Marketing in the Digital World-2
Sa1_Jyyy
7Deliveringvalue.pptx– Delivering Value
(Channelnomics)
londonmet.ac.uk
Module Overview
1. Introduction
2. The Global
Marketplace
3. Segmentation,
Targeting,
Positioning
(Connected consumers )
4. Developing
Value
5.Communicating
Value
6.Pricing Value
7. Delivering Value
(Channelnomics)
8. Market Entry
Strategies
9. International
Sales (Producrts v
Services ) B2C &
B2B
10. Marketing and
the impact of
Digital
11. The New
Customer Path
12. Summary & Planning
Application
londonmet.ac.uk
Delivering Value (Channelnomics)
Getting to the customer …
Any time, any place, any where !
CHANNELS
Marketing channels exist to create utility for customers.
The major categories of channel utility:
place utility (the availability of a product or service in a location that is convenient to a potential
customer),
time utility (the availability of a product or service when desired by a customer),
form utility (the availability of the product processed, prepared, in proper condition, and/or ready to use),
information utility (the availability of answers to questions and general communication
Because these utilities can be a basic source of competitive advantage and represent an important element of a firm’s overall value proposition,
choosing a channel strategy is one of the key policy decisions that management must make
A distributor is a wholesale intermediary that typically carries product lines or brands on a selective basis.
An agent is an intermediary who negotiates exchange transactions between two or more parties but does not take title to the goods being purchased or sold
The Internet and related forms of new media are dramatically altering the distribution landscape. For example, eBay pioneered the peer-to-peer marketing (p-to-p) model, whereby individual consumers market products to other individuals.
Low-cost mass-market products and certain services can be sold on a door-to-door basis via a direct sales force. Door-to-door and house-party selling is considered a mature channel in the United States. For example, Tupperware has a sales force of 200,000 in Indonesia.
CHANNELS
2 types of channel management:
If Management chooses direct involvement, the company establishes its own sales force or operates its own retail stores.
2nd option is indirect involvement, which entails utilizing independent agents, distributors, and retailers.
Channel decisions typically involve long-term legal commitments and obligations to various intermediaries. Such commitments are often extremely expensive to terminate or change, so it is imperative for companies to document the nature of the relationship with the foreign partner.
CHANNELS
DISTRIBUTION CHANNELS: TERMINOLOGY AND STRUCTURE
Physical distribution is the physical flow of goods through channels.
A channel of distribution is “an organised network of agencies and institutions that, in combination, perform all the activities required to link producers with users to accomplish the marketing task.”
Distributor - wholesale intermediary that typically carries
product lines or brands on a selective basis
Agent - an intermediary who negotiates transactions between two or more parties but does not take title to the goods being purchased or sold
Marketing Channels
and Value Networks
Marketing channels
Sets of interdependent organizations participating in the process of making a product or service available for use or consumption
Intermediaries: merchants, agents, and facilitators
Marketing Channels
and Value Networks
A marketing channel system
The particular set of marketing channels a firm employs
Push vs. pull strategy
Marketing Channels
and Value Networks
Multichannel marketing
Using two or more marketing channels to reach customer segments in one market area
Omnichannel marketing
Integrated marketing channel system
Multichannel marketing uses several channels to promote a product or service, but these channels may not be seamlessly integrated
In contrast, omnichannel marketing is a holistic approach where the channels are interconnected and work synergistically to deliver a seamless customer experience.
