Channels of marketing(chap 15)


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  • What was’s experience?
  • 4 Classic picture of the value of intermediaries: If four of you want to go to the store and make pizza and need dough, canned tomatoes, cheese, and anchovies. . .
  • 5 Works even better with 16 consumers, etc. bc geometric. Same model applies to 16 pharmaceutical firms and 16 drugstore: Wholesalers make the “pick” (assortment) and break bulk. When you hear: “We cut out the middleman,” don’t think it’s necessarily a good idea. Most intermediaries add value Consider shopping for T-shirts and jeans without The Gap. = Soviet Union under communism.
  • Channels of marketing(chap 15)

    1. 1. <ul><li>Channels of Marketing </li></ul>
    2. 2. The Value of Channels in Marketing <ul><li>“ We eliminate the middleman!” - may not be such a good idea </li></ul>
    3. 3. Importance of Channels of Marketing Producers Consumers Without intermediaries 16 transactions
    4. 4. Importance of Channels of Marketing Producers Consumers With intermediaries 8 transactions Intermediaries Supermarket Channels reduce number of transactions
    5. 5. Marketing or Distribution Channel <ul><li>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. </li></ul>
    6. 7. Role of Marketing Channels <ul><li>Fill the gaps between production and consumption process </li></ul><ul><ul><li>Time Gap </li></ul></ul><ul><ul><li>Space Gap </li></ul></ul><ul><ul><li>Quantity Gap </li></ul></ul><ul><ul><li>Variety Gap </li></ul></ul>
    7. 8. <ul><ul><ul><li>Possession </li></ul></ul></ul><ul><ul><ul><li>Ownership </li></ul></ul></ul><ul><ul><ul><li>Financial flow </li></ul></ul></ul><ul><ul><ul><li>Information flow </li></ul></ul></ul><ul><ul><ul><li>Risk Flow </li></ul></ul></ul><ul><ul><ul><li>Negotiation </li></ul></ul></ul>Channel Flow
    8. 9. Alternative Channels of Distribution Retailer Channel Wholesaler Channel Agent/Broker Channel Direct Channel Indirect Channels Producer Producer Producer Producer Consumers or User Retailers or Distributor Retailers or Distributor Retailers or Distributor Wholesalers Wholesalers Agents or Brokers Consumers or User Consumers or User Consumers or User
    9. 10. <ul><li>Intensive Distribution </li></ul><ul><li>Exclusive Distribution </li></ul><ul><li>Selective Distribution </li></ul><ul><li>Service Sector Channels </li></ul>Channel Levels
    10. 11. Functions of Marketing Channels Selling & Promoting Matching Buyers and Sellers Bulk-Breaking Warehousing Transportation Financing Risk Bearing Market Information Management Services & Advice
    11. 12. <ul><li>Facilitating the Exchange Process </li></ul><ul><li>Alleviating Discrepancies </li></ul><ul><ul><ul><ul><ul><li>Sorting </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Accumulating </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Allocating </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Assorting </li></ul></ul></ul></ul></ul><ul><li>Standardizing the transactions </li></ul><ul><li>Matching Buyers and Sellers </li></ul><ul><li>Providing customer service </li></ul>
    12. 13. Designing Marketing Channels <ul><li>Analysing Customer ‘s desired service output levels: </li></ul><ul><li>Lot Size </li></ul><ul><li>Waiting and delivery time </li></ul><ul><li>Spatial convenience </li></ul><ul><li>Product variety </li></ul><ul><li>Service backup </li></ul>
    13. 14. <ul><ul><ul><ul><li>Economic Criteria </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Control Criteria </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Adaptive Criteria </li></ul></ul></ul></ul><ul><li>Establishing objectives and constraints </li></ul><ul><li>Identifying major channel alternatives: </li></ul><ul><li>Types of Intermediaries </li></ul><ul><li>Number of Intermediaries </li></ul><ul><li>Evaluating the major alternatives </li></ul>
    14. 15. <ul><li>Dell created a new channel option by bringing new technology to traditional roles played by the distribution channel. Dell takes orders over the telephone, it allows purchasers to customize products to their own needs, it assembles products largely to order, and it achieves rapid delivery. </li></ul>
    15. 16. <ul><li>Compaq Computer has launched a unique distribution strategy to compete with Dell Computer Corp and other computer makers engaged in direct marketing. The initiative, consisting of both direct and indirect distribution. </li></ul>
    16. 17. <ul><li>Exclusive distribution is offering a product for sale only in one outlet or the outlets of a single company.  </li></ul><ul><li>Kodak announced that their new line of EasyShare printers would be available only in Best Buy stores for the first three months following the product launch. </li></ul>
