Markma Group 4 Chapter 15 Presentation

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Group 4 Markma Presentation Top 10 Concepts for Chapter 15- Designing and Managing Integrated Marketing Channels

Group 4 Markma Presentation Top 10 Concepts for Chapter 15- Designing and Managing Integrated Marketing Channels

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  • 1. CHAPTER 15:DESIGNING AND MANAGING INTEGRATED MARKETING CHANNELS GROUP # 4 CRISOSTOMO, KATHLEEN LIZETTE GALICANO, SITON JONGCO, KRISTOFFER PIÑON, RAYMUND
  • 2. Crisostomo, Kathleen Lizette C.MARKMACHAPTER 15:DESIGNING AND MANAGINGINTEGRATED MARKETING CHANNELS
  • 3. Top 10 Concepts1. Marketing Channel System: Push and Pull2. Categories of Buyers3. Decisions in Designing a Marketing Channel System4. Analyzing customer needs: Channel Service Outputs5. Identifying Channel Alternatives: Three Elements6. Channel-Management Decisions7. Channel Power8. Channel Integration and Systems9. Channel Coordination / Channel Conflict10. E-Commerce Marketing Practices
  • 4. Top 10 Concepts1. Marketing Channel System: Push and Pull2. Categories of Buyers3. Decisions in Designing a Marketing Channel System4. Analyzing customer needs: Channel Service Outputs5. Identifying Channel Alternatives: Three Elements6. Channel-Management Decisions7. Channel Power8. Channel Integration and Systems9. Channel Coordination / Channel Conflict10. E-Commerce Marketing Practices
  • 5. • Push strategy uses the manufacturer’s sales force, trade promotion money, and other means to induce intermediaries to carry, promote, and sell the product to end users. - used for low brand loyalty in categories or impulse items
  • 6. • A pull strategy uses advertising, promotion, and other forms of communication to persuade consumers to demand the product from intermediaries. - used when consumers can differentiate brands well and brand are chosen prior to purchase
  • 7. Top 10 Concepts1. Marketing Channel System: Push and Pull2. Categories of Buyers3. Decisions in Designing a Marketing Channel System4. Analyzing customer needs: Channel Service Outputs5. Identifying Channel Alternatives: Three Elements6. Channel-Management Decisions7. Channel Power8. Channel Integration and Systems9. Channel Coordination / Channel Conflict10. E-Commerce Marketing Practices
  • 8. Categories of Buyers• Habitual Buyers • Same place, same manner• High value deal seekers • They know what they need and they surf before buying at the lowest possible price
  • 9. Categories of Buyers• Variety-loving shoppers • Gather info through various channels, take advantage of high-touch services, then buy in their favorite channel regardless of price• High-involvement shoppers • Gather info through alls channels and purchase in a low cost channel but takes advantage of customer support from a high-touch channel
  • 10. Top 10 Concepts1. Marketing Channel System: Push and Pull2. Categories of Buyers3. Decisions in Designing a Marketing Channel System4. Analyzing customer needs: Channel Service Outputs5. Identifying Channel Alternatives: Three Elements6. Channel-Management Decisions7. Channel Power8. Channel Integration and Systems9. Channel Coordination / Channel Conflict10. E-Commerce Marketing Practices
  • 11. Decisions in Designing a Marketing Channel SystemA. Analyze customer needs* Greater service = greater channel costs = higher prices
  • 12. Decisions in Designing a Marketing Channel SystemA. Analyze customer needs* Greater service = greater channel costs = higher pricesB. Establish channel objectives* Which market segment to serve and what best channel to use
  • 13. Decisions in Designing a Marketing Channel SystemA. Analyze customer needs* Greater service = greater channel costs = higher pricesB. Establish channel objectives* Which market segment to serve and what best channel to useC. Identify major channel alternatives* Each channel reaches a different segment and delivers the right product at the least cost
  • 14. Decisions in Designing a Marketing Channel SystemA. Analyze customer needs* Greater service = greater channel costs = higher pricesB. Establish channel objectives* Which market segment to serve and what best channel to useC. Identify major channel alternatives* Each channel reaches a different segment and delivers the right product at the least costD. Evaluate major channel alternative* vs. economic, control and adaptive criteria
  • 15. Top 10 Concepts1. Marketing Channel System: Push and Pull2. Categories of Buyers3. Decisions in Designing a Marketing Channel System4. Analyzing customer needs: Channel Service Outputs5. Identifying Channel Alternatives: Three Elements6. Channel-Management Decisions7. Channel Power8. Channel Integration and Systems9. Channel Coordination / Channel Conflict10. E-Commerce Marketing Practices
  • 16. Analyzing customer needs: Channel Service Outputs– Lot size: How many can be purchased on 1 occasion? ?
