Chapter 9 icore marketing

value delivery network
the network made up of the company, suppliers, distributors, and customers who partner with each other to improve the performance of the entire system in delivering customer value
marketing channel
a set of interdependent organizations that help make a product or service available for use
How do channel members add value?
they create efficiency in making good available to target markets (think of a grocery store housing many brands)

some help to complete transactions: information (marketing research), promotion, contact (finding buyers), matching (fitting the buyer’s needs), negotiation (fair price)

some help to fulfill the completed transactions: physical distribution, financing, risk taking

channel level
layer of intermediaries that performs some work in bringing the product and its ownership closer to the final buyer
producer and consumers are part of every channel
the number of intermediary levels determines length of a channel
direct marketing channel
a marketing channel that has no intermediary levels; company sells directly to consumers
indirect marketing channel
channel containing one or more intermediary levels to help bring its products to buyers (most companies use this type)
channel conflict
disagreement among marketing channel members on goals, roles, and rewards – who should do what and for what rewards
horizontal channel conflict
occurs among firms at the same level of a channel
i.e. two Honda dealers complaining about the pricing of the same model car (one steals sales from the other)
vertical channel conflict
conflicts between different levels of the same channel
i.e. Goodyear not cooperating with their dealers and choosing another route to sell their tires
conventional distribution channel
a channel consisting of one or more independent producers, wholesalers, and retailers, each a separate business seeking to maximize its own profits, even at the expense of profits for the system as a whole
goes from producer –> wholesales –> retailer –> consumer
vertical marketing strategy (VMS)
a distribution channel structure in which producers, wholesalers, and retailers act as a unified system
one channel member has so much power that all others much work together and cooperate

three types: corporate, contractual, administered

corporate VMS
vertical marketing system that combines successive stages of production and distribution under single ownership – channel leadership is established through ownership

i.e. Kroger and its generic brand production

contractual VMS
a vertical marketing system in which independent firms at different levels of production and distribution join together through contracts to obtain more economies or sales impact that they could achiever alone

most common type is a franchise organization

franchise organization
a contractual vertical marketing system in which a channel member, called a franchisor, links several stages in the production-distribution process

three types: manufacturer-sponsored retailer (Honda), manufacturer-sponsored wholesaler (Coca-cola licenses bottlers), service firm-sponsored retailer franchise systems (hotels)

administered VMS
a vertical marketing system that coordinates successive stages of production and distribution, not through common ownership or a contract, but through the size and power of one of the parties (due to GE’s size, they can demand a lot from their intermediaries)
horizontal marketing sysytem
a channel arrangement in which two or more companies at one level join together to follow a new marketing opportunity
i.e. McDonalds being placed in Walmart stores
multichannel distribution system
also called hybrid marketing channels…
a distribution system in which a single firm sets up two or more marketing channels to reach multiple segments
most large companies distribute through multiple channels
i.e. use catalogs to reach segment one, use retailers to reach segment two, use personal selling to reach businesses
the cutting out of marketing channel intermediaries by producers, or the displacement of traditional resellers by new types of intermediaries (when you replace them, they often become your competition)
marketing channel design
designing effective marketing channels by analyzing customer needs, setting channel objectives (provide customer needs while minimizing total channel cost), identifying channel alternatives, and evaluating them
factors to consider when identifying channel alternatives
1) types of intermediaries
2) number of intermediaries
3) responsibilities of each channel member
intensive distribution
stocking the product in as many outlets as possible
often done with convenience products
exclusive distribution
giving a limited number of dealers the right to distribute the company’s products
usually done with luxury brands
selective distrubition
somewhere in between exclusive and intensive distribution…
the use of more than one, but fewer than all of the intermediaries who are willing to carry the company’s product
this gives a producer good market coverage with more control and less cost than that of intensive distribution
marketing channel management
selecting, managing, and motivating individual channel members and evaluating their performance over time

use of partner relationship management (PRM) to forge long term relationships with channel members

exclusive dealing
when a seller requires that dealers not handle competitors products
legal as long as their do not tend to create a monopoly
exclusive territorial agreements
producer may agree not to sell to other dealers in a giver area, or they buyer may agree to sell only in its territory

the second practice is a major legal issue

full-line forcing
when a producer of a strong brand will only sell to dealers who will take the rest of the line (legal unless it lessens competition substantially)
marketing logistics
also call physical distribution…
planning, implementing, and controlling the physical flow of goods from points of origin to points of consumption to meet customer requirements at a profit

three types:
outbound – moving products from factory to consumers
inbound – from suppliers to the factory
reverse – moving broken or excess products back up the chain

supply chain management
managing upstream and downstream value-added flows of goods among suppliers, the company, resellers, and final consumers

marketers care about “downstream” channels – ones that bring product closer to consumers

companies either want to use SCM to either maximize customer service (delivery speed) or minimize distribution costs… cannot do both

major logistics functions
warehousing, inventory management, transportation, and logistics information management
distribution center
a large, highly automatic warehouse designed to receive goods from various plants and suppliers, take orders, fill them efficiently, and deliver goods to customers as quickly as possible (i.e. Walmart centers serve 100 Walmart stores)

storage warehouses store good for a long time while distribution centers are designed to move goods

just-in-time logisitics
when a company carries only small inventories of merchandise, new stock arrives exactly when needed

important to not run up carrying costs b/c entire supply chain accounts for nearly 75% of product’s cost

main transportation modes
truck, rail, water, pipeline, and air
in order from most common to least common

also use Internet as a mode for digital products

intermodal transportation
combining two or more modes of transportation

piggyback – rail and trucks
fishyback – water and trucks
trainship – rail and water
airtruck – air and trucks

vendor-managed inventory (VMI)
when the supplier takes full responsibility for managing inventories and deliveries
integrated logistics management
logistics concept that emphasizes teamwork, both inside (between departments) and outside the company (with suppliers and resellers, to maximize the performance of the entire distribution system

use cross-functional and cross-company teams to do this

third party logistics (3PL) provider
also called outsourced/contract logistics

an independent logistics provider that performs any or all of the functions required to get its client’s product to market

done b.c it can be cheaper, bc it allows the company to focus more on its core business, and logistics companies understand that aspect of the business better