BUAD 332 Demand ManagementExam #3 Chapters 10,12,13,14Chapter 10: Marketing Channels: Delivering Customer Value What is a distribution 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 user. Why are distribution channels used? - The use of intermediaries results from their greater efficiency in making goods available to target markets. - Offers the firm more than it can achieve on its own through intermediaries:o Contacts o Experience o Specialization o Scale of operation - Purpose: match supply from producers to demand form customers Channels of Distribution Issues- 2 primary issueso Channel Design (what should the channel look like) o Channel Management (how do I get channel partners to do what I want them to do)Channel Design Issues - What tasks do manufacturers want performed in the channel of distribution?o Product availability- have the product available with the desired level of coverage and in desirable location within retail outleto Promotional effort- effective point of purchase promotion and effective personal selling supporto Customer service- installation, training, repairo Market information“Conventional” channels of distributionProducerConsumerProducerConsumerRetailerWholesalerProducerConsumerRetailerA trend in Channels of DistributionA MAJOR TREND IS TOWARD DISINTERMEDIATION WHICH MEANS THAT PRODUCT AND SERVICE PRODUCERS ARE BYPASSING INTERMEDIARIES AND GOING DIRECTLY TO FINAL BUYERS OR THAT NEW TYPES OF CHANNEL INTERMEDIARIES ARE EMERGING TO REPLACE TRADITIONAL ONESExamples of Disintermediation:Other examples of Disintermediation:- Horizontal Marketing System: 2 or more companies at one channel level join together to follow a new marketing opportunityo Example: Supermarket banking: a bank and a supermarket agree to have the bank’s ATMs located at the supermarket’s locations, two manufacturers combining to achieve economies of scale, otherwise not possible with each acting alone- Hybrid marketing system: A single firm sets two or more marketing channels to reach one or more customer segmentso Example:Conventional VS Vertical marketing system:Channel Management: - If I don’t own the channel, and I don’t have contracts with my channel partners, how do I get cooperation? INCENTIVESChannel Behavior and Organization- The channel will be most effective when: o Each member is assigned tasks it can do best o All members cooperate to attain overall channel goals and satisfy the target market - When this doesn’t happen, conflict occurs:Types of Vertical Marketing Systems (VMS): Corporate VMS- common ownership at different levels of the channel Contractual VMS: contractual agreements among channel memberso Horizontal Conflict: occurs among firms at the same level of the channel i.e. retailer to retailer o Vertical Conflict: occurs between different levels of the same channel i.e. wholesaler to retailerChapter 12: Communicating Customer Value: Advertising and Public RelationsSeveral factors are changing the face of marketing communications: - Consumers are better informed- Mass markets have fragmented - New media for interaction of targeted consumers As a response to the changing environment:- Firms are doing less broadcasting and more narrowcasting for example:o Specialty Magazines, cable tv, video on demand, internet catalogs, podcasts, and product placements in TV and video games - This has led to integrated marketing communicationsIntegrated Marketing Communications (IMC) – a strong need for IMC exists because conflicting messages from different sources can create confusion or blur brand perceptions. They need to make sure that all these different medias are sending the same message.The Need for IMC: Using IMC, the company carefully integrates and coordinates its many communication channels to deliver a clear, consistent, and compelling message about the organizations and its brands:Push VS Pull Promotion StrategyMajor Decisions in Advertising: 1. Setting Advertising Objectives:- An advertising objective is a specific communication task to be accomplished with a specific target audience during a specific period of time- Classified by a purpose: inform, persuade, compare, remind 2. Setting Advertising Budget: - Affordable - Percentage of Sales- Competitive-Parity - Objective-and-Task 3. Developing Advertising Strategy- Two major elements: Creating advertising messages: what are we gonna say? Selecting advertising media: how are we gonna say it?- The message strategy: Identify customer benefits, develop compelling creative concept: the “Big Idea”, Advertising appeals should be meaningful, believable, and distinctive- Message Execution4. Media Decisions: - Choosing your media type depends on the media habits of your target customers, nature of the product, type of message, and cost- Selecting advertising media:- Reach- % of those in the target market exposed to an ad at least once during a specified time period- Frequency- average number of times a person from the target market is exposed to ad during specified time - Media impact- Reach x Frequency, sometimes expressed as Gross Rating Points (GRPs)- Selection Communications Media- Cost considerations- CPM, or cost per thousand = cost of running ad / # of total contacts- Deciding on Media Timing: Must decide how to schedule the advertising over the course of a year and choose the pattern of the ad; continuous or pulsing 5. Evaluating Advertising- Measure the communication effects of an ad. “Copy Testing”- Measure the sales effects of an ad. “Is the ad increasing sales?”- Assessing advertising effectiveness- For traditional ads this is VERY HARD- Companies are moving towards the internet because there are some creative new ways to measure effectiveness Chapter 13: Communicating Customer Value: Personal Selling and Sales Promotion Personal Selling is hard and expensive- Professional salespeople are well-educated, well-trained professionals who work to build and maintain long-term customer relationships The term salesperson covers a wide range of positions:- Order taker: dept store clerk - Order getter: creative selling in different environments Personal selling:- is the most important part of the marketing communication mix- Is a paid, personal form or promotion- Involves 2 way personal communication between sales people and customersSalespeople:- Probe customers about problems - Adjust