Marketing Kotler & Armstrong Chapter 10 and 11

value delivery network

The network made up of the company, suppliers, distributors, and ultimately customers who "partner" with each other to improve the performance of the entire system in delivering customer value

marketing channel (distribution channel)

A set of interdependent organizations that help make a product or service available for use or consumption by the consumer or business user

channel level

A layer of intermediaries that performs some work in bringing the product and its ownership closer to the final buyer

direct marketing channel

A marketing channel that has no intermediary levels

indirect marketing channel

A channel containing one or more intermediary levels

channel conflict

Disagreement among marketing channel members on goals and roles (who should do what, and for what rewards); can be horizontal (at same level of channel) or vertical (at different levels of channel)1

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

vertical marketing system (VMS)

A distribution channel structure in which producers, wholesalers, and retailers act as a unified system. One channel member owns the others, has contracts with them, or has so much power that they all cooperate

corporate VMS

A vertical marketing system that combines successive stages of production and distribution under single ownership - channel leadership is established through common ownership

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 than they could achieve alone

franchise organization

The most common type of contractual VMS. A channel member (called a franchiser) links several stages in the production-distribution process

administered VMS

A vertical marketing system that coordinates successive stages of production and distribution, NOT through common ownership or contractual ties, but through the size and power of one (OR a few) dominant channel members. Manufacturers of a top brand can obtain strong cooperation and support from resellers. Large retailers can exert strong influence on the manufacturers that supply the products they sell.

horizontal marketing system

A channel arrangement in which two or more companies at one level join together to follow a new marketing opportunity. (For example, McDonalds now has "express" versions of its restaurants in Wal-Mart stores, with McDonalds benefiting from heavy foot traffic and Wal-Mart benefiting by keeping shoppers in the store.)

multichannel distribution system

A distribution system in which a single firm sets up two or more marketing channels to reach one or more customer segments

disintermediation

The cutting out of marketing channel intermediaries by product or service producers, OR the displacement of traditional resellers by radical new types of intermediaries (e.g. selling only over the Internet, and no longer selling through stores)

intensive distribution

Stocking the product in as many outlets as possible

exclusive distribution

Giving a limited number of dealers the exclusive right to distribute the company's products in their territories

selective distribution

The use of more than one, but fewer than all of the possible intermediaries who are willing to carry the company's products

marketing channel management

Selecting, managing, and motivating individual channel members, and evaluating their performance over time

marketing logistics (physical distribution)

Planning, implementing, and controlling the physical flow of materials, final goods, and related information from points of origin to points of consumption to meet customer requirements at a profit

supply chain management

Managing upstream and downstream value-added flows of materials, final goods, and related information among suppliers, the company, resellers, and final consumers.

distribution center

A large, highly automated warehouse designed to receive goods from various plants and suppliers, take orders, fill them efficiently, and deliver goods to customers as quickly as possible.

intermodal transportation

Combining two or more modes of transportation (piggyback: rail/truck, fishyback: water/truck, mainship: water/rail, airtruck: air/truck)

integrated logistics management

The logistics concept that emphasizes teamwork, both inside the company and among all the marketing channel organizations. The goal is to maximize the performance of the entire distribution system.

franchise organization

a contractual VMS in which a channel member, called a franchisor, links several stages in the production-distribution process

marketing channel design

designing effective marketing channels by analyzing customer needs, setting channel objectives, identifying major channel alternatives, and evaluating those alternatives

Market-Skimming Pricing

Setting a high price for the product, then skim revenues layer by layer from segments that are willing to pay the high price

Market-Penetration Pricing

Setting a low price for the product in order to generate large number of sales and large market share.

Conditions for Market-Penetration Pricing

Market must be price-sensitive; production & distribution costs must decrease as sales increase; low prices should keep competition out (too costly for competitors to imitate); must maintain low prices or competitive advantage is not sustainable.

Product Mix Pricing Strategies

Product Line Pricing, Optional Product Pricing, Captive Product Pricing, By-Product Pricing, Product Bundle Pricing

Product Line Pricing

Setting prices across the product lines based on cost differentiation; showing clear gaps between products' prices to create various quality levels in consumers' minds

Optional Product Pricing

Offering to sell optional/accessory products with the main product; must decide what the base cost is and is made of (what items), and which items to offer as optional

Captive Product Pricing

Setting a price for product that must be bought with the main product for use, e.g. shaving/razor brands

Product Bundle Pricing

Combining several products into a bundle and offered at a reduced price, e.g. fast food menu meals

Price Adjustment Strategies

Pricing strategies used to adjust to different customers and changing situations; discount, allowance, segmented, psychological, promotional, geographical, dynamic & internet pricing

Discount Pricing

Reducing prices of products/services for a given period of time, or for bulk purchases, e.g. Cash Discounts, Quantity Discounts, Functional (Trade) Discounts

Cash Discounts

Reduced prices for buyers who pay promptly

Quantity Discounts

For bulk purchases

Functional (Trade) Discounts

For trade channel members who perform a specific function, e.g. storing.

Allowance Pricing

Promotional money

Segmented Pricing

Setting two or more prices where the differences in price are not based on cost differences of the products

Customer Segmented Pricing

Setting price based on the type of customer

Product Form Pricing

Setting different prices for different versions of the product, e.g. Mozzarella cheese vs. Cheddar

Location Based Pricing

Charging different prices for different locations, even though the cost of location is the same, e.g. Royal Theatre seating

Time Based Pricing

Price varies with time units; seasons, days, hours

Psychological Pricing

Firms use psychology for pricing, instead of economics. Prices are used to say something about the product (signal to customer, e.g. higher price = higher quality)

Promotional Pricing

Firms decrease prices temporarily below list price or cost prices, to boost short-run sales. Can come in forms of discounts, special-event pricing, limited time offers, cash rebates

Geographical Pricing

Setting prices for people located in different parts of the country or world

International Pricing

Some companies can set a uniform price for their products worldwide. Most companies adjust their prices to reflect the local markets conditions and cost considerations. Price depends on many factors: economics, legislations, competition and the natural way of doing business there

Status Quo Pricing Objectives

a pricing objective that maintains existing prices or meets the competition's prices

Market share maximization

occurs when a firm maximizes its percentage share of the market in which it sells its product

Elasticity

a measure of the responsiveness of quantity demanded or quantity supplied to a change in the environment

Inelastic

describes demand that is not very sensitive to price changes