Chapter 8 Marketing channels and logistics decisions

1. Chapter 8Marketing channels and logistics decisions

2. Lesson objectives 1 Explain what a marketing channel is and why intermediaries are needed 2 Define the types of channel intermediaries and describe their functions and activities 3 Describe the channel structures for consume and business-to-business products and discuss alternative channel arrangements

3. Lesson objectives (cont.) 4 Discuss the issues that influence channel strategy 5 Explain channel leadership,conflict and partnering 6 Discuss logistics and supply chain management and their evolution into distribution practice 7 Discuss the concept of balancing logistics service and cost

4. Lesson objectives (cont.) 8 Describe the integrated functions of the supply chain 9 Discuss new technology and emerging trends in logistics 10 Identify the special problems and opportunities associated with distribution in service organisations 11 Discuss channel structure and logistics issues in global markets

5. Learning objective 1 Explain what a marketing channel is and why intermediaries are needed Define the term marketing

6. Marketing channel Supply chain 1 Marketing channels A set of interdependent organisations that ease the transfer of ownership as products move from producer to business user or consumer. The connected chain of all the business entities, both internal and external to the company, that perform or support the logistics function.

7. 1 Marketing channel functions Channels fulfill three important functions: • specialisation and division of labour • overcoming discrepancies • providing contact efficiency.

8. 1 Specialisation and division of labour • Provides economies of scale • Aids producers who lack resources to market directly • Builds good relationships with customers

9. Discrepancy of quantity The difference between the amount of product produced and the amount an end user wants to buy. Discrepancy of assortment The lack of all the items a customer needs to receive full satisfaction from a product or products. 1 Overcoming discrepancies

10. Temporal discrepancy Spatial discrepancy 1 Overcoming discrepancies A situation that occurs when a product is produced but a customer is not ready to buy it. The difference between the location of a producer and the location of widely scattered markets.

11. 1 Contact efficiency LG Sony Sharp Toshiba LG Sony Sharp Toshiba Harvey Norman

12. Learning objective 2 Define the types of channel intermediaries and describe their functions and activities Describe four marketing management philosophies.

13. 2 Channel intermediaries Retailer A channel intermediary that sells mainly to customers. Merchant wholesaler An institution that buys goods from manufacturers, takes title to goods, stores them and resells and ships them. Agents and brokers Wholesaling intermediaries who facilitate the sale of a product by representing a channel member.

14. 2 Channel intermediaries (cont.) Retailers Take title to goods Merchant wholesalers Take title to goods Agents and brokers Do not take title to goods

15. 2 Channel functions performed by intermediaries Contacting/promotion Transactionalfunctions Negotiating Risk-taking Physically distributing Logistical functions Storing Sorting Facilitatingfunction Researching Financing

16. 2 Logistics The process of strategically managing the efficient flow and storage of raw materials, in-process inventory and finished goods from point of origin to point of consumption.

17. Learning objective 3 Describe the channel structures for consumer and business-to-business products and discuss alternative channel arrangements Describe four marketing management philosophies.

18. 3 Direct channel A distribution channel in which producers sell directly to consumers.

19. 3 Channels for consumer products Retailer channel Wholesaler channel Direct channel Agent/broker channel Producer Producer Producer Producer Agents orbrokers Wholesalers Wholesalers Retailers Retailers Retailers Consumers Consumers Consumers Consumers

20. 3 Channels for business-to-business products Agent/broker industrialchannel Industrialdistributor Agent/broker channel Direct channel Direct channel Producer Producer Producer Producer Producer Agents or brokers Agents or brokers Industrialdistributor Industrialdistributor Industrialuser Industrialuser Industrialuser Industrialuser Governmentbuyer

21. 3 Alternative channel arrangements • Multiple channels • Non-traditional channels • Adaptive channels • Strategic channel alliances

22. Learning objective 4 Discuss the issues that influence channel strategy

23. 4 Supply chain management A management system that coordinates and integrates all of the activities performed by supply chain members into a seamless process, from the source to the point of consumption.

