Content
The marketing perspective
Segmentation
Quality of service
Setting logistics priorities

The marketing perspective
• Key issue
1
What are the marketing implications for logistics strategy?

The marketing perspective
• Marketing is a philosophy that integrates the disparate activities and functions that take place within the network. Satisfied
[end] customers are seen as the only source of profit, growth and security. (Doyle,1994)

The marketing perspective
The challenge
Increased sales and market shares
Strong brand
Increased productivity
Short lead times

The marketing perspective
The battleground is the customer’s wallet.
The victors will be those that can order their entire organization around the challenges of getting cheaper more profitable and more loyal customers.
It’s an age of expert buyers. Customers are becoming ever more critical and demanding.
Customers know that they can play the market and are placing higher and higher demands on suppliers to give them what they want – and immediately.

The marketing perspective
• Two pairs of concepts business customer
Vs.
end-customer
B2C
B2B consumer
Vs.
customer
B2B B2B

The marketing perspective
• Rising customers expectation
1 better levels of general education
2 better ability to discern between alternative products
3
Exposure to more lifestyle issue in the media

The marketing perspective
• The information revolution
Industry structure
Buyer-supplier relationship internet
Purchasing, SCM and NPD

Content
The marketing perspective
Segmentation
Quality of service
Setting logistics priorities

• Key issue
Segmentation
1
What is segmentation, and what are its implications to logistics strategy?

Segmentation
• Market can be segmented in many ways
– Demographic
: such as age, gender and education
– Geographic
: such as urban vs. country, types of house and region
– Technical
: the use that customers are going to make of a product
– Behavioral
: such as spending pattern and frequency of purchase
A powerful way to bridge marketing and logistics

Beer market consumer
Miller case
Consumption 1:8
Light drinker
•female
•High level income
Heavy drinker
•Blue-collar
•Over 30 years of age
•Spend long time on watching TV per day
•Sporting.

Segmentation
• Fragmentation of Markets and Product
Variety
– Are the requirements of all market segments served identical?
– Are the characteristics of all products identical?
–
Can a single supply chain structure be used for all products / customers? No! A single supply chain will fail different customers on efficiency or responsiveness or both.

Segmentation
• Activity 1
– Try to compare the segmentation strategies between Dell and Lenovo in computer market.
– What logistics strategy should Dell make to fit its market segmentation? So what about
Lenovo?

Segmentation efficient functional
Lenovo innovative responsive Dell

Content
The marketing perspective
Segmentation
Quality of service
Setting logistics priorities

Quality of service
• Key issues
1
2
How do customer expectations affect logistics service?
How does satisfaction stack up with customer loyalty?

Quality of service
Case
: Service of a seafood restaurant
￥
3
Third floor
￥ 6
Second floor
￥ 10
First floor
￥
2
Fourth floor

Quality of service
Service is the combination of outcomes and experiences delivered to and received by the end-customer (Johnston and Clark, 2001).
supplier
Service specification
Gap 2
Service delivery
Gap 1
Gap 4 customer
Expected service
Gap 3
Perceived service

Quality of service
• Customer loyalty ＝ Customer satisfaction
• Value disciplines
– Operational excellence
– Product leadership
– Customer intimacy
• Customer relationship management
– Bow tie
– Diamond supplier customer supplier customer

Content
The marketing perspective
Segmentation
Quality of service
Setting logistics priorities

Setting logistics priorities
• Key issues
1
How can we set logistics priorities?
2
How do such priorities relate to customer segments?

Setting logistics priorities
Identify the order winners and qualifiers according to customer needs by market segment
Priority order winners for each segment
Identify gaps in existing logistics capabilities: reinforce strengths and plug weaknesses
Using market segments to set logistics priorities

Zara case
Flag brand of a Spanish apparel manufacturer and retailer group---Inditex
The first shop of Zara was built in 1975.
Produce and sell the most fashioned apparel, target core is female of 18-35 years.
Own loyal customers, regular buyers visit 17 times per year.
Rivals of Zara: Gap(USA), Mango(Eupope),
Benetton(Italy)

Lead time
Percentage of preseason production
Number of new fashions per year
Stock turnover
ZARA
10 ～ 14 天
10 ～ 15%
12000
11/year
China clothing firm
90 天
100%
4000
3/year

– Product style
• Agile design, not pilot design
• Employ many cool hunters
– Production system
• 50% production at headquarters, 20% imported from low-cost countries (Asia), 30% in other region of Spain or Europe
• Spare production capacity: production is always lower than forecasted sales
• Global sourcing cloth materials. Half of materials are naturally colored, and then dyed and painted in a subsidiary of Inditex. This cycle only spends about one week.
• Zara ’ s production system only covers the elements with scale economy, such as dyeing, cutting, labeling, and packing. The processes of labor-intensive are usually operated by hundreds of subcontractors.

– Logistics
• Receiving orders with a high frequency and small volume, shop managers keep direct contact with headquarters.
• Each delivery runs within 48 hours. Goods are transported by land-carriage (less than 24 hrs) or by air
(more than 24 hrs).
• Two distribution centers are located in Spain. All items are labeled and priced at distribution center, and then delivered by third-party logistics firms.