11. How Channel Members Add Value?
Channel members add value by bridging the major time, place
and possession gaps that separate goods and services from
those who would use them.
12. Distribution Channel Functions
Risk Taking
Risk Taking Information
Information
Financing
Financing Promotion
Promotion
Physical
Physical Contact
Contact
Distribution
Distribution
Negotiation
Negotiation Matching
Matching
13. M
M C
C
Direct
Channel 1
→
M
M R
R C
C
Channel 2 In-Direct
→ →
M
M W
W R
R C
C
Channel 3
→ → → →
M
M W
W J
J R
R C
C
Channel 4
15. Marketing Channels for Business
Goods
Business
Producer
User
Agent/ Business
Producer
Broker User
Business
Producer Wholesaler
User
Agent/ Business
Producer Wholesaler
Broker User
16. Evaluation of Channel Alternatives
Economic Criteria
– -Potential sales, costs and profits of channels
Control Criteria
-Amount of control company has over sales efforts
Adaptive Criteria
-flexibility of channel to adapt to changing situations
18. The channel will be most effective when..
Each member is assigned tasks it can do best.
All members cooperate to attain overall channel goals and
satisfy the target market.
26. Costs
Costs
Minimize Costs of Order Processing
Order Processing
Minimize Costs of Submitted
Attaining Logistics Submitted
Attaining Logistics Processed
Processed
Objectives
Objectives Shipped
Shipped
Logistics
Transportation Functions
Water, Truck, Warehousing
Warehousing
Rail, Pipeline & Air Storage
Storage
Distribution
Distribution
Inventory
Inventory
When to order
When to order
How much to order
How much to order
Just-in-time
Just-in-time
27. Customer Service Concept
Customer service is the ability of logistics management to
satisfy users in terms of:
- time
- dependability
- communication
- convenience
28. Companies today place greater emphasis on logistics
because…..
– Effective logistics is becoming a key to winning and keeping
customers.
– Logistics is a major cost element for most companies.
29. – The explosion in product variety has created a need for
improved logistics management.
– Information technology has created opportunities for major
gains in distribution efficiency.
31. Amount of Service
Amount of Service
Self-Service, Limited-Service and
Self-Service, Limited-Service and
Full-Service Retailer
Full-Service Retailer
Product Line
Product Line
Length and Breadth of the Product
Length and Breadth of the Product
Assortment
Assortment
Relative Prices
Relative Prices
Pricing Structure that is Used
Pricing Structure that is Used
by the Retailer
by the Retailer
Retail Organizations
Independent, Corporate, or Contractual
Ownership Organization
33. Mail Order
Mail Order
••Catalogs --from clothing to computers
Catalogs from clothing to computers
••Direct Mail --brochure offering a product
Direct Mail brochure offering a product
or service at one point in time.
or service at one point in time.
Direct Selling
Direct Selling
••Door-to-Door Sales --declining in U.S.
Door-to-Door Sales declining in U.S.
••Parties & Networks --presentations
Parties & Networks presentations
••Telemarketing --over the phone
Telemarketing over the phone
Automatic Vending
Automatic Vending
••Best suited to inexpensive merchandise
Best suited to inexpensive merchandise
and food and beverages.
and food and beverages.
Direct Response Television
Direct Response Television
••Home Shopping Networks --TV channels
Home Shopping Networks TV channels
that sell products
that sell products
34. What is Wholesaling?
All the activities involved in selling goods and services to those
buying for resale or business use.
Wholesaler - those firms engaged primarily in wholesaling
activity.
36. Easy
Easy
Inquiry
Inquiry Error-Free
Error-Free
and
Accuracy Invoicing
and Invoicing
Order
Order Reliable On-time
On-time
Delivery Delivery
Delivery
Post-Sales
Post-Sales Easy Claims
Easy Claims
Support
Support Handling
Handling
Suppliers’ Logistics Systems
Suppliers’ Logistics Systems
37. Warehouse and
Materials-Handling
Receive goods into
warehouse
Identify, sort, and
Functions label goods
of
Materials
Handling Dispatch the goods to
temporary storage
Recall, select, or pick the
goods for shipment
39. Merchant
Merchant
Wholesaler Brokers/ Agents
Brokers/ Agents
Wholesaler
Independently Owned
Independently Owned They Don’t Take Title to
They Don’t Take Title to
Business that Takes
Business that Takes the Goods, and They
the Goods, and They
Title to the
Title to the Perform Only a Few
Perform Only a Few
Merchandise
Merchandise Functions.
