4. The Importance Of Channels
A marketing channel system is the particular set of marketing channels
a firm employs. And decisions about it are among the most critical
ones management faces.
Channel strategies
1. Push strategy
2. Pull strategy
5.
6. 1. Push strategy
Push Strategy uses the manufacturer’s sales force, trade promotion
money, or other means to induce intermediaries to carry, promote, and
sell the product to end users.
2. Pull strategy
Here the manufacturer uses advertising , promotion, and other forms of
communication to persuade consumers to demand the product from
intermediaries, thus inducing the intermediaries to order it.
7. Multichannel Marketing
It refers to the practice by which companies interact with customer via
multiple channels, both direct and indirect, in order to sell them
goods and services.
Today's successful companies typically employ multichannel
marketing, using two or marketing channels to reach customer
segments in one market area.
1. Omnichannel marketing
2. Integrated marketing channel
8. Omnichannel Marketing
Omnichannel Marketing refers to the one in which multiple channels work
together and match each target customers preferred ways of doing
business, delivering the right product information and customer service
regardless of whether the customers are online, in the store or on the
phone.
Integrated Marketing Channel
Integrated marketing channel system is one in which the strategies and
tactics of selling through one channel reflects the strategies and tactics
of selling through one or more other channels.
9. The Digital Channels Revolution
The digital channel revolution is profoundly transforming
distribution strategies with customers—both individuals and
businesses– becoming more comfortable buying online and
the use of smart phones exploding , traditional brick-and-
mortar channel strategies are being modified or even
replaced.
10. Customers expect smooth channel integration so
they can
• Enjoy helpful customer support in a store, online, or on the phone
• Check online for product availability at local stores before making a
trip
• Find out in-store whether a product that is unavailable can be
purchased and shipped from another store to home
• Order a product online and pick it up at a convenient retail location
• Return a product purchased online to a nearby store of the retailer
• receive discount and promotional offers based on total online and
offline purchases
11. The Role of Marketing Channels
The participants in the marketing channel provide a
number of key functions which increase the
effectiveness of placement through the channel. The
functions are Gathering and distribution. To fill the
Gaps between the production and consumption
Process.
12. Channel functions and flows
A marketing channel performs the work of moving
goods from producers to consumers . It over comes the
time, place and possession gaps that separate goods
and services from those who need or want them.
Members of the marketing channel perform a number
of key functions.
13. Channel member functions
• Gather information about potential and current customers competitors
and other actors and forces in the marketing environment.
• Develop and disseminate persuasive communication to stimulate
purchasing.
• Place orders with manufactures.
• Assume risks a connected with carrying out channel work.
• Provide for the successive storage and movement of physical products.
• Provide for buyers payment of their bills through banks and other financial
institutions.
• Oversee actual transfer of ownership from one organization or person to
another.
14.
15. Channel levels
The producer and the final consumer are part of every channel. We use
number of intermediary levels to designate the length of a channel.
Zero Level Channel
A zero level channel is also called as direct marketing channel. It
consists of a manufacturer selling directly to the final customers. Here
firms sell directly to customers online and via catalogs.
Ex: Mail order, online selling, telemarketing, door to door sales etc..
A one level channel contains one selling intermediary such as retailer. A
two level channel contains two intermediary, a wholesaler and retailer
and three level channel contains three.
16.
17. Service Sector Channels
The concept of a marketing channels is not limited to distribution of
physical goods. Producers of services and ideas also face the problems
of making their output available and accessible to target population.
This institutions must determine agencies and locations for reaching a
population that is spread out over an area.
18. Channel-Design Decisions
Meaning
Channel design decisions are critical because they determine a
products market presence and buyers accessibility to the
product. Channel decisions have additional strategic
significance because they entail long-term commitments. It is
usually easier to change prices or promotion than to change
marketing channels.
19. Analyzing Customer Needs And Wants
Consumers may choose the channels they prefer
based on price, product assortment, and convenience
as well as their Own shopping goals (economic, social,
or experiential). Channel segmentation exists, and
marketers must be aware that different consumers
have different needs during the purchase process.
