10-1 road map: previewing the concepts explain why companies use distribution channels and discuss...
TRANSCRIPT
10-1
ROAD MAP: Previewing the Concepts
• Explain why companies use distribution channels Explain why companies use distribution channels and discuss the functions these channels and discuss the functions these channels perform.perform.
• Discuss how channel members interact and how Discuss how channel members interact and how they organize to perform the work of the they organize to perform the work of the channel.channel.
• Identify the major channel alternatives open to a Identify the major channel alternatives open to a company.company.
• Explain how companies select, motivate, and Explain how companies select, motivate, and evaluate channel members.evaluate channel members.
• Discuss the nature and importance of marketing Discuss the nature and importance of marketing logistics and supply chain management.logistics and supply chain management.
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Marketing or Distribution Channel
• A set of interdependent A set of interdependent organizations involved in the process organizations involved in the process of making a product or service of making a product or service available for use or consumption by available for use or consumption by the consumer or business user.the consumer or business user.
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Channel of Distribution
Click the picture above to play video
eGO faces eGO faces challenges in challenges in establishing a establishing a channel of channel of distribution for its distribution for its product.product.
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Distribution in Action
FedEx’s creative and imposing distribution system made it a market leader in express delivery.
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How Channel Members Add Value
• The use of intermediaries results from The use of intermediaries results from their greater efficiency in making their greater efficiency in making goods available to target markets.goods available to target markets.
• Offers the firm more than it can Offers the firm more than it can achieve on its own through the achieve on its own through the intermediaries:intermediaries:– ContactsContacts– ExperienceExperience– SpecializationSpecialization– Scale of operationScale of operation
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How a Distributor Reduces the Number of Channel Transactions
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ContactContact FinancingFinancing
InformationInformation
Risk TakingRisk Taking
PromotionPromotion
MatchingMatching
NegotiationNegotiation
PhysicalDistribution
PhysicalDistribution
These functions should be assigned to the channel member who can add the most value for
the cost
Channel Functions
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Consumer and Business Channels
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Channel Behavior
• The channel will be most effective when:The channel will be most effective when:– each member is assigned tasks it can do best.each member is assigned tasks it can do best.– all members cooperate to attain overall channel all members cooperate to attain overall channel
goals.goals.
• If this does not happen, conflict occurs:If this does not happen, conflict occurs:– Horizontal ConflictHorizontal Conflict occurs among firms at the occurs among firms at the
same level of the channel (e.g., retailer to same level of the channel (e.g., retailer to retailer).retailer).
– Vertical ConflictVertical Conflict occurs between different levels occurs between different levels of the same channel (e.g., wholesaler to of the same channel (e.g., wholesaler to retailer).retailer).
• Some conflict can be healthy competition.Some conflict can be healthy competition.
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Channel Conflict
When it decided to sell its familiar containers at retail through Target stores, Tupperware avoided conflicts with its army of in-home sales consultants by inviting them into the stores to demonstrate the products.
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Conventional vs. Vertical Marketing System
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Vertical Marketing System (VMS)
• A distribution channel structure in A distribution channel structure in which producers, wholesalers, and which producers, wholesalers, and retailers act as a unified systemretailers act as a unified system
• One channel member owns the One channel member owns the other, has contracts with them, or other, has contracts with them, or has so much power that they all has so much power that they all cooperate.cooperate.
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Corporate VMSCommon Ownership at Different
Levels of the Channel (e.g., Sears)
Contractual VMSContractual Agreements Among
Channel Members (e.g., ACE Hardware)
Administered VMSLeadership is Assumed by One or
a Few Dominant Members (e.g., Kraft)
Types of Vertical Marketing Systems
Control
High
Low
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Franchise Organization
• Manufacturer-Sponsored Retailer Manufacturer-Sponsored Retailer Franchise SystemFranchise System– Ford and its independent franchised Ford and its independent franchised
dealersdealers
• Manufacturer-Sponsored Wholesaler Manufacturer-Sponsored Wholesaler Franchise SystemFranchise System– Coca-Cola’s licensed bottlersCoca-Cola’s licensed bottlers
• Service-Firm Sponsored Retailer Service-Firm Sponsored Retailer Franchise SystemFranchise System– McDonald’s, Avis, and Holiday InnMcDonald’s, Avis, and Holiday Inn
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Innovations in Marketing Systems
Two or more Two or more companies at one companies at one channel level join channel level join together to follow a together to follow a new marketing new marketing opportunity.opportunity.
Example: Banks in Example: Banks in grocery storesgrocery stores
Two or more Two or more companies at one companies at one channel level join channel level join together to follow a together to follow a new marketing new marketing opportunity.opportunity.
Example: Banks in Example: Banks in grocery storesgrocery stores
A single firm sets up A single firm sets up two or more two or more marketing channels marketing channels to reach one or to reach one or more customer more customer segments.segments.
Example: Retailers Example: Retailers and catalogsand catalogs
A single firm sets up A single firm sets up two or more two or more marketing channels marketing channels to reach one or to reach one or more customer more customer segments.segments.
