Business Marketing, VTU,Module 5
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  • 1. By Prof. Raghavendran V
  • 2. Formulating ChannelStrategyA marketing channel is defined as a set of interdependent organizations that make a product or service available to customers for use.The market logistics consist of delivering the completed products to customers and channel intermediaries. To assist in performing the tasks of storing and moving their goods and services, the industrial firms have to engage the services of WH & Transport companies. By Prof. Raghavendran V 2
  • 3. Distinctive nature of businessmarketing channelsFactors affecting the nature of business marketing channels: Geographical Distribution:Industrial Intermediaries are highly concentrated geographically. They are found where industrial market exist, i.e. in large cities or towns with industrial estate. By Prof. Raghavendran V 3
  • 4.  Channel Size:Industrial Channels are short and involve a type of intermediary for selling and handling the products. Sometimes the channels are direct from the manufacturers to the customers, without intermediaries.The reason for the shorter channels in industrial markets is that the Org buyers expect product availability, technical expertise and service capabilities. By Prof. Raghavendran V 5
  • 5.  Characteristics of intermediaries:Industrial intermediaries are often technically qualified and close relationship with the industrial organizations. Mixed System:IM use a mixture of direct & indirect channels in order to meet the requirements of different market segment or when the company has resource constraints. By Prof. Raghavendran V 6
  • 6. Distinctive nature of businesselectronic channelsFactors affecting the nature of business electronic channels: Providing Information Online buying/ Selling Improved supplier-customer relationship By Prof. Raghavendran V 7
  • 7. Alternative Structure ofBusiness Channels B Direct Channel u s Indirect Channel i n Direct Sales Direct Mail e Direct s Channels sManufacturer Directof Industrial Internet Marketing C Goods Indirect u Channels s Tele Marketing t o m e r s By Prof. Raghavendran V 8
  • 8. B Distributors u s i Manufacturer Rep n Direct eManufacturer Channels sof Industrial Brokers s Goods Indirect Channels C Commission u Merchants s t o Jobbers m e r VARs s By Prof. Raghavendran V 9
  • 9. Why Business Marketers UseIntermediariesServices performed by Middlemen: Buying Promotion & Selling Assorting Financing Warehousing Grading Transportation Information Risk Taking Technical Service By Prof. Raghavendran V 10
  • 10. Why Business Customers Buyfrom Distributors? Dependable Delivery Information Variety Liberal Credit By Prof. Raghavendran V 11
  • 11. Participants (intermediaries) inBM channelsIntermediaries are classified on the basis of the number of functions they perform. Some of the common types of industrial middlemen are Manufacturers representative (agents) Industrial Distributors(dealers) ○ Brokers ○ Commission merchants ○ Value Added Resellers Jobbers Manufacturer / Regional office By Prof. Raghavendran V 12
  • 12. Channel Design It is a dynamic process. It deals with developing new marketing channels and modifying the existing ones.For designing a channel, the industrial marketer must go through certain steps:A. Developing the channel objectivesB. Analyzing channel constraintsC. Analyzing channel tasksD. Identifying the feasible channel alternativesE. Evaluation of alternativesF. Selecting the marketing channel By Prof. Raghavendran V 13
  • 13. Channel Objectives Channel TaskChannelConstraints Channel Alternatives Evaluation of alternatives Selection of channel structure By Prof. Raghavendran V 14
  • 14. Developing Channel ObjectivesChannel Objectives is derived from the firm’s marketing objectives. The channel objectives should focus on customer’s need in terms of service levels required by the target market segments. The channel objectives vary from product characteristics & they are developed1. Marketing objectives2. Product characteristics3. Customer needs By Prof. Raghavendran V 15
  • 15. Analyzing the channelconstraints IM have to consider some constraining factorsa. External Environmentb. Competitionc. Companyd. Product characteristicse. Customer By Prof. Raghavendran V 16
  • 16. Analyzing the channel Tasks The critical task must be identified. It should realistic decisions on which tasks can be performed effectively and efficiently By Prof. Raghavendran V 17
  • 17. Identifying the channelalternativesIdentifying the channel alternatives involves four major issues.A. The types of intermediariesB. The number of intermediariesC. The number of channelsD. The terms and responsibilities of channel members By Prof. Raghavendran V 18
  • 18. Types of Intermediaries: VAR’s Industrial Distributors dealers Manufacturers representatives or agents Brokers Commission merchants Jobbers By Prof. Raghavendran V 19
  • 19. The number of intermediaries:1. Selective distribution2. Intensive Distribution3. Exclusive Distribution By Prof. Raghavendran V 20
  • 20. Number of Channels: The IM use of more than one marketing channels.The benefits of multichannel marketing are: ○ Increased marketing coverage ○ Lower channel costs ○ more customized selling By Prof. Raghavendran V 21
  • 21. Evaluating the ChannelAlternativesThe factors that are used for evaluating each of the channel alternatives are:I. Economic PerformanceII. Degree of controlIII. Adoptability to changing market situationsIV. Superior Value. By Prof. Raghavendran V 22