20. Channels produce Five service outputs
1. Desired lot size :The number of units that the marketing channel
permits a typical customer to purchase on a purchase occasion.
2. Waiting and delivery time :The average time Customers wait for receipt
of goods. Customers in creasingly prefer faster delivery channels.
3. Spatial convenience : The degree to which the marketing channel makes
it easy for customers to purchase the product.
4. Product variety : The assortment provided by the marketing channel.
5. Service backup : Add on services (credit, delivery, installation, repairs)
provided by the channel. The more service backup the greater the
benefit provided by the channel.
21. Establishing Objectives and Constraints
Channels objectives vary with product characteristics.
Channel design must take into account the strengths &
weaknesses of different types of intermediaries.
Channel design is also influenced by the competitors
channels.
Channel design must also adapt to the larger
environment.
Legal regulations & restrictions also affect channel design.
22. Identifying Major Channel Alternatives
A channel alternative is described by three elements
1.Types of intermediaries
Depends on the service outputs desired by the target market & the
channel’s transactions costs. The company must search for the
channel alternative that promises the most long-run profitability.
2.Number of intermediaries
A. Exclusive distribution
B. Selective distribution
C. Intensive distribution
23. 1.Exclusive distribution
This distribution severely limits the number of intermediaries. It's appropriate when the
producer wants to ensure more knowledgeable and dedicated efforts by the reseller and it
often requires a close partnership with them. Exclusive distribution is used for new
automobiles. Exclusive distribution often includes exclusive dealing arrangements, especially
in markets increasingly driven by price.
2.Selective distribution
This distribution relies on only some of the intermediaries willing to carry a particular
product. Whether established or new, the company does not need to worry about having too
many outlets, it can gain adequate market coverage with more control and less cost than
intensive distribution.
3. Intensive distribution
This distribution places the goods or services in as many outlets as possible. This strategy
serves well for snack foods, soft drinks, newspapers, candies, and gum-products consumers
buy frequently or in a variety of locations.
Manufacturer's are constantly tempted to move from exclusive or selective
distribution to more intensive distribution to increase coverage and sales.
24. 3) Terms & Responsibilities Of Channel
Members
The producer must determine the rights & responsibilities of the
participating channel members, making sure that each channel member is
treated respectfully & given the opportunity to be profitable.
Price policy.
Conditions of sale.
Distributors territorial rights.
Mutual services and responsibilities.
25. Evaluating Major Channel Alternatives
1) Economic Criteria:
• The first step is to determine whether a company sales force or a
sales agency will produce more sales.
• The next step is to estimate the costs of selling different volumes
through each channel.
• The final step is comparing sales & costs. Each channel will
produce a different level of sales & costs.
Each channel alternative needs to be evaluated against Economic,
Control and Adaptive criteria.
27. 2) Control Criteria:
The agents may concentrate on other customer’s products or
they may lack the skills to handle our products.
3) Adaptive Criteria:
The channel members must make some degree of commitment
to each other for a specified period of time.
28. Level of sales (dollars)
Company sales force
Manufacturer's sales agency
S
B
Sellingcosts(dollars)
Break even cost chart for
the choice between a
company sales force and a
manufacturer's sales
agency
29. Channel Management Decisions
After a company has chosen a channel alternative, individual
intermediaries must be selected, motivated & evaluated.
1.Selecting Channel Members
For some producers this is easy; for others it’s very difficult. Anyway, in
order to select them, producers should determine what characteristics
distinguish the better intermediaries (years in business, other lines
carried, solvency, reputation, etc.)
30. 2.Training And Motivating Channel Members
Constant training, supervision & encouragement. Producers can draw on
the following types of power to elicit cooperation.
Channel Power : Producers vary greatly in their skill in managing
distributors. Channel power is the ability to alter Channel members
behavior so they take actions they would not have taken. Manufacturers
can draw on the following types,
A. Coercive power.
B. Reward power.
C. Legitimate power.
D. Expert power.
E. Referent power.
31. Channel Partnerships
More sophisticated Companies try to forgo a long term partnership with
distributors. The manufacturer clearly communicates what it wants from its
distributors in the way of market coverage, inventory levels, marketing
development, account solicitation, technical advice and services, and marketing
information and may introduce a compensation plan for adhering to the policies.
