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  • Channelconcept

    1. 1. Marketing Channels
    2. 2. Marketing Channel Strategy (Place); the fourth “P” in the Marketing Mix has been largely neglected
    3. 3. Marketing Channel Strategy is Growing in Importance. Why? Five Reasons (1) Search for Sustainable Competitive Advantage (2) Growing Power of Retailers in Marketing (3) The Need to Reduce Distribution Costs (4) The Increased Role and Power of Technology (5) The New Stress on Growth Channels
    4. 4. I. The Search for Sustainable Competitive Advantage
    5. 5. Sustainable Competitive Advantage: • A competitive advantage that cannot be quickly and easily copied by competitors • A sustainable competitive advantage is becoming more difficult to attain through: Product Strategy- rapid technology transfer enables Strategy competitors to quickly produce similar products Pricing Strategy- global economy allows competitors Strategy to find low cost production to match prices Promotion Strategy- high cost, clutter, and short life Strategy promotional campaigns limit competitive advantage
    6. 6. A sustainable competitive advantage is becoming more difficult to attain through: Product Strategy- rapid technology transfer enables competitors to Strategy quickly produce similar products Pricing Strategy- global economy allows competitors to find low cost Strategy production to match prices Promotion Strategy- high cost, clutter, and short life promotional Strategy campaigns limit competitive advantage
    7. 7. Competitive Advantage Based on Superior Marketing Channel Strategy. Which is More Difficult for Competitors to Copy Because: • • • • Channel Strategy is Long Term Requires a Channel Structure Depends on Relationships and People Requires Effective Interorganizational Management
    8. 8. II. Growing Power of Retailers in Marketing Channels Retailers
    9. 9. Retailers.... Are Growing Larger Enjoy Substantial Channel Power Act as Buying Agents for Customers Rather than Selling Agents for Suppliers Often Operate on Low Price / Low Margin Model Operate in Saturated Markets and Fight for Market Share
    10. 10. Concentration of Sales Among the Top 50 Retail Firms 77.6% 22.4% Top 50 Rest
    11. 11. Kinds of Retailers Where Largest Four Firms Account for At Least 50% of Total Sales 44% 56% Conventional Department Stores 31% 69% Misc. General Merchandisers 21% 45% 79% 55% Discount Mass Merchandisers Variety Stores 36% 64% Athletic Footwear 42% 58% Toy Stores Four Largest Firms All Other Firms
    12. 12. Percentage Distribution of Retail Firms and Sales by Size of Firms 83.5 Sales as a percentage of the total Firms as a percentage of the total 62.8 15.6 7.0 1.8 $10,000,000 or more 13.1 14.6 1.6 $5,000,000 to $1,000,000 to $9,999,999 $4,999,999 Less than $1,000,000
    13. 13. •Enjoy Substantial Channel Power Retailer
    14. 14. Retailers Act as Buying Agents for Customers Rather than as Selling Agents for Suppliers
    15. 15. Retailers Often Operate on Low Price / Low Margin Model
    16. 16. Retailers Operate in Saturated Markets and Fight for Market Share
    17. 17. Power or Dominant Retailers are therefore the “Gatekeepers” into the Consumer Marketplace Thus, Effective Channel Strategy for Dealing with Power Retailers is Crucial
    18. 18. III. The Need to Reduce Distribution Costs Distribution Costs
    19. 19. Distribution Costs Often Account for a Significant Percentage of the Final Price of Products Sometimes Distribution Costs are Higher than the Manufacturing Cost or the Costs of Raw Materials and Component Parts
    20. 20. Some Examples... Autos Distribution Manufacturing Raw Materials and Components Software Gasoline Fax Machines Packaged Foods 15% 25% 28% 30% 41% 40% 65% 19% 30% 33% 45% 10% 53% 40% 26%
    21. 21. “rightsizing” have usually been mentioned in the context of corporate organizations, they also apply to Marketing Channels. The latest term.... Disintermediation
    22. 22. IV. Increasing Role and Usefulness of Technology
    23. 23. Technology has the power to greatly enhance the effectiveness and efficiency of Marketing Channels and is changing the entire structure of distribution around the world.
    24. 24. Some Examples... The Internet Wireless Communications Cell Phones Global Telecommunications Robotics & Automated Warehousing Computerized “Salespeople”
    25. 25. Firms that make effective use of these technologies in their channel strategy can gain a substantial competitive advantage Competition
    26. 26. V. The New Stress on Growth Strategy
    27. 27. In American Business Circles “Growth” has Overtaken “Restructuring” as the #1 Buzzword Out In Reengineering Growth Restructuring Expansion Downsizing New Markets Flat Organizations Market Share Lean and Mean Top Line Revenue
    28. 28. In a relatively slow growth economy, how can an individual company selling mature products in mature markets grow?
    29. 29. ANSWER Share of Mind = Share of Market By getting channel members to focus on your products to a greater extent than your competitors, you gain market share and growth
    30. 30. Summary (1) Search For Competitive Advantage (2) Growing Size and Power of Retailers (3) Need to Reduce Distribution Costs (4) Power and Potential of Technology (5) Stress on Growth Instead of Downsizing
    31. 31. Bottom Line Marketing Channel Strategy Has Become Critically Important For Most Businesses
    32. 32. Strategy in Marketing Channels
    33. 33. Channel Strategy The broad principles by which a firm expects to achieve its distribution objectives for satisfying its customers
    34. 34. Basic Strategic Questions (1) What role should distribution play in the firm’s strategies? overall objectives and (2) What role should distribution play in the marketing mix? (3) How should the firm’s marketing channels be designed to achieve its distribution objectives? (4) What kinds of channel members should be selected to meet the firm’s distribution objectives? (5) How can the marketing channel be managed to implement the firm’s channel design effectively and efficiently on a continuing basis?
