Marketing Channels Ch 12.docx

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Management and Organizational Studies
Management and Organizational Studies 2320A/B
Angela White

Marketing Channels 3/29/2012 5:04:00 PM Supply Chains and the Value Delivery Network  Supply chain partners o Upstream partners – include raw material suppliers, components, parts, information, finances and expertise to create a product or service o Downstream partners – the marketing channels that look toward the customer  Supply chain views o Supply chain “make and sell” – includes the firm’s raw material, productive inputs and factory capacity o Demand chain “sense and response” – suggests that planning starts with the needs of the target customer and the firm responds to these needs by organizing a chain of resources and activities with the goal of creating customer value  Value delivery network – the firm’s suppliers, distributors and ultimately customers who partner with each other to improve the performance of the entire system The Importance of Marketing Channels  Marketing (distribution) channels – sets of independent organizations that help make a product or service available for use of consumption by the consumer or business user  Intermediaries – offer producers greater efficiency in making goods available to target markets through their contracts, experience, specialization and scale of operations, help firm achieve more than it could on its own  From an economic view, intermediaries transform the assortment of products into assortments wanted by consumers  Channel members add value by bridging the major time, place and possession gaps that separate goods and services from those who would use them  How channel markets add value: o Information – gathering and distributing marketing research and intelligence information about actors and forces in the marketing environment needed for planning and aiding exchange o Promotion – developing and spreading persuasive communications about an offer o Contact – finding and communicating with prospective buyers o Matching – shaping and fitting the offer to the buyer’s needs, including activities such as manufacturing, grading, assembling and packaging o Negotiation – reaching an agreement on price and other terms of the offer so that ownership or possession can be transferred o Physical distribution – transporting and storing goods o Financing – acquiring and using funds to cover the costs of the channel work o Risk taking – assuming the risks of carrying out the channel work  Number of channel levels o Channel levels – layers of intermediaries that perform some work in bringing product and its ownership closer to the final buyer o Direct marketing channel – refers to a marketing channel that has no intermediary levels o Indirect marketing channels – contain one or more intermediary levels  Connected by types of flows: o Physical flow of products o Flow of ownership o Payment flow o Information flow o Promotion flow 3/29/2012 5:04:00 PM Channel Behaviour  Marketing channel – consists of firms that have partnered for their common good with each member playing a specialized role  Channel conflict – refers to disagreements over goals, roles and rewards by channel members o Horizontal conflict – occurs among firms at the same level of the channel o Vertical conflict – occurs between different levels of the same channel Conventional Distribution Systems  Conventional distribution – consists of one or more independent producers, wholesales and retailers o Each separate business seeks to maximize its own profits, even at expense to profits for the system as a whole o There is little control over the other members and no formal means for assigning roles and resolving conflict Vertical Marketing Systems  VMSs – provide channel leadership and consist of producers, wholesalers and retailer acting as a unified system  One channel owns the others, has contracts with the or has so much power that they must all cooperate o Corporate vertical marketing systems – integrates successive stages of production and distribution under single ownership o Contractual vertical marketing systems – consist of independent firms at different levels of production and distribution who join together through contracts to obtain more economies or sales impact than each could achieve alone, most common form is the franchise organization  Franchise organization – contractual vertical marketing systems in which a channel member, called a franchisor, links several stages in the production- distribution process
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