Lecture 7

Marketing Management
Supply chain and value delivery networks

Supply chain, demand chain, and value delivery

networks

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.
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Supply chain and value delivery networks
The Nature and Importance of Marketing Channels
• Very few companies sell directly to consumers
• Marketing channel (or distribution channel)—a set of interdependent
organizations that help make a product or service available for use or
consumption by the consumer or business user
• Channel decision affect other marketing decisions
• Distribution system can be a source of competitive advantage
• Decisions often involve long-term commitments

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A source of competitive advantage

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• Channel members provide economy by minimizing transactions

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• Producers make narrow assortments of
products in large quantities, but consumers
want broad assortments of products in small
quantities.
• Distributors buy bulk from manufacturers and
sell it in smaller quantities to the customers
• Members of marketing channel offer:
• Information, contact, promotion, delivery, after-sale
service, negotiation

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Number of channel members

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 Channel behavior and organization
• Each channel member depends on the other –
A common good
• Channel conflict
• Disagreements among marketing channel members
on goals, roles, and rewards—who should do what
and for what rewards

• Horizontal conflicts – Toyota dealers

• Vertical conflicts – McDonald’s franchisees

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 Channel behavior and organization
• Conventional v/s Vertical Marketing Systems

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• Corporate VMS

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 Contractual VMS
• A contractual VMS consists of independent firms at different levels of
production and distribution that join together through contracts

• Manufacturer-sponsored retailer franchise system—for example,

Ford/Toyota and its network of independent franchised dealers.
• Manufacturer-sponsored wholesaler franchise system—Coca-Cola
licenses bottlers (wholesalers) in various world markets
• Service-firm-sponsored retailer franchise system—for example, Burger
King and its more than 12,000 franchisee-operated restaurants around
the world.
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Administered VMS

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• Horizontal marketing system
• Two or more companies at the same level join hands
to exploit a marketing opportunity

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Multichannel distribution system

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 Changing channel organization
• Changes in technology are impacting marketing
channels
• Disintermediation - The cutting out of
marketing channel intermediaries by product or
service producers or the displacement of
traditional resellers by radical new types of
intermediaries
• iTunes disrupted the music market, allowing
download of music files.

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 Channel design decisions

• Marketing channel design calls for analyzing consumer needs,

setting channel objectives, identifying major channel
alternatives, and evaluating the alternatives

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 Channel design decisions

Analyzing customer needs

• Providing the fastest delivery, the greatest assortment, and the

most services, however, may not be possible, practical, or
desired

• Consumers accept low service levels for low prices

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 Channel design decisions

• Setting channel objectives

• Influenced by company or product factors
• Competitive factor
• Economic factor

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 Channel design decisions
Identifying Major Alternatives
• Type of marketing intermediaries
• Number of marketing intermediaries
• Intensive distribution: Stocking the product in as many outlets as
possible
• Exclusive distribution: the producer gives only a limited number of
dealers the exclusive right to distribute its products in their territories
• Selective distribution— the use of more than one but fewer than all
of the intermediaries who are willing to carry a company’s products
• Responsibilities of channel members

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 Channel design decisions

• Evaluating major alternatives

• Economic
• Control
• Adaptability

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Designing international distribution channels

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 Channel management decisions
• Marketing channel management
• Selecting, managing, and motivating individual channel
members and evaluating their performance over time.

• Selecting channel members

• Ability to get channel members (Lexus v/s Timex)

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 Channel management decisions
• Managing and motivating supply chain partners

• Sell with the channel partners, rather than selling

through them

• Partner relationship management (PRM)

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 Channel management decisions
• Evaluating channel members

• Sales quotas, average inventory levels, customer

delivery time, treatment of damaged and lost
goods, cooperation in company promotion and
training programs, and services to the customer

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 Channel management decisions
• Public policy and distribution decisions

• Exclusive distribution
• Exclusive dealing
• Exclusive territorial agreements
• The producer may agree not to sell to other dealers in a given
area, or the buyer may agree to sell only in its own territory
• Full-line forcing

• Such actions are legal unless proved to be disruptive to

competition
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 Channel management decisions
• Marketing channel management
• Selecting, managing, and motivating individual channel
members and evaluating their performance over time.

• Selecting channel members

• Ability to get channel members (Lexus v/s Timex)

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 Marketing Logistics and Supply Chain Management
• Marketing logistics—also called physical distribution— involves planning,
implementing, and controlling the physical flow of goods, services, and
related information from points of origin to points of consumption to meet
customer requirements at a profit.

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Importance of logistics

• First, companies can gain a powerful competitive advantage by using

improved logistics to give customers better service or lower prices.
• Second, improved logistics can yield tremendous cost savings to both a
company and its customers.
• Third, the explosion in product variety has created a need for improved
logistics management.
• Fourth, logistics affects the environment and a firm’s environmental
sustainability efforts.

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 Sustainable (green) supply chains
•

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 Major logistics function
• Warehousing
• Storage warehouse
• Distribution centers
• Inventory management
• Balancing between too little inventory
and carrying too much
• just-in-time logistics
• RFD – smart shelves
• Transportation
• Trucks, rail, sea, pipelines, air, internet
• Multimodal transportation
• Logistics information management
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Integrated logistics management

Cross-Functional Teamwork Inside the Company

Building Logistics Partnerships

Third-party logistics

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Retailing

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E-tailing

• Electronic retailing (e- • Omnichannel retailing uses a variety

retailing or e-tailing) is of channels in a customer’s shopping
the communication and experience. Such channels include
sale of products or physical stores, online stores, mobile
services to consumers stores, mobile app stores, telephone
over the Internet. sales, etc.

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Advantages of e-tailing
• Easier for Customers to Walk Away
• Extensive Selection • Security of Personal Data
• Considerable
Information Available
for Product Research
and Evaluation
• Individualized Customer
Experience
• Build Product
Communities

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