    35. 35. The Relationship between customer satisfaction and the company’s marketing mix can be represented as: Cs = f (P1, P2, P3, P4) where: Cs= degree of customer satisfaction P1= product strategy P2= pricing strategy P3= promotional strategy P4= place (channel strategy)
    36. 36. Distribution Channel Strategy should receive especially heavy emphasis if one or more of the following conditions prevails: Distribution appears to be the most relevant variable for satisfying customers Parity exists among competitors in the other three marketing mix variables High degree of vulnerability exists because of competitors’ neglect of distribution Distribution channel strategy can foster synergies
    37. 37. Classic Marketing Channel Strategies Still Relevant Today Dual Distribution Exclusive Dealing Full-Line Forcing Price Differentiation Price Maintenance Refusal to Deal Resale Restrictions Tying Agreements
    38. 38. The Most Basic Questions in the Design of Marketing Channels When Do Customers Buy? Where Do Customers Buy? How Do Customers Buy? Who Buys? Who makes the actual purchase? Who uses the product? Who takes part in the buying decision?
    39. 39. Supply Chain Management
    40. 40. Is this just another “buzzword” for logistics - getting the right product in the right quantity, at the right time and right place? OR Is there something more substantive to this term?
    41. 41. ANSWER There is something more than semantics here: Supply Chain Management takes a broader perspective by viewing logistics as an integral part of the marketing channel relationship
    42. 42. Supply Chain Management Can Therefore be Defined as: A long-term “partnership” among marketing channel participants aimed at reducing inefficiencies, costs, and redundancies in the logistical system in order to provide high levels of customer service
    43. 43. Contrasts Between a Traditional Logistics System and Supply Chain Based System Factor Traditional Supply Chain Mgmt. System Inventory Management Logistics System Total Cost Approach Independent Effort Minimize Firm Costs Short-Term Limited to Needs of Current Transaction Transaction Based Not Relevant Joint Effort to Reduce Channel Inventories Channel-Wide Cost Efficiencies Time Horizon Information Sharing and Monitoring Joint Planning Compatibility of Corporate Philosophies Channel Leadership Sharing of Risks and Rewards Inventory Flow Not Needed Each Channel Member on Their Own “Warehouse” Mentality Storage Safety Stocks Long-Term Continuous Effort to Gather and Monitor Ongoing Important for Major Initiatives Required for Coordination and Focus Risks and Rewards Shared over Long-range “Distribution Center” Orientation-JIT, Quick Response, Cross Docking
    44. 44. Strategic Alliances and Partnerships in Marketing Channels
    45. 45. Definition: Continuing and mutually supportive relationship between the manufacturer and its channel members in an effort to provide a more highly motivated team, network, and alliance of channel partners
    46. 46. Requirements for Partnerships or Strategic Alliances in Marketing Channels (1) Recognition of interdependence of channel members (2) Close cooperation between channel members (3) Careful specification of roles, rights, and the relationship responsibilities in (4) Coordinated effort focused on common goals (5) Good communications and trust between members channel
    47. 47. Relationship Marketing via the Marketing Channel
    48. 48. Relationship Marketing The practice of building long-term relations with key parties - customers, suppliers, distributors- in order to retain their long-term preference and business Because of the importance of channels of distribution, building good relationships in the marketing channel is key to successful relationship marketing
    49. 49. Building Relationships with Channel Members Find Out the Needs and Problems of Channel Members -informal information system (“grapevine”) -research studies of channel members -research studies by outside parties -marketing channel audit -distributor advisory councils
    50. 50. Offer Support to Channel Members that is Consistent with Their Needs and Helps Solve their Problems -cooperative arrangements -partnerships and strategic alliances -distribution programming Provide Leadership to Motivate Channel Members -use power effectively -recognize causes of conflict -resolve conflicts
    51. 51. Bases of Power in the Marketing Channel Reward Power Coercive Power Legitimate Power Referent Power Expert Power Effective Channel Management Depends on How Well These Power Bases are Combined and Used
    52. 52. Causes of Marketing Channel Conflict Role Incongruities Resource Scarcities Perceptual Divergencies Expectational Differences Decision Domain Disagreements Goal Incompatabilities Communication Difficulties
    53. 53. Ten Trends in Marketing Channels as We Move into the Next Millennium 1. Growing Emphasis on Marketing Channel Strategy 2. More and More Stress on Technology 3. Focus on Efficiency and Reducing Distribution 4. Shortening and Flattening of Distribution (Disintermediation) Costs Channels 5. Development of New Types of Intermediaries in Channels (Reintermediation)
    54. 54. Trends Continued... 6. Continued Growth in Partnerships and Marketing) Alliances (Relationship 7. Increasing Power for Retailers and Wholesalers (Gatekeepers) 8. Mergers and Acquisitions to Gain Distribution Clout 9. Flexible and Focused Distribution to Match Micro, Niche, and Database Marketing 10. Attention to the Behavioral Dimensions of Augment Technology Distribution to
    55. 55. Lets look at where a product fits into all of this
    56. 56. Iphone Apple