The marketing channels

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  • "Push or Pull"?
    Marketing theory distinguishes between two main kinds of promotional strategy - "push" and "pull".
    Push
    A “push” promotional strategy makes use of a company's sales force and trade promotion activities to create consumer demand for a product.
    The producer promotes the product to wholesalers, the wholesalers promote it to retailers, and the retailers promote it to consumers.
    A good example of "push" selling is mobile phones, where the major handset manufacturers such as Nokia promote their products via retailers such as Carphone Warehouse. Personal selling and trade promotions are often the most effective promotional tools for companies such as Nokia - for example offering subsidies on the handsets to encourage retailers to sell higher volumes.
    A "push" strategy tries to sell directly to the consumer, bypassing other distribution channels (e.g. selling insurance or holidays directly). With this type of strategy, consumer promotions and advertising are the most likely promotional tools.
    Pull
    A “pull” selling strategy is one that requires high spending on advertising and consumer promotion to build up consumer demand for a product.
    If the strategy is successful, consumers will ask their retailers for the product, the retailers will ask the wholesalers, and the wholesalers will ask the producers.
    A good example of a pull is the heavy advertising and promotion of children's’ toys – mainly on television. Consider the recent BBC promotional campaign for its new pre-school programme – the Fimbles. Aimed at two to four-year-olds, 130 episodes of Fimbles have been made and are featured everyday on digital children's channel CBeebies and BBC2.
    As part of the promotional campaign, the BBC has agreed a deal with toy maker Fisher-Price to market products based on the show, which it hopes will emulate the popularity of the Tweenies. Under the terms of the deal, Fisher-Price will develop, manufacture and distribute a range of Fimbles products including soft, plastic and electronic learning toys for the UK and Ireland.
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  • The marketing channels

    1. 1. “Necessity is the mother of Invention” Friday, February 14, 2014 Dr. Ashutosh Kumar 1
    2. 2. “God couldn’t be everywhere: therefore- He created mothers” Similarly manufacturers couldn’t be omnipresent; human needs created Distribution Friday, February 14, 2014 Dr. Ashutosh Kumar 2
    3. 3. Friday, February 14, 2014 Dr. Ashutosh Kumar 3
    4. 4. THE MARKETING CHANNELS Friday, February 14, 2014 Dr. Ashutosh Kumar 4
    5. 5. DIGICOMP + RCV DISTRIBUTORS DEALERS SUB DEALERS TYPE OF BUSINESS •Consumer Electronics •Cable Hard ware •Home appliances •Super Market •FMCG •Telephony RCV KEY DEALERS DIRECT SELLING CALL CENTER DEMO VAN CONSUMERS Friday, February 14, 2014 Dr. Ashutosh Kumar YOUR ROLE BTL DEMONSTRATIONS 5
    6. 6. The Marketing Channels • Marketing channel is a set of institution that transfer the ownership of and move goods from the point of production to the point of consumption • Independent organizations are called marketing intermediaries. Friday, February 14, 2014 Dr. Ashutosh Kumar 6
    7. 7. Q: Why Are Marketing Intermediaries Used? Producer Typically produces goods: • At limited locations • In large quantities • With limited variety • Over the year Consumer consumes goods: •All over the country at their own location •In limited quantity per consumer •With large variety/ assortment •Whenever they need Friday, February 14, 2014 Dr. Ashutosh Kumar 7
    8. 8. PUSH Effect Friday, February 14, 2014 Dr. Ashutosh Kumar 8
    9. 9. PULL Effect Friday, February 14, 2014 Dr. Ashutosh Kumar 9
    10. 10. The push & the pull selections Producer promotes aggressively Channels Promotes aggressively Retailer Promotes aggressively Consumer Push Strategy Producer Promotes aggressively to Channels Retailer Consumer Pull Strategy A Push strategy involves the manufacturer for using the sales force and trade promotion activities to induce intermediaries to carry, promote and thus sell the product to the end users A Pull strategy involves the manufacturer using advertising and promotion to persuade consumers to ask intermediaries for the product, thus inducing the intermediaries to order it. Friday, February 14, 2014 Dr. Ashutosh Kumar 10
    11. 11. Transportation Modes Rail Rail Cost-effective for shipping bulk products. Cost-effective for shipping bulk products. Water Water Low cost for shipping bulky, low-value, Low cost for shipping bulky, low-value, non perishable goods, slowest form. non perishable goods, slowest form. Truck Truck Most important carrier for consumer Most important carrier for consumer goods, flexible. goods, flexible. Air Air High cost, ideal when speed is needed or High cost, ideal when speed is needed or distant markets have to be reached distant markets have to be reached Pipeline Pipeline Carry petroleum based products, Carry petroleum based products, very low cost, requires little energy. very low cost, requires little energy. Internet Internet Web sites have products available, used Web sites have products available, used especially for services. especially for services. Friday, February 14, 2014 Dr. Ashutosh Kumar 11
    12. 12. Role of Marketing Channels To fill the gaps between the production and consumption process. Friday, February 14, 2014 Dr. Ashutosh Kumar 12
    13. 13. The Role of Marketing Channels in Marketing Strategy  Channels provide the means by which the firm moves the goods and services it produces to ultimate users  Facilitate the exchange process by cutting the number of contacts necessary  Adjust for discrepancies in the market’s assortment of goods and services via sorting  Standardize exchange transactions Friday, February 14, 2014 Dr. Ashutosh Kumar 13
    14. 14. Think Efficiency and Effectiveness Friday, February 14, 2014 Dr. Ashutosh Kumar 14
    15. 15. Add a Distributor Friday, February 14, 2014 Dr. Ashutosh Kumar 15
    16. 16. How intermediaries improve exchange efficiencies Friday, February 14, 2014 Dr. Ashutosh Kumar 16
    17. 17. Channel Intermediaries Retailer Retailer A channel intermediary that A channel intermediary that sells mainly to customers. sells mainly to customers. Merchant Merchant Wholesaler Wholesaler An institution that buys goods An institution that buys goods from manufacturers, takes title from manufacturers, takes title to goods, stores them, to goods, stores them, and resells and ships them. and resells and ships them. Agents and Agents and Brokers Brokers Wholesaling intermediaries who Wholesaling intermediaries who facilitate the sale of a product by facilitate the sale of a product by representing channel member. representing channel member. Friday, February 14, 2014 Dr. Ashutosh Kumar 17
    18. 18. Channel Intermediaries Retailers Retailers Take Title to Goods Take Title to Goods Merchant Merchant Wholesalers Wholesalers Take Title to Goods Take Title to Goods Agents Agents and and Brokers Brokers Do NOT Take Title to Goods Do NOT Take Title to Goods Friday, February 14, 2014 Dr. Ashutosh Kumar 18
    19. 19. Channel functions & Flow • Marketing Channels performs work of moving goods from producers to consumers. • For this, they perform some key functions. • They are: Friday, February 14, 2014 Dr. Ashutosh Kumar 19
    20. 20. Physical Possession (PP) P Ownership (Own) R Negotiation (N) O Promotion (Pr) D Financing (F) U Risk Taking (R) C E Ordering Payment R Information (Ord) (P) W H O L E S E L L E R C O N S U M E R R E T A I L E R (I) Fig: 1.1 Marketing Flows in the marketing Channel Friday, February 14, 2014 Dr. Ashutosh Kumar 20
    21. 21. Direct Vs. Indirect Channels  Direct channel- a marketing channel that does not use intermediaries to distribute the product.   Why sell directly? Indirect channel – a marketing channel where intermediaries are used to help distribute the product.  Why sell indirectly? Friday, February 14, 2014 Dr. Ashutosh Kumar 21
    22. 22. Channel levels Zero Level Channel (Direct Marketing Channel): Example: Dell. One Level Channel: Example: Automobile. Two Level Channel: Example: White Goods/ Consumer Durables. Three Level Channel: Example: FMCG. Friday, February 14, 2014 Dr. Ashutosh Kumar 22
    23. 23.  Dual Distribution: Network that moves products to a firm’s target market through more than one marketing channel  Reverse Channels: Channels designed to return goods to their producers  Example: Soft-drink Bottles/ Old Newspapers. Friday, February 14, 2014 Dr. Ashutosh Kumar 23
    24. 24. Channels for Consumer Products Direct Channel Retailer Channel Wholesaler Channel Agent/Broker Channel Producer Producer Producer Producer Agents or Brokers Wholesalers Retailers Consumers Wholesalers Retailers Retailers Consumers Consumers Consumers Friday, February 14, 2014 Dr. Ashutosh Kumar 24
    25. 25. Channels for Business-to-Business Products Agent/Broker Industrial Channel Direct Channel Direct Channel Industrial Distributor Agent/Broker Channel Producer Producer Producer Producer Producer Agents or Brokers Agents or Brokers Industrial Distributor Industrial Distributor Industrial User Govt. Buyer Industrial User Friday, February 14, 2014 Dr. Ashutosh Kumar Industrial User 25 Industrial User
    26. 26. Channel Design Decisions To design a marketing channel, procedure to be followed is: Analysing Customers Needs Establishing Channel Objectives Identifying Channel Alternatives Evaluating Channel Options Friday, February 14, 2014 Dr. Ashutosh Kumar 26
    27. 27. (A) Analyzing Customer Needs: -Firstly, we try to understand: “What” “Where” Target Customer Buy ? “Why” “When” “How” Friday, February 14, 2014 Dr. Ashutosh Kumar 27
    28. 28. What are the service outputs  Waiting time  Breaking the bulk  Spatial convenience  Product assortment  Service back-up Friday, February 14, 2014 Dr. Ashutosh Kumar 28
    29. 29. Example of a service output delivered template Service dimension Service output delivered 1. Bulk-Breaking Units are delivered in ones 2. Spatial convenience There is at least one outlet for almost every 3 km radius 3. Waiting time Not more than 2 days for any model 4. Assortment Other consumer goods items including that of other competitors are available at all the Outlets. 5. Installation support Available 6. After sales support Free for first two years, but available on payment afterwards. Also available at every city from where the product was bought. 7. Consumer financing Available Friday, February 14, 2014 Dr. Ashutosh Kumar 29
    30. 30. (B) Establishing Channel Objectives: •Channel objectives need to be stated in terms of targeted service output levels. •Channel objectives vary with product characteristic. Product could be:  Perishable (bread, butter, newspaper etc)  Bulky (building materials)  Requiring Installation/maintenance services (Computer, AC)  High Unit Value (generators & turbines) Friday, February 14, 2014 Dr. Ashutosh Kumar 30
    31. 31. • Channel design should take into account strengths and weakness of different types of intermediaries. • Also, competitive channels should be understood & analysed. Friday, February 14, 2014 Dr. Ashutosh Kumar 31
    32. 32. (C ) Identifying Channel Alternatives: Channel alternatives are described by: • • • Types of Intermediaries Available. Number of Intermediaries Needed. Terms/ Responsibilities of each Channel Members. Friday, February 14, 2014 Dr. Ashutosh Kumar 32
    33. 33.  Types of Intermediaries   Number of Intermediaries     Company Sales Force, Manufacturer’s Agents, and Industrial Distributors Intensive distribution Exclusive distribution Selective distribution Terms & Responsibilities of Channel Members     Price Policy Conditions of sale Distributor’s territorial rights Mutual services and responsibilities Friday, February 14, 2014 Dr. Ashutosh Kumar 33
    34. 34.  Types of Intermediaries  Company Sales Force, Manufacturer’s Agents, and Industrial Distributors Example: sale of food grains to rural market. 1. Mobile vans for direct distribution 2. Periodic markets (haats) 3. Agricultural markets (mandis) HUL’s Operation shakti, involves self-help groups (SHGs) of women to distribute its products in rural areas.   ITC’s e-Choupal. Friday, February 14, 2014 Dr. Ashutosh Kumar 34
    35. 35.  Number of Intermediaries  Exclusive distribution    Selective distribution    What is it? When is it used? What is it? When is it used? Intensive distribution   What is it? When is it used? Friday, February 14, 2014 Dr. Ashutosh Kumar 35
    36. 36. Exclusive distribution * * Friday, February 14, 2014 Dr. Ashutosh Kumar 36
    37. 37. Exclusive Distribution: • Involves limiting the number of intermediaries • Used when company desires more control over services provided by intermediaries • Intermediaries may agree not to carry competitive brands (Exclusive Dealing) Friday, February 14, 2014 Dr. Ashutosh Kumar 37
    38. 38. Exclusive Distribution: • Example: Textile mills like Mafatlal group, Delhi cloth and General Mills & Bombay Dyeing •Tata Engineering & Locomotive Co. Ltd (TELCO) and Ashok Leyland •Pioma Industries, Ahmedabad, manufacturer of Rasna soft drink Friday, February 14, 2014 Dr. Ashutosh Kumar 38
    39. 39. Selective distribution * * * * * * Friday, February 14, 2014 Dr. Ashutosh Kumar 39
    40. 40. Selective Distribution: • Involves use of more than a few, but less than all intermediaries who are willing to carry a particular product • This enables producer to have just right amount of outlets to cover territory • In turn helps producer to control services to customer better coverage. Coverage cost is lower for company. • Example: Stihl company dealing with power equipment Friday, February 14, 2014 Dr. Ashutosh Kumar 40
    41. 41. Intensive distribution **** ** * * *** * * ** ** * * * ** ** * * * ** * **** * * ** **** ***** * ** **** * ** ** * ** * * ** * * * Friday, February 14, 2014 Dr. Ashutosh Kumar 41
    42. 42. Intensive Distribution: • Manufacturer places goods in as many outlets as possible •Marketers of convenience products like cigarettes, chewing gum, salt, biscuits, bread, soaps, detergents & soft drinks want intensive distribution •Example: Titan Watches, Asian Paints, HUL etc. Friday, February 14, 2014 Dr. Ashutosh Kumar 42
    43. 43. Intensive Distribution: • Asian Paints distribution network consists of 21 sales offices, 3 agencies and 6000 dealers •HUL network consists of 4000 redistribution stockists and 3,00,000 dealers spread over the entire country Friday, February 14, 2014 Dr. Ashutosh Kumar 43
    44. 44. Intensity of Distribution Friday, February 14, 2014 Dr. Ashutosh Kumar 44
    45. 45. Terms & Responsibilities of Channel Intermediaries Producer must clearly indicate rights/ duties of each channel member. Each channel member’s profitability is to be ascertained & they should be treated with respect. Elements of terms could be: •Price policy: •Conditions of sale: •Distributor’s territorial rights: •Mutual services & responsibilities: Friday, February 14, 2014 Dr. Ashutosh Kumar 45
    46. 46. (D) Evaluating Channel Alternatives: Channel alternatives evaluated against: • • • Economic Criteria. Control Criteria. Adaptive Criteria. Friday, February 14, 2014 Dr. Ashutosh Kumar 46
    47. 47. Evaluating Channel Alternatives: Lets take an examples: A Jodhpur based branded furniture manufacturer wants to sell furniture in the Southern markets. The manufacturer has to decide between two alternatives: First Channel alternative is:- •Hiring Ten new sales representatives who will operate from offices in Bangalore, Chennai, and Hyderabad. They would receive a base salary plus commissions. Also, the company will have to meet the expenses of setting up the office-cumresidence for these employees Friday, February 14, 2014 Dr. Ashutosh Kumar 47
    48. 48. Evaluating Channel Alternatives: Second Channel alternative is:•Using a Bangalore based industrial distributor dealing in furniture with offices in Chennai and Hyderabad. The distributor has 30 sales representatives, who would receive commissions based on their respective sales. ??? Friday, February 14, 2014 Dr. Ashutosh Kumar 48
    49. 49. DISCUSSION Friday, February 14, 2014 Dr. Ashutosh Kumar 49

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