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CATERPILLAR ®
• They have dominated the world’s market forheavy construction and mining equipment.
• Their yellow tractors, crawlers, loaders andtrucks are the most common sight in manyconstruction area.
• They have captured 35% of the world’s marketshare, selling more than 300 products to 200countries.
CATERPILLAR ®
Many factors contribute to their success:
• High quality products
• Flexible and efficient manufacturing
• Innovative products
• An organization that is responsive to thecustomer’s needs.
• There prices may be high but they providehigh quality, trouble free operation for longterm value
CATERPILLAR ®
• Yet those are not the reasons of Caterpillar’sdominance. It is through their dealers whoprovide and build strong customerrelationships in their communities.
• Caterpillar and its dealers work in closeharmony to find better ways to bring value tocustomers. The entire system is linked by asingle worldwide computer network.
CATERPILLAR ® Caterpillar has provided strong partnership with its dealers:
• Dealer Profitability: Share the gain as well as the pain.
• Extraordinary Dealer Support: Fast distribution andproblem solving.
• Communications: Frequently, fully and honestly
• Dealer Performance: Making sure that the dealers aredoing well through monitoring of sales, position, servicequality, financial capabilities, etc.
• Personal Relationships: Forming close and personal tieswith its dealers.
CATERPILLAR ®
Caterpillar’s superb distribution system serves as amajor source of competitive advantage. The system isbuilt through mutual trust and shared dreams.Caterpillar and their dealers shared pride as theyachieve together.
It is more than financial arrangement but feeling greatthrough doing what is good for the world because theyare part of an organization that makes, sells, and tendsto the machine that help make the world work.
DISTRIBUTION CHANNEL
It is a set of interdependent organizationsinvolved in the process of making a product orservice available for use of consumption by theconsumer or business user.
WHY ARE MARKETING INTERMEDIARIES USED?
• Greater efficiency in making goods available tothe target market
• Offer the target market communication,experience, specialization and scale of operationsmore than it can achieve with its own company.
• Reduce the amount of work.• Transform products made by producers into the
assortments wanted by consumers.• Can buy large quantities and then break them
into assortments for consumers.• They play a good role in the demand and supply.
DISTRIBUTION CHANNEL FUNCTIONS Information: gathering and distributing market
research and intelligence
Promotion: developing and spreading persuasivecommunication about an offer.
Contact: finding and communicating with buyers.
Matching: shaping and fitting the offer to the buyer’sneeds, including activities such as manufacturing,grading, assembling and packaging.
DISTRIBUTION CHANNEL FUNCTIONS Negotiation: reaching agreed price and other terms
of the offer.
Physical Distribution: transporting and storinggoods
Financing: use funds to cover the cost of channelwork
Risk Taking: taking the risk of carrying out thechannel work.
NUMBER OF CHANNEL LEVELS
• Channel Level – a layer of intermediaries that performs some work in bringing the product and its ownership closer to the final buyer.
• Direct Marketing Channel – a marketing channel that has no intermediary levels.
• Indirect Marketing Channel – channel containing one or more intermediary levels.
CONSUMER & BUSINESS MARKETING CHANNELSAll institutions in the channel are connected by severaltypes of flows:
Physical flow of products
Flow of ownership
Payment flow
Information flow
Promotion flow
CHANNEL BEHAVIOR AND ORGANIZATION
Distribution channels are more than simple collectionof firms tied together for their common good.
CHANNELDISTRIBUTION
A distribution channel are firms banded together for their common good.
Each member is dependent on other.
CHANNEL CONFLICT
• Channel Conflict – disagreement amongmarketing channel members on goals androles – who should do what and for whatrewards.
• Horizontal Conflict – conflict among forms atthe same level of the channel
• Vertical Conflict – conflict between differentlevels of the same channel – the mostcommon of all.
CONVENTIONAL DISTRIBUTION CHANNEL Conventional Distribution Channel – a channel
consisting of one or more independent producers,wholesaler, and retailers, each a separate businessseeking to maximize its own profits even at theexpense of profits for the system as a whole.
