Marketing Channels


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Marketing Channels

  1. 1. Marketing Channel and Market Testing#Peny Meliaty Hutabarat #Suci Defina Sari #Kutut Wijanarko Marketing Channel
  2. 2. Marketing ChannelsStructure & Channels Marketing Functions-Structure & Functions -- Coughlan Chapter 1 -- Segmentation For Segmentation For Design Marketing Channel Marketing Channel Design -- Coughlan Chapter 2 -- Market Testing -- Crawford Chapter 18 -- Marketing Channel
  3. 3. Marketing channels are the routes to market used to sell every product and service that consumers and business buyers purchase everywhere in the world. Marketing Channel
  4. 4. Important of Studying Marketing Channels Gatekeeper Important Asset of Marketing Strategy # Differentiator #Difficult to replicate End-User Satisfaction # Overall brand image Awareness of channel important is low # Opportunity for competitive advantage Difficult to create and maintain channel #Difficult and costly to change #Right the first time Marketing Channel
  5. 5. What is a Marketing Channels? Set of Interdependent Organizations.  A marketing channel is a set of interdependent organizations involved A Process (usually over time) in the process of making a product or service available for use or Process with purpose consumption. - “ to satisfy end-users” The marketing channel is often viewed as a key strategic asset of a manufacturer Marketing Channel
  6. 6. Why Do Marketing Channels Exist and Change? Two forces for channel development and and change Demand-Side Factors Facilitation of Search Intermediary channels arise because buyers and sellers cannot find each other Adjustment of Assortment Discrepancy Manufacturer = large quantity of limited variety Consumers = large variety in small quantities (customization & choice) 1. Sorting out (packer : orange size and grade) 2. Accumulation (wholesaler : gather together supply) 3. Allocation (wholesale distributor : breaking bulk) 4. Assorting (complementary Bottom Line : Meeting customer demands, driven by the consumer. Marketing Channel
  7. 7. Channel Development & Change Supply-Side Factors  Routinization of transactions  Electronic Data Interchange ; Continuous replenishment program (CRP)  Reduction in number of contacts  Employing more and more intermediaries is subject to diminishing returns simply from the point of view of number and cost of contacts in the market ManufacturersManufacturers Wholesaler RetailerRetailer Bottom Line : mitigating risk, minimizing management costs, maximizing utility Marketing Channel
  8. 8. Source : Marketing Channels (a relationship management approach) ;Pelton, lou E.2002 Marketing Channel
  9. 9. What is The Work of The Marketing Channel? Marketing Flows in Channels Physical Physical Physical Ownership Ownership Ownership Promotion Promotion Promotion Consumers: Negotiation Negotiation Negotiation Industrial Producers Wholesalers Retailers and Financing Financing Financing Household Risking Risking Risking Ordering Ordering Ordering Payment Payment PaymentIntermediaries participate in the work of marketing channel because they both add value and help reduce cost in the channel. Marketing Channel
  10. 10. Marketing Flows Processes flow through the channel Done at different points in time by different channel members Flow of information The eight universal marketing channel flows : 1. Physical possession 2. Ownership 3. Promotion 4. Negotiation 5. Financing 6. Risking 7. Ordering 8. Payment Marketing Channel
  11. 11. Who Belongs To A Marketing Channel? Manufacturers Channel Members Intermediaries (retailers, wholesalers, specialized) End-users “Channel Captain” : “Channel format as Combination of An organization that taks the keenest interest in Channel Members the workings of this product or service and that The various channel participants can combine in act as a prime mover in establishing and many ways to create effective marketing maintaining channel links. channels. The range and number of channel members are affected by the nature of demand by end-users, and the captaincy of the channel can vary from situation to situation. Marketing Channel
  12. 12. Channel Analysis Framework CHANNEL DESIGN PROCESS : CHANNEL IMPLEMENTATION # Segmentation PROCESS : Recognize and Respond to target customers’ service output demands Channel Power: Channel Conflict: Identify sources for Identify actual and all channel members potential source Decisions about Efficient Channel Response : #Channel Structure : What kind of intermediaries are in my channel? ; Manage/ Defuse Conflict : Who are they? ; How many of them? Use power source strategically, subject to # Splitting the workload legal constraints With what responsibilities? # Degree of commitment: Distribution alliance? Goal : Vertical integration / ownership? Channel Coordination # Gap analysis What do i have to change? Insight for specific channel institutions : Retailing, Wholesaling and Logistics, Franchising
  13. 13. Segmentation • Splitting market into groups of end-users  Similar within groups  Different between groups  Based on demands for the outputs of the marketing channel  Added value  Service outputs Example : Segments of book end-users Marketing Channel