  • 17. Analyzing customer needs: Channel Service Outputs– Lot size: How many can be purchased on 1 occasion?– Waiting and delivery time: The faster, the better
  • 18. Analyzing customer needs: Channel Service Outputs– Lot size: How many can be purchased on 1 occasion?– Waiting and delivery time: The faster, the better– Spatial convenience: how easy is it to buy the product?
  • 19. Analyzing customer needs: Channel Service Outputs– Product variety: more choices = more chances of finding what is needed
  • 20. Analyzing customer needs: Channel Service Outputs– Service back-up: add-ons
  • 21. Top 10 Concepts1. Marketing Channel System: Push and Pull2. Categories of Buyers3. Decisions in Designing a Marketing Channel System4. Analyzing customer needs: Channel Service Outputs5. Identifying Channel Alternatives: Three Elements6. Channel-Management Decisions7. Channel Power8. Channel Integration and Systems9. Channel Coordination / Channel Conflict10. E-Commerce Marketing Practices
  • 22. Identifying Channel Alternatives: Three Elements 1. Types of intermediaries• Do I need a wholesaler? Retailer? Dealer?
  • 23. Identifying Channel Alternatives: Three Elements 1. Types of intermediaries * Do I need a wholesaler? Retailer? Dealer? 2. Number of intermediaries* Distribution: Exclusive? Selective? Intensive? * Risk = price wars among retailers
  • 24. Identifying Channel Alternatives: Three Elements 1. Types of intermediaries * Do I need a wholesaler? Retailer? Dealer? 2. Number of intermediaries* Distribution: Exclusive? Selective? Intensive? * Risk = price wars among retailers 3. Terms and responsibilities * Respect + Opportunity to make profits
  • 25. Top 10 Concepts1. Marketing Channel System: Push and Pull2. Categories of Buyers3. Decisions in Designing a Marketing Channel System4. Analyzing customer needs: Channel Service Outputs5. Identifying Channel Alternatives: Three Elements6. Channel-Management Decisions7. Channel Power8. Channel Integration and Systems9. Channel Coordination / Channel Conflict10. E-Commerce Marketing Practices
  • 26. Channel-Management Decisions Because to the customers, the channels are Select the company!
  • 27. Channel-Management Decisions Because to the customers, the channels are Select the company! Train Because intermediaries are partners in satisfying customers!Motivate
  • 28. Channel-Management Decisions Because to the customers, the channels are Select the company! Train Because intermediaries are partners in satisfying customers!MotivateEvaluate Is the strategy still working? (external analysis Modify and current channels)
  • 29. Top 10 Concepts1. Marketing Channel System: Push and Pull2. Categories of Buyers3. Decisions in Designing a Marketing Channel System4. Analyzing customer needs: Channel Service Outputs5. Identifying Channel Alternatives: Three Elements6. Channel-Management Decisions7. Channel Power8. Channel Integration and Systems9. Channel Coordination / Channel Conflict10. E-Commerce Marketing Practices
  • 30. • Channel Power is the ability to alter channel’s behavior• Cooperation is a huge challenge!
