Marketing management Chapter 15 doc

PART DELIVERING VALUE IN THIS CHAPTER, WE WILL ADDRESS THE FOLLOWING QUESTIONS: 1. What is a marketing channel system and value network? 2. What work do marketing channels perform? 3. How should channels be designed? 4. What decisions do companies face in managing their channels? 5. How should companies integrate channels and manage channel 6. What is the future for e-commerce? -:''••."''•'' -'• •• rSte:?"^'' 1 ''' CHAPTER 15 DESIGNING AND MANAGING VALUE NETWORKS AND CHANNELS Successful value creation needs successful value delivery. Holistic marketers are increasingly taking a value network view of their busi- nesses. Instead of limiting their focus to.their immediate suppliers, distributors, and customers, they are examining the whole supply chain that links raw materials, components, and manufactured goods and shows how they move toward the final consumers. Companies are looking at their suppliers' suppliers upstream and at their distributors' customers downstream. They are looking at cus- tomer segments and how company resources can best be orga- nized to meet needs. Failure to coordinate the value network prop- erly can have dire consequences. A Blue Light Shop Online kiosk at Kmart. 467 iscount chain Km art's rise in the 1970s was characterized by its blue light specials and famous (or infamous) in-store announce- ment, "Attention Kmart Shoppers 1 ." But suffering from poor loca- Itions, an unfavorable image, and deteriorating sales, Kmart decided to try to match Wal-Mart's everyday low prices. This move, however, forced the com- pany to drop the widely distributed Sunday newspaper circulars that pro- moted sales and drove store traffic. Even worse, a terrible replenishment sys- tem also resulted in numerous hot sellers being out of stock. Kmart filed for Chapter 11 bankruptcy on January 22, 2002, the biggest retailer to have done so up to that time.' 1 468 PART 6 DELIVERING VALUE ' III Marketing Channels and Value Networks Most producers do not sell their goods directly to the final users; between them stands a set of intermediaries performing a variety of functions. These intermediaries constitute a marketing channel (also called a trade channel or distribution channel). Formally, mark- eting channels are sets of interdependent organizations involved in the process of mak- ing 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 use by the final end user. 2 Some intermediaries—such as wholesalers and retailers—buy, take title to, and resell the merchandise; they are called merchants. Others—brokers, manufacturers' representa- tives, sales agents—search for customers and may negotiate on the producer's behalf but do not take title to the goods; they are called agents. Still others—transportation compa- nies, independent warehouses, banks, advertising agencies—assist in the distribution process but neither take title to goods nor negotiate purchases or sales; they are called facilitators. The Importance of Channels A marketing channel system is the particular set of marketing channels employed by a firm. Decisions about the marketing channel system are among the most critical facing manage- ment. In the United States, channel members collectively earn margins that account for 30 to 50 percent of the ultimate selling price. In contrast, advertising typically accounts for less than 5 to 7 percent of the final price. 3 Marketing channels also represent a substantial oppor- tunity cost. One of the chief roles of marketing channels is to convert potential buyers into profitable orders. Marketing channels must not just serve markets, they must also make markets. 4 The channels chosen affect all other marketing decisions. The company's pricing depends on whether it uses mass merchandisers or high-quality boutiques. The firm's sales force and advertising decisions depend on how much training and motivation dealers need. In addition, channel decisions involve relatively long-term commitments to other firms as well as a set of policies and procedures. When an automaker signs up independent dealers to sell its automobiles, the automaker cannot buy them out the next day and replace them with company-owned outlets. 5 In managing its intermediaries, the firm must decide how much effort to devote to push versus pull marketing. A push strategy involves the manufacturer using its sales force and trade promotion money to induce intermediaries to carry, promote, and sell the product to end users. Push strategy is appropriate where there is low brand loyalty in a category, brand choice is made in the store, the product is an impulse item, and product benefits are well understood. A pull strategy involves the manufacturer using advertising and promotion to persuade consumers to ask intermediaries for the product, thus inducing the intermediaries to order it. Pull strategy is appropriate when there is high brand loyalty and high involve- ment in the category, when people perceive differences between brands, and when people choose the brand before