  14. 14. Channel Structure1. Types of channel members2. Identities of specific channel members3. Channel intensity : number of each type Splitting the Workload• Assign channel flows to channel members  Meet target segment’s service output demands  Reliable  Minimize total cost, while meeting service level Marketing Channel
  15. 15. Degree of Commitment  Transactional relationships  Vertical integration - Pursue individual goals - Own channel members - No guarantee of continued business - Reasons  Alliances - Channel members do not exist - Enduring connections throughout - Company can handle flows as efficiently companies - Channel member is not sufficiently - Pursue common goals committedGap Analysis  The difference between optimal and actual channels  Demand side gaps - Service output demands are not being met - Undersupplied - Oversupplied  Supply side gaps - At least one flow is costing too much - Lack of expertise - Waste  Closing gaps is difficult and costly Marketing Channel
  16. 16. Channel Power  Ability to control other channel members  Necessary to implement channel design  May be used to optimize channel to benefit of all channel membersChannel Conflict  Actions of channel members prevent channel from achieving its goals  Goal conflict  Domain conflict  Perceptual conflict Marketing Channel
  17. 17. Manage/ Difuse Conflict  Identify sources of conflict - Poor channel design - Poor performance  Take action - Exercise channel powerChannel Coordination  Result of - Channel designed to meet service output demands of target end-user segments - Application of channel power to ensure smooth implementation of the channel design  Ongoing process Marketing Channel
  18. 18. Marketing Channel
  19. 19. End-User Channel PreferencesProduct or service can be boughtin multiple way, ex; corporatepersonal PC and online bill paymentDiff. end user have diff. demandsIdentify how the end-user wants tobuy as well as what the end-userwants to buy Marketing Channel
  20. 20. Service OutputsBulk breakingSpatial convenienceWaiting timeProduct varietyCustomer serviceInformation provision Marketing Channel
  21. 21. Service Outputs Spatial Bulk breaking Waiting time convenience • Enabling • Reducing • Time period customers to customers‟ between buy in their transportation ordering and desired requirements receiving quantities and search products and costs services • Longer waiting times mean customers must be able to predict needs and plan further in advance Marketing Channel
  22. 22. Service Outputs Information Product variety Customer service provision • Variety; diff. • Easing the • Education of classes of good shopping and customers about making up the purchase product product offering process attributes, (the breadth of • Must be product usage product lines) sensitive to the capabilities, • Assortment; target end-user solutions depth of product retailing, pre- brand/models purchase offered within services, and each generic post-purchase product services Marketing Channel
  23. 23. TABLE 1-1: SERVICE OUTPUT DEMAND DIFFERENCES (an example of segmentation in the book-buying market) Browser buying best-sellers to take on vacation Student buying textbooks for fall semester at college Service Output Service Output Descriptor Demand Level Descriptor Demand LevelBulk- “I‟m looking for some „good “I only need one copy of my Medium Highbreaking read‟ paperbacks to enjoy.” Marketing textbook!”Spatial “I have lots of errands to run “I don‟t have a car, so I can‟tconvenienc before leaving town, so I‟ll be Medium High travel far to buy.”e going past several bookstores.”Waiting “I‟m not worried about getting “I just got to campus, butand the books now… I can even classes are starting tomorrow Low Highdelivery pick up a few when I‟m out of and I‟ll need my books bytime town if need be.” then.” “I want the best choiceAssortment “I‟m just buying what‟s on my available, so that I can pick High Lowand variety course reading list.” what looks good.”Customer “I like to stop for a coffee when “I can find books myself, and High Lowservice book browsing.” don‟t need any special help.” “I value the opinions of a well- “My professors have alreadyInformation read bookstore employee; I High decided what I‟ll read this Lowprovision can‟t always tell a good book semester.” from a bad one before I buy.” Marketing Channel
  24. 24. Service OutputsService output demanded by meaningful segment of end-userCostly activities of channel members Marketing Channel
  25. 25. Segmenting the Market Identify all relevant service outputs A priori segmentation Service output segmentation - Maximally similar within groups - Maximally different between groups - On dimensions that matter Marketing Channel
  26. 26. FIGURE 2-1: IDEAL CHANNEL SYSTEM FOR BUSINESS-TO-BUSINESS SEGMENTS BUYING A NEW HIGH-TECHNOLOGY PRODUCT Manufacturer (New High Technology Product) Associations, Pre-Sales Events, Awareness Efforts Third- Dealers Party VARs TeleSales/ Supply Sales TeleMktg Out- source Internal Support - Install, Training & Service Post-Sales Group Lowest Responsive References/ Full-Service Total Segment Support Credentials Cost Source: Reprinted with permission of Rick Wilson, Chicago Strategy Associates, 2000. Marketing Channel
