Transcript Marketing Logistics and Supply Chain Management

A Global Perspective
12
Marketing Channels
and Supply Chain
Management
Copyright © 2009 Pearson Education South Asia Pte Ltd
Philip Kotler
Gary Armstrong
Swee Hoon Ang
Siew Meng Leong
Chin Tiong Tan
Oliver Yau Hon-Ming
PowerPoint slides adapted by
Peggy Su
12-1
Chapter Outline
1. Supply Chains and the Value Delivery
Network
2. The Nature and Importance of Marketing
Channels
3. Channel Behavior and Organization
4. Channel Design Decisions
5. Channel Management Decisions
6. Public Policy and Distribution Decisions
7. Marketing Logistics and Supply Chain
Management
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[Caterpillar Case]
37% M/S of Worldwide construction &
farming equipment
Why successful?
Innovative New Product/Product Quality/…
-> 200 independent dealers worldwide!
“Buy the iron, get the company”
: Dealer profitability/Extraordinary dealer
support(parts delivery system)/
Communications/Dealer Perf./Personal
relationships
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Supply Chains and the Value
Delivery Network
Supply Chain Partners
• Upstream partners include raw material suppliers,
components, parts, information, finances, and
expertise to create a product or service.
• Downstream partners include the marketing
channels or distribution channels that look toward
the customer.
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Supply Chains and the Value
Delivery Network
Supply Chain Views
• Supply chain “make and sell” view includes the
firm’s raw materials, productive inputs, and factory
capacity.
• Demand chain “sense and respond” view suggests
that planning starts with the needs of the target
customer and the firm responds to these needs by
organizing a chain of resources and activities with
the goal of creating customer value.
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Supply Chains and the Value
Delivery Network
Value Delivery Network
• The value delivery network is the firm’s
suppliers, distributors, and ultimately,
customers who partner with each other to
improve the performance of the entire system.
• Palm Inc. Case on p.307
• Marketing channels=Downstream side of
Value Delivery Network
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The Nature and Importance of
Marketing Channels
Marketing Channel Defined
• A marketing channel is a set of independent
organizations that help make a product or
service available for use or consumption by
the consumer or business users.
* FedEx/Dell/Amazon.com/Calyx&Corolla
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The Nature and Importance of
Marketing Channels
How Channel Members Add Value
• Channel members add value by bridging the
major time, place, and possession gaps that
separate goods and services from those who
would use them.
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The Nature and Importance of
Marketing Channels
How Channel Members Add Value
• Producers use intermediaries because they
create greater efficiency in making goods
available to target markets.
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The Nature and Importance of
Marketing Channels
How Channel Members Add Value
• Intermediaries offer the firm more than it can
achieve on its own through their contacts,
experience, specialization, and scale of
operations.
• From an economic view, intermediaries
transform the assortment of products into
assortments wanted by consumers.
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The Nature and Importance of
Marketing Channels
How Channel Members Add Value
• Promotion refers to the development and
spreading persuasive communications about
an offer.
• Contacts refers to finding and communicating
with prospective buyers.
-> Figure 12.1 @ p.308
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The Nature and Importance of
Marketing Channels
How Channel Members Add Value
• Matching refers to shaping and fitting the offer to
the buyer’s needs, including activities such as
manufacturing, grading, assembling, and
packaging.
• Negotiation refers to reaching an agreement on
price and other terms of the offer so that
ownership or possession can be transferred.
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The Nature and Importance of
Marketing Channels
How Channel Members Add Value
• Physical distribution refers to transporting and
storing goods.
• Financing refers to acquiring and using funds to
cover the costs of carrying out the channel work.
• Risk taking refers to assuming the risks of
carrying out the channel work.
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The Nature and Importance of
Marketing Channels
Number of Channel Members
• Channel level refers to each layer of marketing
intermediaries that performs some work in bringing
the product and its ownership closer to the final
buyer. -> Figure 12.2 @ p 309
• Direct marketing channel has no intermediary
levels; the company sells directly to consumers.
-> Avon, Amway
• Indirect marketing channels contain one or more
intermediaries.
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The Nature and Importance of
Marketing Channels
Number of Channel Members
• Connected by types of flows:
• Physical flow of products
• Flow of ownership
• Payment flow
• Information flow
• Promotion flow
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Channel Behavior and Organization
Channel Behavior
• A marketing channel consists of firms that
have partnered for their common food with
each member playing a specialized role.
