10 Product Branding and Packing Concepts 11 Business Markets and Buying Behavior 12 Developing and Managing Prices 13 Marketing Channels and SupplyChain Management 14 Retailing Direct Marketing and Wholesaling ID: 674055
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Part 4PRODUCT AND PRICE DECISIONSSlide2
10: Product, Branding, and Packing Concepts
11:
Business Markets and Buying Behavior
12: Developing and Managing Prices13: Marketing Channels and Supply-Chain Management14: Retailing, Direct Marketing, and WholesalingSlide3
Chapter 13Marketing Channels and Supply-Chain ManagementProfessor Jason
C. H. Chen, Ph.D.
School
of Business AdministrationGonzaga UniversitySpokane, WA 99258chen@jepson.gonzaga.eduSlide4
To describe the foundations of supply-chain managementTo explore the role and significance of marketing channels and supply chainsTo identify the intensity of market coverageTo examine strategic issues in marketing channels, including leadership, cooperation, and conflictTo examine physical distribution as a part of supply-chain managementTo explore legal issues in channel managementLearning ObjectivesSlide5
Customercentric
Who are the customers?
Where are the customers?
Their purchasing habitsHow to reach them?
What they need/want?
How many they need/want?
When they need/want?
How to reach them?
Demands
Products
IS/E-BUSINESS
BUSINESS
VALUE &
FOCUS: IS
Perspective
SCM
CRM
BPR
ERP
Value
Business Models & Strategies
SCM: Supply Chain Mgt.
CRM: Customer Relationship Mgt.
BPR: Business Process Reengineering
ERP: Enterprise Resources Planning Slide6
CRM Applications
Customer Relationship Management (CRM) systems store data in a single database and link CRM processes to one another.Slide7
Supply-Chain Management A set of approaches used to integrate the functions of operations management, logistics management, supply management and marketing channel management so products are produced and distributed in the right quantities, the right locations and at the right timeThe goal is to achieve optimal levels of efficiency and service
The supply chain includes all entities that facilitate product distribution and benefit from cooperative effortsSlide8
Decisions
and activities involved in making products available to customers when and where they want to purchase them
Distribution
Activities
associated with the flow and transformation of products from raw materials through to the end customer
Supply chain
Total set of managerial activities used by an organization to transform resource inputs
into ______, _______,
or both
Operations management
Foundations of
the Supply
Chain
goods
servicesSlide9
Planning, implementing, and controlling the efficient and effective flow and storage of products and information from the point of origin to
consumption in
order to meet customers’
_______ and ______
Logistics management
Processes that enable the progress of value from raw material to final customer and back to redesign and final disposition
Supply management
Set of approaches used to integrate the functions of operations, logistics, supply, and marketing channel management
Supply chain management
Foundations of the
Supply
Chain
needs
wantsSlide10
Supply Chain Management – Technology IssuesTechnology
Information technology has created almost seamless distribution processes
Information _________ has reduced costs
Increased speed, flexibility, and cooperationTechnology has improved service Increasing number of innovative goodsIncreased involvement of firms in management supply chainEffective supply-chain management is closely linked to a ________ orientation
market
sharingSlide11
Marketing channel: Group of individuals and organizations that direct the _____ of products from producers to customers within the supply chainPrimary role is to make products available at the right time at the right place in the right quantities.Providing customer satisfaction should be the driving force behind marketing channel decisionsRole of Marketing Channels in Supply Chains
flowSlide12
Marketing intermediaries: Link producers to other intermediaries or to ultimate consumers through contractual arrangements or through the purchase and resale of productsPlay key roles in customer relationship management (CRM)Through distribution activities and maintaining databases and information systemsRole of Marketing Channels in Supply Chains (cont.)Slide13
CRM Applications
Customer Relationship Management (CRM) systems store data in a single database and link CRM processes to one another.Slide14
Table 13.1 - Marketing Activities Performed by IntermediariesSlide15
Marketing channel decisions influence the rest of the marketing mix (product, promotion, and pricing)Channel decisions determine a product’s:Market presenceAccessibilityEffective marketing channels required for organizational
successMarketing channel decisions have strategic
significance
Why?Entail ____-term commitments among a variety of firms (e.g., suppliers, logistics providers, and operations firms) and ________ to change/undo marketing channel decisionsThe Significance of Marketing ChannelslongdifficultSlide16
