as possible 3) adaptability criteria- although channels often involve long-term commitments, company wants to keep the channel flexible so it can adapt to environmental changes. thus to be considered, a channel involving long term commitments should be greatly superior on economic and control grounds

Evaluating the major altneratives

giving a limited number of dealers the exclusive right to distribute the company's product in their territories -often found in the distribution of luxury brands

Exclusive distribution

-a channel member, called a franchisor, links several stages in the production-distribution process -3 types of franchises 1) Manufacturer-sponsored retailer franchise system 2) Manufacturer-sponsored wholesaler franchise system 3) Service firm-sponsored retailer franchise system

Franchise organization

-no logistic system can both maximize customers service and minimize distribution costs -**Goal should be to provide a targeted level of customer service at the least cost -objective is to maximize profits not sales, therefore company must weigh the benefits of providing higher levels of service against the costs

Goals of the logistic system

1) companies can gain a powerful competitive advantage by using improved logistics to give customers better service or lower prices 2)improved logistics can yield tremendous cost savings to both a company and its customers (as much as 20% of an averages product's price is accounted for shipping and transport alone) 3) explosion in product variety has created a need for improved logistics management 4) improvements in information technology has created opportunities for major gains in distribution efficiency 5) logistics, more than any other marketing function, affects the environment and a firm's environmental sustainability efforts- developing a green supply chain is not only environmentally responsible but also can be profitable

Greater emphasis on logistics

occurs among firms at the same level of the channel ex- Ford dealers in Chicago might complain that other dealers in the city steal sales from them by pricing too low or advertising outside their assigned territory

Horizontal conflict

-a channel arrangement in which 2 or more companies at one level join together to follow a new marketing opportunity -by working together, companies can combine their financial production or marketing resources to accomplish more than any one company could alone -companies might join forces with competitors or non competitors, work with each other on a temporary or permanent basis -ex Walmart partners with Mcdonals to place express versions of mcdonalds restaurants in Walmart stores-->Mcdonalds benefits from Walmart's heavy store traffic and Walmart keeps hungry shoppers from needing to go elsewhere to eat

Horizontal marketing system

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 1. Information 2. Promotion 3. Contact 4. Matching 5. Negotiating (others help to fulfill the transactions below) 6. Physical distribution 7. Financing 8. Risk taking

How channel members add value

1) types of intermediaries 2) number of marketing intermediaries 3) responsibilities of channel members

Identifying major alternatives

gather and distribute info about consumers producers and other actors and forces in the marketing environment needed for planning and aiding exchange

Information

stocking the product in as many outlets as possible ex- toothpaste, candy are sold in millions of outlets to provide maximum brand exposure and consumer conveience (Coca-cola, kraft)

Intensive distribution

combining 2 or more modes of transportation -piggyback-rail and trucks -fishyback-water and trucks -trainship-water and rail -airtruck- air and truck

Intermodal transportation

-managers must maintain the delicate balance between carrying too little inventory ad carrying too much -too little=firm risks not having product when customers want to buy -too much= higher than necessary inventory carrying costs and stock obsolescence

Inventory managment

-producers and retailers carry only small inventories of parts or merchandise, often enough for only a few days of operation -new stock arrives exactly when needed--> requires accurate forecasting with fast frequent and flexible delivery -result in substantial savings in inventory-carrying and handling costs

Just-in-time logistics system

-flows of info such as customer transactions, billing, shipment and inventory levels are closely linked to channel performance -information sharing takes place mostly through electronic data interchange

Logistics information management

1. warehousing 2. inventory management 3. transportation 4. logistics information management

Major logistic functions

ex- Ford and its network of independence franchised dealers

Manufacturer-sponsored retailer franchise system

ex- Coca-Cola license bottlers (wholesalers) in various world markets who buy Coca-Cola syrup concentrate and then bottle and sell the finished product to retailers locally.

Manufacturer-sponsored wholesaler franchise system

assume the risks of carrying out the channel work

Risk taking

- a set of interdependent organizations that help make a product or service available for use or consumption by the consumer or business user -a company's channel decisions directly affect every other marketing decision ex- pricing depends on whether the company works with national discount chains, high quality specialty stores or sells directly to consumers online -distribution channel decisions often involve long term commitments to other firms

Marketing channel (or distribution channel)

designing effective marketing channels by 1) analyzing consumer needs 2) setting channel objectives 3) identifying major channel alternatives 4) evaluating those alternatives

Marketing channel design

-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 for profit

Marketing logistics (or physical distribution)

shape offers to meet the buyer's needs, including activities such as manufacturing, grading, assembling and packaging

