Marketing Chapter 10.

upstream

set of firms that supply the raw materials, components, parts, information, finances and expertise needed to create a product or service

downstream

marketers focus

(marketing channels or distribution channels)

such as wholesalers and retailers, vital link between the firm and its customers

value delivery network

network composed of the company, suppliers, distributors and ultimately customers who partner together to improve the performance of the entire system to deliver better customer value

marketing channel (distribution channel)

a set of interdependent organizations that help make a product or service available for use or consumption

channel level

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

the number of intermediaries indicates the length of a channel

direct marketing channel

a marketing channel that has no intermediary level, sells straight to the customer

what is this an example of : GEICO sells insurance directly to the customer via phone or internet

direct marketing channel

indirect marketing channel

a marketing channel containing one or more intermediary levels

more levels means

less control and greater cannel complexity

all the institutions in the channels are connected by several types of ___ and these can make even channels with one or a few levels very complex

flows

-physical flow of products

-the flow of ownership

-the payment flow

-the information flow

-promotion flow

channel conflict

disagreements among marketing channel members on goals, roles and rewards- who should do what and for what rewards?

-horizontal or vertical conflict

horizontal conflict

occurs among firms at the same level of the channel

what kind of conflict is ford dealers in chicago claiming other ford dealers steal their deals?

horizontal

vertical conflict

conflicts between different levels of the same channel (more common)

what kind of conflict is burger king not allowing franchises to set prices

vertical conflict

conventional distribution channel

consists of one or more independent producers, wholesalers and retailers, each a separate business seeking to maximize its own profits, perhaps even at the expense of profits for the system as a whole

conventional distribution channel

no channel member has much control over the other members and no formal means exist for assigning roles and resolving channel conflict

vertical marketing system VMS

consists of producers, wholesalers and retailers acting as a unified system

vertical marketing system VMS

one channel member owns the others, has contracts with them or wields so much power that they all must cooperate

types of VMS

-corporate

-contractual

-administrated

corporate VMS

integrates successive stages of production and distribution under single ownership-channel leadership is established through common ownership

ex:zara delivers fast fashion extremely fast

contractual VMS

independent firms at different levels of production and distribution join together through contracts to obtain more economies or sales impact than each could achieve alone-channel members coordinate their activities and manage conflict through agreements

franchise organizations

most common type of contractual agreement-a channel member called a franchisor, links several stages in the production-distribution process

types of franchise systems

-manufacturer-sponsored retailer

-manufacturer-sponsered wholesaler

-service-firm-sponsored retailer

what kind of franchise is Ford and its networks of independent franchised dealers?

-manufacturer-sponsored retailer

what kind of franchise is Coca-Cola license bottlers in various world markets who buy Coca-Cola syrup concentrate and then bottle and sell the finished product to retailers locally?

-manufacturer-sponsered wholesaler

what kind of franchise is Burger King and its nearly 10,500 franchisee-operated restaurants around the world?

-service-firm-sponsored retailer

administered VMS

leadership is assumed through the size and power of one or a few dominant channel members

horizontal marketing system

a channel arrangement in which two or more companies at one level join together to follow a new marketing opportunity

what marketing system is this an example of: Walmart has McDonalds in stores and Microsoft and competitor Yahoo joined together to be more powerful against google?

horizontal marketing system

multichannel distribution

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

what is this an example of: John Deere sells through John Deere retailers, Lowes and online

multichannel distribution

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

what is this an example of: internet iTunes closed music retail stores

disintermediation

marketing channel design

calls for analyzing consumer needs, setting channel objectives, identifying major channel alternatives and evaluating those alternatives

intensive distribution

stocking the product in as many outlets as possible

convenience products, common raw materials, available where and when consumer wants

ex: toothpaste, candy, Coke

exclusive distribution

giving a limited number of dealers the exclusive right to distribute the company's products in their territories. Higher mark ups due to greater value-added dealer service

ex: luxury brands like Bentleys

selected distribution

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

ex: television, furniture and home appliance brands

economic criteria

a company compares the likely sales, costs and profitability of different channel alternatives

control issues

using intermediaries usually means giving the some control over the marketing of the product, and some intermediaries take more control than others-company wants to keep as much control as possible

adapting criteria

channels often involve long term commitments, yet the company wants to keep the channel flexible so that it can adapt to environmental changes-superior on economic and control ground

marketing channel management

calls for selecting managing and motivating individual channel members and evaluating their performance overtime

what should be considered when choosing channel members or intermediaries

-years in business

-other lines carried

-location

-growth and profit record

-cooperativeness

-reputation

partner relationship management

to forge lont-term partnerships with channel members- creates a value delivery system that meets the needs of both the company and its marketing partners

exclusive dealing

when the seller requires that dealers do not handle competitors products

what does the seller obtain from exclusive dealing?

more loyal and dependable outlets

what does the dealer obtain from exclusive dealing?

a steady source of supply and stronger seller support

exclusive territorial agreement

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

full line forcing or "tying agreements"

producer of a strong brand sometimes sells it to dealers only if the dealers will take some or all of the rest of its line

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 customer requirements at a profit(getting the right product to the right consumer in the right place and at the right time)

customer centered logistics

start with the market place and works backwards to the factory or even to sources of supply

outbound distribution

moving products from the factory to resellers and ultimately to customers

inbound distribution

moving products and materials from suppliers to the factory

reverse distribution

reusing, recycling, refurbishing or disposing of unwanted or excess products returned by consumers or resellers

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

storage warehouse

stores for moderate to long time

distribution centers

move goods rather than store them, they are larger and highly automated warehouses designed to receive goods from various plants and suppliers, take orders, fill them efficiently and deliver goods to customers as quickly as possible

just-in-time

logistics system, producers and retailers carry only small inventories of parts or merchandise, often enough for only a few days of operations

trucks

faster than railroads, highly flexible in their routing and time schedules, efficient for short hauls of high-value merchandise (speed)

railroads

most cost effective mode for shipping large amounts of bulk products

water carriers

very low cost but can be very slow and affected by weather

pipelines

petroleum, natural gas, chemicals most are used by their owners to shop their own products

air

higher cost but fast and travels long distance (jewelry, fresh fish) also reduces inventory levels, packaging costs and the number of warehouses needed (speed)

intermodal transportation

combining two or more modes of transportation

piggyback

use of rail and truck

fishyback

water and truck

trainship

water and rail

airtruck

air and truck

electronic-data interchange (EDI)

the digital exchange of data between organizations, which primarily is transmitted via the internet

vender managed inventory (VMI) or continuous inventory replenishment systems

customer shares real-time date on sales and current inventory levels with the supplier the supplier then takes full responsibility for managing inventories and deliveries

integrated logistics management

concept that emphasizes teamwork-both inside the company and among all the marketing channel organizations to maximize the performance of the entire distribution system

cross-functional, cross company teams

companies coordinate their logistic strategies and forge strong partnerships with suppliers and customers to improve customer service and reduce channel costs

shared projects

many large retailers conduct joint in-store programs with suppliers

third party logistics (3PL)

an independent logistics provider that performs any or all of the functions required to get a clients product to market also called outsources logistic or contract logistics (UPS, FedEx)