Ch 12 Part 4 | Principles of Marketing | Marketing Channels: Delivering Customer Value | Kotler
Summary
TLDRThe transcript discusses the concept of disintermediation in marketing channels, where producers bypass intermediaries to reach customers directly, as seen with Black & Decker's online sales. It explores the importance of analyzing customer needs, setting channel objectives, and evaluating alternatives. The script also covers types of distribution, such as intensive, exclusive, and selective, and the evaluation criteria including economic and adaptive factors. International channel design, logistics, supply chain management, and inventory management are also highlighted, with examples like just-in-time systems and RFID for efficient inventory tracking.
Takeaways
- 🛒 Intermediation is when producers bypass traditional intermediaries and sell directly to consumers or use new types of intermediaries.
- 🌐 Black & Decker is an example of a company that has moved from traditional distributors to online sales to reach customers directly.
- 📊 Designing channel strategies involves analyzing customer needs, setting channel objectives, identifying alternatives, and evaluating them.
- 🎯 Channel objectives often include maximizing customer reach, segmenting services, and minimizing cost of customer service.
- 🛍 Types of intermediaries, their number, and responsibilities are crucial decisions in channel strategy, including whether to use intensive, exclusive, or selective distribution.
- 🌟 Exclusive distribution limits a product to certain outlets, exclusive dealing restricts sellers from handling competitors' products, and exclusive territorial agreements confine sales to specific geographic areas.
- 🔄 Adaptive criteria for evaluating channel alternatives include economic viability, control over the brand, and the ability to adapt to market requirements.
- 🌍 International distribution channels must be adaptable to different country-specific structures and consumer behaviors.
- 📈 General management decisions in channel strategy involve selecting, managing, motivating, and evaluating channel members.
- 🚚 Marketing logistics involves the physical distribution of goods and services to meet consumer requirements at a profit.
- 🔄 Reverse logistics refers to the process of managing returns, damaged goods, or recyclable materials back to suppliers.
Q & A
What is intermediation in the context of product distribution?
-Intermediation refers to the process where producers bypass traditional intermediaries and sell directly to the final buyer, or when new types of intermediaries emerge that replace traditional ones. It's a strategy where companies aim to reach customers directly without the need for agents, distributors, or wholesalers.
Why might a company like Black & Decker choose to sell directly to consumers online?
-Black & Decker might choose to sell directly to consumers online to cut out intermediaries, reduce costs, and have more control over the customer experience, pricing, and branding.
What are the potential benefits and drawbacks of cutting out intermediaries?
-Benefits include cost reduction, direct customer relationships, and better control over the product's journey. Drawbacks may involve losing the expertise and reach of intermediaries, increased logistical challenges, and the need for more significant investments in direct sales infrastructure.
How does a company decide on the best channel objectives?
-A company decides on channel objectives by analyzing customer needs, setting specific goals, identifying major channel alternatives, and evaluating these alternatives against economic, control, and adaptive criteria.
What are the different types of distribution a company might consider?
-A company might consider intensive distribution, exclusive distribution, or selective distribution. Intensive distribution is where products are widely available, like candy. Exclusive distribution is limited to a few outlets, like luxury cars. Selective distribution is somewhere in between, like TVs and home appliances available at selected retailers.
Why is it important for a company to evaluate its channel alternatives?
-Evaluating channel alternatives is important to ensure that the chosen distribution strategy aligns with the company's economic goals, provides sufficient control over the brand, and is adaptable to market changes and company requirements.
How does designing international distribution channels differ from domestic ones?
-International distribution channels must be adapted to the existing structures within each country, taking into account cultural, legal, and logistical differences. This requires a more nuanced approach to channel strategies that can vary significantly from one country to another.
What are some general management decisions involved in channel management?
-General management decisions in channel management include selecting channel members, managing and motivating the seller channel members, and evaluating their performance.
Can you explain exclusive distribution and give an example?
-Exclusive distribution is when a seller allows only certain outlets to carry its products. For example, a luxury brand might only sell its products in high-end department stores and not in mass-market retailers.
What is meant by supply chain management in the context of this script?
-Supply chain management in this context refers to the process of overseeing the flow of goods from raw materials to end consumers, including procurement, production, distribution, and reverse logistics, ensuring efficient and cost-effective movement of products.
How does just-in-time inventory management benefit a company?
-Just-in-time inventory management benefits a company by reducing the amount of capital tied up in inventory, minimizing storage costs, and ensuring that products are fresh and in demand, thereby reducing waste and improving cash flow.
