Successfully reported this slideshow.



Published on

  • Be the first to comment

  • Be the first to like this


  1. 1. Channel Review: Chapters 12, 13 and 17 Margaret Cornish
  2. 2. Distribution Decisions Chapt 12: Objectives <ul><li>Why do companies need distribution channels? </li></ul><ul><li>What value do they add? </li></ul><ul><li>What are the alternative channels are there? </li></ul><ul><li>How do you evaluate channel members? </li></ul>
  3. 3. Channel Conflict <ul><li>Conflict amongst one or more of wholesaler, retailer and producer about who should do what in the value chain and for what rewards. Frequently reduces value to consumer. </li></ul>
  4. 4. Vertical Marketing System <ul><li>Channel structure in which producers wholesalers, and retailers act as a unified system under contractual dominance of one member in the chain </li></ul><ul><li>Dominance frequently a result of ownership ties </li></ul>
  5. 5. Vertical Marketing System <ul><li>In conventional distribution channel each member tries to maximize its own profits and co-operates only opportunistically </li></ul>
  6. 6. Vertical Marketing System (VMS) <ul><li>Can be producer, wholesaler or retailer </li></ul><ul><li>Rationale is to manage and control channel conflict. Maximize value to the consumer by achieving smooth flow through the channel and by wringing costs from the system (purchasing economies, reduced handling or other elimination of duplication etc) </li></ul>
  7. 7. VMS: Three types <ul><li>Corporate or 100% owned channel </li></ul><ul><li>Contractual </li></ul><ul><ul><li>Wholesaleer-sponsored (independent firms) </li></ul></ul><ul><ul><li>Retail co-operatives (backward integration) </li></ul></ul><ul><ul><li>Franchise organization </li></ul></ul><ul><li>Administered VMS – co-operation comes from size and power of one member (eg P&G, Toys R Us, Campbell Soup) </li></ul>
  8. 8. Horizontal Marketing System <ul><li>Two or more companies at same level collaborate to pursue new marketing opportunity </li></ul><ul><li>Global airline alliances are example of HMS (eg Star Alliance of Air Canada, Varig, Thai Lufthansa and SAS) – more seamless global travel: better connections fewer lost bags </li></ul><ul><li>Coke and Nestle marketing ready to drink coffee and tea </li></ul>
  9. 9. Hybrid Marketing Systems <ul><li>Multi-channel or hybrid distribution: different channels used to reach different customer segments </li></ul><ul><li>IBM </li></ul><ul><ul><li>own sales force </li></ul></ul><ul><ul><ul><ul><ul><li>Business customers requiring major support </li></ul></ul></ul></ul></ul><ul><ul><li>IBM Direct </li></ul></ul><ul><ul><ul><ul><ul><li>Mail order </li></ul></ul></ul></ul></ul><ul><ul><li>Mass Retailers </li></ul></ul>
  10. 10. Hybrid Marketing Systems <ul><li>Advantages enables large company to maximize sales by meeting needs of vary different customer segments; </li></ul><ul><li>Disadvantage: May create friction amongst channels: mass marketers resented IBM Direct initiative </li></ul>
  11. 11. Channel Design <ul><li>Analyzing consumer service needs </li></ul><ul><li>Setting channel objectives </li></ul><ul><li>Identifying channel alternatives </li></ul><ul><li>Evaluating </li></ul>
  12. 12. Consumer Service Needs Customer value delivery systems <ul><li>Desired location, delivery timing and add- on services (training, credit, repairs, installation) </li></ul><ul><li>Must balance consumer service needs, against feasibility and cost as well as consumer price preferences </li></ul>
  13. 13. Channel Objectives & Constraints <ul><li>Efforts to minimize total costs </li></ul><ul><li>Product characteristics require special factors: perishable, bulky etc – reduced distances </li></ul><ul><li>Firm characteristics: size and financial strength </li></ul><ul><li>Firm intermediaries expertise: promotion, customer contact, storage and credit </li></ul><ul><li>Competitor channels: strength and location </li></ul><ul><li>Environmental: economic conditions and legal considerations </li></ul>
  14. 14. Identifying Major Alternatives Types, number <ul><li>Types </li></ul><ul><ul><li>Company sales force </li></ul></ul><ul><ul><li>Manufacturer’s agency </li></ul></ul><ul><ul><li>Industrial distributors </li></ul></ul><ul><li>Number to use at each level </li></ul><ul><ul><li>Intensive </li></ul></ul><ul><ul><li>Exclusive </li></ul></ul><ul><ul><li>Selective </li></ul></ul>
