Marketing Channels and Supply Chain Management
( Distribution )
Supply Chains and the Value Delivery Network
a) Supply Chain Partners
Upstream partners include raw material suppliers, components,
parts, information, finances, and expertise to create a product or
service
Downstream partners include the marketing channels or
distribution channels that look toward the customer
---------------------------------------------------------------------------------
Supply Chain Views
Supply chain “make and sell” view includes the firm’s raw
materials, productive inputs, and factory capacity
Demand chain “sense and respond” view 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
---------------------------------------------------------------------------------
b) Value Delivery Network
The value delivery network is the firm’s suppliers, distributors,
and ultimately customers )‫ (و فى النهاية المستهلك‬who partner with
each other to improve the performance of the entire system
Distributors consists of :
a) direct (agent)
b)indirect (intermediary)
- Distribute is apart of supply chain who can affect the perceive value of customer
Value delivery networks is --- 1 - (Suppliers)
2- (Distributer)
3- (Customers)
Supply chain ================= Supply Value
To maximize perceived value of customer to achieve
( win-win situation)
Alternate channels :- Direct selling , Agent , Distributor (wholesaler) ,
Retailers ( resellers – dealers ) , Advertisements .
The Nature and Importance of Marketing Channels
Marketing Channel Defined
Marketing channel:-
(Availability , Time utility
)‫(منفعة زمنية‬
, Ownership utility )
is a set of independent organizations that help make a product or
service available for use or consumption by the consumer or business
users .
( while Production gives Form-utility )‫) (منفعة شكلية‬
How Channel Members Add Value
From an economic view, intermediaries )‫( الوسطاء‬transform the
assortment of products into assortments wanted by consumers .
(widening the base of choice , different levels , decreased showed quantity )
Distribution channel functions :Information refers to the gathering and distributing research and
intelligence information about actors and forces in the marketing environment
needed for planning and aiding exchange
Promotion refers to the development and spreading persuasive
communications about an offer
Contacts refers to finding and communicating with prospective buyers .
( Decresae number of contacts ----At a supermarkets u find all products of
different producers (mostly with conveince products)).
Matching refers to shaping and fitting the offer to the buyer’s needs,
including activities such as manufacturing, grading, assembling, and
packaging ‫ تجميع مجموعة علب فى عرض واحد‬: ‫مثال‬
Negotiation refers to reaching an agreement on price and other terms of
the offer so that ownership or possession can be transferred
( With producer to get better offer / With consumer to buy more )
Physical distribution refers to transporting and storing goods
Financing refers to acquiring and using funds to cover the costs or
carrying out the channel work
Risk taking refers to assuming the risks of carrying out the channel work
Number of Channel Members
Channel level refers to each layer of marketing intermediaries that
performs some work in bringing the product and its ownership closer to the
final buyer
Direct marketing channel has no intermediary levels; the company
sells directly to consumers ( Manufacturer
Retailer) , Producer has
it’s own outlet ( no uses of intermediaries called ( 0 level / 1 level )
Indirect marketing channels contain one or more intermediaries
Manufacturer
Retailer
Manufacturer
Wholesaler
Manufacturer
Consumer
Retailer
Wholesaler
Jobber
Consumer
Retailer
Consumer
Connected by types of flows:
•
Physical flow of products
•
Flow of ownership
•
Payment flow ( Cash / Credit )
•
Information flow
•
Promotion flow
These levels depend on :- 1) type of product--- (bulky- level , service - short)
2) Market ----( Concentrated (direct) , dispersed (indirect))
3) Tradition of market
--------------------------------------------------------------------------------
Channel Behavior and Organization
Channel Behavior
Marketing channel consists of firms that have partnered for their
common good with each member playing a specialized role
Channel conflict refers to disagreement among marketing
channel member on goals, roles, and rewards .
* Horizontal conflict
* Vertical conflict
Horizontal conflict is conflict among members at the same channel
level
Vertical conflict is conflict between different levels of the same channel
--------------------------------------------------------------------------------
Systems of Distribution
Conventional distribution systems consist of one or more
independent producers, wholesalers, and retailers. Each seeks to maximize its
own profits and there is little control over the other members and no formal
means for assigning roles and resolving conflict.
