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The network made up of the company, suppliers, distributors, and ultimately customers who partner with each other to improve the performance of the entire system. A Value Delivery is a company's supply chain and how it partners with specific suppliers and distributors in the process of producing goods and delivering them to market. It involves using competitive advantages external to the firm (suppliers, distributors, customers)
Marketing Channels
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
A strong distribution system can be a competitive advantage Channel decisions involve long-term commitments to other firms
Intermediaries offer greater efficiency. Intermediaries have better contacts, experience, specialization and scale of operations, Intermediaries transform the assortment of products into assortment wanted by consumers.
Producers lose more control and face greater channel complexity as additional channel levels are added.
Overcoming Discrepancies
Discrepancy Discrepancy of of Quantity Quantity Discrepancy Discrepancy of of Assortment Assortment Temporal Temporal Discrepancy Discrepancy Spatial Spatial Discrepancy Discrepancy The The difference difference between between the the amount amount of of product product produced produced and and the the amount amount an an end end user user wants wants to to buy. buy. The The lack lack of of all all the the items items a a customer customer needs needs to to receive receive full full satisfaction from a product satisfaction from a product or or products. products. A A situation situation that that occurs occurs when when a a product product is is produced produced but but a a customer customer is is not not ready ready to to buy buy it. it. The The difference difference between between the the location location of of a a producer producer and and the the location location of of widely widely scattered scattered markets. markets.
Contact Efficiency
Motorola Motorola LG LG
Sony Sony Ericssons Ericssons
Nokia Nokia
Motorola Motorola
LG LG
Nokia Nokia
Channel Intermediaries
Retailer Retailer Merchant Merchant Wholesaler Wholesaler Agents Agents and and Brokers Brokers
A A channel channel intermediary intermediary that that sells sells mainly mainly to to customers. customers. An An institution institution that that buys buys goods goods from from manufacturers, manufacturers, takes takes title title to to goods, goods, stores stores them, them, and resells and ships them. and resells and ships them. Wholesaling Wholesaling intermediaries intermediaries who who facilitate facilitate the the sale sale of of a a product product by by representing representing channel channel member. member.
Intermediaries
Retailer
Consumer Consumer
Consumer
Direct Channel
The channel structures for consumer and businessbusiness-toto-business products and alternative channel arrangements.
A distribution channel in which producers sell directly to consumers.
Direct Channel
Producer
Producer
Producer
Producer
Producer
Agents or Brokers Industrial Distributor Industrial User Industrial User Industrial User
Using the Internet to make goods & services available to consumers or business buyers. Combine electronic and traditional intermediaries to create utility. Electronic intermediaries can not perform some logistical functions Inability of many electronic intermediaries to master the logistical function in a cost-effective manner contributed to their demise in the dot-com crash of 2001.
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Multiple Channels
In some situations producers use dual distribution, an arrangement whereby a firm reaches different buyers by employing two or more different types of channels for the same basic product. For instance, GE sells its large appliances directly to home and apartment builders but uses retail stores including Walmart to sell to consumers.
Multiple Channels-2
In some instance firms pair multiple channels with a multi-brand strategy. This is done to minimize cannibalization of the firms family brand and to differentiate the channels. For example Hallmark sells its Hallmark greeting cards through Hallmark stores and select department stores and its Ambassador brand of cards through discount stores and drug stores chains
Adaptive Channels
Adaptive channels help companies meet infrequent but critical situations such as a rush order on an item that is out of stock or a request for a service that that the distributor has never supplied. In these situations channel member share their resources to meet the demand instead of loosing the business to a competitor By sharing resources and capabilities in novel ways, the channel members can take advantage of profit making opportunities that they could not avail themselves acting alone.
Adaptive Channels
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Factors Factors Affecting Affecting Channel Channel Choice Choice Market Market Factors Factors Product Product Factors Factors Producer Producer Factors Factors
Levels Levels of of Distribution Distribution Intensity Intensity Intensive Intensive Distribution Distribution Selective Selective Distribution Distribution Exclusive Exclusive Distribution Distribution
Producer factors
Manufacturer has adequate resources to perform channel functions Broad product line Channel control important
Product factors
Competitive factors
Selective Selective
Several Several
Exclusive Exclusive
One One
Types of Conflict
Horizontal conflict: occurs among firms at the same channel level Vertical conflict: occurs among firms at different channel levels
Channel Relationships
Supply Chain Management Channel Captain: The dominant member (producer,
wholesaler, or retailer) establishes channel policies & coordinates the marketing mix Leadership by example Cooperation.. common objectives Conflict resolution Power to enforce
Power
Control
Performance
Distribution Decisions
Exclusive distribution: channel policy in which a firm grants exclusive rights to a single wholesaler or retailer to sell its products and a particular geographic area Intensive distribution: Stocking the product in as many outlets as possible Selective distribution: channel policy in which a firm chooses only a limited number of retailers to handle its product line Exclusive-dealing agreement: arrangement between manufacturer and marketing intermediary that prohibits the intermediary from handling competing product lines Tying agreement: Arrangement that requires a marketing intermediary to carry items other than those they want to sell
Disintermediation
Occurs when product and service producers cut out intermediaries and go directly to final buyers, or when radically new types of channel intermediaries displace traditional ones.
The Internet has made the disintermediation of many traditional retailers possible.
Pak Court
If Xerox required every business who bought or leased their copiers to also buy their brand of paper, it would be a tying agreement.
Station storage,
Consumer
Consumer
Consumer
Questions
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(Contractual Systems)
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Explain what is meant by a marketing channel of distribution and why intermediaries are needed? Distinguish among traditional marketing channels, electronic marketing channels, and different types of vertical marketing systems. Describe the factors and considerations that affect a company's choice and management of a marketing channel. Recognize how conflict, cooperation, and legal considerations affect marketing channel relationships.