24. 4 Supply chain management (cont.) Results of supply chain management: • focus on innovative solutions • competitive with focus on customer satisfaction • sychronised flow • customer value.

25. 4 Role of supply chain management • Communicator of customer demand from point of sale to supplier • Physical flow process that engineers the movement of goods

26. 4 Supply chain management activities • Determine channel strategy and level of distribution intensity • Manage relationships in the supply chain • Manage the logistical components of the supply chain • Balance the costs of the supply chain with the service level demanded by customer

27. 4 Benefits of supply chain management • Reduced costs • Improved service • Enhanced revenues

28. Learning objective 5 Explain channel leadership, conflict and partnering

29. 5 Channel strategy decisions Issues that influencechannel strategy Factors affecting channel choice Levels ofdistributionintensity Market factors Intensive distribution Product factors Selective distribution Producer factors Exclusive distribution

30. 5 Market factors • Customer profiles • Consumer or industrial customer • Size of market • Geographic location

31. 5 Product factors • Product complexity • Product price • Product life cycle • Product delicacy

32. 5 Producer factors • Producer resources • Number of product lines • Desire for channel control

33. 5 Levels of distribution intensity Intensity level Objective Number of intermediaries Intensive Achieve mass-market selling. Convenience goods. Many Selective Work with selected intermediaries. Shopping and some specialty goods. Several Exclusive Work with single intermediary. Specialty goods and industrial equipment. One

34. 5 Managing channel relationships Social dimensions of channels • Channel power • Channel control • Channel leadership • Channel conflict • Channel partnering

35. Channel power A channel member’s capacity to control or influence the behaviour of other channel members Channel control A situation that occurs when one marketing channel member intentionally affects another member’s behaviour. Channel leader A member of a marketing channel that exercises authority/power over the activities of other members. 5 Channel power, control and leadership

36. 5 Channel conflict A clash of goals and methods between distribution channel members. Horizontal conflict Occurs among channel members on the same level. Vertical conflict Occurs among channel members at different levels.

37. 5 Channel partnering The joint effort of all channel members to create a supply chain that serves customers and creates a competitive advantage.

38. Learning objective 6 Discuss logistics and supply chain management and their evolution into distribution practice

39. 6 Supply chain management Management system that coordinates all of the activities performed by supply chain members from source to the point of consumption that results in enhanced customer and economic value.

40. 6 Supply chain activities • Managing the movement of information and customer requirements up and down the supply chain. • Managing the movement and storage of raw materials and parts from their sources to the production site. • Managing the movement of raw materials, semi-manufactured products and finished products within and among plants, warehouses and distribution centres.

41. 6 Supply chain activities (cont.) • Planning production in response to consumer demand. • Planning and coordinating the physical distribution of finished goods to intermediaries and final buyers. • Cultivating and coordinating strategic partnerships with supply chain members.

42. Learning objective 7 Discuss the concept of balancing logistics service and costs

43. 7 Customers want … • availability • timeliness • quality • undamaged goods • minimal order effort • consistent delivery … balanced with costs

44. Learning objective 8 Describe the integrated functions of the supply chain

45. 8 Integrated logistical components of the supply chain Sourcing & procurement Production scheduling Supplychainteam Order processing & customer service Logistics information system Inventory control Warehouse & materials handling Transportation

46. 8 Sourcing and procurement Role of purchasing departments • Plan purchasing strategies • Develop specifications • Select suppliers • Negotiate price • Negotiate service levels

47. 8 Just-in-time (JIT) manufacturing A process that redefines and simplifies manufacturing by reducing inventory levels and delivering raw materials just when they are needed on the production line.

48. 8 Benefits of JIT • Reduces raw material inventories • Shortens lead times • Creates better supplier relationships • Reduces production and storeroom costs • Reduces paperwork

49. 8 Electronic data interchange Information technology that replaces paper documents that accompany business transactions.

50. 8 Stock control system A method of developing and maintaining an adequate assortment of materials or products to meet customer’s demand.