Marketing Managements- Asc1 Chapter 15

Front 1

Marketing Channels

Back 1

sets of interdependent organizations participating in the process of making a product or service available for use or consumption.

They are the set of pathways a product or service follows after production, culminating in purchase and consumption by the final end user.

Front 2

Merchants

Back 2

such as wholesalers and retailers—buy, take title to, and resell the merchandise

Front 3

Agents

Back 3

brokers, manufacturers’ representatives, sales agents—search for customers and may negotiate on the producer’s behalf but do not take title to the goods

Front 4

facilitators

Back 4

transportation companies, independent warehouses, banks, advertising agencies—assist in the distribution process but neither take title to goods nor negotiate purchases or sales

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marketing channel system

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is the particular set of marketing channels a firm employs, and decisions about it are among the most critical ones management faces.

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Marketing channels must not just serve markets, they must also _______ markets

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Make

Front 7

The marketing channel chosen

Back 7

affects all other marketing decisions

Front 8

Channel decisions include

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relatively long term commitments with other firms as well as a set of policies and procedures.

Front 9

Channel choices themselves depend on

Back 9

the company’s marketing strategy with respect to segmentation, targeting, and positioning.

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push strategy

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uses the manufacturer’s sales force, trade promotion money, or other means to induce intermediaries to carry, promote, and sell the product to end users.

A push strategy is particularly appropriate when there is low brand loyalty in a category, brand choice is made in the store, the product is an impulse item, and product benefits are well understood

Front 11

pull strategy

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the manufacturer uses advertising, promotion, and other forms of communication to persuade consumers to demand the product from intermediaries, thus inducing the intermediaries to order it.

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A __________ strategy is more effective when accompanied by a well-designed __________ strategy

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push
pull...

that activates consumer demand. On the other hand, without at least some consumer interest, it can be very difficult to gain much channel acceptance and support, and vice versa for that matter.

Front 13

Today’s successful companies typically employ _____________ and ______________, multiplying the number of “go-to-market” channels in any one market area

Back 13

Hybrid Channels

Multichannel Marketing

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Hybrid channels or multichannel marketing

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occurs when a single firm uses two or more marketing channels to reach customer segments.

In multichannel marketing, each channel targets a different segment of buyers, or different need states for one buyer, and delivers the right products in the right places in the right way at the least cost.

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What happens when a multichannel marketing channel is not running efficiently

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there can be channel conflict, excessive cost, or insufficient demand.

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Channel integration

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allows customers to

Order a product online and pick it up at a convenient retail location

Return an online-ordered product to a nearby store of the retailer

Receive discounts and promotional offers based on total online and offline purchases

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Demand Chain Planning

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Think of the target market first and build supply chain backward from that.

Front 18

Value network

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a business analysis perspective that describes social and technical resources within and between businesses

A value network includes a firm’s suppliers and its suppliers’ suppliers, and its immediate customers and their end customers. The value network includes valued relationships with others such as university researchers and government approval agencies

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Demand chain planning yields several insights

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1. estimate whether more money is made upstream or downstream, in case it can integrate backward or forward.
2. more awareness of disturbances anywhere in the supply chain that might change costs, prices, or supplies.
3. can go online with their business partners to speed communications, transactions, and payments; reduce costs; and increase accuracy.

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Managing a value network means making increasing investments in _______________________and ________

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Information technology

software

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Companies have invited firms such as SAP and Oracle to

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design comprehensive enterprise resource planning systems to manage cashflow, manufacturing, human resources, purchasing, and other major functions within a unified framework. This is to carry out business functions more seamlessly.

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CRM

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customer relationship management software

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SCM

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supply chain management

Front 24

Why do companies WANT to work with intermediaries?

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Intermediaries can be more efficient at reaching the target market because of their contacts, experience, specialization and scale of operation.

Front 25

Many producers lack the __________ and _____________to sell directly on their own

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Financial resources

Expertise

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A marketing channel preforms the work of

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moving goods from producers to consumers

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forward flow of activity

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from the company to the customer

storage and movement, title, and communications

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backward flow of activity

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from customers to the company.

