designing and managing integrated marketing channels
DESCRIPTION
Designing and Managing Integrated Marketing ChannelsTRANSCRIPT
Designing and Managing Designing and Managing Integrated Marketing Integrated Marketing
Channels Channels
ObjectivesObjectives To Describe the Nature and Functions of Marketing To Describe the Nature and Functions of Marketing
ChannelsChannels To Identify the Types of Marketing ChannelsTo Identify the Types of Marketing Channels To Examine the Major Levels of Marketing CoverageTo Examine the Major Levels of Marketing Coverage To Explore the Concepts of Leadership, Cooperation, To Explore the Concepts of Leadership, Cooperation,
and Conflict in Channel Relationshipsand Conflict in Channel Relationships To Specify How Channel Integration Can Improve To Specify How Channel Integration Can Improve
Channel EfficiencyChannel Efficiency To Examine the Legal Issues Affecting Channel To Examine the Legal Issues Affecting Channel
ManagementManagement
…….Marketers realize that if they .Marketers realize that if they
were to make the brands available were to make the brands available
in the right size, at the right time in the right size, at the right time
and at the right price, the Indian and at the right price, the Indian
consumer can be motivated to buy consumer can be motivated to buy
it and consume it…..it and consume it…..
DefinitionsDefinitions Value Delivery NetworkValue Delivery Network
The network made up of the company, The network made up of the company, suppliers, distributors, and ultimately suppliers, distributors, and ultimately customers who “partner” with each other to customers who “partner” with each other to improve the performance of the entire system.improve the performance of the entire system.
Marketing channelMarketing channel Set of interdependent organizations involved Set of interdependent organizations involved
in the process of making a product or service in the process of making a product or service available for use or consumption by the available for use or consumption by the consumer or business userconsumer or business user
Goal 1: Know why companies use channels and understand their functions
What is a Marketing What is a Marketing Channel?Channel?
Marketing channel (a.k.a. Marketing channel (a.k.a. distribution channel) - network distribution channel) - network of organizations that create of organizations that create time, place, and possession time, place, and possession utilities for consumersutilities for consumers
TIMETIMEPLACEPLACE
POSSESSIONPOSSESSION
Marketing Channels Create UtilityMarketing Channels Create Utility
The Nature of The Nature of Marketing ChannelsMarketing Channels
The Role of Marketing The Role of Marketing ChannelChannel
•Channel Functions and Flows
•Channel Levels
•Service Sector Channels
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 Marketing Channel FunctionsFunctions
Marketing Channel Marketing Channel FlowsFlows
Product FlowProduct Flow The movement of the product The movement of the product
from manufacturer through from manufacturer through all parties who take physical all parties who take physical possessionpossession
Negotiation FlowNegotiation Flow Interplay of buying/selling Interplay of buying/selling
tasks associated with title tasks associated with title transfertransfer
Marketing Channel Marketing Channel FlowsFlows
Ownership FlowOwnership Flow Movement of title of the Movement of title of the
productproduct Information FlowInformation Flow
Information to and from the Information to and from the manufacturermanufacturer
Promotion FlowPromotion Flow Flow of persuasive Flow of persuasive
communication (advertising, communication (advertising, personal selling, etc.)personal selling, etc.)
Marketing Channel Marketing Channel FlowsFlows
Channel LevelsChannel Levels
Manufacturer Manufacturer Manufacturer Manufacturer
Consumer Consumer Consumer Consumer
Retailer Retailer Retailer
Wholesaler Wholesaler
Agent
1 level1 level 2 level2 level 3 level3 level 4 level4 level
Length of marketing channel
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
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 uniform
d) Firm sells goods to wholesaler or a large dealer
2, 3 or even 4 levels in case of:
a) Consumer products
b) Customers spread across the country
c) Market is large
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 longerchannel
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
Manufacturer
Customer
Customer
Wholesaler/Dealer
Manufacturer
Zero Level One Level
(a) (b)
Length of channel distribution
Wholesaler/Dealer
Retailer
Distributor
Customer
Manufacturer Manufacturer
Wholesaler
Retailer
Customer
Two Level Three Level
(c) (d)
Length of channel distribution
Manufacturer
Market 1
Dealer Dealer DealerDealerDealerDealer Dealer
A B C D E F G
Retailers
Customers Customers Customers
Width of channel of distribution
Market
Market
Market
Market
Market
Market
Market
Market
Market
Market
Market
MarketMarket
Market
Market
Market
Market
Market
Market
Market
Market
MarketMarket
Market
Market
Market
Market Market
Market
Market
Market
Market
Market
MarketMarket
Market
Retail spokes-restaurants, soft drink kiosks, panwalsa, sweetmarts
Dealer/wholesalerDealer Hub
FranchiseMajor Hub ofParent Company
Hub and spoke pattern of distribution of a soft drink firm
Wholesalers Retailers ConsumersProducerAgents orBrokers
Producer
Wholesalers Retailers
Consumers
Producer Retailers Consumers
Producer Consumers
Types of Marketing ChannelsTypes of Marketing ChannelsChannels for Consumer ProductsChannels for Consumer Products
Types of Marketing ChannelsTypes of Marketing ChannelsChannels for Industrial ProductsChannels for Industrial Products
