Mod 1n 2


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Mod 1n 2

  1. 1.  Value Delivery Network ◦ 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. Marketing channel ◦ 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
  2. 2.  Marketing channel: system of marketing institutions that promotes the physical flow of goods and services, along with ownership title, from producers to consumer or business user; also called a distribution channel
  3. 3.  Channel choices affect other decisions in the marketing mix ◦ Pricing, Marketing communications A strong distribution system can be a competitive advantage Channel decisions involve long-term commitments to other firms
  4. 4.  How Channel Members Add Value ◦ Intermediaries require fewer contacts to move the product to the final purchaser. ◦ Intermediaries help match product assortment demand with supply. ◦ Intermediaries help bridge major time, place, and possession gaps that separate products from those who would use them.
  5. 5.  Information gathering Consumer motivation Negotiating with suppliers Placing orders Financing Inventory management Risk bearing After sales support
  6. 6.  Physical reach Customer contact Building relationships Market feedback Understand market trends and keep principals informed Handle price risks Finances market credit and inventory holdings Provide after sales service
  7. 7.  Number of Channel Levels ◦ The number of intermediary levels indicates the length of a marketing channel.  Direct Channels  Indirect Channels ◦ Producers lose more control and face greater channel complexity as additional channel levels are added.
  8. 8.  Physical Flow Payment Flow Information Flow Promotion Flow Flow of Ownership
  9. 9.  Direct channel: marketing channel that moves goods directly from a producer to ultimate user Direct selling: strategy designed to establish direct sales contract between producer and final user
  10. 10.  Conventional Distribution Channels ◦ Consists of one or more independent channel members ◦ Lack leadership and power ◦ Often result in poor performance Vertical Marketing Systems ◦ Consists of members acting as a unified system ◦ Use contracts, ownership or power
  11. 11.  Vertical marketing system (VMS): planned channel system designed to improve distribution efficiency and cost effectiveness by integrating various functions throughout the distribution chain Three types of VMS:
  12. 12.  Corporation owns production and distribution Coordination and conflict through regular organizational channelsExamples: Bata, Bombay Dyeing, Raymond Sears, Goodyear Suppliers of food items could be also their own supplying firms - like Nilgiris
  13. 13.  Individual firms who join through contracts Franchise organizations ◦ Manufacturer-sponsored retailer franchise system ◦ Manufacturer-sponsored wholesaler franchise system ◦ Service-firm-sponsored retailer franchise system
  14. 14.  Leadership through the size and power of dominant channel members Leadership could be manufacturer or retailer Gains market power by dominating a channel Usually true of dominant brands like GE, Kodak, Pepsi, Gillette, Coke and HLL in certain locations ◦ Command high level of co-operation in shelf space, co-operation from resellers, displays, pricing policies and promotion strategies
  15. 15.  Horizontal Marketing Systems ◦ Companies at the same level work together with channel members Multichannel Distribution Systems ◦ Also called hybrid marketing channels ◦ Occurs when a firm uses two or more marketing channels Company uses different channels to reach / same or different market segments ◦ Most FMCG companies have separate networks for retail market and institutions ◦ Most B2B firms use multi-channels for customer segments like Government, institutions etc
  16. 16.  Used in situations where: ◦ Same product but different market segments ◦ Unrelated products in same market – detergents and ice creams (HLL) ◦ Size of buyers varies ◦ Geographic concentration of potential consumers varies ◦ Reach is difficult Benefits include lower cost, better market coverage and customized selling