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Delivering Value:
Designing & Managing
Integrated Marketing
Channels
Overview
• Marketing Channels
• Definition and Types
• Marketing Channel Strategy
• Hybrid Channels or Multichannel Marketing
• Value Networks
• The Role of Marketing Channel
• Channel Design Decisions
• Channel Management Decisions
• Channel Integration & Systems
• E-Commerce
2
Classified - Highly Confidential
Marketing Channels are sets of interdependent organizations
participating in the process of making a product or service
available for use or consumption. They are the set of pathways
a product or service follows after production, culminating in
purchase and consumption by the final end user.
Marketing Channels or Intermediaries may be following
types/categories:
• Merchants such as wholesalers and retailers buy, take title
to, and resell the merchandise.
3
Classified - Highly Confidential
Marketing Channels
• Agents such as brokers, manufacturers’ representatives,
sales agents search for customers and may negotiate on the
producer’s behalf but do not take title to the goods.
• Facilitators such as transportation companies, independent
warehouses, banks, advertising agencies assist in the
distribution process but neither take title to goods nor
negotiate purchases or sales.
4
Classified - Highly Confidential
Marketing Channels
Marketing Channel Strategy
5
Marketing Channels
Push Strategy
Producer Intermediaries Consumer
inducing
Producer Intermediaries Consumer
ordering
Pull Strategy
A 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.
In a pull strategy 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.
demand
sell
6
Classified - Highly Confidential
Hybrid Channels or Multichannel Marketing occurs when a
single firm uses two or more marketing channels to reach
customer segments.
PRODUCER INTERMEDIARIES CONSUMER
Marketing Channels
Value Networks
7
Classified - Highly Confidential
Value Network
A system of partnerships and alliances that a firm creates to
source, augment and deliver its offerings.May include:
• Suppliers
• Customer
• Consumer
• Media
The Role Of Marketing Channel
8
Classified - Highly Confidential
A marketing channel performs the work of moving goods from
producers to consumers. It overcomes 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 such as:
• Forward flow functions:
– From company to customers
– Develop / disseminate communication
– Store and move the physical products
– Oversee transfer of ownership
The Role Of Marketing Channel
9
Classified - Highly Confidential
• Backward flow functions:
– From customers to company
– Place orders with manufacturers
– Facilitate payment of bills
• Forward and backward flow functions:
– Gather information
– Negotiate price and transfer of ownership
– Finance inventories
– Assume risk
10
Classified - Highly Confidential
Consumer Marketing Channel Levels(fig a)
• A zero-level channel, also called a direct marketing channel,
consists of a manufacturer selling directly to the final customer.
Examples are door-to-door sales, mail order, telemarketing ,etc.
• A one-level channel contains one selling intermediary, such as a
retailer.
• A two-level channel contains two intermediaries such as a
wholesaler and a retailer.
• A three-level channel contains three intermediaries. In the
meatpacking industry, wholesalers sell to jobbers, essentially
small-scale wholesalers, who sell to small retailers.
The Role Of Marketing Channel
11
12
Classified - Highly Confidential
The Role Of Marketing Channel
Industrial Marketing Channel Levels (fig b)
• Zero level channel: manufacturer-customer
• One level channel: manufacturer-distributor-customer
• Two level channel: manufacturer-manufacturer’s
representative OR sales branches-customer
• Three level channel: manufacturer-manufacturer’s
representative OR sales branches-distributor-customer
13
Channel Design Decisions
14
Classified - Highly Confidential
Designing a Channel System requires:
– Analyzing Consumer Needs
– Setting Channel Objectives
– Identifying Major Channel Alternatives
– Evaluation
Analyzing Consumer Needs
15
Classified - Highly Confidential
Lot Size - the number of units the channel permits a typical customer
to purchase on one occasion.
Waiting And Delivery Time - the average time customers wait for
receipt of goods. costumer increasingly prefer faster delivery
channels.
Spatial Convenience - the degree to which the marketing channel
Makes It Easy For Customers To Purchase The Product.
Product Variety - the assortment provided by the marketing channel.
Service Backup - add on services (Credit, delivery, installation,
repairs) provided by the channel. the greater the service backup, the
greater the work provided by the channel.
Setting Objectives and Constraints
16
Classified - Highly Confidential
– In order to develop channel structure, manager should decide
on some goals to be achieved.
– These goals must be in line with some other component of
marketing mix, to anticipate collision among them.
– These goals must be congruent with marketing and other
general objectives and strategies of the firm
Identifying Major Channel Alternatives
17
Classified - Highly Confidential
• Types Of Intermediaries . Identifying what alternatives are
available and best suited for the purpose.
• Number of Intermediaries
– Exclusive distribution means severely limiting the number of
intermediaries
– Selective distribution relies on only some of the
intermediaries willing to carry a particular product.
