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Marketing:AnIntroductionFifteenthEditionChapter10MarketingChannels:DeliveringCustomerValueCopyright©2023,2020,2017PearsonEducation,Inc.AllRightsReservedObjectivesOutline(1of2)10.1

Explainwhycompaniesusemarketingchannelsanddiscussthefunctionsthesechannelsperform.10.2Discusshowchannelmembersinteractandhowtheyorganizetoperformtheworkofthechannel.10.3Identifythemajorchannelalternativesopentoacompany.ObjectivesOutline(2of2)10.4Explainhowcompaniesselect,motivate,andevaluatechannelmembers.10.5Discussthenatureandimportanceofmarketinglogisticsandintegratedsupplychainmanagement.FirstStop:AirbnbAirbnb’schanneldisruptionhassignificantlyreshapedthehabitsofmanyoftheworld’svacationtravelers.WithAirbnb,you“belongAnywhere.”ObjectiveOutline10.1Explainwhycompaniesusemarketingchannelsanddiscussthefunctionsthesechannelsperform.SupplyChainsUpstreampartnerssupplytherawmaterials,components,parts,information,finances,andexpertiseneededtocreateaproductorservice.Downstreampartnersserveasdistributionchannelsthatlinkthefirmanditscustomers.ValueDeliveryNetwork(1of2)Anetworkcomposedofthecompany,suppliers,distributors,and,ultimately,customerswhopartnerwitheachothertoimprovetheperformanceoftheentiresystemindeliveringcustomervalueValueDeliveryNetwork(2of2)Valuedeliverynetwork:Inmakingandmarketingitslinesofcars,Toyotamanagesahugenetworkofpeoplewithinthecompanyplusthousandsofoutsidesuppliers,dealers,andmarketingservicefirmsthatworktogethertodeliverthebrand’s“Let’sGoPlaces”and“Let’sGoBeyond”promises.MarketingChannels(DistributionChannels)InterdependentorganizationsthathelpmakeaproductorserviceavailableforuseorconsumptionChanneldecisionsAffecteveryothermarketingdecisionCanleadtocompetitiveadvantageMayinvolvelong-termcommitmentstootherfirmsFigure10.1

HowaDistributorReducestheNumberofChannelTransactionsHowChannelMembersAddValueIntermediariescreategreaterefficiencyinmakinggoodsavailabletotargetmarkets.Marketingintermediariestransformtheassortmentsofproductsmadebyproducersintotheassortmentswantedbyconsumers.Intermediariesbridgethemajortime,place,andpossessiongapsthatseparategoodsandservicesfromusers.KeyFunctionsPerformedbyChannelMembersHelptocompletetransactionsInformationPromotionContactMatchingNegotiationHelptofulfillthecompletedtransactionsPhysicaldistributionFinancingRisktakingNumberofChannelLevels(1of2)Channellevel:AlayerofintermediariesthatperformsworkinbringingtheproductanditsownershipclosertothefinalbuyerDirectmarketing

channel:NointermediarylevelsIndirectmarketingchannels:OneormoreintermediarylevelsNumberofChannelLevels(2of2)Typesofflowsthatconnecttheinstitutionsinthechannel:PhysicalflowofproductsFlowofownershipPaymentflowInformationflowPromotionflowFigure10.2

ConsumerandBusinessMarketingChannelsObjectiveOutline10.1SummaryValuedeliverynetworkIntermediariesformthemarketingchannel(ordistributionchannel)Marketingchannelfunctions:Transaction,information,communication,matching,negotiation,physicaldistribution,financing,andrisktakingObjectiveOutline10.2Discusshowchannelmembersinteractandhowtheyorganizetoperformtheworkofthechannel.ChannelBehavior(1of2)Channelconflict:Disagreementsamongmarketingchannelmembersongoals,roles,andrewardsHorizontalconflictoccursamongfirmsatthesamelevelofthechannel.Verticalconflictoccursbetweendifferentlevelsofthesamechannel.ChannelBehavior(2of2)“Channelconflict:AhighleveloffranchiseediscontentisworrisometoMcDonald’s.There’sahugeconnectionbetweenfranchiseesatisfactionandcustomerservice.Figure10.3

ComparisonofConventionalDistributionChannelwithVerticalMarketingSystemVerticalMarketingSystemsAverticalmarketingsystem(VMS)consistsofproducers,wholesalers,andretailersactingasaunifiedsystem.TherearethreetypesofVMSs:CorporateContractualAdministeredHorizontalMarketingSystem(1of2)Twoormorecompaniesatoneleveljointogethertofollowanewmarketingopportunity.HorizontalMarketingSystem(2of2)Horizontalmarketingsystems:TargetpartnerswithCVSHealth,whichoperatesstores-within-storestothebenefitofall—Target,CVS,andtheirmutualcustomers.MultichannelDistributionSystemsAsinglefirmsetsuptwoormoremarketingchannelstoreachcustomersegments.Advantages:ExpansionofsalesandmarketingcoverageTailor-madeproductsandservicesforthespecificneedsofcustomersegmentsDisadvantages:HardertocontrolGeneratesconflictFigure10.4

