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Designing and Managing Integrated Marketing Channels
Objectives <ul><li>To Describe the Nature and Functions of Marketing Channels </li></ul><ul><li>To Identify the Types of M...
… .Marketers realize that if they were to make the brands available in the right size, at the right time and at the right ...
Definitions <ul><li>Value Delivery Network </li></ul><ul><ul><li>The network made up of the company, suppliers, distributo...
What is a Marketing Channel? <ul><li>Marketing channel (a.k.a. distribution channel) - network of organizations that creat...
<ul><li>Marketing Channels Create Utility </li></ul>The Nature of  Marketing Channels TIME PLACE POSSESSION
The Role of Marketing Channel <ul><li>Channel Functions and Flows </li></ul><ul><li>Channel Levels </li></ul><ul><li>Servi...
a)  Provide  information  about the market to the manufacturer b)  Maintain  price stability  in the market c)  Promotion ...
Marketing Channel Flows <ul><li>Product Flow </li></ul><ul><ul><li>The movement of the product from manufacturer through a...
Marketing Channel Flows <ul><li>Ownership Flow </li></ul><ul><ul><li>Movement of title of the product </li></ul></ul><ul><...
Marketing Channel Flows
Channel Levels <ul><li>Length of marketing channel </li></ul>Manufacturer Manufacturer Manufacturer Manufacturer Consumer ...
Channel Level Decisions that a firm must take regarding the number of channel levels appropriate to serve a given market F...
Channel level: Firm adopts a one channel level when: a) Number of customers is high b) Customers in specific geographical ...
Factors determining the length of the Channel a) Size of the market -larger it is more economical it is to serve it direct...
Manufacturer Customer Customer Wholesaler/ Dealer Manufacturer Zero Level One Level (a) (b) Length of channel distribution
Wholesaler/ Dealer Retailer Distributor Customer Manufacturer Manufacturer Wholesaler Retailer Customer Two Level Three Le...
Width of channel of distribution Manufacturer Market 1 Dealer  Dealer  Dealer Dealer Dealer Dealer  Dealer A B C D E F G R...
Market Market Market Market Market Market Market Market Market Market Market Market Market Market Market Market Market Mar...
Types of Marketing Channels Channels for Consumer Products
Types of Marketing Channels Channels for Industrial Products
Channel design Decisions <ul><li>Analyzing Customers Desired Service Output levels </li></ul><ul><li>Establishing Objectiv...
Analyzing Customers Desired Service Output levels <ul><ul><li>Cost and feasibility of meeting needs must be considered  </...
Establishing Objectives and Constraints <ul><ul><li>Set channel objectives in terms of targeted level of customer service ...
Identifying and Evaluating major Channel Alternatives <ul><ul><li>Types of intermediaries </li></ul></ul><ul><ul><ul><li>C...
Types of intermediaries Functional Middlemen Merchant Middlemen
Types of intermediaries Functional Middlemen Do not take title to products;  they simply facilitate the exchange process  ...
Types of intermediaries Merchant Middlemen Take title to products and resell them.
Number of marketing intermediaries Exclusive Distribution Selective Distribution Intensive Distribution Intensity at vario...
Number of marketing intermediaries <ul><li>Practiced when a manufacturer restricts product distribution to a single retail...
Number of marketing intermediaries <ul><li>Selectively distributed bands are available in multiple retail outlets in a par...
Number of marketing intermediaries <ul><li>Used when convenience products are sold through virtually every available retai...
Price policy- the middlemen have to ensure that everyone involved gets a fair and equitable deal Payment terms- the manufa...
Evaluating the Major Alternatives <ul><ul><li>Economic criteria </li></ul></ul><ul><ul><li>Control issues </li></ul></ul><...
Criteria for Evaluating Channel Alternatives Evolution of Channels Growth Dedicated stores: Computer point Shopper’s stop ...
Eight Steps in Designing the Market Driven Distribution are: 1.  Know what the customers want 2.  Decide on the outlet 3. ...
Channel Behavior and Organization <ul><li>Channel Conflict </li></ul><ul><ul><li>Occurs when channel members disagree on r...
Channel Behavior and Organization <ul><li>Conventional Distribution Channels </li></ul><ul><ul><li>Consists of one or more...