– Intensive distribution places the goods or services in as many
outlets as possible.
Identifying Major Channel Alternatives
18
Classified - Highly Confidential
• Terms and Responsibilities of Channel Members. Each channel
member must be treated respectfully and given the opportunity
to be profitable. The main elements in this regard are:
– Price policy calls for the producer to establish a price list and
schedule of discounts and allowances that intermediaries see
as equitable and sufficient.
– Conditions of sale refers to payment terms and producer
guarantees.Most producers grant cash discounts to distributors
for early payment. They might also offer a guarantee against
defective merchandise or price declines, creating an incentive
to buy larger quantities.
– Distributors’ territorial rights define the distributors’ territories
and the terms under which the producer will enfranchise other
distributors.
– Mutual services and responsibilities must be carefully spelled
out, especially in franchised and exclusive-agency channels.
Evaluating Major Channel Alternatives
19
Classified - Highly Confidential
Evaluation Criteria
• Economic criteria compares the likely sales costs and
profitability of different channel members
• Control refers to channel members’ control over the
marketing of the product
• Adaptive criteria refers to the ability to remain flexible to
adapt to environmental changes
Channel Management Decisions
20
Classified - Highly Confidential
• Selecting channel members
• Training channel members
• Motivating channel members
• Evaluating channel members
• Modifying channel design and arrangements
• Global Channel Considerations
Channel Management Decisions
21
Classified - Highly Confidential
• Selecting Channel Members. To select the appropriate channel
members, producers should determine what characteristics
distinguish the better intermediaries such as:
– number of years in business
– other lines carried, growth
– profit record
– financial strength
– Cooperativeness
– service reputation
• Training and Motivating Channel Members. Carefully
implemented training, market research, and other capability-
building programs can motivate and improve intermediaries’
performance. The company must constantly communicate the
importance of intermediaries in a joint effort to satisfy end users
of the product.
Channel Management Decisions
22
Classified - Highly Confidential
• Evaluating Channel Members. Producers must periodically
evaluate intermediaries’ performance against standards such as:
– sales quota attainment
– average inventory levels
– customer delivery time
– treatment of damaged and lost goods
– cooperation in promotional and training programs
• Underperformers need to be counseled, retrained, motivated, or
terminated.
• Modifying Channel Design and Arrangements. In competitive
markets with low entry barriers, the optimal channel structure
will inevitably change over time. The change could mean:
– adding or dropping individual market channels or channel
members or
– developing a totally new way to sell goods.
Channel Management Decisions
23
Classified - Highly Confidential
• Global Channel Considerations. International markets pose
distinct challenges, including variations in customers’ shopping
habits, but opportunities at the same. Companies must:
– Try to get close to customers in order to understand their
needs and wants.
– modify and design channels to satisfy the customers.
Channel Integration & Systems
24
Classified - Highly Confidential
• Vertical Marketing Systems. A conventional marketing channel
consists of an independent producer, wholesaler(s), and retailer(s).
Each is a separate business seeking to maximize its own profits,
even if this goal reduces profit for the system as a whole.No
channel member has complete or substantial control over other
members. A vertical marketing system (VMS), by contrast, includes
the producer, wholesaler(s), and retailer(s) acting as a unified
system. There are three types:
– Corporate VMS combines successive stages of production and
distribution under single ownership.
– Administered VMS coordinates successive stages of production
and distribution through the size and power of one of the
members. Manufacturers of dominant brands can secure
strong trade cooperation and support from resellers.
Channel Integration & Systems
25
Classified - Highly Confidential
– 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.
• Horizontal Marketing Systems. Another channel development is
the horizontal marketing system, in which two or more unrelated
companies put together resources or programs to exploit an
emerging marketing opportunity. The companies might work
together on a temporary or permanent basis or create a joint
venture company.
Channel Integration & Systems
26
Classified - Highly Confidential
• Integrating Multichannel Marketing Systems. An integrated
marketing channel system is one in which the strategies and
tactics of selling through one channel reflect the strategies and
tactics of selling through one or more other channels. Adding
more channels gives companies three important benefits:
– increased market coverage.
– lower channel cost
– more customized selling
E-Commerce
27
Classified - Highly Confidential
• E-Commerce uses a Web site to transact or facilitate the sale
of products and services online. Online retailers can
predictably provide convenient, informative, and
personalized experiences for vastly different types of
consumers and businesses. By saving the cost of retail floor
space, staff, and inventory, online retailers can profitably sell
low-volume products to niche markets. Online retailers
compete in three key aspects of a transaction:
– customer interaction with the Web site
– Delivery
– ability to address problems when they occur.
28
Classified - Highly Confidential
E-Commerce
• E-commerce Type
– Pure click companies are those that have launched a
Web site without any previous existence as a firm.
– Brick-and-click companies are existing companies that
have added an online site for information or e-
commerce.
