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Chapter 8
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Explain why companies use marketing channels and discuss the functions these channels perform. Discuss how channel members interact and how they organize to perform the work of the channel. Identify the major channel alternatives open to a company. Explain how companies select, motivate, and evaluate channel members. Discuss the nature and importance of marketing logistics and integrated supply chain management.
Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall 10- 2
First Stop
Enterprise Leaves Competitors in the Dust!
Competitive Market
Background: Hertz and Avis were historically #1 and #2 in car rental market. In the late 1990s Enterprise became #1 in revenues, profits, locations and cars, and is currently 50% larger than Hertz. How Did They Do It? Enterprise catered to the home-city market via rental sites in neighborhood areas. Enterprises offer to pick customers up at repair shops, accident sites, etc., became the theme of its value proposition.
Growth at Enterprise
Tapping New Markets: Enterprise expanded distribution to the airport market, and acquired Vanguard Car Rental group in 2007. More recently, Enterprise has ventured into the car-sharing and hourly rental market, called WeCar, in densely populated areas where many dont own vehicles. Customer Satisfaction is Key: Enterprise uses the ESQi (Enterprise Service Quality index) to measure satisfaction; managers arent promoted unless customers are satisfied.
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Firms that supply the raw materials, components, parts, and other elements necessary to create a good. Downstream: Marketing channel partners that link the firm to the customer.
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network made up of the company, suppliers, distributors, and ultimately customers who partner with each other to improve the performance of the entire system in delivering customer value.
Marketing channel:
A
set of interdependent organizations that help make a product or service available for use or consumption by the consumer or business users.
Channel decisions affect other marketing decisions. Channel decisions can lead to competitive advantage.
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use of intermediaries results from their greater efficiency in making goods available to target markets. Channel members offer the firm more than it can achieve on its own in terms of:
Contacts. Experience. Specialization. Scale of operation.
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Transaction
completion:
Information Promotion Contact Matching Negotiation
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Transaction
fulfillment:
Physical
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member is assigned tasks it can do best. All members cooperate to attain overall channel goals.
conflict occurs among firms at the same level of the channel (e.g., retailer to retailer). Vertical conflict occurs between different levels of the same channel (e.g., wholesaler to retailer).
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of one or more independent producers, wholesalers, and retailers, each a separate business seeking to maximize its own profits even at the expense of profits for the system as a whole.
distribution channel structure in which producers, wholesalers, and retailers act as a unified system. One channel member owns the other, has contracts with them, or has so much power that they all cooperate.
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Corporate VMS:
Vertical
Contractual VMS:
Vertical
marketing system that combines successive stages of production and distribution under single ownership. Channel leadership is established via common ownership. marketing system in which independent firms at different levels of production/distribution join together through contracts to obtain more economies of scale than they could alone.
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or more companies at one level join together to follow a new marketing opportunity.
when a single firm sets up two or more marketing channels to reach one or more customer segments. Also called hybrid marketing channel system. Offers many advantages.
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occurs when product and service producers cut out traditional intermediaries or displace resellers with radical new types of intermediaries.
Example: Airline firms sell tickets directly to consumers via the Internet.
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presents both problems and opportunities for both producers and resellers.
Resellers and intermediaries must innovate to survive. Producers must seek additional direct channels to remain competitive, though channel conflict often results.
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effective marketing channels by analyzing consumer needs, setting channel objectives, identifying major alternatives, and evaluating them.
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consumers want to buy from nearby locations or are they willing to travel? Do they want to buy-in person, by phone, or online? Do they value breadth of assortment or do they prefer specialization? Do consumers want many add-on services?
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of customer-service requirements. Nature of the company. The firms products. Marketing intermediaries. Competitors. Environment.
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of intermediaries:
criteria:
A company compares the likely sales, costs, and profitability of different channel alternatives.
Control
issues:
criteria:
country has its own unique distribution system. Distribution systems can be complex with many layers and a large number of intermediaries. Distribution systems in developing countries may be scattered or inefficient. Customs and government regulation can restrict distribution in global markets.
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channel members.
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prevent the exclusionary tactics that some firms might use to keep another from using a desired channel. Situations with the potential to violate Clayton Act include:
Exclusive
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.
can gain a competitive advantage when logistics result in better service or lower prices. Improved logistics can lower costs. Increased product variety has created a need for improved logistics management. Improvements in information technology have created the means for major gains in distribution efficiency. Logistics affect the environment as well as the firms environmental sustainability efforts.
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Warehousing:
How
Inventory
management:
Balance
between too much and too little inventory Just-in-time logistics systems RFID or smart tag technology
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Internet Intermodal
transportation
Piggyback,
Requires:
logistics concept that emphasizes teamwork, both inside the company and among all the marketing channel organizations, to maximize the performance of the entire distribution system.
teamwork inside the
Cross-functional
1. 2. 3. 4. 5.
Explain why companies use marketing channels and discuss the functions these channels perform. Discuss how channel members interact and how they organize to perform the work of the channel. Identify the major channel alternatives open to a company. Explain how companies select, motivate, and evaluate channel members. Discuss the nature and importance of marketing logistics and integrated supply chain management.
Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall 10- 32