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Chapter 10

MKTG 2201 Chapter 10: MKTG Chapter 10

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MKTG 2201
Thomas Lerra

MKTG CHAPTER 10 Supply Chains • Upstream partners supply the raw materials, components, parts, information, finances, and expertise needed to create a product or service • Downstream partners serve as distribution channels that link the firm and its customers Value Delivery Network- A network composed of the company, suppliers, distributors, and, ultimately, customers who partner with each other to improve the performance of the entire system in delivering customer value Marketing Channels • Interdependent organizations that help make a product or service available for use or consumption • Channel decisions o Affect every other marketing decisions o Can lead to competitive advantage o May involve long-term commitments to other firms How Channel Members Add Value • Intermediaries create greater efficiency in making goods available to target markets • Marketing intermediaries transform the assortments of products made by producers into the assortments wanted by consumers • Intermediaries bridge the major time, place, and possession gaps that separate goods and services from users Key Functions Performed by Channel Members Help to complete transactions • Information- consumers, producers, and other actors and forces in the marketing environment • Promotion- spread the word • Contact- find engaging consumers and prospective buyers • Matching- shaping offers to meet the buyers’ needs • Negotiation- reaching an agreement on price and other terms so that ownership or possession can be transferred Help to fulfill the completed transactions • Physical distribution • Financing • Risk taking Number of Channel Levels • Channel level: a layer of intermediaries that performs work in bringing the product and its ownership closer to the final buyer o Direct marketing channel: no intermediary levels o Indirect marketing channels: one or more intermediary levels • The number of intermediary levels indicates the length of a channel • Types of flows that connect the institutions in the channel: o Physical flow of products o Flow or ownership o Payment flow o Information flow o Promotion flow Channel Behavior • Channel conflict: disagreements among marketing channel members on goals, roles, and rewards o Horizontal conflict occurs among firms at the same level of the channel o Vertical conflict- conflict between different levels of the same channel Conventional Distribution Channel • A channel consisting of one or more independent producers, wholesalers, and retailers, each a separate business seeking to maximize its own profits, perhaps even at the expense of profits for the system as a whole. Vertical Marketing Systems • A vertical marketing system (VMS) consists of producers, retailers, and wholesalers • Members at different levels work together in a unified way to accomplish the work • Type 1: Corporate VMS o Combines successive stages of production and distribution under single ownership- channel leadership is established through common ownership • Type 2: Contractual VMS o Independent firms at different levels of production and distribution join together through contracts o Franchise organization: A channel member, a franchisor, links several stages in the production-distribution process ▪ Sponsored retailer franchise system- Ford and its dealers ▪ Manufacturer-sponsored wholesaler franchise system- Coca-Cola and its bottlers (wholesalers) ▪ Service-firm-sponsored retailer franchise system- Burger King • Type 3: Administered VMS o Coordinates successive stages of production and distribution through the size and power of one of the parties ▪ E.g.) Apple, GE can ask retailers for certain shelf space Horizontal marketing System • Two or more companies at one level join together to follow a new marketing opportunity o E.g.) McDonalds in Walmart, Hulu Multichannel Distribution Systems • A single firm sets up two or more marketing channels to reach customer segments • Advantages: o Expansion of sales and marketing coverage o Tailor-made products and services for individual customers • Disadvantages: o Can create conflict o Harder to control Changing Channel Organization • Disintermediation- cutting out of marketing channel intermediaries by product or service producers or the displacement of traditional resellers by radical new types of intermediaries Channel Design Decisions Marketing channel design- designing e
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