Channel Behavior and Organization <ul><li>Corporate VMS </li></ul><ul><li>Contractual VMS </li></ul><ul><li>Administered V...
Channel Behavior and Organization <ul><li>Corporate VMS </li></ul><ul><li>Contractual VMS </li></ul><ul><li>Administered V...
Channel Behavior and Organization <ul><li>Corporate VMS </li></ul><ul><li>Contractual VMS </li></ul><ul><li>Administered V...
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Designing And Managing Integrated Marketing Channels

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Designing And Managing Integrated Marketing Channels

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Transcript of "Designing And Managing Integrated Marketing Channels"

  1. 1. Designing and Managing Integrated Marketing Channels
  2. 2. Objectives <ul><li>To Describe the Nature and Functions of Marketing Channels </li></ul><ul><li>To Identify the Types of Marketing Channels </li></ul><ul><li>To Examine the Major Levels of Marketing Coverage </li></ul><ul><li>To Explore the Concepts of Leadership, Cooperation, and Conflict in Channel Relationships </li></ul><ul><li>To Specify How Channel Integration Can Improve Channel Efficiency </li></ul><ul><li>To Examine the Legal Issues Affecting Channel Management </li></ul>
  3. 3. … .Marketers realize that if they were to make the brands available in the right size, at the right time and at the right price, the Indian consumer can be motivated to buy it and consume it…..
  4. 4. Definitions <ul><li>Value Delivery Network </li></ul><ul><ul><li>The network made up of the company, suppliers, distributors, and ultimately customers who “partner” with each other to improve the performance of the entire system. </li></ul></ul><ul><li>Marketing channel </li></ul><ul><ul><li>Set of interdependent organizations involved in the process of making a product or service available for use or consumption by the consumer or business user </li></ul></ul>Goal 1: Know why companies use channels and understand their functions
  5. 5. What is a Marketing Channel? <ul><li>Marketing channel (a.k.a. distribution channel) - network of organizations that create time, place, and possession utilities for consumers </li></ul>
  6. 6. <ul><li>Marketing Channels Create Utility </li></ul>The Nature of Marketing Channels TIME PLACE POSSESSION
  7. 7. The Role of Marketing Channel <ul><li>Channel Functions and Flows </li></ul><ul><li>Channel Levels </li></ul><ul><li>Service Sector Channels </li></ul>
  8. 8. a) Provide information about the market to the manufacturer b) Maintain price stability in the market c) Promotion of the products in his territory d) Financing by providing the necessary working capital in the form of advance payments for goods and services e) Middlemen also take the title of the goods and services and trade in their own name Marketing Channel Functions
  9. 9. Marketing Channel Flows <ul><li>Product Flow </li></ul><ul><ul><li>The movement of the product from manufacturer through all parties who take physical possession </li></ul></ul><ul><li>Negotiation Flow </li></ul><ul><ul><li>Interplay of buying/selling tasks associated with title transfer </li></ul></ul>
  10. 10. Marketing Channel Flows <ul><li>Ownership Flow </li></ul><ul><ul><li>Movement of title of the product </li></ul></ul><ul><li>Information Flow </li></ul><ul><ul><li>Information to and from the manufacturer </li></ul></ul><ul><li>Promotion Flow </li></ul><ul><ul><li>Flow of persuasive communication (advertising, personal selling, etc.) </li></ul></ul>
  11. 11. Marketing Channel Flows
  12. 12. Channel Levels <ul><li>Length of marketing channel </li></ul>Manufacturer Manufacturer Manufacturer Manufacturer Consumer Consumer Consumer Consumer Retailer Retailer Retailer Wholesaler Wholesaler Agent 1 level 2 level 3 level 4 level