Outlines
🛒 Direct-to-Consumer and Channel Design
This paragraph discusses the concept of disintermediation, where producers sell directly to consumers, bypassing traditional intermediaries like distributors and wholesalers. It uses Black & Decker as an example, highlighting their shift from physical stores to online sales. The paragraph emphasizes the importance of analyzing customer needs, setting channel objectives, and evaluating different channel alternatives to determine the best strategy for reaching customers. It also touches on the need for economic, control, and adaptive criteria when evaluating these alternatives. The discussion extends to international distribution channels, noting the importance of adapting to different market structures and consumer behaviors.
📦 Logistics and Supply Chain Management
The second paragraph delves into general management decisions related to channel members, including selection, management, motivation, and evaluation. It introduces various types of distribution agreements such as exclusive distribution, exclusive dealing, exclusive territorial agreements, and tying agreements. The concept of marketing logistics is explained, which involves the physical distribution of goods and services to meet consumer requirements at a profit. The paragraph also covers supply chain management, emphasizing the flow of materials, goods, and information among suppliers, companies, and consumers. It discusses procurement management, the role of warehouses in inventory storage, and the importance of transportation in logistics. Additionally, it mentions reverse logistics for handling returns and recycling.
📈 Inventory Management and Technology
This paragraph focuses on inventory management, explaining the need for accounting systems and databases to track inventory levels. It introduces the concept of logistics information management and the importance of knowing the quantity and location of products in warehouses. The paragraph discusses different types of warehouses and distribution centers, and the concept of just-in-time inventory management, which aims to minimize inventory by ensuring it arrives exactly when needed. It also mentions RFID technology for tracking inventory and smart shelves that can automatically place orders, highlighting how these technologies help in managing inventory more efficiently.
🏨 Smart Inventory in Hospitality
The final paragraph provides an example of inventory management in a five-star hotel with 500 rooms, each equipped with a refrigerator stocked with various beverages and snacks. It describes how smart shelves in these refrigerators automatically record when a product is taken, triggering a replacement and an order. This system allows for precise inventory tracking and management, ensuring that rooms are always stocked without excess inventory. The paragraph illustrates how technology can streamline inventory management in a hospitality setting.
Mindmap
Keywords
💡Intermediation
💡Channel Objectives
💡Channel Alternatives
💡Customer Service Levels
💡Intensive Distribution
💡Exclusive Distribution
💡Selective Distribution
💡Supply Chain Management
💡Inventory Management
💡Logistics
💡Reverse Logistics
Highlights
Intermediation occurs when producers bypass intermediaries to sell directly to consumers or when new types of intermediaries emerge.
Black & Decker shifted from traditional distributors to online sales as an example of intermediation.
Companies may opt for direct sales to customers but sometimes still require the support of intermediaries.
Designing channel strategies involves analyzing customer needs, setting objectives, and evaluating alternatives.
Channel objectives often aim to minimize costs while meeting customer service requirements.
Identifying major channel alternatives includes deciding on the type and number of intermediaries.
The decision to distribute products through various channels, such as exclusive or intensive distribution, is crucial.
Evaluating channel alternatives requires considering economic, control, and adaptive criteria.
International distribution channels must adapt to the existing structures and strategies of each country.
General management decisions in distribution include selecting, managing, and evaluating channel members.
Exclusive distribution limits a product to certain outlets, while exclusive dealing restricts sellers to one brand.
Exclusive territorial agreements confine sales to specific geographical areas.
Tying agreements require dealers to sell an entire product line.
Marketing logistics involves the physical distribution of goods from origin to consumption.
Logistics management is about ensuring product availability and may involve outsourcing physical distribution.
Supply chain management encompasses the flow of materials, goods, and information between suppliers, companies, and consumers.
Procurement management focuses on purchasing and is a key logistics function.
Warehouses are essential for inventory storage and management.
Inventory management includes just-in-time systems to minimize inventory and reduce costs.
RFID technology helps in tracking and managing inventory by identifying the exact location of items.
Smart shelves can automatically place orders, streamlining inventory management in hotels and other establishments.
