MarketingChannelsandSupplyChainManagementChapter1313-1Objectives•Knowwhycompaniesusedistributionchannelsandunderstandthefunctionsthatthesechannelsperform.•Learnhowchannelmembersinteractandhowtheyorganizetoperformtheworkofthechannel.•Knowthemajorchannelalternativesthatareopentoacompany.13-2Objectives•Comprehendhowcompaniesselect,motivate,andevaluatechannelmembers.•Understandthenatureandimportanceofmarketinglogisticsandintegratedsupplychainmanagement.13-3•Dominatesworld’smarketsforheavyconstructionandminingequipment.•Independentdealersarekeytosuccess•Dealernetworkislinkedviacomputers•Caterpillarstressesdealerprofitability,extraordinarydealersupport,personalrelationships,dealerperformanceandfull,honest,andfrequentcommunicationsCaterpillarCaseStudy13-4Definition•ValueDeliveryNetworkThenetworkmadeupofthecompany,suppliers,distributors,andultimatelycustomerswho“partner”witheachothertoimprovetheperformanceoftheentiresystem.13-5•ChannelchoicesaffectotherdecisionsinthemarketingmixPricing,Marketingcommunications•Astrongdistributionsystemcanbeacompetitiveadvantage•Channeldecisionsinvolvelong-termcommitmentstootherfirmsNature&ImportanceofMarketingChannels13-6•HowChannelMembersAddValueIntermediariesrequirefewercontactstomovetheproducttothefinalpurchaser.Intermediarieshelpmatchproductassortmentdemandwithsupply.Intermediarieshelpbridgemajortime,place,andpossessiongapsthatseparateproductsfromthosewhowouldusethem.Nature&ImportanceofMarketingChannels13-7KeyFunctionsPerformedbyChannelMembersNature&ImportanceofMarketingChannels•Information•Promotion•Contact•Matching•Negotiation•PhysicalDistribution•Financing•Risktaking13-8•NumberofChannelLevelsThenumberofintermediarylevelsindicatesthelengthofamarketingchannel.DirectChannelsIndirectChannelsProducerslosemorecontrolandfacegreaterchannelcomplexityasadditionalchannellevelsareadded.Nature&ImportanceofMarketingChannels13-9ChannelMembersAreConnectedViaAVarietyofFlowsNature&ImportanceofMarketingChannels•PhysicalFlow•PaymentFlow•InformationFlow•PromotionFlow•FlowofOwnership13-10•ChannelConflictOccurswhenchannelmembersdisagreeonroles,activities,orrewards.TypesofConflict:Horizontalconflict:occursamongfirmsatthesamechannellevelVerticalconflict:occursamongfirmsatdifferentchannellevelsChannelBehaviorandOrganization13-11•VerticalMarketingSystemsCorporateVMSContractualVMSManufacturer-sponsoredretailerfranchisesystemManufacturer-sponsoredwholesalerfranchisesystemService-firm-sponsoredretailerfranchisesystemAdministeredVMSChannelBehaviorandOrganization13-12•MultichannelDistributionSystemsAlsocalledhybridmarketingchannelsOccurswhenafirmusestwoormoremarketingchannelsHybridmarketinghasmanyadvantages•ChangingChannelOrganizationDisintermediationChannelBehaviorandOrganization13-13•Step1:AnalyzingConsumerNeedsCostandfeasibilityofmeetingneedsmustbeconsidered•Step2:SettingChannelObjectivesSetchannelobjectivesintermsoftargetedlevelofcustomerserviceManyfactorsinfluencechannelobjectivesChannelDesignDecisions13-14•Step3:IdentifyingMajorAlternativesTypesofintermediariesCompanysalesforce,manufacturer’sagency,industrialdistributorsNumberofmarketingintermediariesIntensive,selective,andexclusivedistributionResponsibilitiesofchannelmembersChannelDesignDecisions13-15•Step4:EvaluatingMajorAlternativesEconomiccriteriaControlissuesAdaptivecriteriaChannelDesignDecisions13-16•DesigningInternationalDistributionChannelsGlobalmarketersusuallyadapttheirchannelstrategiestostructuresthatexistwithinforeigncountriesKeychallenges:MaybecomplexorhardtopenetrateMaybescattered,inefficient,ortotallylackingChannelDesignDecisions13-17•SelectingChannelMembersIdentifycharacteristicsthatdistinguishthebestchannelmembers•ManagingandMotivatingChannelMembersPartnerrelationshipmanagement(PRM)iskey•EvaluatingChannelMembersPerformanceshouldbecheckedagainststandardsChannelmembersshouldberewardedorreplacedasdictatedbyperformanceChannelManagementDecisions13-18•ExclusivedistributionOnlycertainoutletsareallowedtocarryafirm’sproducts•ExclusivedealingExclusiveterritorialagreementsTyingagreementsPublicPolicyandDistributionDecisions13-19•MarketingLogisticsOutbounddistributionInbounddistributionReversedistributionInvolvestheentiresupplychainmanagementsystemMarketingLogisticsandSupplyChainManagement13-20•WhyGreaterEmphasisisBeingPlacedonLogistics:OffersfirmsacompetitiveadvantageCanyieldcostsavingsGreaterproductvarietyrequiresimprovedlogisticsImprovementsindistributionefficiencyarepossibleduetoinformationtechnologyMarketingLogisticsandSupplyChainManagement13-21•GoalsoftheLogisticsSystemNosystemcanbothmaximizecustomerserviceandminimizecosts.Firmsmustfirstweighthebenefitsofhigherserviceagainstthecosts.Stategoalsintermsofatargetedlevelofcustomerserviceattheleastcost.MarketingLogisticsandSupplyChainManagement13-22•MajorLogisticsFunctionsWarehousingInventoryManagementTransportationLogisticsInformationManagementMarketingLogisticsandSupplyChainManagement13-23TransportationCarrierOptionsMarketingLogisticsan