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Chapter 10
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Supply Chains And The Value Delivery Network
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Supply Chains And The Value Delivery Network
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Supply Chains And The Value Delivery Network
Value Delivery NetworkThe 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 (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
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13- 5
Channel choices affect other decisions in the marketing mix
Pricing, Marketing communications, new products…etc
A strong distribution system can be a competitive advantage
Channel decisions involve long-term commitments to other firms
Nature & Importance of Marketing Channels
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Nature & Importance of Marketing Channels
Q. Why do producers give some of the selling job to channel partners??
A. Producers use intermediaries because they create greater efficiency in making goods available to target market
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Nature & Importance of Marketing Channels
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22
33
44
55
66
77
88
99
A. Number of contacts without a A. Number of contacts without a distributordistributor
11
22
33
44
55
66
B. Number of contacts with a B. Number of contacts with a distributordistributor
= = Manufacturer Manufacturer
= Customer = Customer = Distributor = Distributor
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Nature & 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.
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Key Functions Performed by Channel Members
Nature & Importance of Marketing Channels
Information: marketing research and information intelligence
Promotion: developing a persuasive communications to stimulate purchasing.
Contact: finding prospective buyers
Matching: fitting the offer to the buyer’s needs
Negotiation: reaching an agreement on price.
Physical Distribution: transporting and storing goods
Financing: acquiring funds to cover the cost of the channel work
Risk taking: carrying out thee channel work
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Nature & Importance of Marketing Channels
Consumer and business marketing channel levels
Consumer Consumer
producer producer
Channel 1 Channel 1 Channel 2 Channel 2 Channel 3 Channel 3
ConsumeConsumer r
Retailer Retailer
producer producer
ConsumeConsumer r
Retailer Retailer
producer producer
wholesalwholesaler er
A. Customer marketing channelsA. Customer marketing channels
Business Business Consumer Consumer
producer producer
Channel 1 Channel 1 Channel 2 Channel 2 Channel 3 Channel 3
Business Business ConsumConsum
er er
producer producer
Business Business Consumer Consumer
Business Business distributor distributor
producer producer
ManufacturManufacturer’s er’s
representatrepresentatives or ives or sales sales
branch branch
Business Business distributor distributor
B. Business marketing channelsB. Business marketing channels04/20/23 00:49 10
Nature & Importance of Marketing Channels
Number of Channel Levels
“A layer of intermediaries that performs some work in bringing the product and its ownership closer to the final buyer”
The number of intermediary levels indicates the length of a marketing channel.
○ Direct Channels: a marketing channel that has no intermediary.
○ Indirect Channels: channel containing one or more intermediary levels.
Producers lose more control and face greater channel complexity as additional channel levels are added.
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Channel Members Are Connected Via A Variety of Flows
Nature & Importance of Marketing Channels
Physical Flow Payment Flow
Information Flow Promotion Flow
Flow of Ownership
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Channel 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 objectives
○ The nature of the company, its products, its competitors, and the environment
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Channel Design Decisions Step 3: Identifying Major Alternatives
Types of intermediaries○ Company sales force, manufacturer’s agency,
industrial distributorsNumber of marketing intermediaries
○ Intensive, selective, and exclusive distributionResponsibilities of channel members
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Channel Design Decisions Step 4: Evaluating Major Alternatives
Economic criteriaControl issuesAdaptive criteria
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Channel Design Decisions Designing International Distribution
ChannelsGlobal marketers usually adapt their
channel strategies to structures that exist within foreign countries
Key challenges:○ May be complex or hard to penetrate○ May be scattered, inefficient, or totally lacking
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