    17. 18. <ul><li>Selective distribution involves the use of more than a few intermediaries who are willing to carry a particular product. </li></ul>
    18. 19. <ul><li>Intensive distribution consists of the manufacturer placing the goods or services in as many as outlets as possible. </li></ul><ul><li>This strategy is used for general items like FMCG products etc… </li></ul>
    19. 20. <ul><li>Selection of channel members </li></ul><ul><li>Training of Channel Members </li></ul><ul><li>Motivation & Evaluation </li></ul><ul><li>Modifying Channel Arrangement </li></ul><ul><li>Legal and Ethical issues </li></ul><ul><ul><ul><ul><li>Dual Distribution </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Exclusive dealing agreement </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Tying agreements </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Restricted Sales territories </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Dealer’s rights </li></ul></ul></ul></ul>Channel Management
    20. 21. Channel Integration and systems <ul><li>A vertical marketing system comprises of the producer, wholesaler, and retailer acting as a unified system. </li></ul>
    21. 22. <ul><li>Corporate VMS: A corporate VMS combines successive stages of production and distribution under single ownership. </li></ul><ul><li>Administered VMS: An administrated VMS coordinates successive stages of production and distribution through the size and power of one of the members. </li></ul>
    22. 23. <ul><li>Contractual VMS consists of independent firms at different levels of production and distribution integrating their programs on a contractual basis to obtain more economies of scales impact than they could achieve alone. </li></ul>
    23. 24. Contractual VMS…… <ul><li>Wholesaler-sponsored voluntary chains are those where wholesalers organize voluntary chains of independent retailers to help them compete with large chain organizations. </li></ul><ul><li>Ex: All India Garments Manufacturers' & Wholesalers' Association (R) </li></ul>
    24. 25. Retail cooperatives <ul><li>Bhartiya Udyog Vyapar Mandal (BUVM), the biggest national-level association of mom and pop kirana stores. </li></ul><ul><li>The Handloom Societies in Andhra Pradesh are organized as a two tier structural societies in the village called Primary Handloom weaver's co-operative society. </li></ul>
    25. 26. Franchise organizations <ul><li>A channel member called a franchisor might link several successive stages in the production-distribution process. </li></ul><ul><li>--manufacturer-sponsored retailer </li></ul><ul><li>--manufacturer-sponsored wholesaler </li></ul><ul><li>--service firm-sponsored retailer franchise. </li></ul>
    26. 27. Horizontal Marketing System <ul><li>Apple and Starbucks announced music partnership in 2007. The purpose of this partnership was to allow Starbucks customers to wirelessly browse, search for, preview, buy, and download music from iTunes Music Store onto their iPod touch, iPhone, or PC or Mac running iTunes. Apple’s leadership in digital music together with the unique Starbucks experience synergized a partnership to offer customers a world class digital music experience. </li></ul>
    27. 28. Multichannel marketing system <ul><li>Multichannel occurs when a single firm uses two or more marketing channels to reach one or more customer segments. </li></ul><ul><li>Mattel, the toy manufacturer, sells its Fisher-Price toys at Mattel’s Fisher-Price online web site ( www.fisher-, print catalogue, at, a pure Internet retailer and also at Wal-Mart store. </li></ul>
    28. 29. <ul><li>Nike company sells its products to retail accounts, through its owned retail stores, and through a mix of independent distributors and licensees, as well as through Internet Web site, </li></ul>
    29. 30. Management of Conflicts in Channels <ul><li>Types of Conflicts </li></ul><ul><ul><ul><ul><li>Vertical </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Horizontal </li></ul></ul></ul></ul><ul><ul><ul><ul><li>MultiChannel </li></ul></ul></ul></ul>
    30. 31. Vertical channel conflict <ul><li>Vertical channel conflict means conflict between different levels within the same channel. </li></ul><ul><li>Horizontal channel conflict involves between members at the same level within the channel. </li></ul><ul><li>Multichannel conflict exists when the manufacturer has established two or more channels to sell the market. </li></ul>
    31. 32. Causes of conflict <ul><li>Goal incompatibility </li></ul><ul><li>Unclear roles and rights </li></ul><ul><li>Differences in perception </li></ul><ul><li>Dependence </li></ul>
    32. 33. Managing Channel Conflicts <ul><li>Co-optation </li></ul><ul><li>Diplomacy </li></ul><ul><li>Mediation </li></ul><ul><li>Arbitration </li></ul>
    33. 34. Thank You