  27. 27. Meeting Service Output DemandsCost—prohibitively expensive - Decide whether or not to provide the service - Decide whether to cover the cost or explicitly charge the customerCompetitive—what do the competitors offer? - Providing extra service may not affect market shareEase of entry - New competitorsOther elements of excellence in offering - Very low price - Truly superior product Marketing Channel
  28. 28. The Role of Service Output Demand Analysisin Marketing Channel Design  Assess segment attractiveness  Select segments to target and not to target  Customize the marketing channel for each targeted segment - Create new marketing channels - Modify existing marketing channels Marketing Channel
  29. 29. Marketing Channel
  30. 30. Market TestingThe objective1. to get insight about opportunity in obtaining solid forecast of dollar and unit sales.2. As diagnostic information to revise and refine anything about the launch. Marketing Channel
  31. 31. The Market Testing Decision Marketing Channel
  32. 32. Factor to be considered in market test decision  Any special twists on the launch  What Information is needed  Cost  Nature of the marketplace Marketing Channel
  33. 33. Methods of market Testing Pseudo Sale : refers to the presentation of the product directly to its potential consumers in order to record their thoughts about it and then use it to figure out if the product will have a market or not. Controlled Sale : the newly developed product is actually displayed for sale, but the only difference is that it is controlled. Full Sale : all variables are go, including competition and the trade. Marketing Channel
  34. 34. Methods of market testing and where are used Marketing Channel
  35. 35. Pseudo Sale MethodSpeculative Sale  the marketing team presents the product to the potential consumers. Once the presentation is over, the potential consumers are free to ask any questions about the product to the marketing team. And of course, here the marketing team must make sure to reply to them in a convincing manner. The next job then is figuring out how much the potential customers are willing to pay for the product. In the end, the marketing team asks them whether they would be interested in buying it. In the process, all the reactions and answers of these potential customers are recorded. Marketing Channel
  36. 36. Pseudo Sale MethodSimulated Test market  Simulated test market refers to a marketing research technique where consumers are subjected to engineered advertising and purchase decisions to examine their response to a new product or service. Marketing Channel
  37. 37. Control Sale MethodInformal Selling In informal selling category, a specific location is picked where a salesperson trained by the marketing team is stationed with the new product. This location can be anything ranging from trade show to hallway of a mall. As people come to see this product the salesperson is supposed to give them a presentation of the product. After hearing his explanation if the people buy the product and then again come back to buy another portion of it after a week or two then the marketing team sees it as a good sign. Marketing Channel
  38. 38. Control Sale MethodDirect Marketing direct marketing is an "interactive system of marketing which uses one or more advertising media to effect a measurable response and/or transaction at any location, using mail, telephone, TV, Fax, or computer network. Marketing Channel
  39. 39. Control Sale MethodMinimarket the marketing team selects a few different stores (limited outlet) for displaying their newly developed product. These stores happen to be very specific. They must be close to the potential customers who are in need of the product and also their sales people. In majority of the cases, a marketing team picks those stores which already have old connection with the company of the newly developed product. However, the goal remains the same. The marketing team wishes to see if the potential customers buy the product and makes repeated purchases in later time. Marketing Channel
  40. 40. Full Sale MethodTest Marketing Product development stage where the product and the marketing program are introduced on a small scale into one or more selected cities or market areas. Test marketing provides the marketer the opportunity to observe consumer behavior toward the product in a real market situation, gain experience with the marketing program, and assess potential problem areas before launching a full-scale product introduction. Marketing Channel
  41. 41. Full Sale MethodTest Marketing Marketing Channel
  42. 42. Full Sale MethodRollout Sometime called tired marketing or limited marketing is a term for the introduction of a new product or service to the market and often accompanied by a strong marketing campaign to generate a large amount of consumer’s interest. Marketing Channel
  43. 43. Full Sale MethodPattern of information gained at various stage of rollout Marketing Channel
  44. 44. Marketing Channel