Download Study on Marketing Management for TPL Enterprises Based on Supply Chain

Study on Marketing Management for TPL Enterprises Based on
Supply Chain
XIE Shao’an, YU Guilan
Wuhan University of Textile
No.1 Av.Yangguang, Jiangxia District, Wuhan, Hubei, China, 430074
[email protected]
Abstract: Third party logistics (TPL) companies, as one key player in the chain, are mostly in a weak
position. It is found through the authors’ investigation and analysis that the major reason for this is that
most of these TPL companies are weak in marketing and their core competitiveness is not strong. In
response to that, the authors put forward four major strategies of integrating marketing into supply chain
and illustrate the point that TPL companies should strengthen customer-oriented marketing mix 4Cs as
well as competition-driven marketing 4Ps in synergy with the supply chain. It is hold that TPL
enterprises strengthen "customer first, service-oriented" concept and improve their marketing effect and
core competitiveness through integrating 4Ps, 4Cs and 4Rs into their marketing management based on
the supply chain, collaborating with other players in the supply chain and serving the supply chain to
ensure sustainable development.
Keywords: supply chain, third party logistics, marketing management
I. Introduction
In the past few years, China's logistics industry witnessed rapid growth. On February 25, 2009, the State
Council Executive Meeting approved in principal “the Adjustment and Revitalization Plan of the
Logistics Industry” to further promote steady development of China's logistics industry. Third party
logistics (TPL) companies, as one key player in the chain, are mostly in a weak position. It is found
through the authors’ investigation that more logistics enterprises are only doing promotions while less
ones highlighting marketing management; that more enterprises focus on business while less ones pay
attention to partnership building and more enterprises attach importance on investment in equipment and
technology while less ones in building of marketing team. The major reason among others for the above
phenomena is that most of these TPL companies are very weak in marketing. Effective marketing
management, as one strategy, will contribute to the improvement of their competitiveness.
II. Optimizing the 4Ps Marketing Mix to Be Integrated into the Supply Chain
The basic activities of logistics are related to marketing strategy. These activities form the ties between
marketing and logistics systems. On one hand, logistics enterprises can only undertake logistics service
from customers when they get to know about the customers well and conduct effective marketing of
their logistics. On the other hand, only when logistics enterprises know the target of client's marketing
objectives, marketing strategies, marketing activities, distribution and retailing, after-sale services, they
can effectively undertake the client's outsourcing services of their logistics.
Logistics enterprises should strengthen the supply chain based on marketing innovation and services. By
importing the 4Ps concept, TPL enterprises will understand the marketing objectives, strategies and
other information of their target customers and optimize the allocation of resources by effective
combination of Product, Price, Place and Promotion. In this way they can actively adapt to the needs of
core enterprises in the supply chain and become part of the Supply Chain Community (shown in Figure
1) to undertake logistics services based on the supply chain effectively.
411
Other enterprises
TPL
enterprises
Product
Price
Place
Promotion
Supply
Core enterprises
Customers
Chain
Other enterprises
Figure 1.4Ps and Supply Chain
2.1 Product strategy in joining in the supply chain
Product of TPL enterprises is service, which is intangible and can not be stored with the characteristics
of being inseparable between production and consumption and the service is of variability, including
transportation, storage, handling, packaging, distribution, information, logistics solutions, and even
including procurement, sales, billing, order processing, data transmission and many other services. In
service product strategy, it is necessary for TPL enterprises to pay attention to four issues: The first is
how to design and develop customized services. Enterprises have to make wise decisions in accordance
with the market demand and the enterprises’ resources. Second, they should attach great importance to
the quality of service products or product package to carry out specialized business and provide fine
services. Third, in learning and borrowing from large-scale logistics enterprise service modes and
products, it is necessary to pay attention to studying the blind spot of the large companies' services and
to explore "blue ocean" according to "long tail theory" and looking for new service modes, service
projects and service products. The forth is to strengthen the worksite management of logistics operation
aiming at being "safe, efficient and of high quality," and improving customer satisfaction
2.2 Price strategy in joining in the supply chain
According to Michael Porter's five forces of competition theory, TPL enterprises are in a
disadvantageous competitive position, which determines that they have to take demand-oriented pricing
and/or following pricing in undertaking third-party logistics services. By following pricing, it essentially
follows the price of large logistics companies or subject to market fluctuation. In making price strategy,
TPL enterprises should pay attention to the following three points. First, price should be set
appropriately in accordance with the logistics "5R principle" bearing win-win and multi-win in mind.