  • 31. Channel Powera. Coercive power- Withdraw resource or terminate relationshipb. Reward power- Extra benefit for performancec. Legitimate power- Behavior warranted under the contractd. Expert power- Must develop new expertise for them to cooperatee. Referent power- Respect causes intermediaries to have pride in the association
  • 32. Top 10 Concepts1. Marketing Channel System: Push and Pull2. Categories of Buyers3. Decisions in Designing a Marketing Channel System4. Analyzing customer needs: Channel Service Outputs5. Identifying Channel Alternatives: Three Elements6. Channel-Management Decisions7. Channel Power8. Channel Integration and Systems9. Channel Coordination / Channel Conflict10. E-Commerce Marketing Practices
  • 33. Channel Integration and SystemsVertical Marketing Systems -Producer + Wholesaler + Retailer = Unified system under channel captain - Corporate (single ownership), administered or contractual (independent firms)
  • 34. Channel Integration and SystemsVertical Marketing Systems Horizontal - 2 or more unrelated Marketing Systems companies put together resources to exploit an emerging market
  • 35. Channel Integration and SystemsVertical Marketing Systems - More marketing channels/ strategies of 1 Horizontal channel reflect the Marketing Systems strategies of other channels - Goal: maximum market Integrated Multichannel coverage Marketing Systems
  • 36. Top 10 Concepts1. Marketing Channel System: Push and Pull2. Categories of Buyers3. Decisions in Designing a Marketing Channel System4. Analyzing customer needs: Channel Service Outputs5. Identifying Channel Alternatives: Three Elements6. Channel-Management Decisions7. Channel Power8. Channel Integration and Systems9. Channel Coordination / Channel Conflict10. E-Commerce Marketing Practices
  • 37. • Channel Coordination – channel members are brought together to advance the goals of the channel
  • 38. • Channel conflict - one member’s actions prevent another channel from achieving its goal* Can be vertical, horizontal or multichannel
  • 39. Top 10 Concepts1. Marketing Channel System: Push and Pull2. Categories of Buyers3. Decisions in Designing a Marketing Channel System4. Analyzing customer needs: Channel Service Outputs5. Identifying Channel Alternatives: Three Elements6. Channel-Management Decisions7. Channel Power8. Channel Integration and Systems9. Channel Coordination / Channel Conflict10. E-Commerce Marketing Practices
  • 40. * Online retailers provide convenient, informative and personalized experiences without: • Retail floor space • Staff • Inventory* Customer service is critical: no social interaction
  • 41. E-Commerce Marketing PracticesPure-click Launched a website without any previous experience as a firm
  • 42. E-Commerce Marketing Practices Pure-click Launched a website without any previous experience as a firmBrick-and-click - Existing companies with an added online site - Risk: conflict with offline intermediaries
  • 43. Designing and Managing Integrated Marketing Channels Galicano Siton Markma – v57
  • 44. What is a Marketing Channel? A marketing channel Producer Agent system is the particular set of interdependent Retailer organizations involved in the process of making a product or serviceProduct to the Consumer available for use or consumption.
  • 45. Channels and Marketing Decisions Producer A push strategy uses the manufacturer’sConsumer Sales Force sales force, trade promotion money, and other means to induce intermediaries to carry, Retailer Wholesaler promote, and sell the product to end users
  • 46. Channels and Marketing DecisionsA pull strategy uses Advertiseadvertising, Demandpromotion, and Pull Productother forms of Manufacturercommunication topersuade consumersto demand theproduct fromintermediaries
  • 47. Buyer Expectations for Channel Integration • Ability to order a product online and pick it up at a Ease convenient retail locationExpertise Experience • Ability to return an online- ordered product to a Product nearby store • Right to receive discounts based on total online and offline purchases
  • 48. Category and Types of Buyers Habitual Quality Buyers Service High Value deal Seakers Variety Loving Shoppers Buyers High Affinity Price Involvement Shoppers Value
  • 49. Channel Member FunctionsGather Information• Develop and disseminate persuasive communication Reach Agreement on price and terms • Acquire funds to finance inventories Assume risk and Provide for storage Provide for buyers payment of their bills • Supervise actual transfer of ownership
  • 50. Designing aMarketing Channel System Analyze Establish customer channel needs objectives Identify Evaluate major major channel channel alternatives alternatives
