Marketing:AnIntroductionThirteenthEditionChapter10MarketingChannels:DeliveringCustomerValueCopyright?2017,2015,2013PearsonEducation,Inc.AllRightsReservedLearningObjectives(1of4)10-1.Explainwhycompaniesusemarketingchannelsanddiscussthefunctionsthesechannelsperform.10-2.Discusshowchannelmembersinteractandhowtheyorganizetoperformtheworkofthechannel.10-3.Identifythemajorchannelalternativesopentoacompany.LearningObjectives(2of4)10-4.Explainhowcompaniesselect,motivate,andevaluatechannelmembers.10-5.Discussthenatureandimportanceofmarketinglogisticsandintegratedsupplychainmanagement.FirstStop:UberRadicallyReshapingUrbanTransportationUberletspassengershailthenearestcabfromanylocationusingitssmartphoneapp.LearningObjective10-1Explainwhycompaniesusemarketingchannelsanddiscussthefunctionsthesechannelsperform.SupplyChainsUpstreampartnerssupplytherawmaterials,components,parts,information,finances,andexpertiseneededtocreateaproductorservice.Downstreampartnersserveasdistributionchannelsthatlinkthefirmanditscustomers.ValueDeliveryNetwork(1of2)Anetworkcomposedofthecompany,suppliers,distributors,and,ultimately,customerswhopartnerwitheachothertoimprovetheperformanceoftheentiresystemindeliveringcustomervalueValueDeliveryNetwork(2of2)Pepsimanagesahugenetworktocreatecustomervalueandestablishthebrand’spositioning.MarketingChannels(DistributionChannels)InterdependentorganizationsthathelpmakeaproductorserviceavailableforuseorconsumptionChanneldecisionsAffecteveryothermarketingdecisionCanleadtocompetitiveadvantageMayinvolvelong-termcommitmentstootherfirmsFigure10.1-HowaDistributorReducestheNumberofChannelTransactionsHowChannelMembersAddValueIntermediariescreategreaterefficiencyinmakinggoodsavailabletotargetmarkets.Marketingintermediariestransformtheassortmentsofproductsmadebyproducersintotheassortmentswantedbyconsumers.Intermediariesbridgethemajortime,place,andpossessiongapsthatseparategoodsandservicesfromusers.KeyFunctionsPerformedbyChannelMembersHelptocompletetransactionsInformationPromotionContactMatchingNegotiationHelptofulfillthecompletedtransactionsPhysicaldistributionFinancingRisktakingNumberofChannelLevels(1of2)Channellevel:AlayerofintermediariesthatperformsworkinbringingtheproductanditsownershipclosertothefinalbuyerDirectmarketing

