MarketingChannels:DeliveringCustomerValueChapter10Copyright2011,PearsonEducationInc.,PublishingasPrentice-Hall10-21.Explainwhycompaniesusemarketingchannelsanddiscussthefunctionsthesechannelsperform.2.Discusshowchannelmembersinteractandhowtheyorganizetoperformtheworkofthechannel.3.Identifythemajorchannelalternativesopentoacompany.4.Explainhowcompaniesselect,motivate,andevaluatechannelmembers.5.Discussthenatureandimportanceofmarketinglogisticsandintegratedsupplychainmanagement.RestStop:PreviewingtheConceptsCopyright2011,PearsonEducationInc.,PublishingasPrentice-Hall10-3EnterpriseLeavesCompetitorsintheDust!FirstStopCompetitiveMarketBackground:HertzandAviswerehistorically#1and#2incarrentalmarket.Inthelate1990’sEnterprisebecame#1inrevenues,profits,locationsandcars,andiscurrently50%largerthanHertz.HowDidTheyDoIt?Enterprisecateredtothe“home-city”marketviarentalsitesinneighborhoodareas.Enterprise’soffertopickcustomersupatrepairshops,accidentsites,etc.,becamethethemeofitsvalueproposition.GrowthatEnterpriseTappingNewMarkets:Enterpriseexpandeddistributiontotheairportmarket,andacquiredVanguardCarRentalgroupin2007.Morerecently,Enterprisehasventuredintothe“car-sharing”andhourlyrentalmarket,called“WeCar”,indenselypopulatedareaswheremanydon’townvehicles.CustomerSatisfactionisKey:EnterpriseusestheESQi(EnterpriseServiceQualityindex)tomeasuresatisfaction;managersaren’tpromotedunlesscustomersaresatisfied.Copyright2011,PearsonEducationInc.,PublishingasPrentice-Hall10-4SupplyChainsandtheValueDeliveryNetworkProducingandmakingproductsavailabletobuyersrequiresbuildingrelationshipswith“upstream”and“downstream”supplychainpartners.–Upstream:Firmsthatsupplytherawmaterials,components,parts,andotherelementsnecessarytocreateagood.–Downstream:Marketingchannelpartnersthatlinkthefirmtothecustomer.Copyright2011,PearsonEducationInc.,PublishingasPrentice-Hall10-5ValueDeliveryNetworkThenetworkmadeupofthecompany,suppliers,distributors,andultimatelycustomerswho“partner”witheachothertoimprovetheperformanceoftheentiresystemindeliveringcustomervalue.Copyright2011,PearsonEducationInc.,PublishingasPrentice-Hall10-6SupplyChainsandtheValueDeliveryNetworkMarketingchannels,suchasretailers,representthe“downstream”sideofthevaluedeliverynetwork.Copyright2011,PearsonEducationInc.,PublishingasPrentice-Hall10-7MarketingChannelsAsetofinterdependentorganizationsthathelpmakeaproductorserviceavailableforuseorconsumptionbytheconsumerorbusinessusers.Copyright2011,PearsonEducationInc.,PublishingasPrentice-Hall10-8NatureandImportanceofMarketingChannelsMarketingchanneldecisions:–Affectothermarketingdecisions,suchaspricingorproductdesign.–Canleadtocompetitiveadvantage.WatchthisvideotoseehowProgressive’schanneldecisionsledtocompetitiveadvantage.ClickonflimstripiconatlefttoplayvideoCopyright2011,PearsonEducationInc.,PublishingasPrentice-Hall10-9Figure10.1:HowAddingADistributorReducestheNumberofChannelTransactionsCopyright2011,PearsonEducationInc.,PublishingasPrentice-Hall10-10NatureandImportanceofMarketingChannelsHowchannelmembersaddvalue:–Theuseofintermediariesresultsfromtheirgreaterefficiencyinmakinggoodsavailabletotargetmarkets.Copyright2011,PearsonEducationInc.,PublishingasPrentice-Hall10-11NatureandImportanceofMarketingChannelsHowchannelmembersaddvalue:–Channelmemberscanoffermore:•Contacts.•Experience.•Specialization.•Scaleofoperation.–Channelmembersmayperformmanyfunctions.Copyright2011,PearsonEducationInc.,PublishingasPrentice-Hall10-12NatureandImportanceofMarketingChannelsTransactionfulfillment:–Physicaldistribution–Financing–RisktakingTransactioncompletion:–Information–Promotion–Contact–Matching–NegotiationKeyfunctionsperformedbychannelmembers:Copyright2011,PearsonEducationInc.,PublishingasPrentice-Hall10-13Figure10.2:CustomerandBusinessMarketingChannelsCopyright2011,PearsonEducationInc.,PublishingasPrentice-Hall10-14NatureandImportanceofMarketingChannelsNumberofchannellevels:–Thenumberofintermediarylevelsindicatesthelengthofachannel.•Directmarketingchannels–Havenointermediarylevelsbetweenthemanufacturerandthecustomer.•Indirectmarketingchannels–Containsoneormoreintermediaries.–Allchannelinstitutionsareconnectedbyseveraltypesofflows.Copyright2011,PearsonEducationInc.,PublishingasPrentice-Hall10-15ChannelBehaviorandOrganizationThechannelwillbemosteffectivewhen:–Eachmemberisassignedtasksitcandobest.–Allmemberscooperatetoattainoverallchannelgoals.Otherwise,channelconflictcanoccur:–Horizontalconflictoccursamongfirmsatthesamelevelofthechannel(e.g.,retailertoretailer).–Verticalconflictoccursbetweendifferentlevelsofthesamechannel(e.g.,wholesalertoretailer).Someconflictcanbehealthycompetition.Copyright2011,PearsonEducationInc.,PublishingasPrentice-Hall10-16MarketinginActionGoodyear’s1992decisiontoselltiresviaSam’s,Wal-Mart,andSearscreatedconflictwithit’sprizednetworkofindependentdealers.Copyright2011,PearsonEducationInc.,PublishingasPrentice-Hall10-17Figure10.3:ComparisonofConventionalDistributionChannelwithVerticalMarketingSystemCopyright2011,PearsonEducation