  • 51. Channel Service Outputs Lot size Waiting/deliveryService backup time Spatial Product variety convenience
  • 52. Identifying Channel Alternatives• Types of intermediaries• Number of intermediaries• Terms and responsibilities
  • 53. Number of Intermediaries• Exclusive• Selective• Intensive
  • 54. Terms and Responsibilities of Channel Members• Price policy• Condition of sale• Distributors’ territorial rights• Mutual services and responsibilities
  • 55. Channel-Management Decisions Select Modify Train Evaluate Motivate
  • 56. Channel Power• Coercive• Reward• Legitimate• Expert• Referent
  • 57. Channel Integration and SystemsVertical marketing systems• Corporate VMS• Administered VMS• Contractual VMSHorizontal marketing systemsMultichannel systems
  • 58. What is Channel Conflict?• Channel conflict occurs when one member’s actions prevent another channel from achieving its goal.• Types of channel conflict – Vertical – Horizontal – Multichannel
  • 59. Causes of Channel Conflict• Goal incompatibility• Unclear roles and rights• Differences in perception• Intermediaries’ dependence on manufacturer
  • 60. Table 15.3 Strategies for Managing Channel Conflict• Adoption of • Cooptation superordinate goals • Diplomacy• Exchange of employees • Mediation• Joint membership in • Arbitration trade associations • Legal recourse
  • 61. Designing & Managing Integrated Marketing Channels Kristoffer Z. Jongco Marketing Management www.kristofjongco.blogspot.com
  • 62. Outline:1. Defining Marketing Channels2. Importance of Marketing Channels3. Understand Customer Needs4. Role of Marketing Channels5. Channel Design Decisions6. Establish Objectives & Constraints www.kristofjongco.blogspot.com
  • 63. Outline:7. Identify & Evaluate Major Channel Alternatives8. Channel Management Decisions9. Channel Integration & Systems10. Channel Conflict, Cooperation & Competition www.kristofjongco.blogspot.com
  • 64. Designing and Managing Integrated Marketing Channels (10 Things to Remember) www.kristofjongco.blogspot.com
  • 65. Outline:1. Defining Marketing Channels2. Importance of Marketing Channels3. Understand Customer Needs4. Role of Marketing Channels5. Channel Design Decisions6. Establish Objectives & Constraints www.kristofjongco.blogspot.com
  • 66. 1. Marketing ChannelsMeans by which firms attempt to inform, persuade, and remind consumers, directly or indirectly, about the products and brands they sell
  • 67. Outline:1. Defining Marketing Channels2. Importance of Marketing Channels3. Understand Customer Needs4. Role of Marketing Channels5. Channel Design Decisions6. Establish Objectives & Constraints www.kristofjongco.blogspot.com
  • 68. 2. Importance of Marketing ChannelsNew Ideas Increase Profits www.kristofjongco.blogspot.com
  • 69. Outline:1. Defining Marketing Channels2. Importance of Marketing Channels3. Understand Customer Needs4. Role of Marketing Channels5. Channel Design Decisions6. Establish Objectives & Constraints www.kristofjongco.blogspot.com
  • 70. 3. Understand Customer NeedsCustomers Product/Services www.kristofjongco.blogspot.com
  • 71. Outline:1. Defining Marketing Channels2. Importance of Marketing Channels3. Understand Customer Needs4. Role of Marketing Channels5. Channel Design Decisions6. Establish Objectives & Constraints www.kristofjongco.blogspot.com
  • 72. 4.Role of Marketing Channels 0 Level 1 Level 2 LevelManufacturer 3 Level Manufacturer’s Industrial Industrial Sales Branch Distributor Customer www.kristofjongco.blogspot.com
  • 73. Outline:1. Defining Marketing Channels2. Importance of Marketing Channels3. Understand Customer Needs4. Role of Marketing Channels5. Channel Design Decisions6. Establish Objectives & Constraints www.kristofjongco.blogspot.com
  • 74. 5.Channel Design DecisionsAnalyze Customer Needs Decisions www.kristofjongco.blogspot.com
  • 75. Outline:1. Defining Marketing Channels2. Importance of Marketing Channels3. Understand Customer Needs4. Role of Marketing Channels5. Channel Design Decisions6. Establish Objectives & Constraints www.kristofjongco.blogspot.com
  • 76. 6.Establish Objectives & Constraints Channel Objective Product Prepare for larger environment www.kristofjongco.blogspot.com
  • 77. Outline:7. Identify & Evaluate Major Channel Alternatives8. Channel Management Decisions9. Channel Integration & Systems10. Channel Conflict, Cooperation &Competition www.kristofjongco.blogspot.com
  • 78. 7.Identify & Evaluate Major Channel AlternativesSelective Distribution Exclusive Distribution Intensive Distribution www.kristofjongco.blogspot.com
  • 79. Outline:7. Identify & Evaluate Major Channel Alternatives8. Channel Management Decisions9. Channel Integration & Systems10. Channel Conflict, Cooperation &Competition www.kristofjongco.blogspot.com
