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1 2002 Edition Vitale and Giglierano Chapter 12 Channel Relationships Prepared by John T. Drea,...
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Transcript of 1 2002 Edition Vitale and Giglierano Chapter 12 Channel Relationships Prepared by John T. Drea,...
1
2002 Edition
Vitale and Giglierano
Chapter 12Channel Relationships
Prepared by John T. Drea, Western Illinois University
2
Basic Channel Terms
Direct ChannelParticipants
Wholesalers, distributors, retailers, etc. who are part of the proactive marketing design of the channel
Ancillary ChannelParticipants
Business and service providers who are necessary for the channel to function (trucking, JIT, 3PL, etc.)
Direct ChannelA channel in which the supplier markets and sells directly to the buying organization
3
Exhibit 12-1 Channels Can Create Efficiency
Direct: V x C transactions
V1
V2
V3
V4
C1
C2
C3
C4
V1
V2
V3
V4
C1
C2
C3
C4
Via reseller: V x C transactions
RS
V = Vendors C = Customers RS = Reseller
4
Economic Utility
FormFormFormFormThe quantity/mode of the product most preferred by the customer
5
Economic Utility
FormFormFormForm
TimeTimeTimeTime
The quantity/mode of the product most preferred by the customer
The availability of the product when the customer needs it.
6
Economic Utility
FormFormFormForm
TimeTimeTimeTime
PlacePlacePlacePlace
The quantity/mode of the product most preferred by the customer
The availability of the product when the customer needs it.
The availability of the product where it is needed. In B2B, it involves rapid/frequent product delivery.
7
Economic Utility
FormFormFormForm
TimeTimeTimeTime
PlacePlacePlacePlace
PossessionPossessionPossessionPossession
The quantity/mode of the product most preferred by the customer
The availability of the product when the customer needs it.
The availability of the product where it is needed. In B2B, it involves rapid/frequent product delivery.
The process by which the customer obtains ownership or the right to use a product/service.
8
Exhibit 12-2b Marketing Channel Flows from Customer to Supplier
9
Why Do Some End Users
Prefer Distributors?
Distributors Can…
Provide fast deliveryProvide fast delivery
Provide segment-base product assortment
Provide segment-base product assortment
Provide local creditProvide local credit
Provide product informationProvide product information
Assist in buying decisionsAssist in buying decisions
Anticipate needsAnticipate needs
10
Why Do Some Suppliers
Prefer Distributors?
Distributors Can…
Buy and hold inventoryBuy and hold inventory
Combine manufacturers’ outputsCombine manufacturers’ outputs
Share credit riskShare credit risk
Share selling riskShare selling risk
Forecast market needsForecast market needs
Provide market informationProvide market information
11
Exhibit 12-5 A Value Network
12
Different target
markets have
different expectations of the total
offering
User TrainingUser TrainingThink about the different training needsof corporate customers vs. consumers
Product InformationProduct InformationDealers are likely to emphasize what
an offering can accomplish, rather thanhow it can accomplish it
Product Support and DeliveryProduct Support and DeliveryInstitutional buyers expect more
than consumers.
FinancingFinancingInstitutional buyers are likely to expectsuppliers/distributors to arrange credit.
13
The Physical Distribution Concept Focuses on Three Elements
InventoryInventoryManagementManagement
WarehousingWarehousing
TransportationTransportation
It is a balancing of cost and service.
14
Inventory Management
• Often the largest logistics cost.
• Inventory management tools are important for reducing logistics costs.
• While lower inventory levels result in lower costs, lower inventory levels may result in more frequent and costly transportation.
15
Transportation
• Involves the choice of water, air, truck, rail, or pipeline.
• Slower transportation methods usually have lower costs, but imply larger safety stocks and longer lead times.
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Warehousing
• As inventory increases, so do warehousing costs.
• Lowering inventory levels and warehousing costs can lead to stockouts.
• Channels that focus on rapid movement of goods (as opposed to storage of large quantities) are likely to utilize distribution centers.
17
Channel Design Decisions
Through marketing
intermediariesor a directchannel?