Marketing Channels
and Value Networks
Value network
A system of partnerships and alliances that a firm
creates to source, augment, and deliver its offerings
Demand chain planning
Marketing Channels
and Value Networks
The digital channels revolution
Customer support in store/online/phone
Check online for product availability at local stores
Order product online to pick up at store
Return a product purchased online to a nearby store
Advocacy
The Role of
Marketing Channels
Channel functions and flows
THE ROLE OF MARKETING CHANNELS
Channel levels
Zero-level channel (direct)
One/two/three-level channels (intermediaries)
Reverse-flow channels (laundry, recycle)
Service sector channels
Consumer/Industrial
Marketing Channels
Channel-Design Decisions
Analysing customer needs and wants
Desired lot size
Waiting and delivery time
Spatial convenience
Product variety
Service backup
Consumer Channels
Manufacturer-owned stores
Nike,
Levi Strauss,
Apple,
Sony,
Many fashion design houses have flagship stores
Independent franchises
Independent retailers
Tesco, Aldi, Lidl
Flagship retail stores for Apple, Sony, well-known fashion houses, Nike to build brand loyalty, showcase products, and help gather marketing intelligence
Channel-Design Decisions
Establishing objectives and constraints
Channel-Design
Decisions
Identifying major channel alternatives
Types of intermediaries
Number of intermediaries
Terms/responsibilities of channel members
Establishing Channels
Direct involvement - the company establishes its own sales force or operates its own retail stores
Indirect involvement - the company utilises independent agents, distributors, and/or wholesalers
Channel strategy must fit the company’s competitive position
and marketing objectives within each market it operates
Examples : Microsoft dominance /
Identifying major channel alternatives
Number of intermediaries
Exclusive distribution
Selective distribution
Intensive distribution
Identifying major Channel Alternatives
Terms and responsibilities of channel members
Price policy
Conditions of sale
Distributors’ territorial rights
Mutual services and responsibilities
Channel-Design
Decisions
Evaluating major channel alternatives
Economic criteria
Control and adaptive criteria
Channel-Management
Decisions
Selecting channel members
Training channel members
Evaluating channel members
Modifying channel design
Channel modification decisions
Global channel considerations
Channel Objectives & Utility
Marketing channels exist to create utility for customers
Place utility - availability of a product or service in a location that is convenient to a potential customer
Time utility - availability of a product or service when desired by a customer
Form utility - availability of the product processed,
prepared, in proper condition and/or ready to use
Information utility - availability of answers to questions and general communication about useful product features and benefits
Training and Motivating
Channel Members
Manufacturer & Channel power
Coercive Reward Legitimate
Expert
Referent / Respect
Training and Motivating
Channel Members
Channel partnerships and practices
Demand-side management
Supply-side management
Enablers and integrators
Peer-to-Peer Marketing
The Internet and other related media are dramatically altering distribution
Interactive TV is becoming a viable direct marketing
channel
eBay pioneered P2P
Helped Disney and IBM set up auction sites for B2C auctions
Interactive TV is coming when homes are wired for 2-way
Door-to-Door Selling
Mature form in the U.S.
Tupperware has a sales force of 200,000 in Indonesia, its biggest market
Growing popularity in China-
Avon, Mary Kay
½ of cars are sold door-to-door in Japan with 100,000 salespeople
Herbal Life ??
The U.S. marklet accounts for only 10% of Tupperware sales. Tricia Stitzel is CEO of the company.
Retailing in Emerging Markets
Consumers purchase food, soft drinks, and other items at “Mom & Pop” stores, kiosks, and market stalls in single-use packages. 70% of Mexicans shop at these stores
P&G aids stores that carry at least 40 P&G products with displays, promo materials through a golden store programme
Nestlé has a floating supermarket that sails the Amazon River to reach remote areas
Microsoft B2B – Gold and Platinum Partnerships
Industrial Products Channels
Marketing Channel Alternatives: Industrial Products
Working with Channel Intermediaries
Select distributors - don’t let them select you !
Look for distributors capable of developing markets, rather than those with a few good customer contacts
Treat local distributors as long-term partners, not temporary market-entry vehicles
Support market entry by committing resources and proven marketing ideas
From the start, maintain control over marketing strategy
Make sure distributors provide detailed market and financial performance data as frequently as possible
Build links among national distributors at the earliest opportunity
Intermediaries
Be realistic about the intermediary’s motives
May maximise its own profit margins rather than the
manufacturer’s
May engage in cherry picking-only taking products with known demand
Manufacturer may need to establish its own distribution
channel although it will have high costs
Or the manufacturer can supplement the cost of the sales force of the distributor
Examples : King of Cooks’ knives
Global Retailing
Department stores
Specialty retailers
Supermarkets
Convenience stores
Discount stores and warehouse clubs
Hypermarkets
Category killers
Outlet stores / Villages
The LP12 Mall of Berlin opened in 2014 with 270 stores as well as apartments.
Global Retailing
Major European retailers spread to colonies in the 19th,
early 20th centuries
Global retailers serve developing nations with more products & better prices
Organised retail refers to modern, branded chain stores
Only 8% of India’s total market !
Sector is predicted to have double-digit growth
Top Global Retailers 2017
| Rank | Company | Country | Formats | Sales ($ millions) |
| 1 | Walmart Stores | United States | Discount store, wholesale club | $485,873 |
| 2 | Carrefour | France | Hypermarket | 82,996 (2016 data) |
| 3 | Tesco PLC | United Kingdom | Supermarket/hypermarket | 69,501 |
| 4 | Metro AG | Germany | Diversified | 43,828 |
| 5 | Aldi | Germany | Discount store | NA |
Top Global Retailers 2019
Products /Services
?