they go to the store. Top marketing companies such as Nike, Intel, and Coca-Cola skillfully employ both push and pull strategies. Companies today must build and manage a continuously evolving value net- work. In this chapter, we consider strategic and tactical issues with marketing channels and value networks. We will examine marketing channel issues from the perspective of retailers, wholesalers, and physical-distribution agencies in Chapter 16. DESIGNING AND MANAGING VALUE NETWORKS AND CHANNELS CHAPTER 15 469 Channel Development A new firm typically starts as a local operation selling in a limited market, using existing intermediaries. The number of such intermediaries is apt to be limited: a few manufactur- ers' sales agents, a few wholesalers, several established retailers, a few trucking companies, and a few warehouses. Deciding on the best channels might not be a problem; the problem might be to convince the available intermediaries to handle the firm's line. If the firm is successful, it might branch into new markets and use different channels in different markets. In smaller markets, the firm might sell directly to retailers; in larger mar- kets, it might sell through distributors. In rural areas, it might work with general-goods mer- chants; in urban areas, with limited-line merchants. In one part of the country, it might grant exclusive franchises; in another, it might sell through all outlets willing to handle the merchandise. In one country it might use international sales agents; in another, it might partner with a local firm. 6 In short, the channel system evolves in response to local opportu- nities and conditions. This entrepreneur started by developing channels in a small niche and then expanding slowly into new channels. r- SEAYU ENTERPRISES INC. SeaYu is taking a slow and steady approach to channel development for its pioneering product "Petrotech Odor Eliminator." Designed to eliminate the odors that pets generate—from wet doggy smell to kitty litter box aroma—Petrotech Odor Eliminator was first sold across the country at small pet specialty retailers and kennels, through breeders, and animal rescue centers. Once it established a reputation in these specialized channels and gained some publicity, SeaYu signed a contract with the huge PetSmart chain. SeaYu's product will first begin selling only in PetSmart's mail-order catalog and then will be rolled out to its retail locations. In the meantime, customers have given SeaYu feedback that the product not only eliminates pet odors, but is also useful for clear- ing the air of other annoying smells such as bacon cooking or cigarette smoke. SeaYu plans to eventually broaden distribution into other markets like housewares and the automotive aftermarket.This, in turn, could lead i to deals with larger discount chains such as Wal-Mart or Target. 7 Today's successful companies are also multiplying the number of "go-to-market" or hybrid channels in any one market area: s IBM uses its sales force to sell to large accounts, outbound telemarketing to sell to medium-sized accounts, direct mail with an inbound number for small accounts, retailers to sell to still smaller accounts, and the Internet to sell specialty items. a Charles Schwab enables its customers to do transactions in its branches, over the phone, or on the Internet. s Staples markets through its traditional retail channel, a direct-response Internet site, vir- tual malls, and thousands of links on affiliated sites. Companies that manage hybrid channels must make sure these channels work well together and match each target customer's preferred ways of doing business. Customers expect channel integration, characterized by the following features: • The ability to order a product online and pick it up at a convenient retail location, a The ability to return an online-ordered product to a nearby store of the retailer, n The right to receive discounts based on total online and offline purchases. "Marketing Memo: Multichannel Shopping Checklist" offers some concrete advice on chan- nel integration. Here's a specific example of a company that has carefully managed its mul- tiple channels. p REI What's more frustrating: Buying hiking boots that cripple your feet or trying on the perfect hiking boots only to find that the store is out of stock in the size or style you want? At Recreational Equipment Inc. (REI), out- door enthusiasts can easily avoid both frustrations. In 59 REI stores across the country, customers are light- ing up gas stoves, pitching tents, and snuggling deep into sleeping bags. If an item is out of stock, all cus- tomers need do is tap into the store's Internet kiosk to order it from REI's Web site. Less Internet savvy 470 PART 6 DELIVERING VALUE MARKETING MEMO MULTICHANNEL SHOPPING CHECKLIST During the 2003 "back-to-school" season, the e-tailing group, an e-commerce consulting firm in Chicago, sent mystery shoppers to visit retail locations of 16 e-tailers to test their claims of an integrated shopping experience in the online/retail