VALUE NETWORKS Designing & managing value networks & marketing channels The art & science of creating, exploring and delivering VALUE to satisfy the needs of a target market at a price Principles or standards of behavior; one’s judgment of what is important in life: e.g. they internalize their parents' rules and values According to Martinez (2003) “Value resides in the satisfaction and fulfilment of customers’ expectations, at the same time, generating wealth for organization's.” A set of connections between organizations and/or individuals interacting with each other to benefit the entire group. Value networks are an example of an economic ecosystem. Each member relies on the others to foster growth and increase value. Value network members can consist of external members and internal members. Value Network is a system of partnership and alliances used by a firm to source, augment and deliver its offerings. Intermediaries that help get the product from manufacturer to consumer or end users from the Marketing Channel(s).. marketing channels are sets of interdependent organizations participating in the process of making a product or service available for use or consumption. They are the set of pathways a product or service follows after production, culminating in purchase and consumption by the final end user. 19 Percent of Retail Publisher National Wholesaler Distributor Retailer 35% 15% 10% 40% $7.00 $3.00 $2.00 $8.00 Customer $20.00 • You get - 35% of retail - the distributor gets 10% - the wholesaler gets 15% - the retailer gets 40% - less any discount they offer the customer 20 Travel Services: Impact of Changing Technology The Advent of GDS Systems (1980 -1995) Turning the Screen Around Online Travel (1995-2010) FAST FACTS ……..In the United States, channel members collectively have earned margins that account for 30 percent to 50 percent of the ultimate selling price. In contrast, advertising typically has accounted for less than 5 percent to 7 percent of the final price…… FAST FACTS ……..The Marketing Channel Chosen affects all the marketing decisions…….. VARIES ACCORDING TO THE NUMBER OF INTERMEDIARIES Service sector channels use agencies and locations to access population to be served Buy, take title, and resell merchandise. MERCHANT Find customers, negotiate, do not take title to merchandise. AGENT Aid in distribution, do not negotiate or take title to merchandise. FACILITATOR Exclusive distribution Severely limited distribution. Selective distribution Some intermediaries willing to carry good are selected. Intensive distribution Offering is placed in as many outlets as possible. Price policies Price list and schedule of discounts Conditions of sale Payment terms and guarantees Territorial rights Define territory / terms. Services to be performed by party Buy, take title, and resell merchandise. MERCHANT Exclusive distribution Severely limited distribution. Price policies Price list and schedule of discounts Payment terms and guarantees Two common distribution practices are legal as long as they don’t substantially lessen competition: