Chapter 20
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Chapter 20






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Chapter 20 Chapter 20 Presentation Transcript

  • Place Managing marketing channels Chapter 20
  • Managing the marketing channels
    • Firms are increasingly paying greater attention to how they manage their marketing channels, so that products and services are delivered at the right time, right place and the right price.
    • The marketing channel participants are vital partners in the value delivery network.
  • Supply chains and the value delivery network
    • Upstream partners are the suppliers of raw materials, components, parts, information, finance and expertise to the organisation.
    • Downstream partners are the wholesalers and retailers who connect the firm with the customer.
  • The nature and importance of marketing channels
    • The marketing or distribution channel is comprised of a set of interdependent organisations involved in the process of making a product or service available for use or consumption by the consumer or an industrial user.
    • The new forms of marketing channels have evolved based on robust partnerships, with long-term commitment to each other and the customer.
  • How channel members add value
    • Transactional value :
      • Risk moves to the intermediary, who also gets to know the specialist market.
    • Logistical value :
      • Intermediaries assemble an assortment that is compatible with the needs of the ultimate customers.
    • Facilitating value :
      • Intermediaries often offer credit to customers, may offer training in the use of products, and collect and deliver marketing information.
  • Figure 20.1  How a marketing intermediary reduces the number of channel transactions and raises economy of effort Channel interactions
  • Key value adding functions
    • Information
    • Promotion
    • Contact with prospective buyers
    • Matching the offer to meet the needs of the customer
    • Negotiation
    • Physical distribution
    • Financing
    • Risk taking
  • Figure 20.2  Consumer and business marketing channels
  • Channel behaviour
    • All participants dependent upon each other.
    • Each channel member has a specialised role
    • Co-operation to achieve overall channel objectives may sometimes conflict with internal organisational goals and objectives, resulting in channel conflict .
      • Horizontal conflict
        • Conflict with firms at the same level of the channel.
      • Vertical conflict
        • Conflict at different levels e.g. between wholesaler and retailer.
  • Channel organisation
      • Historically channels have followed the conventional distribution channel format:
        • comprised of independent producers, wholesalers and retailers, with separate businesses and seeking to maximise their own profit individually, even at the expense of the entire channel.
      • Modern channel management has evolved to develop vertical marketing systems (VMS) that provide channel leadership.
  • Figure 20.3  A conventional marketing channel versus a vertical marketing system
  • Vertical marketing systems
    • Vertical marketing systems (VMS) are structured, interdependent producers, wholesalers and retailers that act as a unified system.
    • There are also different constructs of VMS for various types of industries.
  • Figure 20.4  Main types of vertical marketing system
  • Corporate VMS
          • Combines successive stages of production and distribution under single ownership.
          • Breweries and petrol stations are examples.
  • Contractual VMS
            • Independent firms at different levels join contractually to create efficiencies and economies of scale that could not be achieved alone. 3 types:
            • Wholesaler-sponsored voluntary chains of independent retailers organised to help compete against large organisations.
            • Retailer co-operatives
            • Franchise
  • Franchise VMS
            • Reduced set-up costs
            • Contractual relationship
            • Proven system and established brand name
            • Centralised buying power
            • Expertise in operational, managerial, legal matters
            • Forfeit some control
            • Performance against exacting standards
            • Aggressive targets
  • Administered VMS
            • VMS that co-ordinates successive stages of production and distribution through the size and power of one of the parties.
  • Other channel variations
        • Horizontal marketing systems
          • Channel arrangement in which two or more companies at one level join together to follow a new marketing opportunity.
        • Hybrid marketing systems
          • Multi channel distribution targeting different market segments.
        • Changing channel organisation
          • Major trend to disintermediation through elimination of intermediaries and traditional sellers and replacement by radically new types of intermediaries.
  • Channel retailing trends
    • New retail forms and shortening of the retail life-cycles
      • ‘ Wheel of retailing’ , new types of retailer, usually begin as low-margin, low-price, low-status operations but later evolve to higher priced, higher service operations and eventually become like the conventional retailers that they replaced
    • Growth of non-store retailing
      • ‘ click and brick’ retailers
      • Retail convergence
      • Rise of mega-retailers
      • Growing importance of retail technology
      • Global expansion of retailers
  • Channel wholesaling trends
    • Face considerable challenges
    • Formation of hybrid operators such as the cash and carry concepts.