returns process. Overall, the study found that 44 percent of in-store returns of merchandise pur- chased online required a store manager to override the retail system in order to accept the return. In response to this and several other inadequacies revealed by the study, the e-tailing group created a "Best of Breed Multi-channel Shopping Checklist" to help marketers better integrate online and offline channels: J Train all store associates on processes for online merchandise returns. i List your company's 800 number on the Web homepage, and be sure your customer service hours of operation are easily accessible. Provide an information center that is easy to navigate and includes contact information, FAQs, guarantees, return policies, and tips for first-time customers. Implement a store locator feature that includes store locations, hours, and events. Make store pickup for purchases an option and include real-time inventory levels, where applicable. Post the store's weekly circular online for a more complete mul- tichannel experience. Offer gift certificates that can be redeemed online and offline. Send e-mail notifications of the order, shipping, and return credit; include a reminder of the returns process in notifications as well as a link to your store locator. Suppy all pertinent/compatible information for store return of merchandise on the packing slip or invoice. Source: Excerpted from Hallie Mummert, "Multi-Channel Marketers Earn a 'C+' on Returns," Target Marketing (October 2003): 158. customers can even get clerks to place the order for them from the checkout counters. For its seamless inte- gration of retail store, Web site, Internet kiosks, mail-order catalogs, value-priced outlets, and toll-free order number, REI has been named today's top multichannel marketer by Forrester Research. And REI not only gen- erates store-to-internet traffic, it also sends Internet shoppers into its stores. If a customer browses REI's site and stops to read an REI "Learn and Share" article on backpacking, the site might highlight an in-store promo on hiking boots. Linking all its channels has produced outstanding results: In a 24-month period, REI found that dual-channel shoppers spent 114 percent more than single-channel ones and that tri-channel shoppers spent 48 percent more than dual-channel shoppers. 8 Different consumers, however, have different needs during the purchase process. Nunes and Cespedes argue that in many markets, buyers fall into one of four categories. 9 1. Habitual shoppers - Purchase from the same places in the same manner over time. 2. High value deal seekers - Know their needs and "channel surf" a great deal before buy- ing at the lowest possible price. 3. Variety-loving shoppers'-Gather information in many channels, take advantage of high- touch services, and then buy in their favorite channel, regardless of price. 4. High-involvement shoppers- Gather information in all channels, make their purchase in a low-cost channel, but take advantage of customer support from a high-touch channel. The same consumer may choose to use different channels for different functions in mak- ing a purchase. A consumer may choose to browse through a catalog before visiting a store or take a test drive at a dealer before ordering a car online. Consumers may seek different types of channels depending on the particular types of goods involved. Some consumers are willing to "trade up" to retailers offering higher-end goods such as TAG Heuer watches or Callaway golf clubs; these same consumers are also willing to "trade down" to discount retailers to buy private-label paper towels, detergent, or vitamins. 10 Value Networks A supply chain view of a firm sees markets as destination points and amounts to a linear view of the flow. The company should first think of the target market, however, and then design the supply chain backward from that point. This view has been called demand chain planning. Northwestern's Don Schultz says: "A demand chain management approach doesn't just push things through the system. It emphasizes what solutions consumers are looking for, not what DESIGNING AND MANAGING VALUE NETWORKS AND CHANNELS CHAPTER 15 471 Sales channel for Bowflex fitness equipment: a print ad with a coupon and an 800 number for phone calls. products we are trying to sell them." Schultz has suggested that the traditional marketing "four P's" be replaced by a new acronym, SIVA, which stands for solutions, information, value, and access." An even broader view sees a company at the center of a value network—a system of part- nerships and alliances that a firm creates to source, augment, and deliver its offerings. A value network includes a firm's suppliers and its suppliers' suppliers, and its immediate cus- tomers and their end customers. The value network includes valued relations with others such as university researchers and government approval agencies. A company needs to orchestrate these parties to enable it to deliver superior value to the target market. Palm, the leading manufacturer