  • 80. 8.Channel Management DecisionsSelectTrainMotivate CHANNELEvaluate MEMBERSModify www.kristofjongco.blogspot.com
  • 81. Outline:7. Identify & Evaluate Major Channel Alternatives8. Channel Management Decisions9. Channel Integration & Systems10. Channel Conflict, Cooperation &Competition www.kristofjongco.blogspot.com
  • 82. 9.Channel Integration & SystemsVertical System Horizontal System Multi Channel System www.kristofjongco.blogspot.com
  • 83. Outline:7. Identify & Evaluate Major Channel Alternatives8. Channel Management Decisions9. Channel Integration & Systems10. Channel Conflict, Cooperation &Competition www.kristofjongco.blogspot.com
  • 84. 10. Channel Conflict, Cooperation & Competition Conflict Cooperate Competition www.kristofjongco.blogspot.com
  • 85. Summary: Designing and Marketing Integration Marketing ChannelsThink Profit Cooperate Channels DecisionCustomer Needs www.kristofjongco.blogspot.com
  • 86. Designing & Managing Integrated Marketing Channels Kristoffer Z. Jongco Marketing Management www.kristofjongco.blogspot.com
  • 87. Chap. 15Designing and Managing Integrated Marketing Channels Raymund C. Piñon Marketing Management V57 Prof. Bong De Ungria
  • 88. Outline• 6th Task of Marketing – Delivering Customer Value• Marketing channels: definition, importance, examples• Functions of marketing channels• Flows and levels of marketing channels• Value networks – a broader view of customer value delivery• How to design marketing channels• Challenges in managing channels• Integrated marketing channels – a new development• Channel conflicts and how they are managed• Key issues with e-commerce
  • 89. Recall: Marketing is…• A system of profitably creating, DELIVERING and communicating superior VALUE to satisfy customers’ needs, wants and demands better than competition.
  • 90. To achieve this, the 6th Task of Marketing is…1. Developing marketing strategies and plans2. Capturing marketing insights and performance3. Connecting with customers4. Building strong brands5. Shaping the marketing offer6. Delivering and communicating value7. Creating successful long-term growth
  • 91. 1st some definitions• Marketing Channels, Trade Channels, Distribution Channels – A set of interdependent organizations involved in the process of making products or services available for use or consumption – A set of pathways a product or service follows after production, culminating in purchase and use by the final end-user – Intermediaries performing a variety of functions• Value-delivery network – A company’s supply chain and how it partners with specific suppliers and distributors to make products and bring them to markets• Value-delivery system – All the expectancies the customers will have on the way to obtaining and using the offering• Value networks – A system of partnerships and alliances that a firm creates to source, augment and deliver its offerings
  • 92. Examples of Intermediaries• Merchants – Wholesalers and Retailers – Buy, take title to goods, resell• Agents – Brokers, manufacturers’ representatives, sales agents – Look for customers, negotiate for producer, don’t take title to goods• Facilitators – Transportation companies, warehouses banks, advertising agencies – Assist in the distribution process but don’t take title to goods nor negotiate on purchases or sales
  • 93. Why are Channels Important? Channel functions and flows• Gather marketing information• Develop and disseminate persuasive communications• Reach agreement on prices and terms to effect transfer of ownership or possession of goods• Place order with manufacturers• Acquire funds to finance inventory• Assume risks for carrying out channel functions• Provide for storage and movement of physical products• Provide for buyers’ payment of bills through banks• Oversee actual transfer of ownership of goods• Convert potential buyers into profitable customers
  • 94. Why are Channels Important? Marketing channel system• Choice of particular set of marketing channels a firm employs is critical – They account for 30% to 50% of SRP – They can convert potential buyers to profitable customers – Channel decisions affect all other marketing decisions • Pricing • Sales force and advertising decisions • Involve long-term commitments with other firms as well as a set of policies and procedures • Channel decisions must align with overall strategy
  • 95. So (again) Step #1 is… Understanding Customer Needs Consumers choose where to buy based on:• Price• Product assortment• Convenience• Personal shopping goals Marketers using different channels must be aware that different consumers have different needs during the buying process