: Samsung-> Best Denki(@ Japan, Indonesia,
Singapore…)
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Channel Behavior and Organization
Channel Behavior
• Channel conflict refers to disagreement over
goals, roles, and rewards by channel
members.
• Horizontal conflict
• Vertical conflict
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Channel Behavior and Organization
Channel Behavior
• Horizontal conflict is conflict among
members at the same channel level.
: Among Toyota dealers
• Vertical conflict is conflict between different
levels of the same channel.
: UA -> Agents/ UA -> Consumers
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Channel Behavior and Organization
Conventional Distribution Systems
• Consist of one or more independent
producers, wholesalers, and retailers.
• Each seeks to maximize its own profits and
there is little control over the other members.
• No formal means for assigning roles and
resolving conflict.
-> Figure 12.3 @p.311
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Channel Behavior and Organization
Vertical Marketing Systems
• Vertical marketing systems (VMS) provide
channel leadership and consist of producers,
wholesalers, and retailers acting as a unified
system and consist of:
• Corporate marketing systems
• Contractual marketing systems
• Administered marketing systems
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Channel Behavior and Organization
Vertical Marketing Systems
• Corporate vertical marketing system
integrates successive stages of production
and distribution under single ownership.
: Luxottica makes Ray-Ban, Vogue, Anne Klein,
Ferragamo, Bulgari eyewears & sells them at
LensCraftes, Sungass Hut
: Japanese Keiretsu
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Channel Behavior and Organization
Vertical Marketing Systems
• Contractual vertical marketing system
consists of independent firms at different levels
of production and distribution who join together
through contracts to obtain more economies or
sales impact than each could achieve alone.
• Most common form is the franchise organization
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Channel Behavior and Organization
Vertical Marketing Systems
• Franchise organizations link several stages in
the production distribution process.
• Manufacturer-sponsored retailer franchise system
: Toyota & franchised independent dealers
• Manufacturer-sponsored wholesaler franchise system
: Coca Cola & Coca Cola bottlers
• Service firm-sponsored retailer franchise system
: McDonald’s
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Channel Behavior and Organization
Vertical Marketing Systems
• Administered vertical marketing
system has a few dominant channel
members without common ownership.
Leadership comes from size and power.
: GE/P&G
: Walmart
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Channel Behavior and Organization
Horizontal Marketing Systems
• Horizontal marketing systems include two or
more companies at one level that join together to
follow a new marketing opportunity.
• Companies combine financial, production, or
marketing resources to accomplish more than
any one company could alone.
: Phillips & TCL/ McDonald’s & Sinopec (@p.313)
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Channel Behavior and Organization
Multichannel Distribution Systems
• Hybrid marketing channels exist when a single
firm sets up two or more marketing channels to
reach one or more customer segments. ->
Rather common!
Firm
Customer
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Customer
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Channel Behavior and Organization
A multichannel distribution system
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Channel Behavior and Organization
Hybrid Marketing Channels
• Advantages
• Increased sales and market coverage
• New opportunities to tailor products and services to
specific needs of diverse customer segments
• Challenges
• Hard to control
• Create channel conflict
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Channel Behavior and Organization
Changing Channel Organization
• Disintermediation occurs when product or
service producers cut out intermediaries and go
directly to final buyers, or when radically new
types of channel intermediaries displace
traditional ones.
* Dell, Singapore Airlines go directly to final buyers.
* sonystyle.com/amazon.com,…
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Channel Design Decisions
Analyzing Consumer Needs
• Designing a channel system requires:
• Analyzing consumer needs
• Setting channel objectives
• Identifying major channel alternatives
• Evaluation
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Channel Design Decisions
Analyzing Consumer Needs
• Designing a marketing channel
starts with finding out what
target consumers want from
the channel.
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Channel Design Decisions
Setting Channel Objectives
• In terms of:
• Targeted levels of customer service
• What segments to serve
• Best channels to sue
• Minimizing the cost of meeting customer service
requirements
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Channel Design Decisions
Setting Channel Objectives
• Objectives are influenced by
• Nature of the company
• Marketing intermediaries
• Competitors
• Environment
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Channel Design Decisions
Identifying Major Alternatives
• In terms of
• Types of intermediaries
• Number of intermediaries
• Responsibilities of each channel member
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Channel Design Decisions
Identifying Major Alternatives
• Types of intermediaries refers to channel
members available to carry out channel work.
