Marketing Channels Overview

Marketing Channels: Delivering Customer Value

• Marketing channels are interdependent organizations that facilitate product or service availability for consumers.
• Channel decisions influence all other marketing decisions and can contribute to a competitive edge.
• Channel decisions often involve long-term commitments with other firms.

Objectives Outline (1-2)

• Companies use channels to facilitate product availability and fulfill functions like promotion, contact, matching, and negotiation.
• Channel members interact and coordinate to complete transactions and meet customer needs.
• Channels have various options accessible for company products to reach consumers.

Objective Outline (3)

• Companies select, motivate, and evaluate channel members to ensure optimal performance.
• Marketing logistics and integrated supply chain management are crucial for efficient product delivery and demand fulfillment.

Supply Chains and Value Delivery

• Upstream partners provide raw materials, components, finances, and expertise for product creation.
• Downstream partners connect the company to consumers; channels form a crucial element of product distribution.
• The value chain (a network of the company, suppliers, distributors, and customers) partners and collaborates to deliver optimal customer value.

Marketing Channels (Distribution Channels)

• Interdependent organizations facilitate product or service availability for end-users.
• Channel decisions impact other marketing efforts, potentially fostering a competitive advantage.
• Channel arrangements typically involve long-term commitments.

How Channel Members Add Value

• Intermediaries improve product availability to target markets.
• Intermediaries modify product assortments to align with consumer demands.
• Intermediaries bridge the gap between products and consumers in terms of time, place, and possession.

Key Functions Performed by Channel Members

• Channel members facilitate complete transactions (information, promotion, contact, matching, and negotiation).
• Channel members also ensure successful transactions fulfillment (physical distribution, financing, and risk-taking).

Number of Channel Levels

• A channel level is a tier of intermediaries that facilitates product transfer towards the final consumer.
• Direct channels have no intermediaries between producer and consumer.
• Indirect channels utilize one or more intermediary levels to facilitate product distribution.
• Types of flows (physical products, ownership, payments, information, and promotions) connect the entities in a channel.

Consumer and Business Marketing Channels

• Direct channels (producer directly to consumer) and indirect channels (multiple intermediaries) serve different needs.
• Manufacturers utilize specific channels for reaching business and consumer clients.

Objective Outline 10-1 Summary

• Intermediaries form critical components of marketing channels or distribution channels.
• Marketing channels function in transaction, information, communication, matching, negotiation, fulfillment, financing, and risk management.

Channel Behavior (1 of 2)

• Channel conflict arises when various channel members disagree on goals, roles, or rewards.
• Horizontal conflict involves competing entities on the same channel level.
• Vertical conflict occurs between different channel levels (e.g., producer and retailer).

Channel Behavior (2 of 2)

• A strong connection exists between franchise success and customer satisfaction.

Comparison of Conventional Distribution Channel with Vertical Marketing System

• Conventional marketing channels typically involve multiple independent parties, each seeking their own objectives.
• Vertical marketing systems involve a unified approach, integrating various levels of the channel (producer, wholesaler, retailer) for efficient product distribution.

Vertical Marketing Systems

• Producers, wholesalers, and retailers act as a unified system (VMS) for synchronized product delivery.
• Corporate, contractual, and administered VMS exist and have various characteristics.

Horizontal Marketing System (1 of 2)

• Two or more companies at the same level unite to pursue specific market opportunities.

Horizontal Marketing System (2 of 2)

• Target and CVS Health partnered to form store-within-store pharmacies, benefiting both businesses and their combined customer base.

Multichannel Distribution Systems

• Businesses establish two or more distribution channels or strategies to reach different target segments.
• Advantages include sales expansion and custom product design.
• Disadvantages lie in complex control and potential channel conflict.

Disintermediation (1 of 2)

• Disintermediation happens when producers eliminate intermediaries or new intermediaries replace traditional ones.

Disintermediation (2 of 2)

• Toys "R" Us, an innovator in superstore toy retail, faced disintermediation due to competition.

Objective Outline 10-2 Summary

• Conflicts in channels, conventional distribution, vertical systems (with various types), multichannel systems, and disintermediation define channel behavior.

Objective Outline 10-3

• Businesses need to examine product channel methods as an option.

Channel Design Decisions

• Channel design involves analyzing customer needs, setting objectives, identifying alternatives, and evaluating those alternatives to design effective marketing channels.

Major Channel Alternatives

• Channel alternatives include the types of intermediaries, number of intermediaries (intensive, exclusive, and selective), and channel member responsibilities.

Designing International Channels

• Channel strategies require adapting to existing structures within specific countries.
• International distribution networks often involve many layers and intermediaries.
• Government and customs regulations often limit distribution strategies in global markets.

Objective Outline 10-3 Summary

• Channel design begins with assessing customer needs, objectives, and constraints.
• Companies evaluate alternatives based on economic factors, control measures, and adaptability.
• Successful channel management involves the right selection of appropriate intermediaries, their motivation, and regular performance evaluation.

Objective Outline 10-4

• Businesses select, motivate, and evaluate channel members to achieve effective channel performance.

Marketing Channel Management (with Examples)

• Key aspects of channel management, including selection, motivation, and evaluation. Examples of issues that affect marketing channel management such as established brands having difficulty securing desired channel members or retailers.

Public Policy and Distribution Decisions

• Exclusive agreements are legal as long as they don't lessen competition or create monopolies, and parties enter voluntarily.

Objective Outline 10-4 Summary

• Effective channel management requires the selection, motivation, and evaluation of channel members, and consistent performance assessment is crucial.

Objective Outline 10-5

• Companies focus on the key aspects of marketing logistics and integrated supply chain management.

Marketing Logistics (Physical Distribution)

• Logistics encompasses planning, implementing, and controlling the physical movement of materials, final goods, and information, from origins to consumers.
• A customer's needs are paramount in today's centered approach to logistics.

Supply Chain Management

• Supply chain management connects supply sources (inbound logistics) through the company and toward the customer (outbound logistics); reverse logistics is included.

Marketing Logistics and Supply Chain Management

• The goal of marketing logistics is delivering the right level of customer service at the least cost.
• Key functions of logistics include warehousing, inventory management, transportation, and logistics information systems.

Warehousing (1 and 2)

• Storage warehouses store goods for periods ranging from moderate to long term.
• Distribution centers perform more dynamic warehousing tasks by receiving, ordering, filling orders, and delivering goods to customers.

Inventory Management

• Efficient inventory management should be both cost-effective and profitable.
• Just-in-time inventory systems are techniques used.
• RFID (Radio Frequency Identification) technology enhances product location tracking.

Transportation (1 and 2)

• Businesses have multiple transportation options (road, rail, water, etc.).
• Factors like product pricing, delivery time, and customer satisfaction influence transportation mode selection.
• Combining different transportation modes (e.g., piggyback) may create cost savings.

Logistics Information Management

• Effective information flow is crucial for efficient channel performance.
• EDI (electronic data interchange) and VMI (vendor-managed inventory) are relevant technologies for information sharing.

Integrated Logistics Management

• Integrated logistics management requires teamwork across company departments and in the supply chain for efficient collaboration.
• Various tactics are utilized like forming cross-functional teams, creating logistics partnerships, and relying on third-party logistics (3PL) providers.

Objective Outline 10-5 Summary

• Modern marketing logistics involves outbound, inbound, and reverse logistics to efficiently fulfill customer requests.
• Important functions include warehousing, inventory management, transportation, and information management.
• Integrated supply chain management and reliance on third-party logistics providers are also critical components of effective logistics operations.