The second point is to strengthen the enterprise's internal value chain management through improving
logistics efficiency and reducing logistics costs and saving transaction costs. The third point is to
improve profit margins by use of marginal cost and benefit theory and by providing value-added
services.
2.3 Place (channel) strategy in joining in the supply chain
The saying “Channel is the King” highlights the importance of marketing channels. Good channel
strategy in general should include the following three major considerations. The first is to carry out
relationship marketing. Focusing on core customers, TPL enterprises should keep track on their services
demands and requirements, provide customized logistics solutions, design flow of logistics operations
and arrange logistics plan by professional or high-level personnel. The second is to carry out consultant
marketing to strengthen "one-to-one", "door-to-door" service to the customer and be just-in-time
consultant and provide high-quality logistics services. The third is to strengthen the customer resource
management and integrate it into the industry chain and supply chain, set up cooperative relations based
412
on contracts.
2.4 Promotion strategy in joining in the supply chain
Promotion strategy represents the various measures of logistics enterprises to achieve effective
communication with customers and to attract the interest of customers and to enhance corporate
visibility. It includes advertising, personal selling, sales promotion, and public relations etc. There are
two key points in making promotion strategy. One is to strengthen training of marketing personnel
aiming at improving their overall quality and professional skills while the other is to strengthen market
survey and customer study and to understand customers’ needs and meet them accordingly by using
SPIN technique. In promotion strategy, there is another point to be highlighted that is TPL enterprises
have to do promotions and advertisement, not by money, but by the reputation of their excellent service.
III. Optimizing the Marketing Mix to Serve the Supply Chain
On the one hand, logistics enterprises need integrate actively into the supply chain; on the other hand,
they also need provide good services to the supply chain. As a new concept produced in the 21st century,
Service Supply Chain refers to a new business mode that the logistics service providers as the core
ensure product supply chain logistics operation by providing flexible logistics services. Whether it is to
serve the supply chain, or as a new type of service supply chain, logistics enterprises, especially TPL
enterprises have to make innovations in marketing management so that they can adapt to competition
and achieve development accordingly.
3.1 4Cs marketing mix to serve the supply chain
In the practice of marketing management, the concept of 4Ps has played a positive role, but it also has
some limitations. 4Ps is the four marketing elements based on the perspective of service providers. In
order to better reflect customer-centred and customer-oriented concept, the American scholar Professor
Lauterborn optimized the traditional marketing 4Ps in 1990 and thus 4Cs came into being.
Logistics enterprise need optimize their marketing mix by applying 4Cs concept to achieve transition
from the traditional 4Ps to 4Cs (see Figure 2). Namely, logistics enterprises’ service (Product) should
adapt to Customer s’ requirements (Customer); logistics service providers should take customers’
willingness to pay (Cost) into consideration in pricing (Price), channels (Place) of logistics service
should be connected with if it is convenient (Convenience) for the costumers and the key point of
logistics services promotion (Promotion) lies in effective communication with customers
(Communication).
Customers are seeking for better services, thus customer relationship management becomes increasingly
important. Therefore, first of all it is necessary for logistics enterprises to establish a database of their
customers including collection and storage of information about them; next they should conduct various
analysis about their customers; the third point is to maintain a positive contact with customers and,
finally, take efforts to streamline transactions to achieve frequent interactions with the customers in
information flow, capital flow and commodity flow.
413
Product
Custome
r
Promotion
Supply
chain
Communication
Cost
Price
Convenience
Place
：
Figure 2 4Ps&4Cs and supply chain
Today's market competition lies in that of supply chain, so logistics enterprises in the supply chain must
consolidate strategic partnership with their costumers and other enterprises. As a node in the supply
chain, logistics enterprises, on the one hand should trust and support other node enterprises in the supply
chain and actively strengthen communication and cooperation with core companies and other node ones
to promote the establishment of trust and cooperation mechanism among them. On the other hand,
logistics enterprises should develop further development their core business, enhance the ability of
logistics services and improve their service quality, and actively promote the progress of making
flexible and rapid response to the market and improve the overall operation proficiency of the supply
chain. In this way, for TPL enterprises the source of profit is no longer from getting the orders but from
collaboration with and contribution to the entire supply chain.