To stream line the supply chain and cut costs, many manufacturers and retailers
have adopted efficient consumer response practices to organize their
relationships in 3 areas..1) Demand side management or stimulate consumer
demand . 2)Supply side management or to optimize supply. 3)Enablers and
integrators, or collaborative information technology.
32. 3. Evaluating Channel Members
Underperformers need to be counseled, retrained or re-motivated. If they
do no shape up, it might be best to terminate their services.
Modifying Channel Design and Arrangements
Periodic modification to meet new conditions in the marketplace.
Modification is necessary when:
Distribution channel is not working as planned
Consumer buying patterns change.
Market expands.
New competition arises.
Innovative channels emerge.
Product moves into later stages in the product life cycle.
33. Channel Integration and Systems
1. Vertical Marketing Systems (VMS)
A Vertical Marketing Systems (VMS) is a system where the main members of the channel i.e. Producer,
Wholesaler and Retailer work together as a unified or combined group in order to meet the consumer
needs.
34. A. Corporate VMS
A Corporate VMS involves with the ownership of the levels of distribution or
production chain which is associated with a single company.
B. Administered VMS
An Administered VMS is a marketing system in which one member of the
production and distribution chain is dominant and organises the nature of
the marketing system informally.
C. Contractual VMS
A Contractual VMS is a system which involves a formal agreement between
the various levels of the distribution or production channel to coordinate the
overall process.
35. 2. Horizontal Marketing System
• An Horizontal Marketing System is a marketing system where two
or more unrelated companies put together resources or programs
to exploit an emerging market opportunity.
• Here each company lacks capital, know-how, production, or
marketing resources to venture alone, or it is afraid of the risk.
• The companies work together on a temporary or permanent basis
or create a joint venture company.
36. E-Commerce Marketing Practices
E-Commerce uses a website to transact or facilitate
the sale of products and services online.
Pure Click Companies
Pure Click companies are the companies with virtual presence or present in the
internet only. Search engines, Internet service providers, transaction sites etc are
the companies included in pure click companies.
Ex: Flipkart, Amazon, eBay etc
37. Brick-and-Click Companies
Brick-and-Click Companies are the companies where a company operates
both an online store (the Clicks) and an offline store (the bricks) and
integrates the two into a single retail strategy.
Ex: Pepper fry(pepperfry.com), Forever21 etc
38. M-Commerce Marketing Practices
• M-Commerce or Mobile Commerce is a Marketing Practice that allows
your business to engage with your customers – or target market using
a mobile device or network.
• Mobile marketing simply refers to marketing on or with a mobile
device.
Ex: A smartphone or a tablet.
• With mobile marketing, you can use many of the features of normal
internet marketing to connect with potential customers such as Text,
Images, Audio, Video etc.
39. CONFLICT, COOPERATION AND
COMPETITION
• Channel conflict is generated when one channel member’s actions
prevent another channel member from achieving its goal.
• Channel coordination occurs when channel members are brought
together to advance the goals of the channel instead of their own
potential incompatible goals.
40. Types of Conflict
• Horizontal conflict:
This conflict occurs between channel members at same level.
• Vertical channel conflict:
This conflict occurs between different levels of channel.
• Multichannel conflict:
This conflict occurs when the manufacturer has established two or
more channels that sell to the same market.
41. Causes Of Channel Conflict
• Goal incompatibility
• Unclear roles and rights
• Differences in perception
• Intermediaries dependence on the manufacturer
42. Managing Channel Conflict
• Strategic justification
They serve distinctive segments and do not complete as much as they
think can reproduce potential for conflict among channel members.
• Dual compensation
dual compensation pays existing channels for sales made through new
channels.
• Employee exchange
this is an useful step for exchanging persons between two or more
channel levels.
