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Chapter Overview
What is Marketing Channel? Types of Intermediaries Push vs Pull Marketing Functions of Marketing Intermediaries Understanding Marketing Channel flows Levels of Distribution Channel Retail Consumers Industrial Consumers Marketing Channel Integration and Systems Vertical Marketing Systems Horizontal Marketing Systems Hybrid Marketing Channel Designing a Marketing Channel Managing Marketing Channel Members Managing Channel Conflicts
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
Value delivery network is the firms suppliers, distributors, and ultimately customers who partner with each other to improve the performance of the entire system
Intermediaries offer producers greater efficiency in making goods available to target markets. Through their contacts, experience, specialization, and scale of operations, intermediaries usually offer the firm more than it can achieve on its own.
(Channel members add value by bridging the major time, place, and possession gaps that separate goods and services from those who would use them)
Information
Promotion
Contact
Matching
Negotiation
Physical distribution
Financing
Risk taking
Connected by types of flows: Physical flow of products Flow of ownership Payment flow Information flow Promotion flow
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Marketing channel consists of firms that have partnered for their common good with each member playing a specialized role Channel conflict refers to disagreement over goals, roles, and rewards by channel members Horizontal conflict Vertical conflict
Vertical marketing systems (VMSs) 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
Retailer
Customer
Versace, Gabbana
Customer
Administered vertical marketing system has a few dominant channel members without common ownership. Leadership comes from size and power.
Ex: Parle, Amul, Dabur, Gillette can command unusual cooperation and support from resellers, regarding displays, shelf space, promotion and price policies.
Wal-Mart
McDonalds
Coca-Cola
Nestle
Multichannel Distribution systems (Hybrid marketing channels) are when a single firm sets up two or more marketing channels to reach one or more customer segments
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
d) Evaluation
Examples:
Targeted levels of customer service What segments to serve Best channels to use Minimizing the cost of meeting customer service requirements
c. 1) Types of Intermediaries
Merchants (Wholesalers and retailers)
buy, take title to, and resell the merchandise; they are called merchants.
Ex: Dell Directly to consumers Direct Sales force ( to large corporate) Through Retailers ( Croma, E-zone) Copyright 2009 Dorling Value Added Resellers
Kindersley (India) Pvt. Ltd.
c. 3 Responsibilities of Intermediaries
Availability Economies Product Assortment
Channel-Management Decisions
Mediation
Arbitration Legal recourse
Superordinate goals. Channel members come to an agreement on the fundamental goal they are jointly seeking, whether it is survival, market share, high quality, or customer satisfaction.
Co-optation is an effort by one organization to win the support of the leaders of another organization by including them in advisory councils, boards of directors, and the like. Diplomacy takes place when each side sends a person or group to meet with its counterpart to resolve the conflict. Mediation means resorting to a neutral third party who is skilled in conciliating the two parties' interests. Arbitration occurs when the two parties agree to present their arguments to one or more arbitrators and accept the arbitration decision.
Copyright 2009 Dorling Kindersley (India) Pvt. Ltd.
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
Warehousing
Transportation
Smart shelves
Placing orders automatically
Truck
Pipeline
Rail
Air
Water
Internet
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)
Integrated logistics management is the recognition that providing customer service and trimming distribution costs requires teamwork internally and externally
Third-party logistics is the outsourcing of logistics functions to third-party logistics providers (3PLs)
CASE STUDY
End of Module-I