  13. 13. Channel Level Decisions that a firm must take regarding the number of channel levels appropriate to serve a given market From zero-directly from the manufacturer to the customer- to as high as 4 to 5 levels involved in distribution. Zero level in industrial product marketing, project marketing
  14. 14. Channel level: Firm adopts a one channel level when: a) Number of customers is high b) Customers in specific geographical area c) Order lot size not uniform d) Firm sells goods to wholesaler or a large dealer 2, 3 or even 4 levels in case of: a) Consumer products b) Customers spread across the country c) Market is large
  15. 15. Factors determining the length of the Channel a) Size of the market -larger it is more economical it is to serve it directly b ) Order lot size -if it is small, better to have longer channel c) Service requirements -if higher level of service is required, then it is better to have a shorter level d) Product variety -if customers shop for product assortment, a wider channel of distribution is required
  16. 16. Manufacturer Customer Customer Wholesaler/ Dealer Manufacturer Zero Level One Level (a) (b) Length of channel distribution
  17. 17. Wholesaler/ Dealer Retailer Distributor Customer Manufacturer Manufacturer Wholesaler Retailer Customer Two Level Three Level (c) (d) Length of channel distribution
  18. 18. Width of channel of distribution Manufacturer Market 1 Dealer Dealer Dealer Dealer Dealer Dealer Dealer A B C D E F G Retailers Customers Customers Customers
  19. 19. Market Market Market Market Market Market Market Market Market Market Market Market Market Market Market Market Market Market Market Market Market Market Market Market Market Market Market Market Market Market Market Market Market Market Market Market Retail spokes-restaurants, soft drink kiosks, panwalsa, sweetmarts Dealer/wholesaler Dealer Hub Franchise Major Hub of Parent Company Hub and spoke pattern of distribution of a soft drink firm
  20. 20. Types of Marketing Channels Channels for Consumer Products
  21. 21. Types of Marketing Channels Channels for Industrial Products
  22. 22. Channel design Decisions <ul><li>Analyzing Customers Desired Service Output levels </li></ul><ul><li>Establishing Objectives and Constraints </li></ul><ul><li>Identifying and Evaluating major Channel Alternatives </li></ul><ul><li>Evaluating the Major Alternatives </li></ul>
  23. 23. Analyzing Customers Desired Service Output levels <ul><ul><li>Cost and feasibility of meeting needs must be considered </li></ul></ul><ul><ul><li>Lot Size </li></ul></ul><ul><ul><li>Waiting & Delivery Time </li></ul></ul><ul><ul><li>Spatial Convenience </li></ul></ul><ul><ul><li>Product Variety </li></ul></ul><ul><ul><li>Service Backup </li></ul></ul>
  24. 24. Establishing Objectives and Constraints <ul><ul><li>Set channel objectives in terms of targeted level of customer service </li></ul></ul><ul><ul><li>Product Characteristics </li></ul></ul><ul><ul><li>Strength & weakness of intermediaries </li></ul></ul><ul><ul><li>Adaptability to larger environment </li></ul></ul>
  25. 25. Identifying and Evaluating major Channel Alternatives <ul><ul><li>Types of intermediaries </li></ul></ul><ul><ul><ul><li>Company sales force, manufacturer’s agency, industrial distributors </li></ul></ul></ul><ul><ul><li>Number of marketing intermediaries </li></ul></ul><ul><ul><ul><li>Intensive, selective, and exclusive distribution </li></ul></ul></ul><ul><ul><li>Responsibilities of channel members </li></ul></ul>
  26. 26. Types of intermediaries Functional Middlemen Merchant Middlemen
  27. 27. Types of intermediaries Functional Middlemen Do not take title to products; they simply facilitate the exchange process by performing buying and/or selling functions.
  28. 28. Types of intermediaries Merchant Middlemen Take title to products and resell them.
