Marketing Channel Structure and Functions Overview
Outline • Overview • Primary Function of Channel Members • How Channel Member add Value • Consumer Channels Vs Business Channels • Multi Channel Distribution • Distribution System Selection • Carefully Select Channel Members • Building International Distribution • Future Direction of Distribution • Summary
Overview • Business channel management - is the process of designing a set of marketing and distribution arrangements that fulfill the requirements and preferences of targeted market segments and customers, creating value through direct sales force and logistics systems, and constructing offerings for channel members that build marketplace equity.
What is a Marketing Channel? A marketing channel is a a set of interdependent organisations involved in the process of making a product or service available for use or consumption.
Primary Functions of Channel Members • to be a stockist of your product • to represent your brand in the market place • to gather marketing intelligence • to assume risk • to deliver product and offer post sales support • to add value to the sale
Primary Questions 1. Which intermediary, or intermediary combination, is best suited for to take a new product or service to market? 2. How should the intermediary network be managed once it is up and running?
Specialisation and Division of Labour Principle-Fender Guitars Production Distribution Tasks Tasks Thickening the wood Buying Shaping body and neck Selling Gluing and clamping parts Transferring the title Sanding and assembly Transportation Applying finish Storage Installing electric components Processing orders Attaching machine heads & strings Providing information Adjusting action and pickup After sales customer service
Specialisation and Division of LabourPrinciple- Fender Guitars Production DistributionWorker Manufacturer Production Distribution tasks allocated tasks allocatedWorker to workers Agents to intermediaries specializing specializing in performing in performing WholesalersWorker those those tasks tasks RetailersWorker Consumers Result? Production Efficiency Result? Distribution Efficiency
Distribution System Selection • Marketing Managers select the most feasible marketing channels that effectively perform the business processes and functions needed to correct the targeted gaps in service outputs. • Hybrid Channels, Multiple Channels and Shorter Channels or Direct Channels.
Figure 1 : Channel Selection: Traditional View Manufacturer Wholesaler Own sales force or reps Wholesaler Dealer Customer
Figure 2 : Hybrid Channel Customer Demand Physical After -sales generation distribution service Own sales Outside Inside or Outside force distributor service specialists Supplier
Figure 3 : The Free – Riding Problem Supplier A Supplier B Distributor Demand generation Demand fulfillment Full function functions functions distributor Customer
Figure 4 : Multiple Channels Seller No frills/Low cost channel Full service/Full cost channel Customers who wear Price Service sensitive different hats on different sensitive customers purchase occasions customers
Figure 5 : Multiple Channel Conflict Seller Α B Full product line Limited product line X and Z X Mainly Z Customers Mainly X Customers
Figure 6 : The role of master distributors Seller Master distributor Retail distributors Bunnings Hardware House Dealer Building Trade and Do-it yourself (DIY) customers
Carefully Select Channel Members • Specify channel capabilities the supplier seeks in terms of: Technical competence Sales force deployment Warehouse and delivery capabilities Financial stability Leadership
Build International Marketing Channels • Firms operating overseas should anticipate longer business processes and additional functions in the marketing channels. • They must cover additional geography • Adhere to export and import regulations of each country market as well as local culture and distribution practices
Future Direction of Distribution ….. • Proliferation of information technology. • Polarisaton of customers (consolidation on one hand and fragmentation on the other). • Manufacturing operations that can mass customise. • Quick shipment distribution logistics.
Summary • Regardless of structural form, distribution channels in the future will be more interactive with the customer. • The internet will continue to challenge traditional channels. • International channels of distribution are important • Channel Management is about being adaptive to where the customer prefers to buy.
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