What is the work of a Marketing Channel?(Channel flow)
Physical Possession Ownership Promotion Negotiation Financing RIsking Ordering Payment
Market flows and costs represented
Physical possession - Storage and delivery costs Ownership - Drawing title, cost of capital Promotion - Personal selling, advertising, sales promotion, publicity, public relations costs Negotiation - Time and legal costs Financing - Credit terms, terms and conditions of sale Risking - Price guarantees, warranties, insurance, repair and after sales service costs Ordering - Order-processing costs Payment - Collections, bad debt costs
Characteristics of a good flow analysis
Activities/flows have recognizable names Recognizes where costs occur Accounts for all relevant costly flow activities
Functions of an Efficiency template
Describes type and amount of work done by each channel member Highlights the importance of each channel flow for providing service outputs Shows the normative share of profit that each channel member should collect
Definition of a Zero-based channel design
"A zero-based channel design is one that (a) meets the target market segment's demands for service outputs, (b) at minimum cost of performing the necessary channel flows that produce those service outputs."
Causes and consequences of the Bullwhip Effect (e.g. beer industry)
Causes : - Each party must (a) forcast end-user's demand, (b) plan how muchorder to meet the next channel member's demand. - poor communication between channel members --> each player sees only it's direct link in the supply chain --> demand uncertainty obliges channel members to guess Consequences : - inventories and stocks oscillate - small changes in end-user's demand magnify into larger changes upstream - exploding costs because of stockouts/excessive inventory
Equity Principle (definition)
"Compensation in the channel system should be given on the basis of the degree of participation in the marketing flows and the value created by this participation. That is, compensation should mirror the normative profit shares for each channel member"
Consequences of neglecting the equity principles
channel underperformance (because of lack of incentives) channel conflict channel dissolution
Implications of Equity Principle
Accurately measure costs and value created in channel Agree on respective contribution --> perception versus facts If situation is imbalanced : --> short-term : possibly sustainable (e.g. due to competitive aspects, power) --> long-term : not sustainable - reputation effects - latent to severe conflict ( which consumes resources and creates opportunity costs) - relationship dissolution