Time utility - Making products available when the customer wants themPlace utility - Making products available in locations where customers wish to purchase them__________ utility - Customer has access to the product to use or to store for future useForm utility - Assembling, preparing, or otherwise refining the product to suit customer needsMarketing Channels Create Utility
PossessionSlide17
Marketing Channels Facilitate Exchange ___________Marketing intermediaries can reduce the costs of exchanges by performing certain services or functions efficiently
Intermediaries are specialists in facilitating exchanges
Access to and control over important resources used in the proper functioning of marketing channels
Critics accuse wholesalers of being inefficient and parasiticWhile eliminating wholesalers may lower customer prices it does not eliminate the need for the services the wholesalers provideEfficienciesSlide18
Figure 13.1 - Efficiency in Exchanges Provided by an IntermediarySlide19
Figure 13.2 - Typical Marketing Channels for Consumer Products
Direct Marketing (Internet)
Larger retailers
Most of consumer products
Eg
., Food Industry (Nabisco)
Nabisco (Wheat Thins crackers)
Food Brokers
Supermarkets, vending-machine, convenience storesSlide20
Channels for Consumer Products
A long channel may be the most efficient distribution channel for some consumer goods
When several channel intermediaries perform specialized functions, cost may be lower than when one channel member tries to perform them all
Firms that specialize in certain elements of producing a product or moving it through the channel are more effective and efficient at performing specialized tasksResults in cost efficiencies and added _____ to customersvalueSlide21
Figure 13.3 - Typical Marketing Channels for Business Products
Direct channel (>50% of business products, esp. expensive equipment)
Indus.
distri. takes title to products and carries inventories and most effective when a product has broad market appealAgent does not acquire title to the products and usually does not take possessionWhen producer wishes to cover a large geographic areaSlide22
Industrial distributor: Independent business organization that takes title to industrial products and carries inventoriesUsually sells standardized items, although some carry a wide variety of items Cost effective when a product has broad market appeal, is easily stocked and serviced, is sold in small quantities and is needed on demand
Manufacturers’ agent - Independent businessperson who sells complementary products from several producers in assigned territories and is compensated through commissions
Channels for Business ProductsSlide23
Advantages of industrial distributorPerform required selling activities in local markets at a lower cost to a manufacturerProvide customers with credit servicesPass on market information to producersReduce producers’ capital requirementsChannels for Business Products
Disadvantages
of industrial distributor
Difficult to control
Not dependable to promote
brand
Less likely to handle
items
that need specialized facilities or extra selling efforts
Lack specialized knowledge necessary to sell and service technical productsSlide24
Multiple Marketing Channels and Channel (Strategic) Alliances
____________: a new strategy whereby companies
cooperate
and
compete
at the same time with companies in their value net.
Co-opetition
is the strategy for creating the best possible outcome for a business by optimally combining competition and cooperation.
e.g
,
Covisint
and General Motors, Ford, and DaimlerChrysler.
Co-
opetitionSlide25
Figure 13.4 - Selecting Marketing Channels
Target market
income, gender
Expensive & perishableShort channelLess expensiveLong channelFragileShort channelCompetitive market
Keep cost low
Efficient channel
Government regulation
Modify existing channel
Ineffective intermediaries
Reconsider channel choice
Size
Larger (more channels)
Smaller (less
channelsSlide26
Intensity of Market CoverageIntensive
Selective
ExclusiveSlide27
Intensity of Market Coverage Slide28
Strategic Issues in Marketing ChannelsSupply-chain decision cut across all functional areas of business
Responsibilities, rewards, sanctions
Vertical vs. horizontal channel integrationSlide29
Supply chains can provide a competitive advantage for many marketersSupply chain decisions cut across all functional areas of a businessEffective and efficient supply chain can sustain a business in a variety of competitive environmentsInefficient supply chains can lead to increased costsIntegrated supply chains lead to a holistic view of the supply chainCompetitive Priorities in Marketing ChannelsSlide30
Each channel member performs a specific role in the distribution system Agrees to accept rights, responsibilities, rewards, and sanctions for nonconformityChannel partnerships can facilitate effective supply-chain management Channel cooperation reduces wasted resourcesChannel Leadership, Cooperation, and ConflictSlide31
Channel LeadershipThe channel captain must possess channel power, the ability to influence another channel member’s goal achievement.
Q: Can small retailers assume leadership roles?