?
?
Thank you
Supply Chain Definitions
Supply Chain
Includes all the firms that perform support activities by generating raw materials, converting them into components or finished products, and making them available to customers
Logistics
The management process that integrates the activities of all companies to ensure an efficient flow of goods through the supply chain
Physical Distribution, Supply Chains, and Logistics Management
Order Processing
includes order entry in which the order is actually entered into a company’s information system; order handling, which involves locating, assembling, and moving products into distribution; and order delivery.
Warehousing
Warehouses are used to store goods until they are sold
Distribution centers are designed to efficiently receive goods from suppliers and then fill orders for individual stores or customers.
Physical Distribution, Supply Chains, and Logistics Management
Inventory Management
Ensures that a company neither runs out of manufacturing components or finished goods nor incurs the expense and risk of carrying excessive stock of these items
Social media can play an important role by connecting social media followers with the brand
Transportation
Method or mode a company should utilise when moving products through domestic and global channels; the most common modes of transportation are rail, truck, air, and water
Supply Chain, Value Chain, and Logistics
Transportation
Comparison of Major International Transportation Modes
| Mode | Reliability | Cost | Speed | Accessibility | Capability | Ease of Tracing |
| Rail | Average | Average | Average | High | High | Low |
| Water | Low | Low | Slow | Low | High | Low |
| Truck | High | Varies | Fast | High | High | High |
| Air | High | High | Fast | Low | Moderate | High |
| Pipeline | High | Low | Slow | Low | Low | Moderate |
| Internet | High | Low | Moderate to fast | Moderate; increasing | Low | High |
Channel Strategy - analysing each shipping mode to determine which mode, or combination of modes, will be both effective and efficient in a given situation
CHANNELS
Companies entering emerging markets for the first time must exercise particular care in choosing a channel intermediary.
1. Select distributors. Don’t let them select you.
2. Look for distributors capable of developing markets, rather than those with a few good customer contacts.
3. Treat local distributors as long-term partners, not as temporary market-entry vehicles.
4. Support market entry by committing money, managers, and proven marketing ideas.
MARKETING CHANNELS
DELIVERING VALUE
channel of distribution as “an organized network of agencies and institutions that, in combination, perform all the activities required to link producers with users to accomplish the marketing task.”
Physical distribution is the movement of goods through channels; channels, in turn, are made up of a coordinated group of individuals or firms that perform functions that add utility to a product or service.
Distribution channels are one of the most highly differentiated aspects of national marketing systems. Channels and physical distribution are crucial aspects of the total marketing program; without them, a great product at the right price and effective communications mean very little
A customer value proposition is a business or marketing statement that describes why a customer should buy a product or use a service.
It is specifically targeted towards potential customers rather than employees, partners or suppliers.
Similar to the Unique Selling Proposition, it is a clearly defined statement that is designed to convince customers that one particular product or service will add more value or better solve a problem than others in its competitive set
WHAT IS CUSTOMER VALUE PROPOSITION?
TYPES OF CUSTOMER VALUE PROPOSITION
Anderson, James C., Narus, James A., Rossum, Wouter, “Customer Value Propositions in Business Markets,” – Harvard Business Review, March 2006.
List all the benefits
employees believe
that their offering
might deliver to
target customers
Value proposition recognizes that customer has alternatives and focuses on how to differentiate one product from competitor.
Suppliers provide customer value proposition by making their offerings superior on the few attributes that are most important to target customers and demonstrate the value of this superior performance, communicate it in a way that conveys a sophisticated understanding of the customer's business priorities.
PHYSICAL DISTRIBUTION
Physical distribution consists of activities involved in moving finished goods from manufacturers to customers.
The most important distribution activities are order processing, warehousing, inventory management, and transportation
Supply chain planning and control
Operations strategy
Design
Improvement
Planning and control
Operations management
Supply chain planning and control
The operation supplies … the coordinated delivery of products and services from the supply chain
The market requires … specified time, quantity and quality of products and services
WHAT IS SUPPLY CHAIN MANAGEMENT?
‘Supply chain management is the management of the interconnection of organizations that relate to each other through upstream and downstream linkages between the processes that produce value to the ultimate consumer in the form of products and services.’