29
Classified - Highly Confidential
E-Commerce
Any Queries ?

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Delivering Value: Designing & Managing Integrated Marketing Channels

  • 1. 1 Delivering Value: Designing & Managing Integrated Marketing Channels
  • 2. Overview • Marketing Channels • Definition and Types • Marketing Channel Strategy • Hybrid Channels or Multichannel Marketing • Value Networks • The Role of Marketing Channel • Channel Design Decisions • Channel Management Decisions • Channel Integration & Systems • E-Commerce 2 Classified - Highly Confidential
  • 3. Marketing Channels are sets of interdependent organizations participating in the process of making a product or service available for use or consumption. They are the set of pathways a product or service follows after production, culminating in purchase and consumption by the final end user. Marketing Channels or Intermediaries may be following types/categories: • Merchants such as wholesalers and retailers buy, take title to, and resell the merchandise. 3 Classified - Highly Confidential Marketing Channels
  • 4. • Agents such as brokers, manufacturers’ representatives, sales agents search for customers and may negotiate on the producer’s behalf but do not take title to the goods. • Facilitators such as transportation companies, independent warehouses, banks, advertising agencies assist in the distribution process but neither take title to goods nor negotiate purchases or sales. 4 Classified - Highly Confidential Marketing Channels
  • 5. Marketing Channel Strategy 5 Marketing Channels Push Strategy Producer Intermediaries Consumer inducing Producer Intermediaries Consumer ordering Pull Strategy A 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. In a pull strategy 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. demand sell
  • 6. 6 Classified - Highly Confidential Hybrid Channels or Multichannel Marketing occurs when a single firm uses two or more marketing channels to reach customer segments. PRODUCER INTERMEDIARIES CONSUMER Marketing Channels
  • 7. Value Networks 7 Classified - Highly Confidential Value Network A system of partnerships and alliances that a firm creates to source, augment and deliver its offerings.May include: • Suppliers • Customer • Consumer • Media
  • 8. The Role Of Marketing Channel 8 Classified - Highly Confidential A marketing channel performs the work of moving goods from producers to consumers. It overcomes 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 such as: • Forward flow functions: – From company to customers – Develop / disseminate communication – Store and move the physical products – Oversee transfer of ownership
  • 9. The Role Of Marketing Channel 9 Classified - Highly Confidential • Backward flow functions: – From customers to company – Place orders with manufacturers – Facilitate payment of bills • Forward and backward flow functions: – Gather information – Negotiate price and transfer of ownership – Finance inventories – Assume risk
  • 10. 10 Classified - Highly Confidential Consumer Marketing Channel Levels(fig a) • A zero-level channel, also called a direct marketing channel, consists of a manufacturer selling directly to the final customer. Examples are door-to-door sales, mail order, telemarketing ,etc. • A one-level channel contains one selling intermediary, such as a retailer. • A two-level channel contains two intermediaries such as a wholesaler and a retailer. • A three-level channel contains three intermediaries. In the meatpacking industry, wholesalers sell to jobbers, essentially small-scale wholesalers, who sell to small retailers. The Role Of Marketing Channel
  • 11. 11
  • 12. 12 Classified - Highly Confidential The Role Of Marketing Channel Industrial Marketing Channel Levels (fig b) • Zero level channel: manufacturer-customer • One level channel: manufacturer-distributor-customer • Two level channel: manufacturer-manufacturer’s representative OR sales branches-customer • Three level channel: manufacturer-manufacturer’s representative OR sales branches-distributor-customer
  • 13. 13
  • 14. Channel Design Decisions 14 Classified - Highly Confidential Designing a Channel System requires: – Analyzing Consumer Needs – Setting Channel Objectives – Identifying Major Channel Alternatives – Evaluation
  • 15. Analyzing Consumer Needs 15 Classified - Highly Confidential Lot Size - the number of units the channel permits a typical customer to purchase on one occasion. Waiting And Delivery Time - the average time customers wait for receipt of goods. costumer increasingly prefer faster delivery channels. Spatial Convenience - the degree to which the marketing channel Makes It Easy For Customers To Purchase The Product. Product Variety - the assortment provided by the marketing channel. Service Backup - add on services (Credit, delivery, installation, repairs) provided by the channel. the greater the service backup, the greater the work provided by the channel.
  • 16. Setting Objectives and Constraints 16 Classified - Highly Confidential – In order to develop channel structure, manager should decide on some goals to be achieved. – These goals must be in line with some other component of marketing mix, to anticipate collision among them. – These goals must be congruent with marketing and other general objectives and strategies of the firm
  • 17. Identifying Major Channel Alternatives 17 Classified - Highly Confidential • Types Of Intermediaries . Identifying what alternatives are available and best suited for the purpose. • Number of Intermediaries – Exclusive distribution means severely limiting the number of intermediaries – Selective distribution relies on only some of the intermediaries willing to carry a particular product. – Intensive distribution places the goods or services in as many outlets as possible.