Transcripts
uh this intermediation
it occurs when products or services
producers cut out intermediaries and
they go directly to the final buyer
or when radically new types of channel
intermediaries
displays traditional ones so who did
anyone know us this black and decker
you know many people they go to the shop
that sell dragon decker
but now black and decker they don't like
distributors anymore
they can do it online and then people
they want to buy
an iron they want to buy a new you know
home appliance they can just what online
so this intermediation is companies they
started now
don't want to have any agents or
distributors
or wholesalers just want to reach
directly to the customer
okay it's good or bad
now sometimes it can be good
but many times you need to get the help
of these intermediaries
so how do we design our channels
we need to analyze our customer needs we
need to set
channel objectives we want to identify
major channel alternatives and then we
evaluate
okay it's not very easy to look into all
the decisions of channels let's look at
some of the comments here
targeted levels of customer service you
want to know what segments to serve
best channels to use and you want to
minimize the cost of meeting customer
service requirements
right so these are like your general
objectives
right uh you want to get customers you
have the service
you segment it well you reach them and
you have minimum cost
next you want to identify major
alternatives
what are the type of intermediaries you
want to use the number of marketing
intermediaries responsibilities of
channel members do you guys remember
when we talked about the
what is it the battery the six-month
battery
if you want to distribute it how many
intermediaries do you want to have
would you like to have it available in
only certain shops or in all the shops
do you see that's a decision you know
some people say all the shops and people
say some of the shops
so you need to identify what are the
options
and uh which type what level what
minimum
if all is it all all including this you
know from the small grocery shop
all the way or you want to have a
minimum
and what are the responsibilities is the
responsibility is
just storage do they have to keep a
minimum number of
inventory do you require them to sell
them
you know a minimum number per month to
keep an inventory
so those are important questions do you
want to do intensive
distribution like candy or toothpaste
or maybe you want to do exclusive so
that's you know like luxury
automobiles and prestigious clothing you
want to do it only in exclusive
or maybe you want to do it selective
just like tvs and home appliances
see if you think about tv
if you want sony only in the handy and
some selected shops
you know lg is only available through
places where they
sell home appliances but if you think
about candy
it's like in every grocery shop
basically
luxury automobiles also only available
in
exclusive distribution channels
and then you want to evaluate your major
alternatives
each alternative should be evaluated
against economic criteria control and
adaptive criteria
so if you have a lot of distributors you
want to check
is this uh you know distributor
are they economically doing good are
they
providing enough control over our brand
and
uh are they good uh do they adapt do
they
do they adapt to our requirements so we
tell them right they say okay
now left they go okay they you know
market
requires more attention they say okay
and then here talks about designing
international distribution channels it
says the channel system
can vary from a country to a country and
must be able to adapt channel strategies
to the existing structure within each
country
do you guys see what you see on the
picture here
you know sometimes in some markets you
know this is how they sell
personal care products okay some other
countries they sell personal care
products in a different way
so you need to adapt and see what is the
best strategy
to sell personal care products in those
markets for example
general management decisions you want to
select channel members
manage seller channel members of mark
motivate and evaluate
so uh let's see how we do that
uh what is exclusive distribution that's
when the seller allow only certain
outlets to carry its product products
so only you sell your products only in
those
places okay exclusive dealing is
when the seller requires that the seller
not to handle any competitor
products so if let's say sony they tell
that hey daddy
you cannot sell other than sony okay
exclusive territorial agreements where
the producer or seller
limit territory where they give you okay
alhaderi you can sell
only in this geographical location you
have license to sell but outside don't
sell
tying agreement where the arrangement
where the dealer must
uh make most or all of the line so
that when sony tell hey daddy hey look
you want to
sell sony if you say yes you have to
sell everything somebody
from the playstation to the cameras to
the tvs
all the way to the mobile phones and
laptops
and you have to make them all available
you see
so that's what we call a timing
agreement are you guys okay with these
territory within a location within a
country or within the region
marketing logistics is the marketing is
the physical
distribution and it involved planning
implementing and controlling the
physical flow of goods
services and related information from
point of origin
to points of consumption and that's to
meet consumer requirements at a profits
you guys are okay with this logistics
it's the idea of how you make sure your
products are available to everyone
you always want to have distribution uh
logistics some company maybe that
actually do the caring
sometimes you don't have the ability to
carry it yourself rather you just
you know outsources to a company that
will out will do the physical
distribution on your behalf
and then later we have here the idea of
supply chain management
do you guys know what we mean by
supplier
yeah yeah the people who provide you
with the rav material maybe
that's what you got in both logistics so
you need to get the
you know the stuff over here and then
inside your company
you process and then you generate
outbound logistics so that's when you
need to
you know send it to your retailer who
are going to send it to
their customers or sell to the customers
and then we have the idea of reverse