  • 22. Managing or AdministeringChannel MembersAfter particular channel is selected, the industrial marketer must manage or administer the channel members,Managing channel members include: Selecting Intermediaries Motivating channel members Controlling or managing channel conflicts Evaluating performance of channel members By Prof. Raghavendran V 23
  • 23. Selecting intermediariesGeneral applicable criteria for selecting intermediaries are: Location Relevant experience Financial Standing Infrastructure By Prof. Raghavendran V 24
  • 24. Motivating IntermediariesImr’s must have motivate intermediaries to achieve long term success. The quality of support from middlemen will depend on motivation techniques deployed. Partnership Concept Vendor Managed Inventory System Reasonable Discounts and Commission Distributor councils By Prof. Raghavendran V 25
  • 25. Motivating Intermediaries Training and Coaching Channel Positioning Other motivational Practices By Prof. Raghavendran V 26
  • 26. Controlling ChannelConflictsSource of conflict: Difference in objectives Dealings with customers Difference in interests Difference in perception Compensation Unclear territory boundaries By Prof. Raghavendran V 27
  • 27. Evaluating performance ofchannel membersThe factors or criteria to be used for an evaluation of middlemen’s performance can include± Sales achieved Vs Sales Quota± Average inventory levels± Customer delivery performance± Customer Complaints± Cooperation in market feedback± Support for new products± New customers generated By Prof. Raghavendran V 28
  • 28. Supply Chain ManagementThe council of logistics management defined SCM as : the process of planning, implementing and controlling the efficient, cost effective flow and storage of raw materials, finished goods and related information from point-of- origin to point-of-consumption for the purpose of conforming to customers requirement By Prof. Raghavendran V 30
  • 29. Framework of SCM Supply of raw Planning & materials & Purchase Forecasting Components Productions or Customer Performance Operations Service Evaluation Business Customer/End Users By Prof. Raghavendran V 31
  • 30. In order to achieve the objectives of SCM, a firm must coordinate and integrate various functions or objectives that are carried out across different organizations. The functions performed in SCM are Purchase Inventory control Product design Warehousing Production Planning Material Handling Production Customer Service Processing customer order By Prof. Raghavendran V 32
  • 31. Need for a Supply Chain review There are some visible symtoms in business that indicate the need for review and redesign of the SCF and they are:- ○ Slow response to changes in the market place ○ Rejection & return of large quantity of materials by customers ○ Building up large inventories at the WH iin order to meet customer’s demand delivery ○ The company is not confident of committing delivery dates ○ Improper planning, including forecasting, resulting in either excess or no stock when required ○ Internal department blame games for not satisfying customers need. By Prof. Raghavendran V 33
  • 32. Supply Chain Integration Benefits under the SC integration are:  Reliable demand management  Achievement of high levels of customer service  Reduced lead time  Reduction in supply chain and working capital costs.  Improved customer satisfaction. By Prof. Raghavendran V 34
  • 33. LOGISTICSMANAGEMENTIt is defined as having the right thing at the right place at the right time and at the right cost.Scope of Logistics:Inventory management & Control LogisticsCustomer Service CommunicationTransportation PackagingWarehousing Material HandlingPlant & WH locationsOrder processing By Prof. Raghavendran V 35
  • 34. Market Logistics/PhysicalDistributionIn business, logistics system has two major product movement Physical supply(Raw material, Components & supplies to the manufacturing process) Physical Distribution( delivering finished goods to Distributors or Customers). By Prof. Raghavendran V 36
  • 35. Business Logistics System Physical Supply Industrial Manufacturer Physical DistributionRaw materialComponents Material StorageSupplies Manufacturing Finished Goods & Industrial customer Storage Industrial Distribution/Dealers By Prof. Raghavendran V 37
  • 36. Task of Physical distributionThe task / activities which make up physical distribution are many. Each task affects customer value in terms availability of the product and they are: •Transportation •Order processing •Warehousing •Communication •Inventory Control •Factory & WH locations •Packaging •Customer Service •Material Handling By Prof. Raghavendran V 38
  • 37. Customer Service Customer Service Post Sale Service Pre Sale Service During Sale service Product warranty Advising Service Keeping adequate stocks Maintenance Contract Technical Service Speed and accuracy of Repair service Ordering ease delivery Installation Service Patronage awards Product substitution Customer Training By Prof. Raghavendran V 39
  • 38. Major Cost Centers of Marketlogistics Transportation Warehousing Inventory Order Processing Material Handling By Prof. Raghavendran V 40
  • 39. Assignment Time: to besubmitted on or before 30th Oct’1. Explain why business channels are usually shorter than channels used in consumer goods marketing?2. Explain the role of SCM, logistics.3. Explains different types of intermediaries.4. Explain channel design5. Explain the role of market logistics?6. Explain the Total cost Approach in Logistics Management? By Prof. Raghavendran V 41
  • 40. By Prof. Raghavendran VBy Prof. Raghavendran V 42