Functions.
it Handles.
it Handles.
Manufacturers’
Manufacturers’
Sales Branches
Sales Branches
and Offices
and Offices
Wholesaling by Sellers
Wholesaling by Sellers
or Buyers Themselves
or Buyers Themselves
Rather Than Through
Rather Than Through
Independent
Independent
Wholesalers.
Wholesalers.
40. Right Right
Cost Place
Right
Product
Right Right
Time Condition
41. Compete on value (not just price.)
Save customers time and energy.
Make shopping fun.
Distribution Channel Functions This CTR relates to the material on pp. 354-355. Distribution Channel Functions Information. This function involves gathering and distributing marketing research and intelligence about the environment for planning purposes. Discussion Note: The use of scanner technology has dramatically changed this function in the last few years. Promotion. This involves developing and spreading persuasive communications about an offer. Contact. Contact involves finding and communicating with prospective buyers. Matching. This function consists of shaping and fitting the offer to the buyer’s needs by manufacturing, grading, assembling, and packaging. Negotiation. This involves reaching an agreement on price and other terms. Physical Distribution . This function consists of the transporting and storing of goods. Financing. This function addresses the acquiring and using of funds to cover the costs of channel work. Risk Taking. This function assumes the risk of carrying out the channel work. Discussion Note: Students often assume business is risk-free. You might expand upon the link between risk and value-added services as the justification for profits.
Channel Levels and Channel Conflict This CTR corresponds to Figure 12-2 (A) on p. 355 and relates to the material on pp. 355-356. Channel Levels Distribution channels can be described by the number of channel levels involved. A channel level is defined as each of the marketing intermediaries that perform some work in bringing the product and its ownership closer to the final buyer. Distribution channels can be categorized broadly as: Direct Marketing Channel . This is a marketing channel that has no intermediary levels. The company sells directly to final consumers. Discussion Note: The company may not be the actual producer. Land’s End only makes a small fraction of its clothes but coordinates the sale and ships from its warehouses. Dell Computer assembles its computers on site but from component parts made elsewhere. Indirect Marketing Channels . These contain one or more intermediary levels.
Channel Management Decisions This CTR relates to the material on pp. 369-370. Channel Management Decisions Selecting Channel Members. Choosing middlemen will vary in difficulty be product and producer. Very large and well known companies often have more qualified middlemen seeking to carry their products than the company can effectively use. Some new products will be resisted by existing channels and may require adopting new channel members to carry the line. Motivating Channel Members. Channel members must be motivated to perform. Positive motivators come from high margins, special deals, premiums, cooperative advertising allowances, display allowances, and sales contests. Negative motivators may include threatening margins, delaying delivery, or ending the relationship. Long term cooperation is enhanced by distribution programming which involves building a planned, professionally managed, VMS that meets al channel member needs. Evaluating Channel Members. Assessing channel members requires regular measurement of performance against established criteria such as sales quotas, inventory levels, customer delivery time, training, and overall customer service for each channel member. Effective channel management rewards superior performance and seeks to improve substandard performance in a cooperative professional partnership. Channel member replacement should be used as a last resort with sincere efforts to improve performance have not succeeded.
Logistics Systems This CTR relates to the material on pp. 374-377. Instructor’s Note: Transportation is covered separately on the following CTR. Nature of Logistics Systems Costs . Distribution costs stem from factors other than just size. How products are transported, stored, sorted, inventoried, ordered, and tracked can all affect distribution costs over and above the sheer volume being distributed. Modern facilities utilizing technology to help innovate what it means to physically distribute goods both save on costs and become a viable promotional tool in providing customer service. Order Processing . Processing orders is an area of distribution that benefits from the application of computer technology. Innovative applications of hardware and software can streamline order processing by connecting the salesperson with dispatchers and warehouses. Warehousing . Storage of products to best meet demand requires decisions on stocking locations, estimation of time to be stored and distinguishing between storage warehouse needs and distribution centers utilizing automation to move goods quickly. Inventory . The cost of holding inventory requires developing accurate knowledge on when to order and how much to order to meet demand but not overburden inventory processing capacity.