logistics if there is any return
if there is any uh you know material
damage need to be
fixed or anything that is going to be
recycled
to go back to the suppliers so that's
what we call reverse logistics
and you guys are okay with this
okay
supply chain management is of the
process of management managing upstream
and downstream value
added flow of material final goods
related information among suppliers the
company the sellers and the funnel
consumers
so what is supply chain management how
we make sure all of this
from raw material to information to
money flow
between the different channel members
between the producers
to the marketers to the retailers to the
sellers to the resellers
to the customers
yeah as a procurement management is
you know they're interested in the
supply chain right
they do the actual purchasing right
uh these are like logistics functions
here
uh we've got warehouses do you guys know
what's a warehouse
what is the biggest warehouse you have
ever seen here in summer
wfp they have a huge warehouse any other
warehouse huge
uh this
economic military yeah the eco
you have an economic corporation they
have a huge warehouse
so warehouses are important because
anyone have seen let's say
you know those warehouses where you keep
the inventory
you see and then once you have a
warehouse you need to have very good
transportation companies to fill the
transportation
to the warehouse from the warehouse to
the retailers from the
you need to have good inventory
management you know what's an inventory
management
idea of how you manage your inventory
you need to have accounting system you
know how many you have in the inventory
you see you need to have a database so
you can know from this item i have this
number from this
item i have this number from this item i
have that number
and you may have logistics information
management
how can you manage these databases
sometimes you
your information will be linked by the
suppliers by vendors
by clients maybe if someone wants to
look up your
inventory can they look it up from other
way from other places from other
countries from other companies
so how many you have in your warehouse
what type of
products where to locate the warehouse
uh
warehouses itself the warehouse itself
the building the
you know what's in it what's not in it
and the distribution centers
sometimes you may have a distribution
center where it's
only for redistribution they don't do
any
uh yes
for anyone okay remember if i'm pepsi
i need to do warehouses for my pepsi you
see
if i'm in mri i need to have warehouses
for my mri
now it goes through distribution channel
maybe i will use a warehouse for
some sort of a let's say a supermarket
warehouse
or let's say a distributor warehouse you
know the idea of warehousing in general
yeah if you go to toyota maybe you uh
you know you go here in sana'a you see
the warehouse they have a lot of
where they keep their inventory right
and then you go to their showrooms and
inside the showroom you will see maybe
three or four
you see but you have a warehouse where
you keep your uh
you know the new ones the new arrivals
inventory management is when you uh look
into uh just in time management
system anyone have heard of just-in-time
systems
see maybe to utah now they don't want to
keep a big
inventory they want to have an inventory
that is enough
you see they call this the just in time
where
you know you always keep let's say if
you will make a party tomorrow
then you will buy the stuff you need for
the party tomorrow
today so tomorrow you use it
and it arrived today just in time or
maybe tomorrow morning
just in time okay some people say no
if you have a party every day then buy
for the whole month
now some people say no buy for the whole
two months now
now if i buy for the three months now
that's not just in time
because the inventory arrive and wait
for three months until it's used
but a just-in-time inventory it will
means you bring in
every day just enough for that day
or maybe for one week you try to make it
in a very short
the shorter the better you see the idea
of just-in-time
systems is that you want to keep your
inventory very low
because inventory if you keep a high
inventory that's a lot of money
stuck into the inventory right if i buy
my inventory for the next three months
then i had to have a lot of money to buy
the stuff today
so that it stay for three months
rfid do you anyone have notices the rfid
radio frequency identification
knowing exactly proud location the fid
is
some sort of a small piece in your
clothes maybe
anyone have butter clothes and then
there's a small piece of paper
you know on inside your jacket or and
then if you don't pay for it
by the time you leave it will drink tea
tea
tea
yeah sometimes you pay for it you go to
another store that uses the same rfid
you know and then they might also ring
there again and then you need to tell
them hey look
so that's another way to keep your
inventory because they have this machine
now they walk inside your inventory room
and it will count how many items you
have of each item
do you see so it will give you a report
this is the inventory you have
inside the store
do you see or let's say that there's a
piece missing
now this looks like a gun and then you
know you point it
you know it's in that direction the
piece that you're looking for
uh and also smart shelves and you want
to have heard of the small shelves
place orders automatically
uh remember if you go to this uh
you go to this special uh hotel
five-star hotel
they have 500 rooms every room have a
refrigerator
every refrigerator they have two pepsis
three seven ups
two cookies two chocolate candies three
drinks
two i don't know what how do they keep
an inventory of all of this
it's a huge inventory it's like 500
rooms every room has a small
you see and every day they have to check
what customer ordered
so they have those refrigerators which
has a smart shelf
basically uh there is a you know you
have to flip it
to get the coke and once you flip it the
order is
sent and once you return it back another
coke will
slide in and then you turn it again
you take it two slide it back
another one come in but as soon as it
clicks
it will immediately you know record
so that's smart shelf they make the
order automatically
do you see
so that's inventory management all right
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