Session 26 MG 220 MBA - 11 Nov 10


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Session 26
MG 220 Marketing Management
MBA 10

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Session 26 MG 220 MBA - 11 Nov 10

  1. 1. MG 220 Marketing Management MBA 10 Fall 2010 Muhammad Talha Salam, Asst. Professor Access it online: Part 6: Delivering Value > Marketing Channels and Value Networks > The Role of Marketing Channels: SKIM > Channel-Design decisions > Channel-Management decisions: SKIM > Quiz 7: Part 5 (Complete) Class Presentation | Session 26 | 11 Nov 2010
  2. 2. Access it online: Marketing Channels and Value Networks The Importance of Channels Marketing Channels • Sets of independent organizations involved in the process of making a product or service available for use or consumption Among these ‘intermediaries’ are: • Merchants – who buy, take title to, and resell the merchandise – Wholesalers, Retailers • Agents – who search for consumers but do NOT take title – Brokers, Manufacturers’ representatives, sales agents • Facilitators – assist in distribution but neither take title NOR negotiate sale/purchase – Transporters, independent warehouses, ad agencies, banks Importance of Channels • A marketing channel system is the particular set of marketing channels employed by a firm. • Channels chosen affect all other marketing decisions • Push strategy involves manufacturers using its own sales force and trade promotion money to include intermediaries – Appropriate when: low brand loyalty | choice is made at purchasing time | impulse item | benefits are understood • Pull strategy involves manufacturer using advertising and promotion to persuade consumers to ask intermediaries for the product – Appr0priate when: High brand loyalty | high involvement | people perceive differnces in brands | decision before going to store • Top marketing companies use both strategies MG 220 Marketing Management 2
  3. 3. Access it online: Marketing Channels and Value Networks Channel Development • A new firm typically is a local/limited operation selling in a limited market • As it grows, it moves in new markets and that is where it needs new partners to sell for it • Channel system evolves in response to local opportunities Hybrid channels • Consider IBM, Dell, Microsoft • Selling online (self), through retailers (intermediaries) – CONSUMERS • Selling using sales force (own) – INSTITUTIONAL SELLING • All operate parallel and in one market • Ensuring Channel Integration – consumers would want channels to be working together • Also understanding different needs of customers: • Habitual shoppers | High value deal seekers | Variety-loving shoppers | High-involvement shoppers MG 220 Marketing Management 3
  4. 4. Access it online: Marketing Channels and Value Networks Value Networks Demand chain planning • Company first thinks of the target market and then plans it all backwards • 4Ps replaced by SIVA (Solution | Information | Value | Access) Value Networks • An even broader view. Company at the center • A system of partnerships and alliances that a firm creates to source, augment and deliver its offerings • A value network includes: firm’s suppliers, suppliers’ suppliers, immediate customers and their end customers Demand chain planning yields several insights • Company can estimate whether more money is made upstream or downstream • Company is more aware of disturbances anywhere in the supply chain that might cause costs to change • Companies can use internet to go online to improve these processes Concept of ERP • To manage entire value networks efficiently, different IT solutions and software is extensively deployed. They form Enterprise Resource Planning (ERP) MG 220 Marketing Management 4
  5. 5. Access it online: The Role of Marketing Channels Concept Why delegate the ‘selling job’? • Many producers lack the financial resources to carry out direct marketing • Producers who do establish their own channels can often earn a greater return by increasing investment in their own business (EXAMPLE) • In some cases direct marketing simply is not feasible Reducing number of contacts • Ref: figure • With and without “D” - Distributor MG 220 Marketing Management 5
  6. 6. Access it online: The Role of Marketing Channels Channel Functions and Flows Direction of activities • Some functions have forward flow of activities • Some have backward flow • Others have two-way flow MG 220 Marketing Management 6
  7. 7. Access it online: The Role of Marketing Channels Channel Levels Key Points • Producer and End Customer are there in every case • Zero-level channel is also called direct marketing channel • Different schemes for consumer marketing and industrial marketing MG 220 Marketing Management 7
  8. 8. Access it online: Channel-Design Decisions Analyzing Customers’ Desired service output levels Service Outputs by a channel – Lot Size – number of units a channel permits a user to purchase on one occasion – Waiting & Delivery time – Avg time customers have to wait for receipt of goods – Spatial Convenience – Degree of convenience in purchasing a product – Product Variety – Assortment breadth by a marketing channel – Service Backup – Add-on services provided by a channel Establishing Objectives & Constraints • Channel objectives should be stated in terms of targeted service output levels • Channel objectives vary with product characteristics • Channel design must take into account strengths and weaknesses of different types of intermediaries • Channel design must also take into account economic environment. For instance, economic depressions lead to cost-cutting thus shorter channels. MG 220 Marketing Management 8
  9. 9. Access it online: Channel-Design Decisions Identifying Major Channel Alternatives Decisions of choosing from a wide variety of channels for reaching customers Elements for describing channel alternative: • Type of Intermediaries – Decisions regarding what type of intermediaries shall be used – Retailers or OEMs • Number of Intermediaries – Exclusive Distribution – Selective Distribution – Intensive Distribution • Terms and responsibilities of each channel member – Price Policy calls – Conditions of sale – Distributors’ territorial rights – Mutual services and responsibilities MG 220 Marketing Management 9
  10. 10. Access it online: Channel-Management Decisions After choosing, individual intermediaries need to be trained, motivated and evaluated • Selecting Channel Members • Training Channel Members • Motivating Channel Members – Channel Power – ability to alter channel members’ behavior – Coercive Power – Reward Power – Legitimate Power – Expert Power – Referent Power – how strongly members would like to be associated with the partner MG 220 Marketing Management 10
  11. 11. MG 220 Marketing Management MBA 10 Fall 2010 Muhammad Talha Salam, Asst. Professor Access it online: Part 6: Delivering Value > Channel integration and systems: SKIM > E-Commerce Marketing Practices: SKIM > Retailing > Private Labels > Wholesaling > Market Logistics: SKIM Class Presentation | Session 27 | 15 Nov 2010