Chapter 12 Marketing Channels Supply Chains and the Value Delivery Network Producing a product or service making it available to buyers requires building relationships not only with customers but also with key suppliers resellers in the company s supply chain Supply chain consists of upstream and downstream partners Upstream from the company set of firms that supply the raw materials components parts information finances and expertise needed to create a product or service Downstream marketing distribution channel partners form a vital link between the firm and its customers Wholesalers and retailers Value delivery network partner to help the entire system deliver better customer value Marketing distribution channel use or consumption by the consumer or business user A network composed of the company suppliers distributors and ultimately customers who A set of interdependent organizations that help make a product or service available for Information Gathering and distributing information about consumers producers and other actors and forces in the marketing environment needed for planning and aiding exchange Promotion Developing and spreading persuasive communications about an offer Contact Finding and communicating with prospective buyers Matching Shaping offers to meet the buyer s needs including activities such as manufacturing grading assembling and packaging Negotiation Reaching an agreement on price and other terms so that ownership or possession can be transferred Physical distribution Transporting and storing goods Financing Acquiring and using funds to cover the costs of the channel work Risk taking Assuming the risks of carrying out the channel work A layer of intermediaries that performs some work in bringing the product and its ownership closer to the Number of Channel Levels Channel level final buyer Direct marketing channel A marketing channel that has no intermediary levels Indirect marketing channel Buying directly from the manufacturer A marketing channel containing one or more intermediary levels Channel behavior The channel will be most effective when each member is assigned tasks it can do best o All members cooperate to obtain overall channel goals The success of individual channel members depends on the overall channel s success Disagreements among marketing channel members on goals roles and rewards who should do what Channel conflict and for what rewards Conventional distribution channel A channel consisting of one or more independent producers wholesalers retailers each a separate business seeking to maximize its own profits even at the expense of profits for the system as a whole 1 Chapter 12 Marketing Channels Franchises Franchise organization several stages in the production distribution process Horizontal marketing system a new marketing opportunity Subway express at Wal Mart Starbucks at Target Multichannel distribution system reach one or more customer segments A channel arrangement in which two or more companies at one level join together to follow A distribution system in which a single firm sets up two or more marketing channels to A contractual vertical marketing system in which a channel member called a franchisor links Changing Channel Organizations Disintermediation displacement of traditional resellers by radical new types of intermediaries Netflix digital streaming changing entertainment business model The cutting out of marketing channel intermediaries by product or service producers or the M arketing channel design objectives identifying major channel alternatives and evaluating those alternatives Designing effective marketing channels by analyzing customer needs setting channel Channel Design Decisions Analyzing consumer needs Finding out what target consumers want from the channel Balancing needs against costs and consumer price preferences Setting Channel objectives Marketing Intermediaries Intensive distribution Exclusive distribution territories Selective distribution company s products Stocking the product in as many outlets as possible Giving a limited number of dealers the exclusive right to distribute the company s products in their The use of more than one but fewer than all of the intermediaries who are willing to carry the Selecting managing and motivating individual channel members and evaluating their Marketing channel management performance over time Marketing logistics or physical distribution Planning implementing and controlling the physical flow of materials final goods and related information from points of origin to points of consumption to meet customer requirements at a profit Supply chain management information among suppliers the company resellers and final consumers Managing upstream and downstream value added flows of materials fin l goods and related 2 Chapter 12 Marketing Channels Distribution center A large highly automated warehouse designed to receive goods from various plants and suppliers take orders fill them efficiently and deliver goods to customers as quickly as possible intermodal transportation Combining two or more modes of transportation integrated logistics management all the marketing channel organizations to maximize the performance of the entire distribution system Third party logistics 3PL provider get a client s product to market The logistics concept that emphasizes teamwork both inside the company and among An independent logistics provider that performs any or all of the functions required to 3 Chapter 12 Marketing Channels Chapter 12 Summary Explain why companies use marketing channels and discuss the functions these channels perform In creating customer value a company can t go it alone It must work within an entire network of partners a value delivery network to accomplish this task Individual companies and brands don t compete their entire value delivery networks do Most producers use intermediaries to bring their products to market They forge a marketing channel or distribution channel a 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 Through their contacts experience specialization and scale of operation intermediaries usually offer the firm more than it can achieve on its own Marketing channels perform many key functions Some help complete transactions by gathering and distributing information needed for planning and aiding exchange developing and spreading persuasive