  • 96. There are 5 marketing flows in a marketing channelPhysical Flow Transporters, Transporters, Suppliers Manufacturer Dealers Transporters Customers Warehouses WarehousesTitle Flow Suppliers Manufacturer Dealers CustomersPayment Flow Suppliers Banks Manufacturer Banks Dealers Banks CustomersInformation Flow Transporters, Transporters, Transporters, Suppliers Warehouses, Manufacturer Warehouses, Dealers Customers Banks Banks BanksPromotions Flow Advertising Advertising Suppliers Manufacturer Dealers Customers agencies agencies
  • 97. Channel Levels (Paths) There are different levels of marketing channels in consumer and industrial markets Consumer Marketing Channels Industrial Marketing Channels 0-level 1-level 2-level 3-level 0-level 1-level 2-level 3-levelManufacturer Manufacturer Manufacturer Manufacturer Manufacturer Manufacturer Manufacturer Manufacturer Wholesaler Wholesaler Manufacturer’s Manufacturer’s Representative Sales Branch Jobber Industrial distributor Retailer Retailer Retailer Industrial Industrial Industrial Industrial Consumer Consumer Consumer Consumer customers customers customers customers
  • 98. A broader view of delivering customer value: Value Networks Partnerships created to source, augment & deliver offerings• From a linear view -> Supply Chain – See markets as destinations• To a customer-centric view -> Demand Chain Planning – Emphasize what customers are looking for instead of what we are selling – SIVA 4-Ps • Solutions Product • Information Promotions • Value Price • Access Placement• To a broad view of customer value delivery -> Value Networks – Seeing the company at the center of a value network – Include suppliers, suppliers’ suppliers, immediate customers and their end customers – A company needs to orchestrate these parties in order to deliver superior value to the target market – Managing value chains require increased investments in IT and software • SCM • SAP, Oracle • ERP • CRM
  • 99. Channel Design Decisions What are key issues in designing channels?1. Analyzing customer needs2. Establishing channel objectives3. Evaluating major channel alternatives
  • 100. In Channel Design, Step #1 is… Analyze customers’ desired service output levelThere are 5 channel service outputs• Lot size – customers prefer lot size of one• Waiting and delivery time – fast delivery channels• Spatial convenience – ease of purchase• Product variety – greater assortment• Service back-up – credit, delivery, service, repair, training, consultingNote: increased service output = increased channel costs, and increased prices to consumers. Some customers are willing to accept smaller service outputs if they could save on costs
  • 101. Channel Design Decision Step #2 is… Establishing channel objectives and constraints• State channel target service output level• Arrange channel tasks to minimize total channel costs and provide desired service level output• Choose market segments to serve and best channels for each• In entering new markets, observe what competitors are doing• Adapt channel objectives to larger environmental context – E.g. During depression – use shorter channels to maintain price – E.g. Note legal constraints – vs. monopoly
  • 102. Channel Design Decisions In establishing channel objectives and constraints• Vary objectives to suit product characteristics – For perishables – direct marketing – For bulky (building materials) – minimize shipping distance and amount of handling – Nonstandard products (custom-built machinery) – sales force – Products needing installation or maintenance (heating or cooling systems) – sales force or franchised dealers – High-unit value products (generators of turbines) – sales force
  • 103. In Channel Design Decision, Step #3 is… Identifying and evaluating major channel alternatives Choose a mix of channels that reach different segments of buyers and delivers the right products at the least cost Channel Advantages DisadvantagesSales Force or Can handle complex products Too expensiveowned branches and transactionsInternet, Less expensive Not effective with complextelemarketing productsDistributors Can create sales Customer contact by company is lostManufacturer’s Able to contact customers at Selling effort per customer is lessrepresentatives low cost per customer intense than if company reps did because several clients share the selling costs
  • 104. In Evaluating Channels Consider 3 elements of channel alternatives1. What types of business intermediaries are available?2. How many intermediaries are needed? – Exclusive distribution – limited number of intermediaries • Maintain control of service levels and outputs offered by intermediaries – Selective distribution – few but less than all • Gain adequate market coverage, more control, less cost – Intensive distribution • Places its products in as many outlets as possible3. What are the terms, and what are the responsibilities of each channel members?