Example: Retailers Example: Retailers and catalogsand catalogs
Horizontal Horizontal Marketing Marketing
SystemSystem
Horizontal Horizontal Marketing Marketing
SystemSystem
Hybrid Marketing Hybrid Marketing SystemSystem
Hybrid Marketing Hybrid Marketing SystemSystem
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Hybrid Marketing Channel
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Changing Channel Organization
• DisintermediationDisintermediation means that means that more and more, product and service more and more, product and service producers are bypassing producers are bypassing intermediaries and going directly to intermediaries and going directly to final buyers, or that radically new final buyers, or that radically new types of channel intermediaries are types of channel intermediaries are emerging to displace traditional emerging to displace traditional ones.ones.
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Disintermediation
Travel supersites such as Expedia, Travelocity, Priceline, Hotels.com, and Orbitz have threatened the very existence of traditional travel agents.
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Channel Design Decisions
• Analyzing Consumer NeedsAnalyzing Consumer Needs
• Setting Channel ObjectivesSetting Channel Objectives
• Identifying Major AlternativesIdentifying Major Alternatives– Types of intermediariesTypes of intermediaries– Number of intermediariesNumber of intermediaries– Responsibilities of intermediariesResponsibilities of intermediaries
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Types of Intermediaries
• Company sales forceCompany sales force
• Manufacturer’s agencyManufacturer’s agency
• Industrial distributorsIndustrial distributors
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Number of Intermediaries
• Intensive distributionIntensive distribution
• Exclusive distributionExclusive distribution
• Selective distributionSelective distribution
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Selective Distribution
Luxury car makers sell exclusively through a limited number of dealerships. Such limited distribution enhances the car’s image and generates strong dealer support.
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Evaluating the Major Alternatives
• Economic Criteria:Economic Criteria:– A company compares the likely sales, A company compares the likely sales,
costs, and profitability of different channel costs, and profitability of different channel alternatives.alternatives.
• Control Issues:Control Issues:– How and to whom should control be given?How and to whom should control be given?
• Adaptive Criteria:Adaptive Criteria:– Consider long-term commitment vs. Consider long-term commitment vs.
flexibility.flexibility.
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Selecting Channel MembersSelecting Channel Members
Managing & Motivating Channel Members Managing & Motivating Channel Members
Evaluating Channel MembersEvaluating Channel Members
Channel Management Decisions
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Public Policy and Distribution Decisions
• Exclusive distributionExclusive distribution
• Exclusive dealingExclusive dealing
• Exclusive territorial agreementsExclusive territorial agreements
• Tying agreementsTying agreements
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Logistics and Supply Chain Management
• Planning, implementing, and Planning, implementing, and controlling the physical flow of goods, controlling the physical flow of goods, services, and related information from services, and related information from points of origin to points of points of origin to points of consumption to meet customer consumption to meet customer requirements at a profit.requirements at a profit.
• Includes:Includes:– Outbound distributionOutbound distribution– Inbound distributionInbound distribution– Reverse distributionReverse distribution
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Supply Chain Management
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Major Logistics Functions
• WarehousingWarehousing
• Inventory management Inventory management
• TransportationTransportation
• Logistics information managementLogistics information management
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Warehousing
• How many, what types, and where?How many, what types, and where?
• Storage warehousesStorage warehouses
• Distribution centersDistribution centers
• Automated warehousesAutomated warehouses
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Inventory Management
• Must balance between too much and Must balance between too much and too little inventory.too little inventory.
• Just-in-time logistics systemsJust-in-time logistics systems
• RFID, AutoID, or Smart Tag technologyRFID, AutoID, or Smart Tag technology
•Click Here to Find Out All About RFID
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Logistics Technology
In the not-too-distant future, AutoID or “smart tag” technology could make the entire supply chain—which accounts for nearly 75% of a product’s cost—intelligent and automated.
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Transportation
• TrucksTrucks
• RailroadsRailroads
• Water carriersWater carriers
• PipelinesPipelines
• AirAir
• InternetInternet
• Intermodal transportationIntermodal transportation
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Intermodal Transportation
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Intermodal Transportation
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Intermodal Transportation
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Intermodal Transportation
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Intermodal Transportation
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Integrated Logistics Management
• The logistics concept that The logistics concept that emphasizes teamwork, both inside emphasizes teamwork, both inside the company and among all the the company and among all the marketing channel organizations, to marketing channel organizations, to maximize the performance of the maximize the performance of the entire distribution system.entire distribution system.
• Involves:Involves:– Cross-functional teamwork inside the Cross-functional teamwork inside the
companycompany– Building logistics partnershipsBuilding logistics partnerships– Third-party logisticsThird-party logistics
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Third Party Logistics
Many companies are now outsourcing logistics tasks to companies like Ryder Integrated Logistics. Here, Ryder describes a system it designed to keep Friendly’s refrigerated trucks on the road. “Thanks to Ryder, Friendly’s doesn’t have to worry about breakdowns. Or meltdowns.”
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Rest Stop: Reviewing the Concepts
1.1. Explain why companies use distribution channels Explain why companies use distribution channels and discuss the functions these channels and discuss the functions these channels perform.perform.
