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Session 25 MG 220 BBA - 10 Nov 10

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Session 25 …

Session 25
MG 220 Marketing Management
BBA 09 Sec C

More in: Business , Technology
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  • 1. Part 6:Delivering Value
    > Marketing Channels and Value Networks
    > The Role of Marketing Channels: SKIM
    > Channel-Design decisions
    > Channel-Management decisions: SKIM
    Class Presentation | Session 25 | 10 Nov 2010
  • 2. Marketing Channels and Value NetworksThe Importance of Channels
    Marketing Channels
    Sets of independent organizations involved in the process of making a product or service available for use or consumption
    Among these ‘intermediaries’ are:
    Merchants – who buy, take title to, and resell the merchandise
    Wholesalers, Retailers
    Agents – who search for consumers but do NOT take title
    Brokers, Manufacturers’ representatives, sales agents
    Facilitators – assist in distribution but neither take title NOR negotiate sale/purchase
    Transporters, independent warehouses, ad agencies, banks
    Importance of Channels
    A marketing channel system is the particular set of marketing channels employed by a firm.
    Channels chosen affect all other marketing decisions
    Push strategy involves manufacturers using its own sales force and trade promotion money to include intermediaries
    Appropriate when: low brand loyalty | choice is made at purchasing time | impulse item | benefits are understood
    Pull strategy involves manufacturer using advertising and promotion to persuade consumers to ask intermediaries for the product
    Appr0priate when: High brand loyalty | high involvement | people perceive differences in brands | decision before going to store
    Top marketing companies use both strategies
    MG 220 Marketing Management
    2
  • 3. Marketing Channels and Value NetworksChannel Development
    A new firm typically is a local/limited operation selling in a limited market
    As it grows, it moves in new markets and that is where it needs new partners to sell for it
    Channel system evolves in response to local opportunities
    Hybrid channels
    Consider IBM, Dell, Microsoft
    Selling online (self), through retailers (intermediaries) – CONSUMERS
    Selling using sales force (own) – INSTITUTIONAL SELLING
    All operate parallel and in one market
    Ensuring Channel Integration – consumers would want channels to be working together
    Also understanding different needs of customers:
    Habitual shoppers | High value deal seekers | Variety-loving shoppers | High-involvement shoppers
    MG 220 Marketing Management
    3
  • 4. Marketing Channels and Value NetworksValue Networks
    Demand chain planning
    Company first thinks of the target market and then plans it all backwards
    4Ps replaced by SIVA (Solution | Information | Value | Access)
    Value Networks
    An even broader view. Company at the center
    A system of partnerships and alliances that a firm creates to source, augment and deliver its offerings
    A value network includes: firm’s suppliers, suppliers’ suppliers, immediate customers and their end customers
    Demand chain planning yields several insights
    Company can estimate whether more money is made upstream or downstream
    Company is more aware of disturbances anywhere in the supply chain that might cause costs to change
    Companies can use internet to go online to improve these processes
    Concept of ERP
    To manage entire value networks efficiently, different IT solutions and software is extensively deployed. They form Enterprise Resource Planning (ERP)
    MG 220 Marketing Management
    4
  • 5. The Role of Marketing ChannelsConcept
    Why delegate the ‘selling job’?
    Many producers lack the financial resources to carry out direct marketing
    Producers who do establish their own channels can often earn a greater returnby increasing investment in their own business (EXAMPLE)
    In some cases direct marketing simply is not feasible
    Reducing number of contacts
    Ref: figure
    With and without “D” - Distributor
    MG 220 Marketing Management
    5
  • 6. The Role of Marketing ChannelsChannel Functions and Flows
    Direction of activities
    Some functions have forward flow of activities
    Some have backward flow
    Others have two-way flow
    MG 220 Marketing Management
    6
  • 7. The Role of Marketing ChannelsChannel Levels
    Key Points
    Producer and End Customer are there in every case
    Zero-level channel is also called direct marketing channel
    Different schemes for consumer marketing and industrial marketing
    MG 220 Marketing Management
    7
  • 8. Channel-Design Decisions
    Analyzing Customers’ Desired service output levels
    Service Outputs by a channel
    Lot Size – number of units a channel permits a user to purchase on one occasion
    Waiting & Delivery time – Avg time customers have to wait for receipt of goods
    Spatial Convenience – Degree of convenience in purchasing a product
    Product Variety – Assortment breadth by a marketing channel
    Service Backup – Add-on services provided by a channel
    Establishing Objectives & Constraints
    Channel objectives should be stated in terms of targeted service output levels
    Channel objectives vary with product characteristics
    Channel design must take into account strengths and weaknesses of different types of intermediaries
    Channel design must also take into account economic environment. For instance, economic depressions lead to cost-cutting thus shorter channels.
    MG 220 Marketing Management
    8
  • 9. Channel-Design DecisionsIdentifying Major Channel Alternatives
    Decisions of choosing from a wide variety of channels for reaching customers
    Elements for describing channel alternative:
    Type of Intermediaries
    Decisions regarding what type of intermediaries shall be used
    Retailers or OEMs
    Number of Intermediaries
    Exclusive Distribution
    Selective Distribution
    Intensive Distribution
    Terms and responsibilities of each channel member
    Price Policy calls
    Conditions of sale
    Distributors’ territorial rights
    Mutual services and responsibilities
    MG 220 Marketing Management
    9
  • 10. Channel-Management Decisions
    After choosing, individual intermediaries need to be trained, motivated and evaluated
    Selecting Channel Members
    Training Channel Members
    Motivating Channel Members
    Channel Power – ability to alter channel members’ behavior
    Coercive Power
    Reward Power
    Legitimate Power
    Expert Power
    Referent Power – how strongly members would like to be associated with the partner
    MG 220 Marketing Management
    10
  • 11. Part 6:Delivering Value
    > Channel integration and systems: SKIM
    > E-Commerce Marketing Practices: SKIM
    > Retailing
    > Private Labels
    > Wholesaling
    > Market Logistics: SKIM
    Class Presentation | Session 26 | 15 Nov 2010