Yes
, when they gain strong customer loyalty in local or regional markets.Slide32
Enables retailers, wholesalers, suppliers and logistics providers to:Speed up inventory replenishmentImprove customer serviceCut the costs of bringing products to customersWays to improve channel cooperationMarketing channel should be viewed as a unified supply chain Members should work toward common objectivesChannel member tasks must be clearly definedHow to accomplish this goal? (one word)_______
Channel Cooperation
TRUSTSlide33
Channel conflict occurs when:Self-interest creates misunderstanding about role expectations of channel membersCommunication is poor between channel membersIntermediaries overemphasize competing products or diversify into product lines traditionally handled by other intermediariesChannel ConflictSlide34
Channel members either:Combine and control activitiesPass them to another channel memberChannel functions may be transferred between intermediaries, producers, and customersVertical channel integrationA _____ channel member coordinates or manages all activities to maximize efficiencies, resulting in an effective and low-cost distribution system that does not duplicate service.Horizontal channel integrationAn organization may integrate horizontally by merging with
other organizations at the same level in the marketing channel.
Channel Integration
singleSlide35
Combines two or more stages of the channel under one managementParticipants coordinated efforts to reach a desired target marketOften effective against competition because of increased bargaining power and shared information and responsibilitiesVertical marketing system (VMS): Single channel member coordinates all activities to maximize efficienciesCorporate VMS - Combines all stages of the marketing channel under a single owner
Administered VMS - Informal coordination achieves a high level of interorganizational managementContractual VMS - Members are linked by legal agreements
Vertical Channel IntegrationSlide36
Combining organizations at the same level of operation under one managementCreates economies of scaleLarge size may:Decrease flexibilityIncrease coordination problemsRequire additional research and planningHorizontal Channel IntegrationSlide37
Physical distribution (logistics): Activities used to move products from producers to consumers and other end users_____________ - Contracting of physical distribution tasks to third partiesMost distribution activities can be outsourced to firms with expertise in specific areas___________ (e.g., CRM and Database) plays a large role in physical distribution considerations within marketing channelsCycle time: Time needed to complete a processImportant goal of physical distribution
Physical Distribution in Supply-Chain Management
Outsourcing
TechnologySlide38
Goals of Physical Distribution Slide39
Figure 13.5 - Proportional Cost of Each Physical Distribution Function Slide40
Receipt and transmission of sales order informationOrder entry - Begins when customers place ordersOrder handling - Product availability and customer credit-worthiness is verified; order assembly occursOrder delivery - Delivery is scheduled with carrierElectronic data interchange (EDI): Computer technology to integrate order processing with production, inventory, accounting, and transportationOrder ProcessingSlide41
Developing and maintaining adequate assortments of products to meet customers’ needsStockouts - Shortages of productsReorder point - Inventory level that signals the need to place a new orderOrder lead time - Average time lapse between placing the order and receiving itUsage rate - Rate at which inventory is used/soldSafety stock - Extra inventory a firm keeps
Just-in-time (JIT)
An inventory-management approach in which supplies arrive just when needed for production or
resaleInventory ManagementReorder point = (order lead time x usage rate) + _______ stocksafetySlide42
RE-ORDER POINTReorder point = (order lead time x usage rate) + _______ stock
safety
If order lead time is 10 days, usage rate is 3 units per day, and safety stock is 20 units. The reorder point is:
Reorder point = (10 * 3) + 20 = 50 unitsA lead time is the latency between the initiation and execution of a process. For example, the lead time between the placement of an order and delivery of a new car from a manufacturer may be anywhere from 2 weeks to 6 months. In industry, lead time reduction is an important part of lean manufacturing.Slide43
Physical handling of tangible goods, supplies, and resourcesEfficient materials handling can:Reduce costsDecrease number of times a good is handledImprove customer service, increasing satisfactionRadio frequency identification (RFID) - Radio waves used to track materials using scannersMaterials HandlingSlide44
Common methods used in materials handlingUnit loading - One or more boxes are placed on a pallet or skidContainerization - Consolidating many items into a single, large container that is sealed at its point of origin and opened at its destinationMaterials HandlingSlide45
Design and operation of facilities for storing and moving goodsCreates time utility Helps stabilize prices and the availability of seasonal itemsChoice of warehouse is an important strategic considerationCorrect warehouse can reduce transportation and inventory costs and improve customer serviceWarehousingSlide46
Types of WarehousesPrivate
Public
movingSlide47
Movement of products from where they are made to intermediaries and end users The most expensive physical distribution function
Transportation
Transportation Mode
RailroadsHeavy, bulky freight; long distances over landTrucksThe most flexible schedules and routes; more expensive and vulnerable to weather; size and weight restrictions
Pipelines
Most automated; dependable; contents subject to shrinkage
Waterways
Cheapest method; heavy, low-value nonperishables; markets must be accessible by water
Airways
Fastest and most expensive; high-value, low-bulk, or perishable goodsSlide48
Table 13.2 - Characteristics and Ratings of Transportation Modes by Selection CriteriaSlide49
Coordinating TransportationAs the range of transportation alternatives expands, carriers also put greater emphasis on customer _______ in order to gain a competitive advantage.
