28854780 designing and managing integrated marketing channels

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Designing and Managing

Integrated Marketing Channels


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Objectives

To Describe the Nature and Functions of Marketing Channels

To Identify the Types of Marketing Channels

To Examine the Major Levels of Marketing Coverage

To Explore the Concepts of Leadership, Cooperation, andConflict in Channel Relationships

To Specify How Channel Integration Can Improve ChannelEfficiency

To Examine the Legal Issues Affecting Channel Management


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.Marketers realize that if they were to make

the brands available in the right size, at the

right time and at the right price, the Indian

consumer can be motivated to buy it andconsume it..


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Definitions

Value Delivery Network The network made up of the company, suppliers,

distributors, and ultimately customers who partner witheach other to improve the performance of the entire system.

Marketing channel Set of interdependent organizations involved in the process

of making a product or service available for use orconsumption by the consumer or business user

Goal 1: Know why companies use channels and understand their functions


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What is a Marketing Channel?

Marketing channel (a.k.a. distribution

channel) - network of organizations thatcreate time, place, and possession utilitiesfor consumers


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TIME

PLACE

POSSESSION

Marketing Channels Create Utility

The Nature of

Marketing Channels


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The Role of Marketing Channel

Channel Functions and Flows

Channel LevelsService Sector Channels


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a) Provide information about the market to the

manufacturer

b) Maintain price stability in the market

c) Promotion of the products in his territory

d) Financing by providing the necessary working capital in

the form of advance payments for goods and services

e) Middlemen also take the title of the goods and services

and trade in their own name

Marketing Channel Functions


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Marketing Channel Flows

Product Flow

The movement of the product frommanufacturer through all parties who

take physical possession Negotiation Flow

Interplay of buying/selling tasks

associated with title transfer


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Ownership Flow Movement of title of the product

Information Flow

Information to and from themanufacturer

Promotion Flow

Flow of persuasive communication(advertising, personal selling, etc.)


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Channel Levels

Manufacturer Manufacturer Manufacturer Manufacturer

Consumer Consumer Consumer Consumer

Retailer Retailer Retailer

Wholesaler Wholesaler

Agent

1 level 2 level 3 level 4 level

Length of marketing channel


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Channel Level

Decisions that a firm must take regarding the number of

channel levels appropriate to serve a given market

From zero-directly from the manufacturer to the

customer- to as high as 4 to 5 levels involved in

distribution.

Zero level in industrial product marketing, project

marketing


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Channel level:

Firm adopts a one channel level when:

a) Number of customers is high

b) Customers in specific geographical area

c) Order lot size not uniformd) Firm sells goods to wholesaler or a large dealer

2, 3 or even 4 levels in case of:

a) Consumer productsb) Customers spread across the country

c) Market is large


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Factors determining the length of the Channel

a) Size of the market-larger it is more economical it isto serve it directly

b) Order lot size-if it is small, better to have longer

channel

c) Service requirements-if higher level of service is required,

then it is better to have a shorter level

d) Product variety-if customers shop for product assortment,

a wider channel of distribution is required


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Manufacturer

Customer

Customer

Wholesaler/Dealer

Manufacturer

Zero Level One Level

(a) (b)

Length of channel distribution


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Wholesaler/

Dealer

Retailer

Distributor

Customer

Manufacturer Manufacturer

Wholesaler

Retailer

Customer

Two Level Three Level

(c) (d)

Length of channel distribution


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Manufacturer

Market 1

Dealer Dealer DealerDealerDealerDealerDealer

A B C D E F G

Retailers

Customers Customers Customers

Width of channel of distribution


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Market

Market

Market

Market

Market

Market

Market

Market

Market

Market

Market

MarketMarket

Market

Market

Market

Market

Market

Market

Market

Market

Market

Market

Market

Market

Market

Market Market

Market

Market

Market

Market

Market

Market

Market

Market

Retail spokes-restaurants,

soft drink kiosks, panwalsa,

sweetmarts

Dealer/wholesaler

Dealer Hub

Franchise

Major Hub of

Parent Company

Hub and spoke pattern of distribution of a soft drink firm


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Wholesalers Retailers ConsumersProducerAgents orBrokers

Producer

Wholesalers Retailers

Consumers

Producer Retailers Consumers

Producer Consumers

Types of Marketing ChannelsChannels for Consumer Products


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Types of Marketing ChannelsChannels for Industrial Products