Vertical marketing systems (VMS)
A distribution channel structure where producers, wholesalers, and retailers
acting as a unified system (leadership) and consist of:
•
Corporate marketing systems
•
Contractual marketing systems
•
Administered marketing systems
( One channel member owns the others , has contracts with them or has so
much power to cooperate )
Multi-channel Distribution Systems
Hybrid marketing channels
(Direct channels / Indirect channels)
exist when a single firm sets up two or more marketing channels to reach
one or more customer segments .
(eg. ‫ النساجون الشرقيون‬has it’s outlets + distributors )
•
Advantages
•
Increased sales and market coverage
•
New opportunities to tailor products and services to specific
needs of diverse customer segments
This is the most appropriate ‫ مناسب‬method for the most of product .
•
Challenges
•
Hard to control
•
Create channel conflict
To overcome these challenges Some companies have sub-affiliates under
different names to distributes & have control ( eg. Juhayna
Tiba )
Changing Channel Organization
Disintermediation
‫إلغاء الوسطاء‬
occurs when product or service producers cut out intermediaries and
go directly to final buyers, or the displacement of traditional ones by new
types of channel intermediaries (eg. Travel agency ------ to haave “ e-ticketing” )
-------------------------------------------------------------------------------
Channel Design Decisions
Designing a channel system requires:
•
Analyzing consumer needs
•
Setting channel objectives
•
Identifying major channel alternatives
•
Evaluation
Analyzing Consumer Needs
Designing a marketing channel starts with finding out what target
customers want from the channel ( expectations :- assortment , handling
complaints ‫ معالجة الشكاوى‬, location , price )
Setting Channel Objectives
In terms of:
•
Targeted levels of customer service
•
What segments to serve
•
Best channels to sue
•
Minimizing the cost of meeting customer service requirements
{ SMART } Simple – Measurable – Agreed upon – Realistic – Time-bound
Objectives are influenced by:
•
Nature of the company & it’s products
•
Marketing intermediaries
•
Competitors
•
Environment
•
Identifying Major Alternatives
In terms of:
•
Types of intermediaries
•
Number of intermediaries
•
Responsibilities of each channel member
1)Types of intermediaries refers to channel members available to carry
out channel work. Examples include:
•
Company sales force
•
Manufacturer’s agency
•
Industrial distributors
Company sales force strategies
•
Expand direct sales force
•
Assign )‫ (تعيين‬outside salespeople to territories )‫(األراضى‬
•
Develop a separate sales force
•
Telesales
Manufacturer’s agencies
are independent firms whose sales forces handle related products from
many companies in different regions or industries (eg. Toshiba )
Industrial distributors
•
Find distributors in different regions or industries
•
Exclusive distribution
•
Margin opportunities
•
Training
•
Support
2)Number of marketing intermediaries to use at each level
•
Strategies:
•
Intensive distribution ------ Convenience )‫ (مالئمه‬products
•
Exclusive distribution ----- Brands products
•
Selective distribution ------- Shopping products
Intensive distribution is a strategy used by producers of convenience
products and common raw materials in which they stock their products in as
many outlets as possible . ( Convenience products )
Exclusive distribution is a strategy in which the producer gives only a
limited number of dealers the exclusive right to distribute its products in their
territories . ( Brand products )
•
Luxury automobiles
•
High-end apparel
Selective distribution is a strategy when a producer uses more than one
but fewer than all of the intermediaries willing to carry the producer’s
products . ( Shopping products )
*Televisions
* Appliances
Responsibilities of Channel Members
Producers and intermediaries need to agree on:
•
Price policies
•
Conditions of sale
•
Territorial rights
•
Services provided by each party
--------------------------------------------------------------------------------
Evaluating the Major Alternatives
Each alternative should be evaluated against:
•
Economic criteria
----- turnover cost
•
Control
•
Adaptive criteria ------- flexibility according to demand