Examples include
• Company sales force
• Manufacturer’s agency
• Industrial distributors
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Channel Design Decisions
Identifying Major Alternatives
• Company sales force strategies
• Expand direct sales force
• Assign outside salespeople to territories
• Develop a separate sales force
• Telesales
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Channel Design Decisions
Identifying Major Alternatives
• Manufacturer’s agencies are independent firms
whose sales forces handle related products from
many companies in different regions or industries.
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Channel Design Decisions
Identifying Major Alternatives
• Industrial distributors
• Find distributors in different regions or industries
• Exclusive distribution
• Margin opportunities
• Training
• Support
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Channel Design Decisions
Identifying Major Alternatives
• Number of marketing intermediaries to use at
each level
• Strategies
• Intensive distribution
• Exclusive distribution
• Selective distribution
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Channel Design Decisions
Identifying Major Alternatives
• Intensive distribution is a strategy used by
producers of convenience products and common
raw materials in which they stock their products
in as many outlets as possible.
* Kraft, Coca Cola, Kimberly-Clark,…
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Channel Design Decisions
Identifying Major Alternatives
• Exclusive distribution is a strategy in which the
producer gives only a limited number of dealers
the exclusive right to distribute products in
territories, e.g.
• Luxury automobiles
• High-end apparel
=
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Channel Design Decisions
Identifying Major Alternatives
• Selective distribution is a strategy when a
producer uses more than one but fewer than all
of the intermediaries willing to carry the
producer’s products.
• Televisions
• Electrical appliances
=
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Channel Design Decisions
Responsibilities of Channel Members
• Producers and intermediaries need to agree on
• Price policies
• Conditions of sale
• Territorial rights
• Services provided by each party
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Channel Design Decisions
Evaluating the Major Alternatives
• Each alternative should be evaluated against
• Economic criteria
• Control
• Adaptive criteria
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Channel Design Decisions
Evaluating the Major Alternatives
• Economic criteria compares the likely sales
costs and profitability of different channel
members.
• Control refers to channel members’ control over
the marketing of the product.
• Adaptive criteria refers to the ability to remain
flexible to adapt to environmental changes.
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Channel Design Decisions
Designing International Distribution
Channels
• Channel systems can vary from country to
country.
• Must be able to adapt channel strategies to the
existing structures within each country.
* Japanese distribution system @ p. 318
* Decentralized markets in China & Walmart
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Channel Management Decisions
• Channel management involves
• Selecting channel members
• Managing channel members
• Motivating channel members
• Evaluating channel members
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Channel Management Decisions
Selecting Channel Members
•
Selecting channel members involves determining
the characteristics that distinguish the better ones
by evaluating channel members
•
Years in business
•
Lines carried
•
Profit record
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Channel Management Decisions
Selecting Channel Members
• Selecting intermediaries that are sales agents
involves evaluating
• Number and character of other lines carried
• Size and quality of sales force
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Channel Management Decisions
Selecting Channel Members
• Selecting intermediates that are retail stores that
want exclusive or selective distribution involves
evaluating
• Store’s customers
• Store locations
• Growth potential
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Channel Management Decisions
Managing and Motivating Channel Members
• Partner relationship management (PRM) and supply
chain management (SCM) software are used to
• Forge long-term partnerships with channel members
• Recruit, train, organize, manage, motivate, and
evaluate channel members
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Public Policy and Distribution
Decisions
• Exclusive distribution is when the seller
allows only certain outlets to carry its products.
• Exclusive dealing is when the seller requires
that sellers do not handle competitors’
products.
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Public Policy and Distribution
Decisions
• Benefits of exclusive distribution include
• Seller obtains more loyal and dependable
dealers
• Dealers obtain a steady and stronger seller
support
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Public Policy and Distribution
Decisions
• Exclusive territorial agreement refers to an
agreement where the producer may agree not to sell
to other dealers in a given area, or the buyer may
agree to sell only in its own territory.
• Tying agreements are agreements where there is a
strong brand that producers sometimes sell to
dealers only if the dealers will take some or all of the
rest of the line.
• Not necessarily illegal as long as they do not
substantially lessen competition.
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Marketing Logistics and Supply
Chain Management
• Nature and importance of logistics
management in the supply chain
• Goals of the logistics system
• Major logistics functions
• Need for integrated supply chain
management
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Marketing Logistics and Supply
Chain Management
Nature and Importance of Marketing
Logistics
• Marketing logistics (=physical distribution)
involves planning, implementing, and controlling
the physical flow of goods, services, and related
information from points of origin to points of
consumption to meet consumer requirements at
a profit.
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Marketing Logistics and Supply
Chain Management
Nature and Importance of Marketing
Logistics
• Marketing logistics involves
• Outbound distribution: Moving products from the
factory to resellers and consumers
• Inbound distribution: Moving products and materials
from suppliers to the factory
• Reverse distribution: Moving broken, unwanted, or
excess products returned by consumers or resellers
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Marketing Logistics and Supply
Chain Management
Nature and Importance of Marketing
Logistics
• Supply chain management is the process of
managing upstream and downstream valueadded flows of materials, final goods, and related
information among suppliers, the company,
resellers and final consumers.
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Marketing Logistics and Supply
Chain Management
Supply chain management
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Marketing Logistics and Supply
Chain Management
Nature and Importance of Marketing
Logistics
• Importance of logistics
• Competitive advantage by giving customers better
service at lower prices
• Cost savings to the company and its customers
• Product variety requires improved logistics
• Information technology has created opportunities for
distribution efficiency
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Marketing Logistics and Supply
Chain Management
Goals of the Logistics System
• To provide a targeted level of customer service
at the least cost with the objective to maximize
profit, not sales.
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Marketing Logistics and Supply
Chain Management
Major Logistics Functions
• Warehousing
• Inventory management
• Transportation
• Logistics information management
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Marketing Logistics and Supply
Chain Management
Major Logistics Functions
• Warehousing is the storage function that
overcomes difference in need quantities and
timing, ensuring that the products are available
when customers are ready to buy them.
• Storage warehouses
• Distribution centers
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Marketing Logistics and Supply
Chain Management
Major Logistics Functions
• Storage warehouses are designed to store
goods, not move them.
• Distribution centers are designed to move
goods, not store them.
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Marketing Logistics and Supply
Chain Management
Major Logistics Functions
• Inventory management balances carrying too
little and too much inventory.
• Just-in-time logistics systems
• RFID
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Marketing Logistics and Supply
Chain Management
• Just-in-time logistics systems allow
producers and retailers to carry small
amounts of inventories of parts of
merchandise.: Dell’s 2 days inventory vs.
competitors’ 50 days inventory
• RFID (radio frequency identification devices)
are small transmitter chips embedded in or
placed on products or packages to provide
greater inventory control.
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Marketing Logistics and Supply
Chain Management
Major Logistics Functions
• Transportation affects the pricing of products,
delivery performance, and condition of the goods
when they arrive.
•
•
•
•
•
•
Truck
Rail
Water
Pipeline
Air
Internet
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Marketing Logistics and Supply
Chain Management
Major Logistics Functions
• Intermodal transportation combines two or
more modes of transportation.
• Piggyback uses rail and truck.
• Fishyback uses water and truck.
• Airtruck uses air and truck.
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Marketing Logistics and Supply
Chain Management
Logistics Information Management
• Logistics information management is the
management of the flow of information, including
customer orders, billing, inventory levels, and
customer data.
• EDI (electronic data interchange)
• VMI (vendor-managed inventory)
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Marketing Logistics and Supply
Chain Management
Integrated Logistics Management
• Integrated logistics management is the
recognition that providing customer service and
trimming distribution costs require teamwork
internally and externally.
• Cross-functional teamwork inside the company
• Building partner relationships
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Marketing Logistics and Supply
Chain Management
Integrated Logistics Management
• Cross-functional teamwork inside the company
refers to the inter-relationship of different
departments within the company to achieve the
goals of integrated supply chain management.
• Building partner relationships refers to the
understanding that one company’s distribution is
another company’s supply system.
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Marketing Logistics and Supply
Chain Management
Integrated Logistics Management
• Third-party logistics is the outsourcing of logistics
functions to third-party logistics providers (3PLs)
• Provide logistics functions more efficiently
• Provide logistics functions at lower cost
• Allow the company to focus on its core business
• Are more knowledgeable of complex logistics
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Marketing Logistics and Supply
Chain Management
Company Case: Zara
- Fast Fashion
- H&M, Top Shop, Mango
- Sara’s cycle: 2 weeks vs. months
- 19,000 new items/year vs. 2,000 to 4,000
items by H&M and Gap
- -> Distribution system with domestic
manufacturing !
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