Chapter 10 10/18/2015 12:45 PM1. Supply Chains And The Value Delivery Network Supply chain Downstream Marketing channels or distribution channels, such.

Chapter 10

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Supply Chains And The Value Delivery Network

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Supply Chains And The Value Delivery Network

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Supply Chains And The Value Delivery Network

Value Delivery NetworkThe network made up of the company,

suppliers, distributors, and ultimately customers who “partner” with each other to improve the performance of the entire system.

Marketing channel (distribution channel)Set of interdependent organizations involved in

the process of making a product or service available for use or consumption by the consumer or business user

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Channel choices affect other decisions in the marketing mix

Pricing, Marketing communications, new products…etc

A strong distribution system can be a competitive advantage

Channel decisions involve long-term commitments to other firms

Nature & Importance of Marketing Channels

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Nature & Importance of Marketing Channels

Q. Why do producers give some of the selling job to channel partners??

A. Producers use intermediaries because they create greater efficiency in making goods available to target market

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Nature & Importance of Marketing Channels

11

22

33

44

55

66

77

88

99

A. Number of contacts without a A. Number of contacts without a distributordistributor

11

22

33

44

55

66

B. Number of contacts with a B. Number of contacts with a distributordistributor

= = Manufacturer Manufacturer

= Customer = Customer = Distributor = Distributor

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Nature & Importance of Marketing Channels

How Channel Members Add Value

Intermediaries require fewer contacts to move the product to the final purchaser.

Intermediaries help match product assortment demand with supply.

Intermediaries help bridge major time, place, and possession gaps that separate products from those who would use them.

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Key Functions Performed by Channel Members

Nature & Importance of Marketing Channels

Information: marketing research and information intelligence

Promotion: developing a persuasive communications to stimulate purchasing.

Contact: finding prospective buyers

Matching: fitting the offer to the buyer’s needs

Negotiation: reaching an agreement on price.

Physical Distribution: transporting and storing goods

Financing: acquiring funds to cover the cost of the channel work

Risk taking: carrying out thee channel work

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Nature & Importance of Marketing Channels

Consumer and business marketing channel levels

Consumer Consumer

producer producer

Channel 1 Channel 1 Channel 2 Channel 2 Channel 3 Channel 3

ConsumeConsumer r

Retailer Retailer

producer producer

ConsumeConsumer r

Retailer Retailer

producer producer

wholesalwholesaler er

A. Customer marketing channelsA. Customer marketing channels

Business Business Consumer Consumer

producer producer

Channel 1 Channel 1 Channel 2 Channel 2 Channel 3 Channel 3

Business Business ConsumConsum

er er

producer producer

Business Business Consumer Consumer

Business Business distributor distributor

producer producer

ManufacturManufacturer’s er’s

representatrepresentatives or ives or sales sales

branch branch

Business Business distributor distributor

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Nature & Importance of Marketing Channels

Number of Channel Levels

“A layer of intermediaries that performs some work in bringing the product and its ownership closer to the final buyer”

The number of intermediary levels indicates the length of a marketing channel.

○ Direct Channels: a marketing channel that has no intermediary.

○ Indirect Channels: channel containing one or more intermediary levels.

Producers lose more control and face greater channel complexity as additional channel levels are added.

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Channel Members Are Connected Via A Variety of Flows

Nature & Importance of Marketing Channels

Physical Flow Payment Flow

Information Flow Promotion Flow

Flow of Ownership

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Channel Design Decisions Step 1: Analyzing Consumer Needs

Cost and feasibility of meeting needs must be considered

Step 2: Setting Channel Objectives

Set channel objectives in terms of targeted level of customer service

Many factors influence channel objectives

○ The nature of the company, its products, its competitors, and the environment

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Channel Design Decisions Step 3: Identifying Major Alternatives

Types of intermediaries○ Company sales force, manufacturer’s agency,

industrial distributorsNumber of marketing intermediaries

○ Intensive, selective, and exclusive distributionResponsibilities of channel members

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Channel Design Decisions Step 4: Evaluating Major Alternatives

Economic criteriaControl issuesAdaptive criteria

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Channel Design Decisions Designing International Distribution

ChannelsGlobal marketers usually adapt their

channel strategies to structures that exist within foreign countries

Key challenges:○ May be complex or hard to penetrate○ May be scattered, inefficient, or totally lacking

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