Page 34 - Marketing Management

DEFINING MARKETING FOR THE 21ST CENTURY | CHAPTER 1 11

Marketing Channels

To reach a target market, the marketer uses three kinds of marketing channels. Communication
channels deliver and receive messages from target buyers and include newspapers, magazines, radio,
television, mail, telephone, billboards, posters, fliers, CDs, audiotapes, and the Internet. Beyond
these, firms communicate through the look of their retail stores and Web sites and other media.
Marketers are increasingly adding dialogue channels such as e-mail, blogs, and toll-free numbers to
familiar monologue channels such as ads.
The marketer uses distribution channels to display, sell, or deliver the physical product or
service(s) to the buyer or user. These channels may be direct via the Internet, mail, or mobile phone
or telephone, or indirect with distributors, wholesalers, retailers, and agents as intermediaries.
To carry out transactions with potential buyers, the marketer also uses service channels that in-
clude warehouses, transportation companies, banks, and insurance companies. Marketers clearly
face a design challenge in choosing the best mix of communication, distribution, and service chan-
nels for their offerings.

Supply Chain
The supply chain is a longer channel stretching from raw materials to components to finished
products carried to final buyers. The supply chain for coffee may start with Ethiopian farmers who
plant, tend, and pick the coffee beans, selling their harvest to wholesalers or perhaps a Fair Trade
cooperative. If sold through the cooperative, the coffee is washed, dried, and packaged for shipment
by an Alternative Trading Organization (ATO) that pays a minimum of $1.26 a pound. The ATO
transports the coffee to the developing world where it can sell it directly or via retail channels. Each
company captures only a certain percentage of the total value generated by the supply chain’s value
delivery system. When a company acquires competitors or expands upstream or downstream, its
aim is to capture a higher percentage of supply chain value.

Competition

Competition includes all the actual and potential rival offerings and substitutes a buyer might con-
sider.An automobile manufacturer can buy steel from U.S. Steel in the United States, from a foreign
firm in Japan or Korea, or from a minimill such as Nucor at a cost savings, or it can buy aluminum
for certain parts from Alcoa to reduce the car’s weight, or engineered plastics from Saudi Basic
Industries Corporation (SABIC) instead of steel. Clearly, U.S. Steel would be thinking too narrowly
about its competition if it thought only of other integrated steel companies. In the long run, U.S.
Steel is more likely to be hurt by substitute products than by other steel companies.

Marketing Environment
The marketing environment consists of the task environment and the broad environment. The task
environment includes the actors engaged in producing, distributing, and promoting the offering.
These are the company, suppliers, distributors, dealers, and target customers. In the supplier group
are material suppliers and service suppliers, such as marketing research agencies, advertising agen-
cies, banking and insurance companies, transportation companies, and telecommunications com-
panies. Distributors and dealers include agents, brokers, manufacturer representatives, and others
who facilitate finding and selling to customers.
The broad environment consists of six components: demographic environment, economic envi-
ronment, social-cultural environment, natural environment, technological environment, and po-
litical-legal environment. Marketers must pay close attention to the trends and developments in
these and adjust their marketing strategies as needed. New opportunities are constantly emerging
that await the right marketing savvy and ingenuity. Here are two good examples.

TerraCycle TerraCycle After finding that some of his friend’s indoor herbal plants flourished
with a fertilizer made by feeding table scraps to red wiggler worms in a composting bin,
TerraCycle founder Tom Szaky came up with an idea for a business.TerraCycle is devoted to “up-
cycling,” finding new ways to use nonrecyclable waste materials. Plastic bags become sturdy