serviceSlide50
The numerous federal, state, and local laws governing distribution channel management in the US are based on the principle that the public is best served by _________ competition and free trade.Dual distributionViewed as a threat to competitionProducers that have outlets should use prices that do not severely undercut independent retailers’ pricesRestricted sales territoriesCourts have conflicting opinions on restricting intermediaries to certain sales territoriesExclusive territories can promote competition among dealers handling different brands
Legal Issues
in Channel
ManagementprotectingSlide51
Tying agreement: Supplier furnishes a product to a channel member with the stipulation that the channel member purchases other productsFull-line forcing - Supplier requires that channel members purchase the supplier’s entire line to obtain any of the supplier’s productsAccepted when the supplier is the only one able to provide products of a certain qualityExclusive dealing: Manufacturer forbids an intermediary to carry products of competing manufacturersConsidered legal if: Deal blocks competitors from less than 15% of the market
Sales volume is small and the producer is smaller than the retailer
Legal Issues in
Channel ManagementSlide52
Refusal to dealProducers have the right to choose channel membersSuppliers cannot legally refuse to deal with wholesalers or dealersThese wholesalers or dealers resist policies that are anticompetitive or in restraint of tradeLegal Issues in Channel ManagementSlide53
THE CONNECTED CORPORATION:THE FUTURE OF ERP Data points where SCM, CRM, and ERP integrate.Lines between SCM, CRM, and ERP will continue to blurInternet – continue to help organizations integrate data and process across functional departmentsInterface – customizable employee browsers Wireless technology
– support a mobile workforceSlide54
SummaryOrganizations
1960s
2022
(control/around)
Employees
O
rganizations
O
rganizations
Employees
Employees
Organizations
(support/empower)
Organizations were the exoskeleton around employees.
Organizations will be endoskeleton, supporting the work of people on the exterior..Slide55
Video Case 13.1Taza Cultivates Channel Relationships with ChocolateSlide56
Summary Taza Chocolate is a small manufacturer of stone-ground organic chocolate made in the classic Mexican tradition. The company markets most of its products through U.S. retailers, wholesalers, and distributors. Individual customers around the world can also buy Taza chocolate directly from the Taza website, and local customers can visit the company’s food truck or factory. The case presents the different marketing challenges that come with each form of distribution. Taza also seeks to build positive relationships across the entire supply chain. Slide57
1. Which distribution channels does Taza use, and why are they appropriate for this company? Taza markets most of its products through U.S. retailers, wholesalers, and distributors. Individual customers around the world can also buy Taza chocolate bars, baking squares, chocolate-covered nuts, and other specialty items directly from the Taza website.
If they live in Somerville, Massachusetts, they might even find a Taza employee riding a “chococycle,” selling products and distributing samples at an upscale food truck festival or a weekend market festival. Selling to distributors and retailers helps the company to sell a high volume of product, while selling to individuals helps them to make personal connections and reach a different set of customers
.Slide58
2. In what ways does Taza benefit from selling directly to some consumers? What are some potential problems of selling directly to consumers? Selling directly to consumers helps the company to reach people who aren’t near a retailer or who want a specific product. Selling directly to consumers also helps to forge relationships. However, it is less efficient to ship directly to individuals and complicated to control the chocolate’s quality (i.e., melting). Slide59
3. In what ways are Taza’s distribution efforts influenced by the fact that its products are organic? Taza seeks to make personal connections with all the certified organic growers who supply its ingredients. High quality ingredients are important to the company, so Taza believes that direct relationships with farmers ensure the best product. Dealing directly with suppliers allows
Taza to meet its social responsibility goals while ensuring the kind of quality that commands a premium price.