of handheld devices, consists of a whole com- munity of suppliers and assemblers of semiconductor components, plastic cases, LCD dis- plays, and accessories; of offline and online resellers; and of 275,000 developers who have created over 21,000 software programs and 100 hardware add-ons for the Palm operating systems for hand-held computers and smartphones. Demand chain planning yields several insights. First, the company can estimate whether more money is made upstream or downstream, in case it might want to integrate backward or forward. Second, the company is more aware of disturbances anywhere in the supply chain that might cause costs, prices, or supplies to change suddenly. Third, companies can go online with their business partners to carry on faster and more accu- rate communications, transactions, and payments to reduce costs, speed up information, and increase accuracy. With the advent of the Internet, companies are forming more numerous and complex relationships with other firms. For example, Ford not only man- ages numerous supply chains, but also sponsors or transacts on many B2B Web sites and exchanges as needs arise. 472 PART 6 DELIVERING VALUE (a) Number of Contacts MxC=3x3=9 Managing this value network has required companies to make increasing investments in information technology (IT) and software. They have invited such software firms as SAP and Oracle to design comprehensive enterprise resource planning (ERP) systems to manage cash flow, manufacturing, human resources, purchasing, and other major functions within a uni- fied framework. They hope to break up department silos and carry out core business processes more seamlessly. In most cases, however, companies are still a long way from truly comprehensive ERP systems. Marketers, for their part, have traditionally focused on the side of the value network that looks toward the customer. In the future, they will increasingly participate in and influence their companies' upstream activities and become network managers, not only product and customer managers. The Role of Marketing Channels (b) Number of Contacts M+C=3+3=6 M = Manufacturer C = Customer D = Distributor FIG. 15.1 | How a Distributor Increases Efficiency Why would a producer delegate some of the selling job to intermediaries? Delegation means relinquishing some control over how and to whom the products are sold. Producers do gain several advantages by using intermediaries: ® Many producers lack the financial resources to cany out direct marketing. For example, General Motors sells its cars through more than 8,000 dealer outlets in North America alone. Even General Motors would be hard-pressed to raise the cash to buy out its dealers. B Producers who do establish their own channels can often earn a greater return by increas- ing investment in their main business. If a company earns a 20 percent rate of return on man- ufacturing and a 10 percent return on retailing, it does not make sense to do its own retailing. H In some cases direct marketing simply is not feasible. The William Wrigley Jr. Company would not find it practical to establish small retail gum shops throughout the world or to sell gum by mail order. It would have to sell gum along with many other small products and would end up in the drugstore and grocery store business. Wrigley finds it easier to work through the extensive network of privately owned distribution organizations. Intermediaries normally achieve superior efficiency in making goods widely available and accessible to target markets. Through their contacts, experience, specialization, and scale of operation, intermediaries usually offer the firm more than it can achieve on its own. According to Stern and his colleagues: Intermediaries smooth the flow of goods and services This procedure is neces- sary in order to bridge the discrepancy between the assortment of goods and ser- vices generated by the producer and the assortment demanded by the consumer. The discrepancy results from the fact that manufacturers typically produce a large quantity of a limited variety of goods, whereas consumers usually desire only a lim- ited quantity of a wide variety of goods. 12 Figure 15.1 shows one major source of cost savings using intermediaries. Part (a) shows three producers, each using direct marketing to reach three customers. This system requires nine different contacts. Part (b) shows the three producers working through one distributor, who contacts the three customers. This system requires only six contacts. In this way, inter- mediaries reduce the number of contacts and the work. Channel Functions and Flows A marketing channel performs the work of moving goods from producers to consumers. It overcomes the time, place, and possession gaps that separate goods and services from those who need or want them. Members of the marketing channel perform a number of key func- tions (see Table 15.1). Some functions (physical, title, promotion) constitute a forward flow of activity from the company to the customer; other functions (ordering and payment) constitute a backward flow from customers to the company. Still others (information, negotiation, finance, and risk taking) occur in both directions. Five flows are illustrated in Figure 15.2 for the marketing of forklift trucks. If these flows were superimposed in one diagram, the tremendous complexity of even simple marketing channels would be apparent. A manu- facturer selling a physical product and services might require three channels: a sales DESIGNING AND MANAGING VALUE NETWORKS AND CHANNELS CHAPTER 15 473 • Gather information about potential and current customers, competitors, and other actors and forces in the marketing environment. • Develop and disseminate persuasive communications to stimulate purchasing. • Reach agreements on price and other terms so that transfer of ownership or possession can be effected. • Place orders with manufacturers. • Acquire the funds to finance inventories at different levels in the marketing channel, a Assume risks connected with carrying out channel work. • Provide for the successive storage and movement of physical products. B Provide for buyers' payment of their bills through banks and other financial institutions, a Oversee actual transfer of ownership from one organization or person to another. TABLE 15.1 | Channel Member Functions channel, a delivery channel, and a service channel. To sell its Bovvflex fitness equipment, the Nautilus Group has used television infomercials, the telephone, and the Internet as sales channels; UPS ground service as the delivery channel; and local repair people as the service channel. When sales failed to meet goals, Nautilus added retail stores to its sales channels in 2003. When a competitor infringed on the Bowflex patent by placing an imi- tation product into retail stores, Nautilus began selling Bovvflex home gyms through the retail channel. The question is not whether various channel functions need to be performed—they must be—but rather, who is to perform them. All channel functions have three things in common: They use up scarce resources; they can often be performed better through specialization; and they can be shifted among channel members. When the manufacturer shifts some func- tions to intermediaries, the producer's costs and prices are lower, but the intermediary must add a charge to cover its work. If the intermediaries are more efficient than the manufac- turer, prices to consumers should be lower. If consumers perform some functions them- selves, they should enjoy even lower prices. I FIG. 15.2 . Five Marketing Flows in the Marketing Channel for Forklift Trucks 474 PART 6 DELIVERING VALUE - : Marketing functions, then, are more basic than the institutions that perform them at any given time. Changes in channel institutions largely reflect the discovery of more efficient ways to combine or separate the economic functions that provide assortments of goods to target customers. Channel Levels The producer and the final customer are part of every channel. We will use the number of intermediary levels to designate the length of a channel. Figure 15.3(a) illustrates several consumer-goods marketing channels of different lengths. A zero-level channel (also called a direct-marketing channel) consists of a manufac- turer selling directly to the final customer. The major examples are door-to-door sales, home parties, mail order, telemarketing, TV selling, Internet selling, and manufacturer- owned stores. Avon sales representatives sell cosmetics door-to-door; Tupperware repre- sentatives sell kitchen goods through home parties; Franklin Mint sells collectibles through mail order; AT&T uses the telephone to prospect for new customers or to sell enhanced services to existing customers; Time-Life sells music and video collections through TV commercials or longer "infomercials"; Red Envelope sells gifts online; and Gateway sells computers and other consumer electronics through its own stores. "Marketing Insight: M-Commerce Opens Up New Opportunities for Marketers" describes new developments in that area. A one-level channel contains one selling intermediary, such as a retailer. A two-level chan- nel contains two intermediaries. In consumer markets, these are typically a wholesaler and a retailer. A three-level channel contains three intermediaries. In the meatpacking industry, wholesalers sell to jobbers, who sell to small retailers. In Japan, food distribution may involve as many as six levels. From the producer's point of view, obtaining information about end users and exercising control becomes more difficult as the number of channel levels increases. Figure 15.3(b) shows channels commonly used in industrial marketing. An industrial- goods manufacturer can use its sales force to sell directly to industrial customers; or it can sell to industrial distributors, who sell to the industrial customers; or it can sell through manufacturer's representatives or its own sales branches directly to industrial customers, or indirectly to industrial customers through industrial distributors. Zero-, one-, and two-level marketing channels are quite common. 