CHAPTER THIRTEEN MARKETING CHANNELS AND LOGISTICS … · n Selective distribution: channel policy...
Transcript of CHAPTER THIRTEEN MARKETING CHANNELS AND LOGISTICS … · n Selective distribution: channel policy...
CHAPTER THIRTEENCHAPTER THIRTEENMARKETING CHANNELSMARKETING CHANNELS
ANDANDLOGISTICS MANAGEMENTLOGISTICS MANAGEMENT
STRATEGIC IMPLICATIONS: THEROLE OF MARKETING CHANNELS
IN MARKETING STRATEGY
STRATEGIC IMPLICATIONS: THESTRATEGIC IMPLICATIONS: THEROLE OF MARKETING CHANNELSROLE OF MARKETING CHANNELS
IN MARKETING STRATEGYIN MARKETING STRATEGYnn Channels provide the means by which the firmChannels provide the means by which the firm
moves the goods and services it produces to ultimatemoves the goods and services it produces to ultimateusersusers
nn Channels perform four important functions. They:Channels perform four important functions. They:–– Facilitate the exchange process by cutting theFacilitate the exchange process by cutting the
number of contacts necessarynumber of contacts necessary–– Adjust for discrepancies in the marketAdjust for discrepancies in the market’’ss
assortment of goods and services viaassortment of goods and services via sortingsorting–– Standardize payment terms, delivery schedules,Standardize payment terms, delivery schedules,
prices, and purchase lotsprices, and purchase lots–– Facilitate searches by both buyers and sellersFacilitate searches by both buyers and sellers
TYPES OF MARKETINGCHANNELS
TYPES OF MARKETINGTYPES OF MARKETINGCHANNELSCHANNELS
nn Marketing channel:Marketing channel: system of marketingsystem of marketinginstitutions that promotes the physical flow ofinstitutions that promotes the physical flow ofgoods and services, along with ownership title,goods and services, along with ownership title,from producers to consumer or business user;from producers to consumer or business user;also called aalso called a distribution channeldistribution channel
nn Marketing intermediary:Marketing intermediary: wholesaler or retailerwholesaler or retailerthat operates between producers and consumersthat operates between producers and consumersor business users; also called aor business users; also called a middlemanmiddleman
nn Wholesaler:Wholesaler: marketing intermediary that takesmarketing intermediary that takestitle to goods and then distributes these goodstitle to goods and then distributes these goodsfurther; also called afurther; also called a jobberjobber oror distributordistributor
nn I. Channel Structure refers to the various combinationsof institutions (e.g., manufacturers, wholesalers, andretailers) that join forces in a marketing channelarrangement to facilitate the delivery of goods andservices to ultimate consumers or users (Stern and El-Ansary 1988).
n II. Governance Structure is the framework in whichchannel members conduct business and interact. Inother words, the institutional framework in whichrelationships are established and the terms of therelationship (contracts) are initiated, negotiated,monitored, adapted, enforced, and terminated.
TWO COMPONENTS OFCHANNELS OF DISTRIBUTION
Figure 13.2:AlternativeMarketingChannels
Figure 13.2:Figure 13.2:AlternativeAlternativeMarketingMarketingChannelsChannels
TYPES OF MARKETINGCHANNELS
TYPES OF MARKETINGTYPES OF MARKETINGCHANNELSCHANNELS
Step 1. Analyze Consumer Needs for Channel Services:
* Locational convenience
* Lot size
* Delivery time
* Product variety
Step 2. Establish Channel Objectives for Delivering Service Levels
Step 3. Set Channel Strategy in Terms of:
* Coverage
* Support & Ownership
Step 4. Select Appropriate Channel from Available Alternatives
Direct or Indirect
Step 5. Select Specific Channel Partners
STEPS IN THE CHANNEL STRUCTURE AND DESIGNPROCESS
CHANNEL OBJECTIVE
I. Channel structure must be derived from channel objectives. Theseobjectives, in turn, result from a careful analysis of the service levelsdesired by consumers and from management’s long-run overallgoals for the organization.
II. The specific objectives for the channel must be couched in terms ofthe service levels that are needed to meet the demands of thechannel’s target market.
EXAMPLE
A well-known food processor recently developed a high-qualityprepared frozen entree to be sold in supermarkets and conveniencestores. The channel objectives for this company were clearly stated.
“WE WANT THIS PRODUCT TO BE NO MORE THAN A TEN-MINUTE DRIVE FROM 75 PERCENT OF THE FULL-TIMEWORKING WOMEN IN THE UNITED STATES. WE PLAN TOREACH THIS GOAL WITHIN 12 MONTHS OF OUR PRODUCTROLL-OUT.”
