Chapter 14 Overview Fragmented responsibilities customers interact with companies across a number of different touch points to meet a variety of different needs And while customers view these interactions as pieces of a single relationship companies often don t look at it the same way Pushy Marketing companies regularly promote their goods and services by creating explicit and implicit promises about their brands The Role of the Value Chain and the Value Delivery Chain in the Distribution Process The goals of the various parties are considered as inputs to the value chain and value delivery chain The value chain and value delivery chain are parallel processes Total delivered product is the actual result of the value chain and value delivery chain Satisfaction is based on the perceived value received from the value chain and value delivery chain Feedback regarding service gaps and breakdowns must be handled systematically in the process Goals o Three main channels Suppliers Manufacturers Distribution intermediaries Customers Value Chain and Value Delivery Chain o Value Chain the series of business activities that are performed to design produce market deliver and service a product for customers Activities performed order fulfillment quality control cost management customer service returns task based o Value delivery chain encompasses all of the parties who engage in value chain activities performer based Involves three activities The specific parties in a given value chain Their relationships Activities undertaken by each party Value is added by each participant and differentiation is enhanced by the delivery chain Delivery chain is as strong as its weakest link Total Delivered Product the bundle of tangible and intangible product attributes actually provided to consumers through a value chain and its related value delivery chain o Reflects how well activities in the related value distribution process is performed o Use the WEB Level of Satisfaction Distribution Planning a systematic decision making regarding the physical movement of goods and services from producer to consumer o Encompasses transportation inventory management and customer transactions o Functions carried out by Channel of distribution all the organizations or people involved in the distribution process Channel members may include manufacturers service providers wholesalers retailers marketing specialists and consumers Distribution intermediaries channel members that act as a link between manufacturers service providers and consumers o Industrial channels have more direct contact between manufacturers and consumers The importance of Distribution Planning o With intermediaries a firms total profits would rise if there are far higher sales than Channel functions and the Role of Distribution Intermediaries Sorting Process coordinates manufacturer and consumer goals Accumulation allocation sorting and assorting offering a range of products so the consumer has choices it could attain itself o Buying o Promotion o Customer services o Product planning o Pricing o Distribution o Marketing research Selecting a Channel of Distribution o Key factors Consumer a Characteristics b Needs c segments Company a Goals b Resources c Expertise d Experiences Product a Value b Complexity c Perishability d bulk Competition a Characteristics b tactics Distribution channels a Alternatives b Characteristics c Availability Legalities a Current laws b Laws pending o 2 types of channels Direct Indirect Direct does not involve the use of intermediaries Used by firms who want to control all marketing efforts desire close customer contact and have limited markets Indirect uses intermediaries Used by firms that want to enlarge their markets raise sales and give up distribution functions and costs Contractual channel arrangement all the terms regarding the tasks are stated in writing for each member Administered channel arrangement the dominant firm in the distribution process plans the marketing program Channel length levels of independent members along a distribution channel Channel width the number of independent members at any stage of distribution Broadening increase market share more bargaining power and become more effective Exclusive distribution small market sales Selective moderate market Seeks prestige image channel control high profit margins lower total some channel control and a solid image with goods sales volume and profits Intensive distribution large market Mass coverage channel acceptance high total sales and profits o Dual channel of distribution firms selling through two or more separate channels o A firm may go from exclusive to selective to intensive distribution through the product life cycle o Firms may distribute in new ways Supplier Distribution intermediary contracts o Price policies discounts given to intermediaries for their functions cash payments and commission rates Functional deductions from list prices for performing storage and shipping Quantity deductions from volume purchases Cash deductions for early payment o Conditions of sales covers anything with pricing o Territorial rights outlines the geographical area in which resellers may operate and or the target markets they contact o Services responsibility mix describes the role of each channel member o Contract length and conditions of termination o Written unwritten Channel cooperation and Conflict o The balance of power has shifted more to resellers o Channel member goals need to be balanced o Pushing there is cooperation o Pulling used more firm generates demand before channel support spend lots of resources to gain demand Industrial channel of distribution o Unique characteristics Internal Distribution Planning o Requires particular planning Logistics the broad range of activities concerned with efficiently delivering raw materials parts semi finished items and finished products to designated places at designated times The Importance of Logistics o Cost amounts to 9 10 of US GDP 1 5 loss due to spoilage o Customer Service Total Cost Approach considers both costs and opportunities seeks a balance between low expenditures on distribution and high opportunities for sales Transportation fixed costs o Railroads carry heavy bulky items that are low in value over long distances high o Motor carriers small shipments over long distances large share of shipping revenue o Waterways low value and high bulk freight o Pipelines continuous movement gas petroleum o
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