0-level (a) Consumer Marketing Channels 1-level 2-level 3-level Manufacturer Manufacturer Manufacturer Retailer Retailer Consumer Consumer 0-level (b) Industrial Marketing Channels 1-level 2-Ievel Manufacturer Manufacturer Wholesaler I Wholesaler Jobber Retailer Manufacturer Industrial distributors Consumer Consumer Industrial customer Industrial customer Manufacturer Manufacturer's representative Industrial customer 3-level Manufacturer Manufacturer's sales branch Industrial customer FIG. 15.3 j Consumer and Industrial Marketing Channels DESIGNING AND MANAGING VALUE NETWORKS AND CHANNELS CHAPTER 15 475 IARKETING INSIGHT M-COMMERCE OPENS UP NEW OPPORTUNITIES FOR MARKETERS Consumers and businesspeople no longer need to be near a com- puter to send and receive information. All they need is a cellular phone or personal digital assistant (PDA). While they are on the move, they can connect with the Internet to check stock prices, the weather, sports scores; send and receive e-mail messages; and place online orders. A whole field called telematics involves placing wireless Internet-connected computers in the dashboards of cars and trucks, and making more home appliances (such as computers) wireless so that they can be used anywhere in or near the home. Many see a big future in what is now called m-commerce (m for mobile). Consider the fast growth of Internet- connected phones. In Japan, millions of teenagers carry DoCoMo phones available from NTT (Nippon Telephone and Telegraph). They can also use their phone to order goods. Each month, the subscriber receives a bill from NTT listing the monthly subscriber fee, the usage fee, and the cost of all the transactions. The person can then pay the bill at the nearest 7-11 store. In the United States, Conversagent (for- merly ActiveBuddy) creates software applications that connect Instant Messaging users to marketer-created data using conversa- tional language. The potential market opportunities for location-based services are enormous. Consider some possibilities: • Getting a Coke by pointing and clicking the phone at a vending machine. The bottle drops down and an appropriate amount is deducted from the owner's bank account. • Using the phone to search for a nearby restaurant that meets the customer's entered criteria. • Watching stock prices while sitting in the restaurant and deciding to place a purchase order. • Clicking the phone to pay the bill for the meal; the cellular phone replaces the credit card. • Coming home and clicking a combination of keys on the phone to open the door. Some see positive benefits, such as locating people making emer- gency 911 calls or checking on the whereabouts of one's children late at night. Others worry about privacy issues. What if an employer learns that an employee is being treated for AIDS at a local clinic, or a wife finds out her husband is out clubbing? Like so many new tech- nologies, location-based services have potential for good or harm, and ultimately will warrant public scrutiny and regulation. Sources: Douglas Lamont, Conquering the Wireless World: The Age of M-Commerce Instant Message," Business 2.0, February 2002, pp. 98-99. ew York: Wiley, 2001); Marc Weingarten, "The Medium Is the Channels normally describe a forward movement of products from source to user. One can also talk about reverse-flow channels. They are important in the following cases: (1) to reuse products or containers (such as refillable chemical-carrying drums); (2) to refurbish products (such as circuit boards or computers) for resale; (3) to recycle products (such as paper); and (4) to dispose of products and packaging (waste products). Several intermediaries play a role in reverse-flow channels, including manufacturers' redemption centers, commu- nity groups, traditional intermediaries such as soft-drink intermediaries, trash-collection specialists, recycling centers, trash-recycling brokers, and central-processing warehousing. 13 HEWLETT-PACKARD Each month Hewlett-Packard, the world's second-largest computer maker, sends 1.7 million tons of broken- down and unwanted electronics to meet their end—or their new beginning—at its Roseville, California, recy- cling center. Yet the company, in conjunction with recycling partner Noranda Inc., still only recycles less than 1 percent of the hardware it makes. Pressured by complaints about how they dispose of products—including shipping old machines to be broken down in Asian countries with less strict environmental laws—computer makers have joined with the EPA, environmental groups, and a nonprofit group called Product Stewardship Institute. These groups created the National Electronics Product Stewardship Initiative, but the process of cre- ating a nationwide recycling standard is incredibly slow. Without a system in place, electronics makers like HP and Dell have launched inventive PR campaigns to spur the public to recycle. On Earth Day 2003, at a Starbucks support center in Seattle and the following day in New York's Grand Central Terminal, HP accepted computer hardware made by any manufacturer and recycled it at no charge. HP also boosted the incentive for consumers and small businesses to hire HP to recycle old PCs and monitors through its recycle-by-mail pro- gram, which costs S15 to $46 depending on the size of the equipment. 