Page 441 - Marketing Management

418 PART 6 DELIVERING VALUE

customers and their end customers. The value network includes valued relationships with others
such as university researchers and government approval agencies.
A company needs to orchestrate these parties in order to deliver superior value to the target
market. Oracle relies on 5.2 million developers and 400,000 discussion forum threads to advance its
9
products. Apple’s Developer Connection—where folks create iPhone apps and the like—has
50,000 members at different levels of membership. 10 Developers keep 70 percent of any revenue
their products generate, and Apple gets 30 percent.
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Demand chain planning yields several insights. First, the company can estimate whether more
money is made upstream or downstream, in case it can integrate backward or forward. Second, the
company is more aware of disturbances anywhere in the supply chain that might change costs,
prices, or supplies. Third, companies can go online with their business partners to speed communi-
cations, transactions, and payments; reduce costs; and increase accuracy. Ford not only manages nu-
merous supply chains but also sponsors or operates on many B2B Web sites and exchanges.
Managing a value network means making increasing investments in information technology (IT)
and software. Firms have introduced supply chain management (SCM) software and 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 unified framework. They hope to break up departmental silos—where each
department only acts in its own self interest—and carry out core business processes more seamlessly.
Most, however, 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, adopting customer relationship management (CRM) software and practices.
In the future, they will increasingly participate in and influence their companies’ upstream activi-
ties and become network managers, not just product and customer managers.

The Role of Marketing Channels

Why would a producer delegate some of the selling job to intermediaries, relinquishing control
over how and to whom products are sold? Through their contacts, experience, specialization, and
scale of operation, intermediaries make goods widely available and accessible to target markets,
usually offering the firm more effectiveness and efficiency than it can achieve on its own. 12
Many producers lack the financial resources and expertise to sell directly on their own. 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 is easier to work through the extensive net-
work of privately owned distribution organizations. Even Ford would be hard-pressed to replace all
the tasks done by its almost 12,000 dealer outlets worldwide.

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 functions (see
Table 15.1).
Some of these functions (storage and movement, title, and communications) 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 (informa-
tion, negotiation, finance, and risk taking) occur in both directions. Five flows are illustrated
in Figure 15.1 for the marketing of forklift trucks. If these flows were superimposed in
one diagram, we would see the tremendous complexity of even simple marketing channels.
A manufacturer selling a physical product and services might require three channels: a sales
channel, a delivery channel, and a service channel. To sell its Bowflex fitness equipment, the Nautilus
Group historically has emphasized direct marketing via television infomercials and ads,
inbound/outbound call centers, response mailings, and the Internet as sales channels; UPS ground
service as the delivery channel; and local repair people as the service channel. Reflecting shifting
consumer buying habits, Nautilus now also sells Bowflex through commercial, retail, and specialty
retail channels.