channel:NointermediarylevelsIndirectmarketingchannels:OneormoreintermediarylevelsNumberofChannelLevels(2of2)Typesofflowsthatconnecttheinstitutionsinthechannel:PhysicalflowofproductsFlowofownershipPaymentflowInformationflowPromotionflowFigure10.2-ConsumerandBusinessMarketingChannelsLearningObjective10-1SummaryValuedeliverynetworkIntermediariesformthemarketingchannel(ordistributionchannel)Marketingchannelfunctions:Transaction,information,communication,matching,negotiation,physicaldistribution,financing,andrisktakingLearningObjective10-2Discusshowchannelmembersinteractandhowtheyorganizetoperformtheworkofthechannel.ChannelBehavior(1of2)Channelconflict:Disagreementsamongmarketingchannelmembersongoals,roles,andrewardsHorizontalconflictoccursamongfirmsatthesamelevelofthechannel.Verticalconflictoccursbetweendifferentlevelsofthesamechannel.ChannelBehavior(2of2)“There’sahugeconnection”betweenfranchiseesatisfactionandcustomerservice.Figure10.3ComparisonofConventionalDistributionChannelwithVerticalMarketingSystemVerticalMarketingSystemsAverticalmarketingsystem(VMS)consistsofproducers,wholesalers,andretailersactingasaunifiedsystem.TherearethreetypesofVMSs:CorporateContractualAdministeredHorizontalMarketingSystem(1of2)Twoormorecompaniesatoneleveljointogethertofollowanewmarketingopportunity.HorizontalMarketingSystem(2of2)GeneralMillsandNestléoperateajointventure—CerealPartnersWorldwide.MultichannelDistributionSystemsAsinglefirmsetsuptwoormoremarketingchannelstoreachcustomersegments.Advantages:ExpansionofsalesandmarketingcoverageTailor-madeproductsandservicesforthespecificneedsofcustomersegmentsDisadvantages:HardertocontrolGeneratesconflictFigure10.4–MultichannelDistributionSystemDisintermediation(1of2)OccurswhenproductorserviceproducerscutoutmarketingchannelintermediariesorwhenradicallynewtypesofchannelintermediariesdisplacetraditionalonesDisintermediation(2of2)Spotifyisrapidlydisintermediatingbothtraditionalmusicstoresandmusicdownloadservices.LearningObjective10-2SummaryHorizontalandverticalchannelconflictConventionaldistributionsystem,verticalmanagementsystem(VMS)andhorizontalmarketingsystemMultichanneldistributionsystemDisintermediationLearningObjective10-3Identifythemajorchannelalternativesopentoacompany.ChannelDesignDecisionsMarketingchanneldesigninvolvesdesigningeffectivemarketingchannelsby:AnalyzingcustomerneedsSettingchannelobjectivesIdentifyingmajorchannelalternativesEvaluatingthealternativesMajorChannelAlternativesTypesofintermediariesreferstochannelmembersavailabletocarryoutchannelwork.NumberofintermediariestouseIntensivedistributionExclusivedistributionSelectivedistributionResponsibilitiesofeachchannelmemberDesigningInternationalChannelsChannelstrategiesshouldbeadaptedtotheexistingstructureswithineachcountry.Distributionsystemscanhavemanylayersandalargenumberofintermediaries.Customsandgovernmentregulationscanrestrictdistributioninglobalmarkets.LearningObjective10-3SummaryChanneldesignbeginswithassessingneeds,objectivesandconstraintsCompanydeterminesmajorchannelalternativesTypes,numberofintermediariesandchannelresponsibilitiesChannelalternativesevaluatedaccordingtoeconomic,controlandadaptivecriteriaChannelmanagement-selectingqualifiedintermediaries,motivatingthemandevaluatingregularlyLearningObjective10-4Explainhowcompaniesselect,motivate,andevaluatechannelmembers.MarketingChannelManagement(1of2)SelectingchannelmembersManagingandmotivatingchannelmembersEvaluatingchannelmembersMarketingChannelManagement(2of2)CVSCaremark’sdecisionleavestobaccocompaniesseekingnewsaleschannels.PublicPolicyandDistributionDecisionsExclusivedistributionExclusivedealingExclusivearrangements(ClaytonAct)arelegalaslongasthepartiesDonotsubstantiallylessencompetitionortendtocreateamonopolyEnterintotheagreementvoluntarilyLearningObjective10-4SummaryMarketingchannelmanagementcallsforselecting,managing,andmotivatingindividualchannelmembersandevaluatingtheirperformanceovertime.Companymustsellnotonlythrough

theintermediariesbutalsowith

them.LearningObjective10-5Discussthenatureandimportanceofmarketinglogisticsandintegratedsupplychainmanagement.MarketingLogistics(PhysicalDistribution)Planning,implementing,andcontrollingthephysicalflowofmaterials,finalgoods,andrelatedinformationfrompointsoforigintoconsumptionCustomer-centeredlogistics:MarketplacebackwardstothefactoryorsourcesofsupplyOutboundlogisticsInboundlogisticsReverselogisticsFigure10.5–SupplyChainManagementMarketingLogisticsandSupplyChainManagementThegoalofmarketinglogisticsistodeliveratargetedlevelofcustomerserviceattheleastcost.LogisticsfunctionsincludeWarehousingInventorymanagementTransportationLogisticsinformationmanagementWarehousing(1of2)Storagewarehousesstoregoodsformoderatetolongperiods.Distributioncentersarelarge,highlyautomatedwarehousesthatreceivegoods,takeorders,fillthem,anddelivergoodstocustomers.Warehousing(2of2)Amazonemploysteamsofsuper-retrievers—day-gloorangeKivarobots.InventoryManagementShouldbedoneinacosteffectiveandprofitablemannerJust-in-timelogisticssystemsRadiofrequencyidentification(RFID),smarttagtechnology,givesthephysicallocationofaproduct.Transportation(1of2)Companiescanchooseamongmanytransportationmodes,includingtruck,rail,water,pipeline,andair.Transportation(2of2)FactorsaffectedbychoiceoftransportationPricingofproductsDeliveryperformanceConditionofgoodsCustomersatisfactionModesTrucks,railroads,watercarriers,pipelines,aircarriers,andtheInternetMultimodaltransportationCombiningtwoormoremodesoftransportationPiggyback,fishyback,trainship,andairtruckLogisticsInformationManagementFlowsofinformationcloselylinkedtochannelperformanceInformationcanbesharedandmanagedthroughElectronicdatainterchange(EDI)Vendor-managedinventory(VMI)IntegratedLogisticsManagementEmphasizesteamworkbothinsidethecompanyandamongallthemarketing