SUPPLY CHAIN MANAGEMENT IS CONCERNED WITH MANAGING THE FLOW OF MATERIALS AND INFORMATION BETWEEN A STRING OF OPERATIONS THAT FORM THE STRANDS OR ‘CHAINS’ OF A SUPPLY NETWORK
Flow between processes
Flow between processes
Flow between processes
Supply chain management concerns flow between a string of operations
Supply network management concerns flow between operations
Flow between processes
Flow between processes
Flow between processes
Flow between processes
Supply chain management is concerned with the flow of information as well as the flow of products and services
Products and services
New products and services
Delivery information
Payment request / Credit
‘Downstream’ flow of products and services for customer
fulfilment
‘Upstream’ flow of customer
requirements
Long-term plans and requirements
Market research information
Individual orders
Payment
Potential new products and services
Flow between processes
Consumer
Flow between processes
Flow between processes
First-tier supplier
Second-tier supplier
First-tier customer
Second-tier customer
End customer
Demand side
Supply side
Purchasing and supply management
Physical distribution management
Logistics
Materials management
Supply chain management
Information flow
Physical flow
From the operations perspective – 90% satisfaction
Customer requirements
Product/ service available?
Product/ service appropriate?
Meets price and delivery requirements?
Customer orders?
Produced as promised?
Received as promised?
100
80
20
Y
N
70
10
Y
N
20
50
Y
N
10
40
Y
N
10
10
Y
N
9
1
Y
N
8
1
Y
N
Customer satisfaction
From the customer’s perspective – 8% satisfaction
TAKING A CUSTOMER PERSPECTIVE OF SUPPLY PERFORMANCE CAN LEAD TO VERY DIFFERENT CONCLUSIONS
8
8
1
Y
N
9
1
Y
N
The operation
Purchasing function
Suppliers
Request for products and services
Demand from customers
Supply to customers
Request for quotations
Prepare purchase order
Prepare
quotation for
specification,
price, delivery,
etc.
Requests
Select supplier(s)
Quotations
Produce products and services
Order
Receive products and services
Deliver
Liaison between purchasing and the operation
THE PURCHASING FUNCTION BRINGS TOGETHER THE OPERATION AND ITS SUPPLIERS
| Short-term ability to supply | Longer-term ability to supply |
| Range of products or services provided | Potential for innovation |
| Quality of products or services | Ease of doing business |
| Responsiveness | Willingness to share risk |
| Dependability of supply | Long-term commitment to supply |
| Delivery and volume flexibility | Ability to transfer knowledge as well as products and services |
| Total cost of being supplied | Technical capability |
| Ability to supply in the required quantity | Operations capability |
| Financial capability | |
| Managerial capability |
FACTORS FOR RATING ALTERNATIVE SUPPLIERS
| Factor | Weight | Supplier A score | Supplier B score |
| Cost performance | 10 | 8 (8 x 10 = 80) | 5 (5 x 10 = 50) |
| Quality record | 10 | 7 (7 x 10 = 70) | 9 (9 x 10 = 90) |
| Delivery speed promised | 7 | 5 (5 x 7 = 35) | 5 (5 x 7 = 35) |
| Delivery speed achieved | 7 | 4 (4 x 7 = 28) | 8 (8 x 7 = 56) |
| Dependability record | 8 | 6 (6 x 8 = 48) | 8 (8 x 8 = 64) |
| Range provided | 5 | 8 (8 x 5 = 40) | 5 (5 x 5 = 25) |
| Innovation capability | 4 | 6 (6 x 4 = 24) | 9 (9 x 4 = 36) |
| Total weighted score | 325 | 356 |
WEIGHTED SUPPLIER SELECTION CRITERIA FOR THE HOTEL CHAIN
B2B
Relationship:
Most common, all but the last link in the supply chain
E-commerce examples:
EDI networks
Tesco information exchange
B2C
Relationship:
Retail operations
Catalogue operations, etc.
E-commerce examples:
Internet retailers
Amazon.com, etc.
C2B
Relationship:
Consumer ‘offers’, business responds
E-commerce examples:
Some airline ticket operators
Priceline.com, etc.
C2C
Relationship:
Trading ‘swap’ and auction transactions
E-commerce examples:
Specialist ‘collector’ sites
eBay.com, etc.
