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    Mm.13.10 Mm.13.10 Presentation Transcript

    • Marketing Management MBA CP 205
    • Developing Marketing Channels
      • Learning Objectives:
      • Know what is a marketing channel system and a value network.
      • Know what work marketing channels perform.
      • Know how channels should be designed.
      • Know what decisions companies face in managing their channels.
      • Know how companies should integrate channels and manage
      • channel conflict.
      Developing Marketing Channels
    • Sets of interdependent organizations involved in the process of making a product or service available for use or consumption. Marketing Channels Developing Marketing Channels
    • Channels and Marketing decisions Developing Marketing Channels Push Strategy Pull Strategy
      • While deciding on its intermediaries the firm may adopt a push
      • strategy , a pull strategy or a combination of both.
      • Push strategy involves the manufacturer to use its sales force and
      • trade promotion resources to induce intermediaries to carry,
      • promote, and sell the product to end users.
      • Push strategy is appropriate when there is low brand loyalty, brand
      • choice is made in the store & product benefits are well understood.
      • Push strategy is also appropriate when the product is an impulse
      • item.
      Developing Marketing Channels
      • A pull strategy involves manufacturer using advertising and
      • promotion to persuade consumers to ask intermediaries for the
      • product, thus inducing intermediaries to order it.
      • It is appropriate when there is high brand loyalty, people perceive
      • differences between brands and consumers choose brands before
      • they visit the store.
      • The firm must decide how much effort to devote to push or pull
      • marketing. Some firms employ both push and pull strategies.
      Developing Marketing Channels
      • The Role of Marketing Channels
      • The advantages of using intermediaries are:
      • Many producers do not have adequate resources to carry out
      • direct marketing .
      • Producers who do establish their own channels can often earn
      • more profits by increasing investment in their core business.
      • In some cases direct marketing is not feasible.
      • Intermediaries achieve better efficiency in making goods widely
      • available to target markets through their contacts, experience,
      • specialization and scale of operation.
      Developing Marketing Channels
    • Increasing Efficiency Developing Marketing Channels
    • The Channels Functions and Flows Developing Marketing Channels
      • Channel Member Functions:
      • Gather information about potential and current customers and competitors.
      • Develop and disseminate persuasive communication to stimulate purchasing.
      • Reach agreement on price and other terms so that transfer of ownership is effected.
      • Place orders with manufacturers.
      • Acquire funds to maintain inventories at different levels in the marketing channel.
      • Assume the risks connected with carrying out channel work.
      • Provide for the successive storage and movement of physical products.
      • Provide for buyers’ payment of bills through banks and other financial institutions.
      • Channel Flows:
      • Some functions constitute a forward flow of activity from the
      • company to the customer. These include flow of physical goods,
      • title and promotion.
      • Other functions like ordering and payment constitute a backward
      • flow from customer to the company.
      • Some like information, negotiation, finance and risk taking occur in
      • both the directions.
      Developing Marketing Channels
    • Channel Flows Developing Marketing Channels Suppliers Transporters, Warehouses Manufacturer Transporters, Warehouses dealers Customers 1. Physical Flow: 2. Title Flow: Suppliers Manufacturer dealers Customers
    • Developing Marketing Channels Suppliers Banks Manufacturer Transporters, Warehouses Dealers Customers 3. Payment Flow: 4. Information Flow: Suppliers Manufacturer Dealers Customers 5. Promotion Flow : Manufacturer Suppliers Transporters, Warehouses Dealers Customers Banks Banks Transporters, Banks Advertising agency Advertising agency
      • Channel Levels:
      • The producer and the consumers form the two ends of the
      • marketing channel. Number of intermediary levels determine the
      • length of a channel.
      • Zero-level marketing channel, also called a direct marketing
      • channel consists of a manufacturer directly selling to final customer.
      • A one level channel contains one selling intermediary usually a
      • retailer. A two level channel will have a wholesaler and a retailer.
      Developing Marketing Channels
    • Consumer Marketing Channels Developing Marketing Channels 0-level 1-level 2-level 3-level Manufacturer Manufacturer Manufacturer Manufacturer Consumer Consumer Consumer Consumer Retailer Retailer Retailer Jobber Wholesaler Wholesaler
    • Industrial Marketing Channels Developing Marketing Channels 0-level 1-level 2-level 2-level Manufacturer Manufacturer Manufacturer Manufacturer Industrial customer Industrial customer Industrial customer Industrial customer Industrial distributors Manufacturer’s sales branch Manufacturer’s representative
      • Channel Design Decisions
      • Designing a marketing channel system involves the following:
      • Analyzing customers’ desired service output levels.
      • Establishing channel objectives.
      • Identifying major channel alternatives.
      • Evaluating major channel alternatives.
      • Channels produce five service outputs: Lot size, waiting & delivery
      • time, spatial convenience, product variety and service back up .
      Developing Marketing Channels
      • Channel objectives should be stated in terms of targeted service
      • levels and depend on product characteristics.
      • A company can choose from many of the alternative channels such
      • as its own sales force, agents, distributors, dealers, direct mail,
      • telemarketing, and the internet to reach customers.