Through marketing
intermediariesor a directchannel?
Intensity ofdistribution issues:
1) Kinds ofchannel partners2) Structure ofchannel flows
3) How competitiveadvantage can be built
Intensity ofdistribution issues:
1) Kinds ofchannel partners2) Structure ofchannel flows
3) How competitiveadvantage can be built
One channel, dual distribution
or multidistribution?
One channel, dual distribution
or multidistribution?
18
FactorsFavoring
the Use ofDistributorChannels
FactorsFavoring
the Use ofDistributorChannels
Product requireslocal stock.
Small product line,unable to support
a direct sales force.
Product has lowunit value.
Product is nearthe end of its
product life cycle.
Customers arewidely dispersed.
Local repackaging,sizing, or
fabrication is required
Many small buyers.
Product issomewhat generic.
19
Factors not
Favoringthe use ofDistributorChannels
Factors not
Favoringthe use ofDistributorChannels
Product is highlycustomized.
Product is newor innovative.
Significant missionaryselling isrequired.
Manufacturerrequires control
over productapplication.
Geographicconcentration of
large buyers.
Product istechnically
sophisticated.
20
Selecting & Caring for Distributors:Points to Remember
Ask potential customers who they recommend.
Determine which distributor fitsyour marketing plan goals.
Make calls with them.
Make calls on them.
Train and support themwell and often, at both
your facilities and theirs.
21
Bases of Power in Marketing Channels
Soft Basesof Power
Hard Basesof Power
Expertise
Identification
Information
Legitimate
CoercionReward
22
New Types of Channels
Someone with a special link on its web site that refers a viewer to a product or service supplier’s site. The affiliate downloads a special code from the supplier’s web site that allows the supplier to track referrals. A commission is paid for each referral.
AffiliatesAffiliates
HubsHubs
An intermediate that brings buyers and sellers together to make a market. These can include catalog hubs, auction hubs, exchange hubs, and barter hubs.
23
System Visibility:System Visibility:
Measuring and improving Measuring and improving Distribution ManagementDistribution Management
24
Measurement
EDI
SPC
MRP
ERP
25
Real Time Systems
• Customer Service Metrics
• Internal Operations Metrics
• Purchasing/Planning Metrics
26
Customer Service Metrics
*Revenue MetricsTrack Total Sales Volume, New Product and Market GrowthSame Store Sales
*Profitability MetricsIncome stream from certain market segments
*Efficiency MetricsEffectiveness in meeting customer needs
27
Customer Service Metrics
Challenges
• Customers do not know what they want• Unsure if what they got is what they need• Educating the customer• Used to blame rather than improve• Isolated, need other global metrics
28
Internal Operations Metrics
• Physical process metrics
• Financial metrics
• Purchasing / Planning metrics
29
Financial Metrics
• Automation in tracking DSO, ROA, ROI
• Electronic Funds Transfer/ Fax
• Real time financial processing
• Lead time reduction
30
Internal Operations Metrics
Sales function Quoting Design/Mfg.
Picking
ShippingReceivingScheduling
Invoicing
Scope for Automation in the Internal Operations Cycle
31
Automation in Internal Metrics
• Sales Force Automation (SFA)
• Auto Quote Generation
• Real Time WMS
• Shipping management system
• Auto invoicing and tracking
• Other ERP bolt-ons
32
Visibility in Inventory ManagementC
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Automation and Control
Systems
Man
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RP
Advanced Planning/Scheduling
Web OrderProcessing
Sales ForceAutomation
IntegratedLogistics
CustomerService/Call
Center
Sales/ MarketingData
Warehousing
InternetCatalogs
WMS
TransportationPlanning
Forecasting
Executive Information
Systems
ProfitabilityAnalysis
DistributorERP
Replenishment
RFID
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Customer Relationship Management
Internal Operations Tools
Supplier Connections
33
Conclusion
• Information tools enable the collection and interpretation of metrics
• System Visibility refers to the connection of measurement and tracking systems
• Allows participants to work in real time
• Firms that measure and improve using the right tools with succeed