VERTICAL MARKETING SYSTEMS Vertical Marketing System (VMS) – a distribution
channel structure in which producers, wholesalers,and retailers act as unified system.
1. Corporate
2. Contractual
3. Administered
VERTICAL MARKETING SYSTEMS
1. Corporate VMS – a VMS that combinessuccessive stages of production anddistribution under single ownership –channel ownership is established throughcommon ownership.
VERTICAL MARKETING SYSTEMS
2. Contractual VMS – a VMS in whichindependent firms at different levels ofproduction and distribution join togetherthrough contracts to obtain more economiesor sales impact than they could achievealone.
• Wholesaler-sponsored Voluntary Chains
• Retailer Cooperatives
VERTICAL MARKETING SYSTEMS
• Franchise Organization – a contractual VMSin which a channel member, called afranchiser, links several stages in theproduction-distribution process.
VERTICAL MARKETING SYSTEMS3. Administered VMS – a VMS that coordinates
successive stages of production and distribution, notthrough common ownership or contractual ties, butthrough the size and power of one of the parties.
HORIZONTAL MARKETING SYSTEMS A channel arrangement where two or more companies
at one level join together to follow a new marketing opportunity.
McDonalds and Heinz
HYBRID MARKETING SYSTEMS Multi-channel distribution system in which a single
firm sets up two or more marketing channels to reachone or more customer segments.
HYBRID MARKETING SYSTEMS
PRODUCERS
DISTRIBUTORS DEALERS
RETAILERS
CONSUMERS 1
CONSUMERS 2
CONSUMERS 3
CONSUMERS 4
CHANGING CHANNEL ORGANIZATION Disintermediation – the displacement of traditional
resellers from a marketing channel by radical newtypes of intermediaries.
CHANNEL DESIGN DECISIONS
• Identifying Major Alternatives
1. Types of Intermediaries
Company’s Sales Force
Manufacturer’s Agency
Industrial Distributors
CHANNEL DESIGN DECISIONS
• Identifying Major Alternatives
2. Types of Intermediaries Intensive Distribution – stocking the product in as many
outlets as possible.
Exclusive Distribution – giving a limited number of dealersthe exclusive right to distribute the company’s products intheir territories.
Selective Distribution – the use of more than one but fewerthan all, of the intermediaries who are willing to carry thecompany’s products.
MARKETING LOGISTICS AND SUPPLY CHAIN MANAGEMENT
• Marketing Logistics – the task of involving inplanning, implementing and controlling thephysical flow of materials, final goods, andrelated information from points of origin topoints of consumption to meet customerrequirement and a profit.
• Supply Chain Management – managing valueadded flows of materials, final goods and relatedinformation between suppliers, the company,resellers and final buyers.
SUPPLY CHAIN MANAGEMENT
• Outbound Distribution – moving productsfrom the factory to resellers and finally tocustomers.
• Inbound Distribution – moving products andmaterials from suppliers to factory.
• Reverse Distribution – moving broken,unwanted or excess products returned fromconsumers to resellers.
MAJOR LOGISTICS FUNCTIONS
• Order Processing – through salespeople, mail,email, telephone, internet, intranet andextranet platforms.
• Warehousing
How many warehouses needed
What types of warehouse
Storage warehouse or distribution centers
Automated warehouse
• Warehousing
Distribution Centers – a large, highly automated warehouse
designed to received goods from various plants and suppliers,take orders, fill them efficiently, and deliver goods tocustomers as quickly as possible.
• Inventory Management
Just in Time Logistics System
MAJOR LOGISTICS FUNCTIONS
TRANSPORTATION SYSTEMS
• Intermodal Transportation – combining two or more modes of transportation.
PIGGY BACK
THIRD PARTY LOGISTICS
• An independent logistics provider thatperforms any of all the functions required togets its clients’ product to market.