  • 18. Identifying Major Channel Alternatives 18 Classified - Highly Confidential • Terms and Responsibilities of Channel Members. Each channel member must be treated respectfully and given the opportunity to be profitable. The main elements in this regard are: – Price policy calls for the producer to establish a price list and schedule of discounts and allowances that intermediaries see as equitable and sufficient. – Conditions of sale refers to payment terms and producer guarantees.Most producers grant cash discounts to distributors for early payment. They might also offer a guarantee against defective merchandise or price declines, creating an incentive to buy larger quantities. – Distributors’ territorial rights define the distributors’ territories and the terms under which the producer will enfranchise other distributors. – Mutual services and responsibilities must be carefully spelled out, especially in franchised and exclusive-agency channels.
  • 19. Evaluating Major Channel Alternatives 19 Classified - Highly Confidential Evaluation Criteria • Economic criteria compares the likely sales costs and profitability of different channel members • Control refers to channel members’ control over the marketing of the product • Adaptive criteria refers to the ability to remain flexible to adapt to environmental changes
  • 20. Channel Management Decisions 20 Classified - Highly Confidential • Selecting channel members • Training channel members • Motivating channel members • Evaluating channel members • Modifying channel design and arrangements • Global Channel Considerations
  • 21. Channel Management Decisions 21 Classified - Highly Confidential • Selecting Channel Members. To select the appropriate channel members, producers should determine what characteristics distinguish the better intermediaries such as: – number of years in business – other lines carried, growth – profit record – financial strength – Cooperativeness – service reputation • Training and Motivating Channel Members. Carefully implemented training, market research, and other capability- building programs can motivate and improve intermediaries’ performance. The company must constantly communicate the importance of intermediaries in a joint effort to satisfy end users of the product.
  • 22. Channel Management Decisions 22 Classified - Highly Confidential • Evaluating Channel Members. Producers must periodically evaluate intermediaries’ performance against standards such as: – sales quota attainment – average inventory levels – customer delivery time – treatment of damaged and lost goods – cooperation in promotional and training programs • Underperformers need to be counseled, retrained, motivated, or terminated. • Modifying Channel Design and Arrangements. In competitive markets with low entry barriers, the optimal channel structure will inevitably change over time. The change could mean: – adding or dropping individual market channels or channel members or – developing a totally new way to sell goods.
  • 23. Channel Management Decisions 23 Classified - Highly Confidential • Global Channel Considerations. International markets pose distinct challenges, including variations in customers’ shopping habits, but opportunities at the same. Companies must: – Try to get close to customers in order to understand their needs and wants. – modify and design channels to satisfy the customers.
  • 24. Channel Integration & Systems 24 Classified - Highly Confidential • Vertical Marketing Systems. A conventional marketing channel consists of an independent producer, wholesaler(s), and retailer(s). Each is a separate business seeking to maximize its own profits, even if this goal reduces profit for the system as a whole.No channel member has complete or substantial control over other members. A vertical marketing system (VMS), by contrast, includes the producer, wholesaler(s), and retailer(s) acting as a unified system. There are three types: – Corporate VMS combines successive stages of production and distribution under single ownership. – Administered VMS coordinates successive stages of production and distribution through the size and power of one of the members. Manufacturers of dominant brands can secure strong trade cooperation and support from resellers.
  • 25. Channel Integration & Systems 25 Classified - Highly Confidential – 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. • Horizontal Marketing Systems. Another channel development is the horizontal marketing system, in which two or more unrelated companies put together resources or programs to exploit an emerging marketing opportunity. The companies might work together on a temporary or permanent basis or create a joint venture company.
  • 26. Channel Integration & Systems 26 Classified - Highly Confidential • Integrating Multichannel Marketing Systems. An integrated marketing channel system is one in which the strategies and tactics of selling through one channel reflect the strategies and tactics of selling through one or more other channels. Adding more channels gives companies three important benefits: – increased market coverage. – lower channel cost – more customized selling
  • 27. E-Commerce 27 Classified - Highly Confidential • E-Commerce uses a Web site to transact or facilitate the sale of products and services online. Online retailers can predictably provide convenient, informative, and personalized experiences for vastly different types of consumers and businesses. By saving the cost of retail floor space, staff, and inventory, online retailers can profitably sell low-volume products to niche markets. Online retailers compete in three key aspects of a transaction: – customer interaction with the Web site – Delivery – ability to address problems when they occur.
  • 28. 28 Classified - Highly Confidential E-Commerce • E-commerce Type – Pure click companies are those that have launched a Web site without any previous existence as a firm. – Brick-and-click companies are existing companies that have added an online site for information or e- commerce.
  • 29. 29 Classified - Highly Confidential E-Commerce