2.2. Discuss how channel members interact and how Discuss how channel members interact and how they organize to perform the work of the channel.they organize to perform the work of the channel.
3.3. Identify the major channel alternatives open to a Identify the major channel alternatives open to a company.company.
4.4. Explain how companies select, motivate, and Explain how companies select, motivate, and evaluate channel members.evaluate channel members.
5.5. Discuss the nature and importance of marketing Discuss the nature and importance of marketing logistics and integrated supply chain logistics and integrated supply chain management.management.
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Q: A retailing operation that depends upon handy location and long hours to attract customers to its limited line of frequently purchased products is a:
1. specialty store. 1. specialty store.
2. department store. 2. department store.
3. superstore. 3. superstore.
4. convenience store.4. convenience store.
AK, 7e – Chapter 11
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Q: Kar Krazy, an auto parts category killer, has just opened in your home town. Which of the following types of stores would most likely survive Kar
Krazy’s assault on the market?
1. An auto parts department store that 1. An auto parts department store that offers a little of everything offers a little of everything
2. A small store that caters to owners of 2. A small store that caters to owners of high-performance sports cars high-performance sports cars
3. A small store that sells parts for less 3. A small store that sells parts for less than Kar Krazy than Kar Krazy
4. A small self-service parts shop4. A small self-service parts shop
AK, 7e – Chapter 11
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Q: You prefer to shop for underwear, socks, and other goods at a store in which the staff simply keeps the shelves stocked and assumes you’re there to locate, compare, and select your items on your own. This is what
sort of retailer?
1. Limited-service retailer 1. Limited-service retailer
2. Specialty store 2. Specialty store
3. Full-service retailer 3. Full-service retailer
4. Self-service retailer4. Self-service retailer
AK, 7e – Chapter 11
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Q: A _______ is a group of retail businesses planned, developed, owned, and managed as a unit.
1. power center 1. power center
2. shopping center 2. shopping center
3. central business district 3. central business district
4. strip mall4. strip mall
AK, 7e – Chapter 11
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Q: You want to open a coffee bar that stands a chance of competing with Starbucks, and you must consider product assortment and services. These entail making all the following
decisions except:
1. what will be the general atmosphere of 1. what will be the general atmosphere of your establishment. your establishment.
2. where and how much you will advertise. 2. where and how much you will advertise.
3. what customer service training you will 3. what customer service training you will provide for employees. provide for employees.
4. the types and amounts of coffee you will 4. the types and amounts of coffee you will serve.serve.
AK, 7e – Chapter 11
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Q: Bloomingdale’s is known for running spectacular shows featuring goods from a certain country, such as India or China. These shows are examples of:
1. service mix. 1. service mix.
2. store atmosphere. 2. store atmosphere.
3. product assortment. 3. product assortment.
4. country range.4. country range.
AK, 7e – Chapter 11
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Q: The ________ concept suggests that many new forms of retailing begin as low-margin, low-price, low-status operations, which take the place of other such retailers who have,
over time, added services and moved upscale.
1. retail life cycle 1. retail life cycle
2. wheel-of-retailing 2. wheel-of-retailing
3. scrambled merchandising 3. scrambled merchandising
4. merchant wholesaling4. merchant wholesaling
AK, 7e – Chapter 11
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Q: Which of the following is not a current retailing trend?
1. The demise of the 1. The demise of the department store department store
2. Online retailing 2. Online retailing
3. Global retailing 3. Global retailing
4. The rise of megaretailers4. The rise of megaretailers
AK, 7e – Chapter 11
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Q: Which of the following middlemen takes title to the goods they are selling?
1. Agents 1. Agents
2. Brokers 2. Brokers
3. Merchant wholesalers 3. Merchant wholesalers
4. Cash-and-carry wholesalers4. Cash-and-carry wholesalers
AK, 7e – Chapter 11
10-50
Q: Which of the following services do wholesalers provide to retailers?
1. Retail pricing 1. Retail pricing
2. Accounting services 2. Accounting services
3. Online transactions 3. Online transactions
4. All of the above4. All of the above
AK, 7e – Chapter 11
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Q: Which of the following is not a likely trend in the wholesaling industry?
1. Geographic expansion of 1. Geographic expansion of operations operations
2. Vertical integration 2. Vertical integration
3. Increase in services provided 3. Increase in services provided
4. Increase in the number of 4. Increase in the number of wholesalerswholesalers
AK, 7e – Chapter 11
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EXAMPLES of what you could do. PLS. DO NOT DO MORE THAN ONE OF ANY OF THESE:
Radio CommercialTV commercialMagazine AdNewspaper ADOutdoor Ad Direct Mail PiecePoint-of-Purchase DisplayBrochureInternet AdPress Release
Specialty Advertising Item like: A refrigerator * * CouponsPremiums such as Refrigerator Magnet, Key Chain, or some other type of inexpensive itemSales Literature for Sales RepresentativesNewspaper InsertsSelf-liquidating Premium: Example: Bud Light Sports Bag which customer buys at a reduced price if he/she buys a case of Bud Light.AK, 7e – Chapter 11