  • 105. In Channel Design Evaluate major channel alternatives using…• Economic criteria• Control criteria• Adaptive criteria
  • 106. Economic criteria in channel evaluation Each channel alternative will generate different levels of sales and costs high Sales Value- force Added partners Direct sales Value-Added of Sales Distributors channels Retail Stores Telemarketing “Indirect” channels Internet Direct marketing low channels low high Cost per TransactionTry to align customers and channels to maximize demand at the lowest overall cost
  • 107. Channel Design Decisions Control and adaptive criteria in evaluation• Using sales agency poses control problems for you – They are independent firms seeking to maximize profits – They concentrate on customers who buy – They may not master technical details of product or handle promotions effectively• In rapidly changing, volatile, or uncertain product markets, producers need channel structures and policies that provide high adaptability
  • 108. Channel Management Decisions After choosing a channel system, the company must:1. Select individual channel members2. Train and motivate channel members3. Evaluate individual channel members4. Modify channel design and arrangements over time
  • 109. Channel Management Decisions After choosing a channel system, the company must:1. Set criteria for selection of channel members – Number of years in business – Other lines carried – Growth and profit records – Financial strength – Cooperativeness – Service reputation – Size and quality of sales force – Location – Type of clientele – Future growth potential
  • 110. Channel Management Decisions After choosing a channel system, the company must:2. Train and motivate channel members – Understand intermediaries’ needs and wants – Construct a channel positioning – Implement capacity-building programs • Training • Market research – Exercise channel power to compel action
  • 111. Channel Management Decisions After choosing a channel system, the company must:2. Train and motivate channel members – Types of power to elicit cooperation • Coercive power – Threaten to withdraw a resource or terminate a relationship • Reward power – Higher margins, deals, premiums, cooperative advertising allowances, display allowances, sales contest, bonuses • Legitimate power – Use contract agreements to force compliance • Expert power – Posses special knowledge the intermediary values • Referent power – Intermediary feels proud to be associated with producer
  • 112. Channel Management Decisions In motivating channel members2. Forge long-term partnerships by clarifying expectations – Market coverage – Inventory levels – Marketing development – Account solicitation – Technical advise and services – Marketing information
  • 113. Channel Management Decisions In motivating channel members2. Streamline supply chain and cut costs: ECR – Efficient Consumer Response practices help organize relationship in 3 areas: – Demand-side management • Stimulate demand with joint sales and marketing activities – Supply-side management • Focus on logistics and supply chain activities to optimize supply – Enablers and integrators • Use IT and process improvement tools to support joint activities
  • 114. Channel Management Decisions After choosing a channel system, the company must:3. Evaluate individual channel members on… – Sales quota achievement – Average inventory levels – Customer delivery time – Treatment of damaged and lost goods – Cooperation in training and promotions programs Note: underperformers need to be counseled, retrained, motivated or terminated
  • 115. Channel Management Decisions After choosing a channel system, the company must:4. Modify channel design and arrangements over time when: – Channel is not working as planned – Consumer buying patterns change – Market expands – New competition arises – Innovative distribution channels emerge – Product moves into later stages of PLC Note: change may mean adding or dropping individual channel members, adding or dropping market channels, or developing totally new ways to sell goods
  • 116. In managing channels, how much effort to devote to push or pull?• Push strategy – for low-involvement, impulse products – Use sales force, trade promo to induce intermediaries to carry, promote and sell products to end-users• Pull strategy – For high-involvement, differentiated offers – Use advertising, consumer promotions and other forms of communication to persuade consumers to demand the product from intermediaries
  • 117. Channel Integration and Systems Some of the recent developments in channels• Vertical Marketing Systems – Corporate VMS – Administered VMS – Contractual VMS – New competition in retailing• Horizontal Marketing Systems• Integrating Multi-channel Marketing Systems
  • 118. Channel Integration and Systems Some of the recent developments in channels• Vertical Marketing Systems – Producer, wholesaler(s) and retailer(s) acting as a unified system – Channel captain owns others or franchises them or has so much power that they all cooperate – Strong channel members’ attempts to control channel behavior and eliminate conflict – Achieve economies of scale via size, bargaining power, and elimination of duplicate services – Provides extensive exchange of information
  • 119. Channel Integration and Systems Some of the recent developments in channels• New competition in retailing – Is no longer between independent business units but between • whole systems of centrally-planned networks (Corporate, administered, and contractual) • competing against one another • to achieve the best economies and customer response
