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Marketing channels

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  • 1. Marketing Channels © Macmillan Publishers India Ltd. Chapter 27 / Slide 1
  • 2. © Macmillan Publishers India Ltd. Chapter 27 / Slide 2
  • 3. Chapter 27: Marketing Channels At the end of this chapter, you should be able to: Understand the Nature and Importance of channel Understand the Pivotal Role Channels Play in Value Delivery  Comprehend that Channels Provide Distributional Efficiency to the Firm  Grasp that there are Several Possible Patterns of Channels and Many Types of Intermediaries  © Macmillan Publishers India Ltd. Chapter 27 / Slide 3
  • 4. Chapter 27: Marketing Channels Channel Plays a Pivotal Role in Value Delivery Supplies several products, in suitable assortments, as required  Breaks the bulk and caters to small-size needs of consumers  Takes care of the various flows involved in distribution  Connects the Consumers to the Firm  Provides Distributional Efficiency to the Firm          Channel Functions Cannot be Eliminated   Minimizes the number of contacts needed for reaching consumers Provides salesmanship Helps in price mechanism Takes care of a part of physical distribution and financing Assists in merchandising Provides market intelligence Acts as change agents and generates demand A vital source of competitive advantage for the firm Channels/middlemen are not to be viewed as parasites Channel ‘Level’, Channel ‘Member’, and Channel ‘Length’ © Macmillan Publishers India Ltd. Chapter 27 / Slide 4
  • 5. Functions performed by Marketing Channels       Facilitate selling by being physically close to customers Provide distribution efficiency to the firm by bridging the manufacturer with the user. Break the bulk and cater to the tiny requirements of buyers Assembles products into assortments to meet buyers needs, match segments of supply with segments of demand Look after a part of physical distribution/marketing logistics Sub-distribution i.e. reselling, retransport, handling, accounting.  © Macmillan Publishers India Ltd. Chapter 27 / Slide 5
  • 6. Functions performed by Marketing Channels           Stock holding Sharing financial burden Provide salesmanship to firms Presale and after sale services Assist in sales promotion, merchandizing, new product introduction, price mechanism and sales forecasting provide market intelligence Maintain records Take care of liaison requirements Help diffusion of innovation/New product among consumers and act as change agent and generate demand © Macmillan Publishers India Ltd. Chapter 27 / Slide 6
  • 7. Patterns of Channels and Types of Intermediaries Manufacturer Manufacturer sales man Manufacturer Manufacturer Show Room Manufacturer Retailer Manufacturer Franchisees Manufacturer Wholesaler/D istributor Manufacturer Wholesaler/D istributor Manufacturer Marketing /sole selling agent Whole seller/distr ibutor User User User User Retailer Semi wholesaler Semi whole seller User Retailer User © Macmillan Publishers India Ltd. Retailer User Chapter 27 / Slide 7
  • 8. Chapter 27: Marketing Channels  Types and Characteristics of Intermediaries  Sole-selling agent/marketer  C&F Agent (CFA)  Wholesaler/stockist /distributor  Semi-wholesaler  Retailer/dealer © Macmillan Publishers India Ltd. Chapter 27 / Slide 8
  • 9. Chapter 27: Marketing Designing a Channel System Channels Exhibit 27.2 Issues in Designing a Channel System (Page 510) © Macmillan Publishers India Ltd. Chapter 27 / Slide 9
  • 10. Chapter 27: Marketing Designing a Channel System  Channels Formulating the Channel Objectives  Chart 27.5 Channel Objectives (Pg 512) Channel objectives will decide channel design  Channel objectives differ from firm to firm; so, their channel designs differ Exhibit 27.3 Linkage Between Channel Design and Channel Objectives: Castrol, Reliance, Philips, Archies, Louis Philippe, ITC (Pg 513)    Identifying the Channel Functions Linking the Channel Design to Customer Characteristics Linking the Channel Design to Product Characteristics  Industrial and consumer products need different channels  Channels for industrial products   Need for specialist distributors Chart 27.6 Channels for Industrial Products (Pg 514) Even within consumer products, channel requirements vary • Special/premium products may need special channels  The product’s PLC stage too influences channel choice  Product influences the type of channel and number of members too © Macmillan Publishers India Ltd. Chapter 27 / Slide 10
  • 11. Chapter 27: Marketing Channels Designing a Channel System (…contd)    Evaluating the Distribution Environment, Including Legal Aspects Evaluating Competitor’s Channel Designs Matching the Channel Design to Company Resources   Firms with larger resources have more options Evaluating the Short-listed Alternatives Further and Selecting the Best     Efficiency criterion Control criterion Adaptive criterion A trade-off is inherent Exhibit 27.4 Exiting an Established Channel Structure is Difficult: P&G (Pg 517)   Opting for Multi-Channel Model / Hybrid Distribution to Suit Diverse Customer Segments Choosing Channel Intensity and Number of Tiers  Choosing channel intensity: how many members, how close?  How many tiers? © Macmillan Publishers India Ltd. Chapter 27 / Slide 11
  • 12. Chapter 27: Marketing Channels Designing a Channel System (…contd)  Channel Intensity Intensive distribution Exhibit 27.5 Wrong Choice of Channel • Selective distribution Intensity: P&G and Nestle (Page 519) • Exclusive distribution Within the same channel design, different firms may need different intensities •   Choosing the number of tiers • •  Firms choose different variants within the given design •   Single-tier or Two-tier? Sometimes even three-tier considered In recent years, number of tiers getting shorter HUL and Nirma use different variants within the same design Adopting a Channel Design has a Bearing on Other Marketing Decisions Wholesaling, Retailing and Other Channel Activities have to be Handled as One Unified System Creating and Administering the Channel See SL 28.3, 28.4 and 28.5 in Chapter 28 © Macmillan Publishers India Ltd. Chapter 27 / Slide 12
  • 13. Chapter 27: Marketing Channels Contemporary Channel Scenario in India Chart 27.7 Contemporary Channel Scenario in India (Page 521)    More and More Firms Take to a Multi-Channel Model Outsourcing of Channel Arrangement Becomes More Pronounced Radical Changes are Taking Place on the Retailing Front     Conventional Wholesale-Retail Trade Continues as the Mainstay Image and Profile of the Distributive Trade Undergo a Change         Ascendancy of Multi- Format Retailing (MFR) Spread of Modern Format Stores (MFS) Distributors keep expanding and diversifying Distributing outfits, however, are still mostly family owned Trade Margins Escalate as Costs of Distribution Keep Growing Power Equation among Distribution Triumvirate now Favour Lower Levels Distributors are Becoming Choosy Firms Go in for Different Forms of Non-Traditional Channel Arrangements Firms Embrace Different Forms of Non-Store Retailing Firms Embrace Different Forms of Direct Marketing © Macmillan Publishers India Ltd. Chapter 27 / Slide 13