CHANNEL STRATEGYDECISIONS
CHANNEL STRATEGYCHANNEL STRATEGYDECISIONSDECISIONS
nn Distribution intensity:Distribution intensity: numbernumberof intermediaries through whichof intermediaries through whicha manufacturer distributes itsa manufacturer distributes itsgoodsgoods
nn Intensive distribution:Intensive distribution: channelchannelpolicy in which a manufacturerpolicy in which a manufacturerof a convenience productof a convenience productattempts to saturate the marketattempts to saturate the market
nn Selective distribution:Selective distribution: channelchannelpolicy in which a firm choosespolicy in which a firm choosesonly a limited number ofonly a limited number ofretailers to handle its productretailers to handle its productlineline
DeterminingDistribution Intensity
DeterminingDeterminingDistribution IntensityDistribution Intensity
CHANNEL STRATEGYDECISIONS
CHANNEL STRATEGYCHANNEL STRATEGYDECISIONSDECISIONS
nn Exclusive distribution:Exclusive distribution:channel policy in whichchannel policy in whicha firm grants exclusivea firm grants exclusiverights to a singlerights to a singlewholesaler or retailer towholesaler or retailer tosell its products and asell its products and aparticular geographicparticular geographicareaarea
DeterminingDistribution Intensity
DeterminingDeterminingDistribution IntensityDistribution Intensity
CHANNEL STRATEGYDECISIONS
CHANNEL STRATEGYCHANNEL STRATEGYDECISIONSDECISIONS
nn Factors which impactFactors which impactthe selection of athe selection of amarketing channelmarketing channelinclude:include:–– Market factorsMarket factors–– Product factorsProduct factors–– Organizational factorsOrganizational factors–– Competitive factorsCompetitive factors
Selection of Director Indirect
Marketing Channel
Selection of DirectSelection of Director Indirector Indirect
Marketing ChannelMarketing Channel
InexpensiveInexpensiveExpensiveExpensive
StandardizedStandardizedComplexComplex
DurableDurablePerishablePerishableProductProductfactorsfactors
Small ordersSmall ordersLarge ordersLarge orders
Little technicalLittle technicalknowledge and regularknowledge and regularservicing not requiredservicing not required
Extensive technicalExtensive technicalknowledge and regularknowledge and regularservicing requiredservicing required
Geographically diverseGeographically diverseGeographicallyGeographicallyconcentratedconcentrated
ConsumersConsumersBusiness usersBusiness usersMarketMarketfactorsfactors
Characteristics of LongCharacteristics of LongChannelsChannels
Characteristics of ShortCharacteristics of ShortChannelsChannels
Table 13.1: Factors Influencing MarketingChannel Strategies
Manufacturer feelsManufacturer feelsdissatisfied withdissatisfied withmarketingmarketingintermediariesintermediaries’’performance inperformance inpromoting productspromoting products
Manufacturing feelsManufacturing feelssatisfied with marketingsatisfied with marketingintermediariesintermediaries’’performance inperformance inpromoting productspromoting products
CompetitiveCompetitivefactorsfactors
Channel control notChannel control notimportantimportant
Limited product lineLimited product line
Channel controlChannel controlimportantimportant
Broad product lineBroad product line
Manufacturer lacksManufacturer lacksadequate resources toadequate resources toperform channelperform channelfunctionsfunctions
Manufacturer hasManufacturer hasadequate resources toadequate resources toperform channelperform channelfunctionsfunctions
ProducerProducerfactorsfactors
Characteristics ofCharacteristics ofLong ChannelsLong Channels
Characteristics ofCharacteristics ofShort ChannelsShort Channels
Table 13.1: Factors Influencing Marketing ChannelTable 13.1: Factors Influencing Marketing ChannelStrategies (Continued)Strategies (Continued)
CHANNEL STRATEGYDECISIONS
CHANNEL STRATEGYCHANNEL STRATEGYDECISIONSDECISIONS
nn FundamentalFundamentalprinciple that governsprinciple that governschannel decisions:channel decisions:Channel members can shiftChannel members can shiftresponsibilities for theresponsibilities for theperformance of certainperformance of certainmarketing functions, butmarketing functions, butthey cannot eliminatethey cannot eliminatecentral functionscentral functions
Who Should PerformChannel Functions?
Who Should PerformWho Should PerformChannel Functions?Channel Functions?
VERTICAL MARKETINGSYSTEMS
VERTICAL MARKETINGVERTICAL MARKETINGSYSTEMSSYSTEMS
nn Vertical marketing system (VMS):Vertical marketing system (VMS):planned channel system designed toplanned channel system designed toimprove distribution efficiency and costimprove distribution efficiency and costeffectiveness by integrating variouseffectiveness by integrating variousfunctions throughout the distributionfunctions throughout the distributionchainchain
VERTICAL MARKETINGSYSTEMS
VERTICAL MARKETINGVERTICAL MARKETINGSYSTEMSSYSTEMS
nn Corporate marketingCorporate marketingsystem:system: a VMS in whicha VMS in whicha single owner operatesa single owner operatesat each stage in itsat each stage in itsmarketing channelmarketing channel
nn Example: HartmarxExample: Hartmarxmarkets its Hartmarkets its HartSchaffner and Marx suitsSchaffner and Marx suitsthrough companythrough company--ownedownedstores and selectedstores and selectedindependent retailersindependent retailers
CorporateSystems
VERTICAL MARKETINGSYSTEMS
VERTICAL MARKETINGVERTICAL MARKETINGSYSTEMSSYSTEMS
nn Administered marketingAdministered marketingsystem:system: VMS thatVMS thatachieves channelachieves channelcoordination when acoordination when adominant channeldominant channelmember exercises itsmember exercises itspowerpower
nn Example: Goodyear sellsExample: Goodyear sellstires throughtires throughindependently ownedindependently owneddealers, but controls thedealers, but controls thestock that the dealersstock that the dealerscarrycarry
AdministeredSystems
CHANNEL MANAGEMENTAND LEADERSHIP
CHANNEL MANAGEMENTCHANNEL MANAGEMENTAND LEADERSHIPAND LEADERSHIP
nn Channel Captain:Channel Captain: a dominant anda dominant andcontrolling member of a marketingcontrolling member of a marketingchannelchannel
VERTICAL MARKETINGSYSTEMS
VERTICAL MARKETINGVERTICAL MARKETINGSYSTEMSSYSTEMS
nn Contractual marketingContractual marketingsystem:system:VMS that coordinatesVMS that coordinateschannel activitieschannel activitiesthrough formalthrough formalagreements amongagreements amongchannel members like:channel members like:–– WholesalerWholesaler--SponsoredSponsored
Voluntary ChainsVoluntary Chains–– Retail CooperativesRetail Cooperatives–– FranchisesFranchises
ContractualSystems