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Channel decision and alternatives

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  • They are set of pathways which product or services fallows after production, culminating in purchase and use by the final end user.
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    • 1. CHANNEL DECISION ANDALTERNATIVES
    • 2. CHANNEL- A CONCEPT2  A Marketing channel is a set of organizations involved in the process of making product or services available for use or consumption.
    • 3. Definitions - -PHILIPKOTLER
    • 4. Why Do Marketing Channels Exist? Middlemen often perform the needed functions at a lower cost than either the customer or the manufacturer could by themselves. The first step in designing a distribution channel for a given product is to determine what objectives the channel must accomplish and their relative importance.
    • 5. Designing Distribution Channels: What are theObjectives to be Accomplished? Objectives of distribution channels:  Increase the availability of the good or service to potential customers.  Satisfy customer requirements by providing high levels of service.  Ensure promotional effort.  Obtain timely and detailed market information.  Increase cost- effectiveness.  Maintain flexibility.
    • 6. Designing Distribution Channels: What are theObjectives to be Accomplished? Product availability  The most important objective for a channel.  For industrial goods, two aspects of availability must be considered.  Attain the desired level of coverage in terms of appropriate retail outlets.  The item’s positioning within the store
    • 7. Designing Distribution Channels: What are theObjectives to be Accomplished? Meeting customers’ service requirements  Crucialobjective for analyzer and defender businesses attempting to differentiate themselves on service dimensions.  Some the service requirements include:  Order cycle time  Dependability  Communication between buyer and seller  Convenience  Postsale services
    • 8. Designing Distribution Channels: What are theObjectives to be Accomplished? Promotional effort  Obtain promotional support from channel members for the firm’s product. Market information  Middlemen are often relied on for fast and accurate feedback.  A high level of channel feedback is particularly important for firms in highly competitive industries.  Feedback is crucial for prospectors.
    • 9. Designing Distribution Channels: What are theObjectives to be Accomplished? Cost-effectiveness  Important to businesses pursuing low-cost analyzer or defender strategies. Flexibility  Firms pursuing prospector strategies in new or rapidly growing or technically turbulent product categories, consider this important.  A flexible channel is one where it is relatively easy to switch channel structures or add new types of middlemen.
    • 10. Institutions Found in Marketing Channels
    • 11. Designing Distribution Channels: WhatKinds of Institutions Might Be Included? Merchant Wholesalers  Some types of merchant wholesalers engage in a full range of wholesaling functions while others specialize in only limited services.  Both buy goods from various suppliers and then resell those goods to their commercial customers, either industrial buyers or other resellers such as a retailer.
    • 12. Designing Distribution Channels: WhatKinds of Institutions Might Be Included? Agent middlemen do not take title to, or physical possession of, the goods they deal in.  Manufacturer’s agents or manufacturer’s reps  Salesagents  Brokers  E-Hubs
    • 13. Designing Distribution Channels: WhatKinds of Institutions Might Be Included? Retailers  Sellgoods and services directly to final consumers for their personal, nonbusiness use.  One classification scheme groups stores according to their method of operation:  Low margin/high turnover  High margin/low turnover
    • 14. Designing Distribution Channels: WhatKinds of Institutions Might Be Included? Nonstore Retailing  Includes direct selling, mail-order catalogs, TV shopping, vending machines, and Web sites.  Auction sites facilitate retail start-ups.
    • 15. Marketing Channels for Industrial Goods andServicesManufacturer Manufacturer Manufacturer Manufacturer Manufacturer Manufacturer Representativ Sales Branch e Industrial Distributors Industrial Industrial Industrial Industrial customer customer customer customer Zero level Single Two level Three
    • 16. Which Alternative Is Best? There are trade-offs among the various objectives a company might try to accomplish with its distribution channel. The decision depends on:  Which distribution objectives are considered most important,  Which is influenced by the business’s competitive strategy and the other components of the marketing program.
    • 17. Which Alternative Is Best? Number of intermediaries - Three basic strategies are available:  Intensive Distribution  Exclusive Distribution  Selective Distribution
    • 18. Which Alternative Is Best? Promotional effort, market information, and post sale service objectives Economic criteria  The theory of transaction cost analysis (TCA) argues that when substantial transaction-specific assets are involved, the costs of using and administering independent channel members are likely to be higher than the costs of managing a company sales force and/or distribution centers.
    • 19. Which Alternative Is Best? Cost-effectiveness  Minimizing physical distribution costs subject to the constraint of achieving some target level of product availability and customer service.  Make-or-buy decisions  Supply chain management
    • 20. Transaction Cost Analysis (TCA)High Sales Force Value – added partnersValue-add of sale Distributors Retail stores Telemarketin g InternetLow Low High Cost per transaction
    • 21. Which Alternative Is Best? Channel integration and system:-  Vertical marketing system  It comprises producer, wholesaler and retailer acting as a unified system.  It achieve economies through size, bargaining power and elimination of duplicate service.  Horizontal marketing system  Two or more unrelated companies put together resources or program to exploit an emerging marketing opportunity.
    • 22. Which Alternative Is Best? Flexibility  Generally, vertically integrated systems are difficult to alter quickly.  Channels involving independent middlemen are often more flexible.
    • 23. Which Alternative Is Best? Multichannel distribution  Companies are increasingly using multiple channels.  Some use dual distribution systems.  Hybrid system is a variation.  Multichannel systems employ separate channels to reach different target segments.  Members of a hybrid system perform complementary functions for the same customer segment.
    • 24. Example of a Hybrid Marketing Channel
    • 25. Channel Design for Global Markets Market entry strategies  Exporting is simple because it involves the least commitment and risk.  Contractual entry modes are non equity arrangements that involve the transfer of technology and/or skills to an entity in a foreign country.  Overseas direct investment can be implemented in two ways—through joint ventures or sole ownership.
    • 26. Channel Design for Global Markets Contractual entry modes:  Licensing  Franchising  Includecontract manufacturing  Turnkey construction contract  Coproduction  Countertrade
    • 27. Channel Design for Global Markets Channel alternatives  The use of domestic middlemen who provide marketing services from a domestic base.  The use of foreign middlemen.
    • 28. Conclusion The primary responsibility for channel success lie with the manufacturer. Thus, manufacturers must recognize those functions that cannot be delegated to middlemen and perform them at a level at least equivalent to that expected from the other channel members.