  29. 29. Number of marketing intermediaries Exclusive Distribution Selective Distribution Intensive Distribution Intensity at various levels
  30. 30. Number of marketing intermediaries <ul><li>Practiced when a manufacturer restricts product distribution to a single retailer in a particular market or just a relatively few retailers </li></ul><ul><li>Products that are expensive, infrequently purchased, are sought after by consumers (i.e. specialty goods), or which require considerable after-sale servicing are the most likely candidates for exclusive distribution </li></ul>Exclusive Distribution Intensity at various levels
  31. 31. Number of marketing intermediaries <ul><li>Selectively distributed bands are available in multiple retail outlets in a particular market </li></ul><ul><li>Shopping products, or those that consumers seek out, are sold through selective distribution </li></ul>Selective Distribution Intensity at various levels
  32. 32. Number of marketing intermediaries <ul><li>Used when convenience products are sold through virtually every available retail outlet in a particular market, e.g. soft drinks, candy, gum, cigarettes </li></ul>Intensive Distribution Intensity at various levels
  33. 33. Price policy- the middlemen have to ensure that everyone involved gets a fair and equitable deal Payment terms- the manufacturing firm stipulates the mode and terms of payment Returns policy- this indicates the warranty that the manufacturer extends to the intermediary Territorial rights- the territorial jurisdiction should be spelt spelt out to avoid territory jumping Mutual services and responsibilities- should be spelt out,particularly in case of franchised and exclusive agency channels Terms and Responsibilities of Intermediaries
  34. 34. Evaluating the Major Alternatives <ul><ul><li>Economic criteria </li></ul></ul><ul><ul><li>Control issues </li></ul></ul><ul><ul><li>Adaptive criteria </li></ul></ul>
  35. 35. Criteria for Evaluating Channel Alternatives Evolution of Channels Growth Dedicated stores: Computer point Shopper’s stop Mature Department Stores like Akbarallys Decline Discount Store Low cost alternatives like ‘ Discount Sales’ Introductory Specialist Channels like boutiques in fashion/ designer wear Value Added by Channel Members High Low Market Growth Rate Marketing channels across product life cycle
  36. 36. Eight Steps in Designing the Market Driven Distribution are: 1. Know what the customers want 2. Decide on the outlet 3. Determine the costs 4. Bound the ‘ideal’ 5. Compare the alternatives 6. Review assumptions in the list of research 7. Confront the gap between the ideal and the actual distribution system 8. Implement changes in the system, if required
  37. 37. Channel Behavior and Organization <ul><li>Channel Conflict </li></ul><ul><ul><li>Occurs when channel members disagree on roles, activities, or rewards. </li></ul></ul><ul><ul><li>Types of Conflict: </li></ul></ul><ul><ul><ul><li>Horizontal conflict: occurs among firms at the same channel level </li></ul></ul></ul><ul><ul><ul><li>Vertical conflict: occurs among firms at different channel levels </li></ul></ul></ul>Goal 1: Know why companies use channels and understand their functions
  38. 38. Channel Behavior and Organization <ul><li>Conventional Distribution Channels </li></ul><ul><ul><li>Consists of one or more independent channel members </li></ul></ul><ul><ul><li>Lack leadership and power </li></ul></ul><ul><ul><li>Often result in poor performance </li></ul></ul><ul><li>Vertical Marketing Systems </li></ul><ul><ul><li>Consists of members acting as a unified system </li></ul></ul><ul><ul><li>Use contracts, ownership or power </li></ul></ul>Goal 1: Know why companies use channels and understand their functions
  39. 39. Channel Behavior and Organization <ul><li>Corporate VMS </li></ul><ul><li>Contractual VMS </li></ul><ul><li>Administered VMS </li></ul><ul><li>Corporation owns production and distribution </li></ul><ul><li>Coordination and conflict through regular organizational channels </li></ul>Vertical Marketing Systems Goal 2: Learn how channel members interact and how they organize
  40. 40. Channel Behavior and Organization <ul><li>Corporate VMS </li></ul><ul><li>Contractual VMS </li></ul><ul><li>Administered VMS </li></ul><ul><li>Individual firms who join through contracts </li></ul><ul><li>Franchise organizations </li></ul><ul><ul><li>Manufacturer-sponsored retailer franchise system </li></ul></ul><ul><ul><li>Manufacturer-sponsored wholesaler franchise system </li></ul></ul><ul><ul><li>Service-firm-sponsored retailer franchise system </li></ul></ul>Vertical Marketing Systems Goal 2: Learn how channel members interact and how they organize
  41. 41. Channel Behavior and Organization <ul><li>Corporate VMS </li></ul><ul><li>Contractual VMS </li></ul><ul><li>Administered VMS </li></ul><ul><li>Leadership through the size and power of dominant channel members </li></ul><ul><li>Leadership could be manufacturer or retailer </li></ul>Vertical Marketing Systems Goal 2: Learn how channel members interact and how they organize
  42. 42. THANK YOU
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