MultichannelDistributionSystemDisintermediation(1of2)OccurswhenproductorserviceproducerscutoutmarketingchannelintermediariesorwhenradicallynewtypesofchannelintermediariesdisplacetraditionalonesDisintermediation(2of2)Disintermediationanddisruption:Lyftandotherinnovativeapp-basedrideservicesarerapidlydisintermediatingconventionaltaxicabandurbantransportationsystemsbyofferingbettercustomerexperiencesatlowerfares.ObjectiveOutline10.2SummaryHorizontalandverticalchannelconflictConventionaldistributionsystem,verticalmanagementsystem(VMS),andhorizontalmarketingsystemMultichanneldistributionsystemDisintermediationObjectiveOutline10.3Identifythemajorchannelalternativesopentoacompany.ChannelDesignDecisionsMarketingchanneldesigninvolvesdesigningeffectivemarketingchannelsby:AnalyzingcustomerneedsSettingchannelobjectivesIdentifyingmajorchannelalternativesEvaluatingthealternativesMajorChannelAlternativesTypesofintermediariesreferstochannelmembersavailabletocarryoutchannelwork.NumberofintermediariestouseIntensivedistributionExclusivedistributionSelectivedistributionResponsibilitiesofeachchannelmemberDesigningInternationalChannelsChannelstrategiesshouldbeadaptedtotheexistingstructureswithineachcountry.Distributionsystemscanhavemanylayersandalargenumberofintermediaries.Customsandgovernmentregulationscanrestrictdistributioninglobalmarkets.ObjectiveOutline10.3SummaryChanneldesignbeginswithassessingneeds,objectivesandconstraintsCompanydeterminesmajorchannelalternativesTypes,numberofintermediariesandchannelresponsibilitiesChannelalternativesevaluatedaccordingtoeconomic,control,andadaptivecriteriaChannelmanagement—selectingqualifiedintermediaries,motivatingthemandevaluatingregularlyObjectiveOutline10.4Explainhowcompaniesselect,motivate,andevaluatechannelmembers.ChannelManagementDecisions(1of2)SelectingchannelmembersManagingandmotivatingchannelmembersEvaluatingchannelmembersChannelManagementDecisions

(2of2)Selectingchannels:ThechannelfeudbetweenFedExfromAmazonrisksdamagingbothcompanies’opportunitieswhileatthesametimepotentiallyinconveniencingtheirmutualcustomers.PublicPolicyandDistributionDecisionsExclusivedistributionExclusivedealingExclusivearrangements(ClaytonAct)arelegalaslongasthepartiesDonotsubstantiallylessencompetitionortendtocreateamonopolyEnterintotheagreementvoluntarilyObjectiveOutline10.4SummaryMarketingchannelmanagementcallsforselecting,managing,andmotivatingindividualchannelmembersandevaluatingtheirperformanceovertime.Companymustsellnotonlythrough

theintermediariesbutalsowith

them.ObjectiveOutline10.5Discussthenatureandimportanceofmarketinglogisticsandintegratedsupplychainmanagement.MarketingLogistics(PhysicalDistribution)Planning,implementing,andcontrollingthephysicalflowofmaterials,finalgoods,andrelatedinformationfrompointsoforigintoconsumptionCustomer-centeredlogistics:MarketplacebackwardstothefactoryorsourcesofsupplyOutboundlogisticsInboundlogisticsReverselogisticsFigure10.5

SupplyChainManagementMarketingLogisticsandSupplyChainManagementThegoalofmarketinglogisticsistodeliveratargetedlevelofcustomerserviceattheleastcost.LogisticsfunctionsincludeWarehousingInventorymanagementTransportationLogisticsinformationmanagementWarehousing(1of2)Storagewarehousesstoregoodsformoderatetolongperiods.Distributioncentersarelarge,highlyautomatedwarehousesthatreceivegoods,takeorders,fillthem,anddelivergoodstocustomers.Warehousing(2of2)High-techdistributioncenters:Amazonemploysteamsofsuper-retrievers—Day-Glo-orangeKivarobots—tokeepitsfulfillmentcentershumming.InventoryManagementShouldbedoneinacosteffectiveandprofitablemannerJust-in-timelogisticssystemsRadiofrequencyidentification(RFID),smarttagtechnology,givesthephysicallocationofaproduct.Transportation(1of2)Transportation:Inshippinggoodstotheirwarehouses,dealers,andcustomers,companiescanchooseamongmanytransportationmodes,includingtruck,rail,water,pipeline,andair.Muchoftoday’sshippingrequiresmultiplemodes.Transportation(2of2)FactorsaffectedbychoiceoftransportationPricingofproductsDeliveryperformanceConditionofgoodsCustomersatisfactionModesTrucks,railroads,watercarriers,pipelines,aircarriers,andtheinternetMultimodaltransportationCombiningtwoormoremodesoftransportationPiggyback,fishyback,trainship,andairtruckLogisticsInformationManagementFlowsofinformationcloselylinkedtochannelperformanceInformationcanbesharedandmanagedthroughElectronicdatainterchange(EDI)Vendor-managedinventory(VMI)IntegratedLogisticsManagementEmphasizesteamworkbothinsidethecompanyandamongallthemarketingchannelorganizationsFormingcross-functionalteamsinsidethefirmBuildinglogisticspartnershipsOutsourcingtothird-partylogisticsprovidersforfunctionsrequiredtogetaclient’s

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