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activities that occcur backward and forward

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information, negotiation, finance, and risk taking

Front 30

All channel functions have three things in common:

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They use up scarce resources; they can often be performed better through specialization; and they can be shifted among channel members

Front 31

Shifting some channel functions to intermediaries lowers the producer’s costs and prices, but

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the intermediary must add a charge to cover its work. If the intermediaries are more efficient than the manufacturer, prices to consumers should be lower

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If consumers perform some functions themselves,

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They should enjoy even lower prices

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Changes in channel institutions thus largely reflect

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the discovery of more efficient ways to combine or separate the economic functions that provide assortments of goods to target customers

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The ___________ and the ___________ are part of every channel

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producer

customer

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Zero-level channel

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also called a direct marketing channel

consists of a manufacturer selling directly to the final customer

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one-level channel

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contains one intermediary such as a retailer

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two level channel

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contains two intermediary. typically wholesale and retailer

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Three level channel

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contains three intermediaries.

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Reverse flow channels

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are important

(1) to reuse products or containers (such as refillable chemical-carrying drums)

(2) to refurbish products for resale (such as circuit boards or computers)

(3) to recycle products (such as paper)

(4) to dispose of products and packaging.

Front 40

Reverse-flow intermediaries include

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manufacturers’ redemption centers, community groups, trash-collection specialists, recycling centers, trash-recycling brokers, and central processing warehousing

Front 41

To design a marketing channel system,

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marketers analyze customer needs and wants, establish channel objectives and constraints, and identify and evaluate major channel alternatives.

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Consumers may choose the channels they prefer based on

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price, product assortment, and convenience, as well as their own shopping goals

Front 43

Channels produce 5 service outlets

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1. Lot size—The number of units the channel permits a typical customer to purchase on one occasion.
2. Waiting and delivery time—The average time customers wait for receipt of goods.
3. Spatial convenience—The degree to which the marketing channel makes it easy for customers to purchase the product.
4. Product variety—The assortment provided by the marketing channel. Normally, customers prefer a greater assortment because more choices increase the chance of finding what they need, although too many choices can sometimes create a negative effect.

Front 44

Marketers should state their channel objectives

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in terms of service output levels and associated cost and support levels.

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Under competitive conditions,

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channel members should arrange their functional tasks to minimize costs and still provide desired levels of service

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Channel objectives vary

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with product characteristics.

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When the economy is depressed producers want to

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move goods to market using shorter channels and without services that add to the final price

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Legal regulations and restrictions also affect channel design.

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U.S. law looks unfavorably on channel arrangements that substantially lessen competition or create a monopoly.

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Sales forces can handle complex products and transactions, but

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they are expensive.

Front 50

The Internet is inexpensive but

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may not be as effective with complex products

Front 51

Distributors can create sales, but

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the company loses direct contact with customers.

Front 52

Channel alternatives differ in three ways:

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the types of intermediaries
the number needed
the terms and responsibilities of each

Front 53

Three strategies based on the number of intermediaries

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1. exclusive distribution
2. selective distribution
3. intensive distribution

Front 54

Exclusive distribution

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means severely limiting the number of intermediaries. It’s appropriate when the producer wants to maintain control over the service level and outputs offered by the resellers, and it often includes exclusive dealing arrangements.

By granting exclusive distribution, the producer hopes to obtain more dedicated and knowledgeable selling. It requires a closer partnership between seller and reseller

Front 55

Selective distribution

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Relies on only some of the intermediaries willing to carry a particular product. Whether established or new, the company does not need to worry about having too many outlets; it can gain adequate market coverage with more control and less cost than intensive distribution.

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Intensive distribution

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places the goods or services in as many outlets as possible. This strategy serves well for snack foods, soft drinks, newspapers, candies, and gum—products consumers buy frequently or in a variety of locations

Front 57

The main elements in the “trade-relations mix”

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price policies
conditions of sale
territorial rights
specific services to be performed by each party.

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Price policy

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calls for the producer to establish a price list and schedule of discounts and allowances that intermediaries see as equitable and sufficient.

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Conditions of sale

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Refers to payment terms and producer guarantees. Most producers grant cash discounts to distributors for early payment. They might also offer a guarantee against defective merchandise or price declines, creating an incentive to buy larger quantities.

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Distributors’ territorial rights

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define the distributors’ territories and the terms under which the producer will enfranchise other distributors. Distributors normally expect to receive full credit for all sales in their territory, whether or not they did the selling.

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Mutual services and responsibilities

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must be carefully spelled out, especially in franchised and exclusive-agency channels. McDonald’s provides franchisees with a building, promotional support, a record-keeping system, training, and general administrative and technical assistance. In turn, franchisees are expected to satisfy company standards for the physical facilities, cooperate with new promotional programs, furnish requested information, and buy supplies from specified vendors.

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Each channel alternative needs to be evaluated against

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economic
control
adaptive criteria.