Business
Consumer
Supply chain relationships
Business
Consumer
‘Partnership’ supply management
Character of internal operations activity
Do nothing
Do everything important
Do everything
Transactional – many suppliers
Close –
few suppliers
Type of inter-firm contact
Virtual spot trading
Long-term virtual operation
Vertically integrated operation
Traditional supply management
Types of supply relationship
Attitudes
Actions
Trust
Elements of process partnership relationships
Joint problem solving
Joint co-ordination of activities
Joint learning
Long-term expectations
Sharing success
Multiple points of contact
Few relationships
Information transparency
Dedicated assets
Closeness of relationship
Improved profitability
Supply chain time compression
Schedule changes impact market faster
so can
respond to market changes better
so revenues are maximized
so improved forecasts
so reduced stockholding costs
Forecasts made closer to demand time
so less need for safety stocks
Defects are detected faster
so easier to improve quality
so reduced wastage costs
New products and service faster to market
so fewer lost sales from delayed launch
so reduced risk of obsolescence
so revenues are maximized
so less discounted sales
The effects of supply chain compression
Supply chain dynamics
Supply chains with different end objectives need to be managed in different ways
Matching the supply chain with market requirements
Lean supply chain management
Mismatch
Mismatch
Agile supply chain management
Nature of demand
Functional products
Innovative products
Predictable
Few changes
Low variety
Price stable
Long lead-times
Low margin
Unpredictable
Many changes
High variety
Price markdowns
Short lead-times
High margin
Supply chain objectives
Responsive
Efficient
Low cost
High utilization
Minimum inventory
Low-cost suppliers
Low throughput times
High utilization
Deployed inventory
Flexible suppliers
Products
Information
Supplier
Manufacturer
Depot
Outlets
Depot
Efficient fast-throughput supply
Supplier
Manufacturer
Depot
Outlets
Depot
Customer-responsive supply
Products
Information
Matching supply chain characteristics to the nature of demand
Nature of demand
Functional products Innovative products
Predictable Unpredictable
Few changes Many changes
Low variety High variety
Price stable Price markdowns
Long lead-time Short lead-time
Low margin High margin
Supply chain objectives
Responsive Efficient
Fast response Low cost
Low throughput time High utilization
Deployed inventory Minimum inventory
Flexible suppliers Low-cost suppliers
Match
Mismatch
Mismatch
Match
Additional Reading
TYPES OF RETAILERS
Department stores have a product mix under one roof
Expansion outside of the home market is usually limited to a few countries
Two views:
“It’s quite difficult to transfer a department store brand abroad. You have to find a city with the right demographic for your offer. If you adapt your offer to the locality, you dilute your brand name.”
Maureen Hinton, London Retail Analyst
“Conceptually, department stores are global brands already because we live in a world with an enormous amount of travel between cities and continents.”
Marvin Traub, former CEO, Bloomingdales
Specialty Retailers
Less variety than department stores
Offer merchandise depth & high levels of service
The Body Shop,
Victoria’s Secret,
Starbucks
Shell
Supermarkets
Between 50,000 & 60,000 sq. ft.
5,000 to 50,000 lines
UK Tesco is global (less than it was !)
Focused discounters
increasing market share
TYPES OF RETAILERS
Convenience Stores
High-turnover convenience & impulse goods
Prices 15-20% higher than grocery stores
7-11 is the world’s largest (64,000 locations)
Spar, Nisa, CostCutter…
Trend towards locating in malls, airports, office buildings, and college & universities
What about M&S Food ?
TYPES OF RETAILERS
Shopping Centres
Groups of stores in one place
Enclosed or outdoor
Leisure destinations offer entertainment & convenience
Trend towards outdoor “lifestyle centres” with food courts & entertainment
Outlet Stores
Shops that offer excess inventory, out-of-date merchandise or factory seconds
Popular in the US since the 70’s, fast expanding into Europe & Asia
Types of Retailers
RETAILING TRENDS
Environmental Factors that cause retailers to look outside
the home country
Saturation in the home country market
Recession or other economic factors
Search for scale related economies
Strict regulation on store development
High operating costs
Critical Question
What advantages do they have relative to the local competition?
Global Retailing Categories
GLOBAL RETAILING MARKET ENTRY STRATEGY FRAMEWORK
Global Retailing Strategies
Organic Growth
Company uses its own resources to open a store on a greenfield site or acquire one or more existing retail facilities
Franchise
Appropriate strategy when barriers to entry are low yet the market is culturally distant in terms of consumer behavior or retailing structures
Chain Acquisition
A market entry strategy that entails purchasing a company with multiple existing outlets in a foreign country
Joint Venture
This strategy is advisable when culturally distant, difficult- to-enter markets are targeted