  15. 15. Evaluating Major Alternatives <ul><li>Economic criteria – sales vol vs margin </li></ul><ul><li>Control issues – producers prefer to retain more </li></ul><ul><li>Adaptive criteria – least long-term commitment possible, hence more adaptive to evolving market </li></ul>
  16. 16. Barrow Booster (BB) Which would you choose? <ul><li>What criteria for selecting a channel were used for initial and final choices? </li></ul><ul><li>At Chicago trade show he met with distributors, manufacturers, manufacturers’ reps. Evaluate each one. </li></ul><ul><li>How should he motivate reps? </li></ul><ul><li>Logistical issues at 100,000 units/yr </li></ul>
  17. 17. Channel Mgmt Decisions <ul><li>Selecting </li></ul><ul><ul><li>What are hallmarks of successful ones? </li></ul></ul><ul><li>Motivating by carrot and stick </li></ul><ul><ul><li>Higher margins, special deals, premiums, shared advertising and promotion display allowances etc </li></ul></ul><ul><li>Evaluating channel members </li></ul>
  18. 18. Integrated Logistics Management <ul><li>Teamwork throughout the entire customer value chain to optimize performance of the entire distribution system </li></ul><ul><li>Objective is to shift from anticipatory based distribution to response based distribution systems. This can lead to outsourcing logistics to third parties to save costs and increase efficiency </li></ul>
  19. 19. Store Retailing <ul><li>Amount of service </li></ul><ul><li>Product line – department – specialty </li></ul><ul><li>Relative prices </li></ul><ul><li>Control of outlets </li></ul><ul><ul><ul><li>Independent, corporate and voluntary chains, retail co-ops, franchise and merchandizing conglomerate (diversified retailing) </li></ul></ul></ul>
  20. 20. Non-Store Retailing <ul><li>Direct Marketing </li></ul><ul><li>Direct Selling </li></ul><ul><li>Automatic Vending </li></ul>
  21. 21. Direct Marketing: Benefits to consumers <ul><li>Larger selection </li></ul><ul><li>Saves time </li></ul><ul><li>Saves expense of actual window shopping </li></ul>
  22. 22. Direct Marketing <ul><li>Face-to face </li></ul><ul><li>On-line marketing </li></ul><ul><li>Direct Mail </li></ul><ul><li>Catalogue Marketing </li></ul><ul><li>Telemarketing (inbound and outbound) </li></ul><ul><li>Direct Response (e.g. home shopping) </li></ul><ul><li>Kiosk-marketing (trade show) </li></ul>
  23. 23. Direct Marketing: Benefits to Sellers <ul><li>Database may identify your target market very precisely </li></ul><ul><li>Allows you to customize offer to special needs and wants (simplifies making multiple offers) </li></ul><ul><li>Enhances ability to build closer relationships </li></ul><ul><li>Offer and strategy less visible to competitors </li></ul><ul><li>(May) eliminate cost of physical store </li></ul>
  24. 24. Customer databases <ul><li>Identify prospects </li></ul><ul><li>Deciding which customers should receive an offer </li></ul><ul><li>Deepening customer loyalty </li></ul><ul><li>Reactivating customer purchases; ie, follow-up pitches (replacements, upgrades etc) </li></ul>
  25. 25. Direct Marketing <ul><li>Online </li></ul><ul><li>Direct mail </li></ul><ul><li>Direct response TV </li></ul><ul><li>Telemarketing (outbound, inbound) </li></ul><ul><li>Catalogue </li></ul><ul><li>Face-to-face </li></ul><ul><li>Kiosk </li></ul>
  26. 26. Online Marketing <ul><li>Benefits to Buyers </li></ul><ul><ul><li>Convenient, 24 hours, immediate, inter-active, easy, private </li></ul></ul><ul><ul><li>Unrivalled comparative information </li></ul></ul><ul><li>Benefits to Sellers </li></ul><ul><ul><li>Customer relationship building, global </li></ul></ul><ul><ul><li>Can reduce cost, and increase efficiency </li></ul></ul><ul><ul><li>Flexibility in updating the offer </li></ul></ul>
  27. 27. Online Marketing Channels <ul><li>Creating an electronic storefront </li></ul><ul><li>Advertising online </li></ul><ul><li>Participating in forums, newsgroups and web communities </li></ul><ul><li>Using e-mail and webcasting </li></ul>
  28. 28. Integrated Direct Marketing <ul><li>Direct marketing approach that uses multiple vehicle, multiple stage campaigns </li></ul><ul><li>For example: ad with response channel then direct mail then outbound telemarketing, then face-to-face sales call followed by continuing communication </li></ul><ul><li>What was marketing approach in your project? </li></ul>
  29. 29. Final EXAM <ul><li>Wednesday August 2nd from 9-12 am </li></ul><ul><li>Multiple choice and scenarios </li></ul><ul><li>Know the text </li></ul><ul><li>I will be a procter </li></ul>