Matching

-a single firm sets up 2 or more marketing channels to reach one or more customer segments -with the profileration of customer segments and channel possibilities, more and more companies have adopted multichannel distribution systems -advantageous for companies facing large and complex markets--->with each new channel, the company expands its sales and market coverage and gains opportunities to tailor its products and services to the specific needs of diverse customer segments

Multichannel distribution systems

reach an agreement on price and other terms so that ownership or possession can be transfered

Negotiating

indicates the LENGTH of a channel 1) direct marketing channel- no intermediary levels, company sells directly to consumers (ex GEICO) 2) indirect marketing channel- contain one or more intermediary levels (most of the things you buy) **from the producers point of view-->greater number of levels= less control and greater channel complexity

Number of intermediary levels

1) intensive distribution 2) exclusive distribution 3) selective distribution

Number of marketing intermediaries

transport and store goods

Physical distribution

-account for less than 1% of the cargo ton-miles -specialized means of shipping petroleum, natural gas and chemical from sources to markets

Pipelines

develop and spread persuasive communications about an offer

Promotion

"smart tag" technology, know at any time where a product is located physically within the supply chain

RFID

-account for 40% of total cargo ton-miles moved in the US -most cost effective modes for shipping large amounts of bulk products over long distances

Railroads

producer and intermediaries need to agree on the terms and responsibilities of each channel member--agree on price policies, conditions of sale, territory rights, specific services to be performed by each party, careful about where it places new resellers

Responsibilities of channel memebrs

1) companies should state their marketing channel objectives in terms of targeted levels of customer service--can identify several segments wanting different levels of customer service -should decide which segments to serve and the best channels to use in each case -- in each case the company wants to minimize the total channel cost of meeting customer service requirements 2) channel objectives are also influenced by the nature of the company, its products its marketing intermediaries its competitors and environment 3) company may want to compete in or near the same outlets that carry competitors' products or avoid them 4) environmental factors may affect channel objective and design like economic conditions and legal constraints ex-in a depressed economy producers will want to distribute their goods in the most economical way using shorter channels and dropping unneeded services that add to the final price of goods

Setting channel objectives

consists of upstream and downstream partners -upstream partners= set of firms that supply raw materials, components parts info finances and expertise needed to create a product or service -downstream partners=marketing channels (wholesalers and retailers) that look toward the customer **marketers are traditionally focused on the downstream side of the supply chain -term is too limited--takes a make and sell view of the business

Supply chain

-managing upstream and downstream value added flows of material, final goods and related information among suppliers, the company, resellers and final customers -involves outbound logistics, inbound logistics, reverse logistics

Supply chain management

producing a product or service and making it available to buyers requires building relationships not only with customers but with also key suppliers and resellers in the company's supply chain

Supply chains and the value delivery network

-customer shares real time data on sales and current inventory levels with the supplier -supplier then takes full responsibility for managing inventories and deliveries

Vendor-managed inventory (VMI) /Continuous inventory replenishment systems

conflict between different levels of the same channel

Vertical conflict

company can choose among 5 main transportation modes 1) trucks 2) railroads 3) water 4) pipelines 5) air *in choosing transportation mode for product, shippers must balance speed, dependability, availability, capacity, cost etc

Transportation

-account for 40% of total cargo ton-miles moved in the US -80% of US communities depend solely on trucks for their goods and commodities

Trucks

-a network composed of the company, the suppliers, distributors and customers who partner with each other to improve the performance of the entire system in delivering customer value -most large companies today are engaged in building and managing a complex, continuously evolving value delivery network

Value delivery network

-a channel structure in which producers, wholesalers and retailers act as a unified system -one channel member owns the other others, has contracts with them or has so much power that they all cooperate -can be dominated by the producer, wholesaler or retailer -3 types of vertical marketing systems 1) corporate vms 2) contractual vms 3) administered vms

Vertical marketing system

-production and consumption cycles rarely match--most companies must store their goods while they wait to be sold -company must decide on: 1) how many warehouses 2)what types of warehouses is needs -storage warehouse: stores goods for moderate to long periods -distribution center: a large, highly automated warehouse designed to receive goods from various plants and suppliers, take orders, fill them efficiently, deliver goods to customers as quickly as possible 3) where they will be located

Warehousing

-account for less than 5% of the cargo ton-miles, transport large amounts of goods by ships and barges on US coastal and inland waterways -although cost is very low for shipping bulky, low-value, nonperishable goods (sand, oil, coal, grain)--slowest mode and may be affected by weather

Water carriers

moving products and material from suppliers-->factory

inbound logistics

moving products from the factor-->resellers-->customers

outbound logistics

reusing, recycling, refurbishing o disposing of broken, unwanted or excess products returned by consumers or resellers

reverse logistics