Marketing Channels and Supply Chain ManagementLearning GoalsCase Study CaterpillarDefinitionsNature & Importance of Marketing ChannelsSlide 6Slide 7Slide 8Slide 9Slide 10Slide 11Channel Behavior and OrganizationSlide 13Slide 14Slide 15Slide 16Slide 17Slide 18Channel Design DecisionsSlide 20Slide 20Slide 22Slide 23Channel Management DecisionsSlide 25Slide 26Slide 27Public Policy and Distribution DecisionsMarketing Logistics and Supply Chain ManagementSlide 30Slide 31Slide 32Slide 32Marketing Logistics and Supply Chain ManagementSlide 35Marketing Channels and Supply Chain ManagementChapter 1212 - 2Learning Goals1. Know why companies use distribution channels and understand the functions that these channels perform.2. Learn how channel members interact and how they organize to perform the work of the channel.3. Know the major channel alternatives that are open to a company.4. Comprehend how companies select, motivate, and evaluate channel members.5. Understand the nature and importance of marketing logistics and integrated supply chain management.12 - 3Case StudyCaterpillar•Dominates world’s markets for heavy construction and mining equipment.•Independent dealers are key to success •Dealer network is linked via computers•Caterpillar stresses dealer profitability, extraordinary dealer support, personal relationships, dealer performance and full, honest, and frequent communications12 - 4Definitions•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.•Marketing channelSet of interdependent organizations involved in the process of making a product or service available for use or consumption by the consumer or business userGoal 1: Know why companies use channels and understand their functions12 - 5Nature & Importance of Marketing Channels•Channel choices affect other decisions in the marketing mixPricing, Marketing communications•A strong distribution system can be a competitive advantage•Channel decisions involve long-term commitments to other firmsGoal 1: Know why companies use channels and understand their functions12 - 6Nature & Importance of Marketing Channels•How Channel Members Add ValueIntermediaries require fewer contacts to move the product to the final purchaser.Intermediaries help match product assortment demand with supply. Intermediaries help bridge major time, place, and possession gaps that separate products from those who would use them.Goal 1: Know why companies use channels and understand their functions12 - 7Nature & Importance of Marketing ChannelsGoal 1: Know why companies use channels and understand their functions12 - 8Nature & Importance of Marketing ChannelsContactContactFinancingFinancingInformationInformationRisk TakingRisk TakingPromotionPromotionMatchingMatchingNegotiationNegotiationPhysicalDistributionPhysicalDistribution12 - 9Nature & Importance of Marketing Channels•Number of Channel LevelsThe number of intermediary levels indicates the length of a marketing channel.• Direct Channels• Indirect ChannelsProducers lose more control and face greater channel complexity as additional channel levels are added.Goal 1: Know why companies use channels and understand their functions12 - 10Nature & Importance of Marketing ChannelsGoal 1: Know why companies use channels and understand their functions12 - 11Channel Members Are Connected Via A Variety of FlowsNature & Importance of Marketing Channels•Physical Flow•Payment Flow•Information Flow•Promotion Flow• Flow of Flow of OwnershipOwnershipGoal 1: Know why companies use channels and understand their functions12 - 12Channel Behavior and Organization•Channel ConflictOccurs when channel members disagree on roles, activities, or rewards.Types of Conflict:• Horizontal conflict: occurs among firms at the same channel level• Vertical conflict: occurs among firms at different channel levelsGoal 1: Know why companies use channels and understand their functions12 - 13Channel Behavior and Organization•Conventional Distribution ChannelsConsists of one or more independent channel membersLack leadership and powerOften result in poor performance•Vertical Marketing SystemsConsists of members acting as a unified systemUse contracts, ownership or powerGoal 1: Know why companies use channels and understand their functions12 - 14Channel Behavior and Organization•Corporate VMS•Contractual VMS•Administered VMS•Corporation owns production and distribution•Coordination and conflict management through regular organizational channelsVertical Marketing SystemsGoal 2: Learn how channel members interact and how they organize12 - 15Channel Behavior and Organization•Corporate VMS•Contractual VMS•Administered VMS•Individual firms who join through contracts •Franchise organizations Manufacturer-sponsored retailer franchise system Manufacturer-sponsored wholesaler franchise systemService-firm-sponsored retailer franchise systemVertical Marketing SystemsGoal 2: Learn how channel members interact and how they organize12 - 16Channel Behavior and Organization•Corporate VMS•Contractual VMS•Administered VMS•Leadership through the size and power of dominant channel members•Leadership could be manufacturer or retailerVertical Marketing SystemsGoal 2: Learn how channel members interact and how they organize12 - 17Channel Behavior and Organization•Horizontal Marketing SystemsCompanies at the same level work together with channel members ie: Bank in store•Multichannel Distribution SystemsAlso called hybrid marketing channelsOccurs when a firm uses two or more marketing channels ie: web sales & retailers•Changing Channel OrganizationDisintermediation ie: airlines vs Travel AgencyGoal 2: Learn how channel members interact and how they organize12 - 18Channel Behavior and OrganizationGoal 2: Learn how channel members interact and how they organize12 - 19Channel Design Decisions•Step 1: Analyzing Consumer NeedsCost and feasibility of meeting needs must be considered •Step 2: Setting Channel ObjectivesSet channel objectives in terms of targeted level of customer serviceMany factors influence channel objectivesGoal 3: Know the major channel alternatives open to a company12 - 20Channel Design Decisions•Step 3: Identifying Major AlternativesTypes of