AgentsIndustrialDistributor

Business/Organizational

BuyerProducer

Industrial

Distributor

Business/Organizational

Buyer

Producer

ProducerBusiness/

OrganizationalBuyer

AgentsBusiness/

OrganizationalBuyer

Producer


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Channel design Decisions

Analyzing Customers Desired Service Outputlevels

Establishing Objectives and Constraints

Identifying and Evaluating major ChannelAlternatives

Evaluating the Major Alternatives

A l i C D i d S i


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Analyzing Customers Desired Service

Output levels

Cost and feasibility of meeting needs must beconsidered

Lot Size

Waiting & Delivery Time

Spatial Convenience

Product Variety

Service Backup


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Establishing Objectives and Constraints

Set channel objectives in terms of targeted level ofcustomer service

Product Characteristics

Strength & weakness of intermediaries

Adaptability to larger environment

Id if i d E l i j


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Identifying and Evaluating major

Channel Alternatives

Types of intermediaries

Company sales force, manufacturers agency, industrial

distributors

Number of marketing intermediaries Intensive, selective, and exclusive distribution

Responsibilities of channel members


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Functional

MiddlemenMerchantMiddlemen


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Functional

Middlemen

Do not take title to products;

they simply facilitate theexchange process by performing

buying and/or selling functions.


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MerchantMiddlemen

Take title to products andresell them.


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Exclusive

Distribution

SelectiveDistribution

IntensiveDistribution

Number of marketing intermediaries

Intensity at various levels


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Practiced when a manufacturer restricts product distribution to asingle retailer in a particular market or just a relatively fewretailers

Products that are expensive, infrequently purchased, are soughtafter by consumers (i.e. specialty goods), or which require

considerable after-sale servicing are the most likely candidates forexclusive distribution

Exclusive Distribution




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Selectively distributed bands are available in multipleretail outlets in a particular market

Shopping products, or those that consumers seek out,are sold through selective distribution

Selective Distribution




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Used when convenience products are sold throughvirtually every available retail outlet in a particularmarket, e.g. soft drinks, candy, gum, cigarettes

Intensive Distribution




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Price policy-the middlemen have to ensure that everyoneinvolved gets a fair and equitable deal

Payment terms-the manufacturing firm stipulates the mode and

terms of payment

Returns policy-this indicates the warranty that the manufacturerextends to the intermediary

Territorial rights-the territorial jurisdiction should be spelt spelt

out to avoid territory jumping

Mutual services and responsibilities-should be spelt

out,particularly in case of franchised and exclusive agency

channels

Terms and Responsibilities of

Intermediaries


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Evaluating the Major Alternatives

Economic criteria

Control issues

Adaptive criteria


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Criteria for Evaluating Channel Alternatives

Evolution of Channels

Growth

Dedicated stores:

Computer point

Shoppers stop

Mature

Department Stores like

Akbarallys

Decline

Discount Store

Low cost alternatives like

Discount Sales

Introductory

Specialist Channels like

boutiques in fashion/

designer wear

Value Added by Channel Members

High

Low

MarketGrowth

Rate

Marketing channels across product life cycle


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Eight Steps in Designing the Market Driven

Distribution are:

1. Know what the customers want

2. Decide on the outlet

3. Determine the costs4. Bound the ideal

5. Compare the alternatives

6. Review assumptions in the list of research

7. Confront the gap between the ideal and the actualdistribution system

8. Implement changes in the system, if required


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Channel Behavior and

Organization

Channel Conflict

Occurs when channel members disagree on roles,activities, or rewards.

Types of Conflict: Horizontal conflict: occurs among firms at the same

channel level

Vertical conflict: occurs among firms at different channellevels



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Organization Conventional Distribution Channels

Consists of one or more independent channel members

Lack leadership and power

Often result in poor performance Vertical Marketing Systems

Consists of members acting as a unified system

Use contracts, ownership or power



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Organization

Corporate VMS Contractual VMS Administered VMS

Corporation ownsproduction anddistribution

Coordination andconflict through regularorganizational channels

Vertical MarketingSystems

Goal 2: Learn how channel members interact and how they organize


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Organization


Individual firms who jointhrough contracts

Franchise organizations

Manufacturer-sponsored retailerfranchise system

Manufacturer-sponsoredwholesaler franchise system

Service-firm-sponsored retailerfranchise system



Ch l h i d


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Organization


Leadership through thesize and power ofdominant channel

members Leadership could be

manufacturer or retailer




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THANK YOU

28854780 designing and managing integrated marketing channels

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