14 [...]... Moran, "Marketing Hybrid Marketing Systems," Harvard Business Review (November-December 1990): 146 -155 Also see Gordon S Swartz and Rowland T Moriarty, "Marketing Automation Meets the Capital Budgeting Wall," Marketing Management 1, no 3 (1992); Sridhar Balasubramanian, "Mail versus Mall: A Strategic Analysis of Competition Between Direct Marketers and Conventional Retailers," Marketing Science 17, no... of marketing intermediaries performing a variety of functions 2 Marketing- channel decisions are among the most critical decisions facing management The company's chosen channel(s) profoundly affect all other marketing decisions 3 Companies use intermediaries when they lack the financial resources to carry out direct marketing, when direct marketing is not feasible, and when they can earn more by doing... Effective channel management calls for selecting intermediaries and training and motivating them The goal is to build a long-term partnership that will be profitable for all channel members 6 Marketing channels are characterized by continuous and sometimes dramatic change Three of the most important trends are the growth of vertical marketing systems, horizontal marketing systems, and multichannel marketing. .. by Failures," The Observer, February 11, 2001, p 10 25 For more on relationship marketing and the governance of marketing channels, see Jan B Heide, "Interorganizational Governance in Marketing Channels," Journal of Marketing (January 1994): 71-85 26 Lawrence G Friedman and Timothy R Furey, The Channel Advantage: Going to Marketing with Multiple Sales Channels (Woburn, MA: Butterworth-Heinemann, 1999)... Anderson and Coughlan, "Channel Management: Structure, Governance, and Relationship Management, " pp 223-247 30 These bases of power were identified in John R P French and Bertram Raven, "The Bases of Social Power," in Studies in Social Power, edited by Dorvvin Cartwright (Ann Arbor: University of Michigan Press, 1959), pp 150 -167 31 Bert Rosenbloom, Marketing Channels: A Management View, 5th ed (Hinsdale,... Account service nanagement Internet Source: Rowland T Moriarty and Ursula Moran, "Marketing Hybrid Marketing Systems," Harvard Business Review (November-December 1990): 150 National account management Direct sales Direct mail Retail stores Distributors Dealers and valueadded resellers Advertising CUSTOMER VENDOR Telemarketing DESIGNING AND MANAGING VALUE NETWORKS AND CHANNELS ing everything in all... pp 91-95 38 Coughlan and Stern, "Marketing Channel Design and Management, " pp 247-269 39 Rob Wheery, "Pedal Pushers," Forbes, October 14, 2002, pp 205-206 40 Fareena Sultan and Andrew J Rohm, "The Evolving Role of the Internet in Marketing Strategy: An Exploratory Study," Journal of Interactive Marketing (Spring 2004): 6-19 41 This section draws on Stern and El-Ansary, Marketing Channels, ch 6 See also,... "Giving PC's the Boot," Boston Globe, April 22, 2003, p Fl 15 Irving Rein, Philip Kotler, and Martin Stoller, High Visibility (New York: Dodd, Mead, 1987) 16 Faith Keenan, "Big Yellow's Digital Dilemma," BusinessWeek, March 24, 2003, pp 80-81 17 Taken from AnneT Coughlan and Louis W Stern, "Marketing Channel Design and Management, " in Kellogg on Marketing, edited by Dawn Iacobucci (New York: John Wiley,... NETWORKS AND CHANNELS CHAPTER 15 497 Stihl print ad focuses on the value of its nationwide network of retail dealers, who sell and service its products exclusively If you want a Stihl product,, you have to go to a Stihl dealer SUMMARY : : : 1 Most producers do not sell their goods directly to final users Between producers and final users stands one or more marketing channels, a host of marketing intermediaries... has its sales reps make multilevel calls on its distributors H DuPont has a distributor marketing steering committee that meets regularly a Rust-Oleum introduces a menu of marketing programs each quarter; distributors choose the programs that fit their needs DESIGNING AND MANAGING VALUE NETWORKS AND CHANNELS CHAPTER 15 485 Evaluating Channel M e m b e r s Producers must periodically evaluate intermediaries' . should enjoy even lower prices. I FIG. 15. 2 . Five Marketing Flows in the Marketing Channel for Forklift Trucks 474 PART 6 DELIVERING VALUE - : Marketing functions, then, are more basic. sales branch Industrial customer FIG. 15. 3 j Consumer and Industrial Marketing Channels DESIGNING AND MANAGING VALUE NETWORKS AND CHANNELS CHAPTER 15 475 IARKETING INSIGHT M-COMMERCE OPENS. final price. 3 Marketing channels also represent a substantial oppor- tunity cost. One of the chief roles of marketing channels is to convert potential buyers into profitable orders. Marketing channels