  • 120. Channel Integration and Systems Some of the recent developments in channels• Horizontal Marketing Systems – Two or more unrelated companies put together resources or programs to exploit an emerging marketing opportunity – Each company lacks capital, know-how, production or marketing resources to venture alone or is afraid of the risks – Arrangements may be temporary, permanent or result in joint-venture company
  • 121. Channel Integration and Systems Some of the recent developments in channels• Integrating Multi-channel Marketing Systems – Multi-channel marketing • A company uses two or more channels to reach one or more customer segments – Integrated marketing channel system • Strategies and tactics of selling through one channel reflects the strategies and tactics of selling through other channels
  • 122. Channel Integration and Systems 3 benefits of multi-channel marketing systems• Increased market coverage – Customers can shop for company products in more places – Multi-channel shoppers are more profitable customers• Lower channel cost – Selling by phone is cheaper than selling by personal visit to small customers• More customized selling – Adding a technical sales force to sell more complex products
  • 123. Channel Integration and Systems Disadvantages of multi-channel marketing systems• Channel conflicts – Channels competing for same customer – New channels independent and makes cooperation difficult• Problems with control – Execution of merchandizing and promotions programs – Market coverage and frequency of visits to customers – Inventory levels – Handling of customer complaints, returns and damaged goods – Allocation of effort to other principals served by intermediaries
  • 124. In Channel Architecture Demand-generation Tasks Determine which channels should perform which functions Better Disseminate Reach Pace Acquire Assume Facilitate Facilitate Oversee Information information price orders funds for risks product payment ownership agreement inventories storage & terms movement Internet National accountMarketing channels and Methods management Direct sales Tele- Customer marketing Vendor Direct mail Retail stores Distributors Dealers and value-added resellers Advertising Multi-channel architecture optimizes coverage, customization and control, while minimizing costs and conflict
  • 125. Conflict, Cooperation and Competition Causes of channel conflicts• Goal incompatibility – Low-price market penetration strategy vs. high-margin, short-run profitability• Unclear roles and rights – Territorial boundaries – Sales crediting• Differences in perception – Optimistic vs. pessimistic views on business prospects – Differences in perception about advertising strategy• Intermediaries’ dependence on the manufacturer – Exclusive dealers are at the mercy of manufacturers’ product and pricing policies
  • 126. Conflict, Cooperation and Competition Management of channel conflicts• As companies add channels to grow sales, they risk creating channel conflicts• Too much conflict is dysfunctional• The challenge is not to eliminate conflicts but to manage them through – Adoption of super-ordinate goals – agree on goals they jointly seek – Exchange of employees – e.g. between manufacturer and dealer – Joint membership in trade associations – manufacturers and marketers – Co-optation – include leaders in boards, advisory councils – Diplomacy, mediation, or arbitration – conflict resolution methods – Legal recourse
  • 127. E-Commerce Marketing Practices Some definitions• E-business – Use of electronic means and platforms to conduct a company’s business• E-commerce – Company or site offers to transact or facilitate the selling of products and services online• E-purchasing – Purchase of goods, services and information from online sources• E-marketing – Efforts to inform buyers, communicate, promote and sell company products and services over the internet
  • 128. E-Commerce Marketing Practices Some advantages• Provides convenient, informative and personalized experiences for different types of customers• Allows online retailers to sell low-volume products to niche markets at lesser or no cost in maintaining retail floor space, staff, and inventory
  • 129. E-Commerce Marketing Practices 3 Aspects of online transactions in retailing competition• Customer interaction with the Website• Delivery of the product• Ability to address problems when they occur
  • 130. E-Commerce Marketing Practices 2 Types of Online Competitors• Pure-Click Companies – Launched a website without previous existence as a company • Search engines • ISPs • Commerce sites – amazon.com, buy.com – sell all types of products and services – books, music, toys, stocks, clothes, insurance, financial services • Transaction sites • Content sites • Enabler sites• Brick-and-Click Companies – Existing companies that have added an online site for information or e-commerce
  • 131. E-Commerce Marketing Practices Issues of using online channels for Brick-and-Click and how to handle them• Potential channel conflict with retailers, brokers, agents and branch outlets• How to sell both to intermediaries and online? – Offer different brands or products online – Offer off-line partners higher commissions to offset negative impact on sales – Take orders on the web but have retailers deliver and collect payment
  • 132. M-Commerce• Wireless internet-connectivity to do business• Location-based services
  • 133. Summary of Top 10 Concepts• 6th Task of Marketing – Delivering Customer Value• Marketing channels: definition, importance, examples• Functions of marketing channels• Flows and levels of marketing channels• Value networks – a broader view of customer value delivery• How to design marketing channels• Challenges in managing channels• Integrated marketing channels – a new development• Channel conflicts and how they are managed• Key issues with e-commerce