3.2 4Rs marketing mix to serve the supply chain
It is not only necessary to conduct 4Cs marketing but also 4Rs marketing to make innovations in
marketing management. 4Rs marketing theory was put forward by Don E • Schultz, an American
scholar, based on the 4Cs. By4R, they respectively refer to Relevance, Reaction, Relationship and
Reward. This marketing theory is very helpful for logistics enterprise to implement marketing
management based on supply chain. With the development of the market, 4Rs is a new mode or concept
of business operation for third-party logistics while on the other hand, 4Rs is a more proactive and more
effective means of cooperation for node enterprises in the supply chain. 4Rs in combination with 4Ps
and 4Cs can be integrated effectively to serve the supply chain better. (See Figure 3).
414
Product
Price
Place
Promotion
Customer
Cost
4P
s
Supply
chain
4Cs
Convenience
Communication
4Rs
Relevance, Reaction, Relationship, Reward
Figure 3.Integration of marketing mixes to serve the supply chain
By relevance, it refers to the point that the third-party logistics enterprises join in the supply chain and
sever the supply chain to form a community of interests with supply chain core enterprise and other
node enterprises. The key of relevance is to establish and develop long-term relationships with
customers to form a mutual win-win supply chain strategic alliance. The forms of relevance can be that
of property rights, business associations and even of emotion, it can either be a single relevance or of
several aspects. Relevance also means the integration of marketing elements and enhancement of
customer loyalty to win long-term and stable markets by forming the strategic alliance of mutual
assistance, mutual demand mutual need.
By reaction, it means that the node logistics enterprises should respond to changes of the market quickly
and provide satisfied services to the customers by keeping a cautious eye on their needs and
requirements.
Relationship in 4Rs refers to the point that third-party logistics enterprises should strengthen their
relationship marketing to establish a strategic partnership with their customers and realize three changes
based on the traditional 4Ps. They are (a) change from short-term buyer-seller relationship to that of
long-term cooperation; by (b) change from a single cooperative business into a strategic partnership; (c)
change from passive adaptation to active participation in the service supply chain.
The last R in 4Rs is reward, which is also the aim of marketing management through providing services.
In fact reward comes not only from benefit of providing services and value-added services, it also
suggests that logistics enterprises in the supply chain should strengthen and improve their logistics cost
management to reduce the direct cost on the one hand while on the other hand they can make full use of
the value chain and strengthen human resources management and development to reduce administrative
costs.
IV. Conclusion
With the implementation of “the Adjustment and Revitalization Plan of Logistics Industry”, logistics
enterprises will gain great development. Logistics enterprises should take this opportunity to gain
competitive advantage. One important strategy is to strengthen and improve their marketing
management.
Great importance should be paid to integration of 4Ps, 4Cs and 4Rs and that of various resources. It will
help them be integrated into the supply chain so that they can collaborate with the enterprises in the
supply chain and serve the supply chain to ensure sustainable development for the logistics industry.
415
References
[1]. Linzhi Cao “Practices of 4Rs Marketing Theory Based on Supply Chian” Theory Journal 2006
12 : 55-56
[2]. Lisa M. Ellram, Wendy L.T., Corey B. Understanding and Managing the Service Supply Chain.
Journal of Supply Chain Management. 2004 Fall .17-32
[3]. Pengfei Liu, Ruhe Xie. On the Relationship between Logistics and Marketing. Commercial
Research, 2007 2
[4]. Zhang Xizhou, Wei Wenshu. On Modes of Marketing Mix of Logistics Enterprises. Commercial
Times, 2006 27
[5]. ShaoAn Xie. “Optimizing and Innovating 4Ps & 4Cs in Logistics Service” China Market, 2009
2 :11--13
（ ）
（）
（）
（ ）
（ ）
416