      • Most companies use a mix of channels. A channel alternative is
      • described by three elements: the types of business intermediaries,
      • the number of intermediaries needed and the terms and
      • responsibilities of each channel member.
      Developing Marketing Channels
      • Companies need to decide on number of intermediaries at each
      • channel level. Three options can be exercised:
      • Exclusive distribution.
      • Selective distribution.
      • Intensive distribution.
      • Exclusive distribution means limiting the number of intermediaries
      • to only a few, where producer wants to have control over the
      • service level and outputs offered by the resellers.
      Developing Marketing Channels
      • Selective distribution involves having more than a few but less than
      • all the intermediaries who wish to carry a particular product.
      • In Intensive distribution , the producer places the goods in as many
      • outlets as possible to increase coverage and sales.
      • The producers must establish rights and responsibilities of the
      • channel members. The main elements in trade-mix relations are:
      • Price policy.
      • Conditions of sale.
      • Distributors territorial rights.
      • Mutual services and responsibilities.
      Developing Marketing Channels
      • Channel-Management Decisions
      • After the company has chosen a channel alternative, it must:
      • Select individual intermediaries,
      • Train channel members,
      • Motivate channel members and
      • Evaluate channel members & if required modify channel
      • arrangements.
      Developing Marketing Channels
      • While selecting channel members, evaluation must be based on
      • number of years in business, other lines carried, growth & profit
      • record, financial strength and service reputation.
      • Channel power may be used to alter channel members’ behavior.
      • Producer may draw on coercive, reward, legitimate, expert or
      • referent power in this regard.
      • Producers must constantly evaluate intermediaries’ performance
      • against such standards as sales quota attainment, inventory levels,
      • customer delivery times and cooperation in promotional and
      • training programs.
      Developing Marketing Channels
      • Channel Integration Systems
      • A conventional marketing channel consists of an independent
      • producer, wholesaler(s) and retailer(s).
      • No channel member has complete or significant control over other
      • members in a conventional marketing channel.
      • A vertical marketing system (VMS), comprises the producer,
      • wholesaler(s) and retailer(s) acting as a unified system.
      • One channel member, the channel captain , owns the others or
      • franchises them or has so much power that they all cooperate.
      Developing Marketing Channels
      • Channel captain can be the producer, the wholesaler or the retailer.
      • VMS arose due to strong channel members’ attempts to control
      • channel behavior and eliminate channel conflict.
      • A Corporate VMS combines the successive stages of production and
      • distribution under a single ownership.
      • An Administered VMS coordinates successive stages of production
      • and distribution through the size & power of one of the members.
      Developing Marketing Channels
      • A Contractual VMS consists of independent firms at different levels
      • of production and distribution integrating their programs on a
      • contractual basis to obtain more economies or sales impact than
      • they could achieve alone. These are of three types:
      • Wholesaler sponsored voluntary chains (of retailers).
      • Retailer Cooperatives ( by forming a new business entity).
      • Franchise organizations ( A franchisor links several successive
      • stages of production-distribution process, popular in retailing).
      • The traditional system is the manufacture-sponsored retailer
      • franchise. A newer system is service-firm-sponsored retailer
      • franchise.
      Developing Marketing Channels
      • In Horizontal marketing system, two or more unrelated companies
      • put together resources and programs to exploit a potential
      • marketing opportunity.
      • Multi-channel marketing occurs when a single firm uses two or
      • more marketing channels to reach one or more customer segments.
      • Adding more channels following benefits accrue:
      • Increased market coverage,
      • Lower channel cost and
      • More customized selling.
      Developing Marketing Channels
    • Developing Marketing Channels VENDOR CUSTOMER Marketing Channels and Methods Demand-generation Tasks Hybrid marketing systems Planning Channel architecture Advertising Dealers & value added resellers Distributors Retail stores Direct mail Tele-marketing Direct sales National account management Internet Account management Post-sales service Close of sale Presales Qualifying sales Lead generation
      • Channel Conflict, Cooperation and Competition
      • Channel conflict is generated when one channel member’s actions
      • prevent the channel from achieving its goal.
      • Channel coordination occurs when channel members are brought
      • together to advance the goals of the channel, as opposed to their
      • own potentially incompatible goals.
      • Types of conflict and competition
      • Three types of conflicts: vertical, horizontal and multi-channel can
      • occur.
      Developing Marketing Channels
      • Vertical channel conflict means conflict between different levels
      • with in the same channel.
      • Horizontal channel conflict involves conflict between members at
      • the same level with in the channel.
      • Multi-channel conflict exists when the manufacturer has established
      • two or more channels that sell to the same market.
      • Causes of channel conflict
      • Causes of channel conflict are goal incompatibility, unclear roles &
      • rights, differences in perception and dependence on the producer .
      Developing Marketing Channels
      • Recap:
      • Know what is a marketing channel system and a value network.
      • Know what work marketing channels perform.
      • Know how channels should be designed.
      • Know what decisions companies face in managing their channels.
      • Know how companies should integrate channels and manage
      • channel conflict.
      Developing Marketing Channels