AgentsIndustrialDistributor
Business/Organizational
BuyerProducer
IndustrialDistributor
Business/Organizational
BuyerProducer
ProducerBusiness/
Organizational Buyer
AgentsBusiness/
Organizational Buyer
Producer
Channel design Channel design DecisionsDecisions
Analyzing Customers Desired Analyzing Customers Desired Service Output levelsService Output levels
Establishing Objectives and Establishing Objectives and ConstraintsConstraints
Identifying and Evaluating major Identifying and Evaluating major Channel AlternativesChannel Alternatives
Evaluating the Major AlternativesEvaluating the Major Alternatives
Analyzing Customers Desired Analyzing Customers Desired Service Output levelsService Output levels
Cost and feasibility of meeting needs Cost and feasibility of meeting needs must be considered must be considered
Lot SizeLot Size Waiting & Delivery TimeWaiting & Delivery Time Spatial ConvenienceSpatial Convenience Product VarietyProduct Variety Service BackupService Backup
Establishing Objectives and Establishing Objectives and ConstraintsConstraints
Set channel objectives in terms of Set channel objectives in terms of targeted level of customer servicetargeted level of customer service
Product CharacteristicsProduct Characteristics Strength & weakness of intermediariesStrength & weakness of intermediaries Adaptability to larger environmentAdaptability to larger environment
Identifying and Evaluating Identifying and Evaluating major Channel Alternativesmajor Channel Alternatives
Types of intermediariesTypes of intermediaries Company sales force, manufacturer’s Company sales force, manufacturer’s
agency, industrial distributorsagency, industrial distributors Number of marketing intermediariesNumber of marketing intermediaries
Intensive, selective, and exclusive Intensive, selective, and exclusive distributiondistribution
Responsibilities of channel membersResponsibilities of channel members
Types of intermediariesTypes of intermediaries
FunctionalFunctional
MiddlemenMiddlemen
FunctionalFunctional
MiddlemenMiddlemenMerchant Merchant MiddlemenMiddlemen
Merchant Merchant MiddlemenMiddlemen
Types of intermediariesTypes of intermediaries
FunctionalFunctional
MiddlemenMiddlemen
FunctionalFunctional
MiddlemenMiddlemen
Do not take title to products; Do not take title to products; they simply facilitate the they simply facilitate the exchange process by performing exchange process by performing buying and/or selling functions.buying and/or selling functions.
Types of intermediariesTypes of intermediaries
Merchant Merchant MiddlemenMiddlemen
Merchant Merchant MiddlemenMiddlemen
Take title to products and Take title to products and resell them.resell them.
Exclusive Exclusive DistributionDistribution
Selective Selective DistributionDistribution
Intensive Intensive DistributionDistribution
Number of marketing Number of marketing intermediariesintermediaries
Number of marketing Number of marketing intermediariesintermediaries
Intensity at various levels
Practiced when a manufacturer restricts product Practiced when a manufacturer restricts product distribution to a single retailer in a particular distribution to a single retailer in a particular market or just a relatively few retailersmarket or just a relatively few retailers
Products that are expensive, infrequently Products that are expensive, infrequently purchased, are sought after by consumers (i.e. purchased, are sought after by consumers (i.e. specialty goods), or which require considerable specialty goods), or which require considerable after-sale servicing are the most likely candidates after-sale servicing are the most likely candidates for exclusive distributionfor exclusive distribution
Exclusive DistributionExclusive Distribution
Number of marketing Number of marketing intermediariesintermediaries
Number of marketing Number of marketing intermediariesintermediaries
Intensity at various levels
Selectively distributed bands are available Selectively distributed bands are available in multiple retail outlets in a particular in multiple retail outlets in a particular marketmarket
Shopping products, or those that Shopping products, or those that consumers seek out, are sold through consumers seek out, are sold through selective distributionselective distribution
Selective DistributionSelective Distribution
Number of marketing Number of marketing intermediariesintermediaries
Number of marketing Number of marketing intermediariesintermediaries
Intensity at various levels
Used when convenience products are sold Used when convenience products are sold through virtually every available retail through virtually every available retail outlet in a particular market, e.g. soft outlet in a particular market, e.g. soft drinks, candy, gum, cigarettesdrinks, candy, gum, cigarettes
Intensive DistributionIntensive Distribution
Number of marketing Number of marketing intermediariesintermediaries
Number of marketing Number of marketing intermediariesintermediaries
Intensity at various levels
Price policy-the middlemen have to ensure that everyone involved 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 manufacturer extends 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
Terms and Responsibilities of Intermediaries
Evaluating the Major Evaluating the Major AlternativesAlternatives
Economic criteriaEconomic criteria Control issuesControl issues Adaptive criteriaAdaptive criteria
Criteria for Evaluating Channel Alternatives
Evolution of Channels
GrowthDedicated stores:Computer pointShopper’s stop
Mature Department Stores like
Akbarallys
DeclineDiscount Store
Low cost alternatives like‘Discount Sales’
IntroductorySpecialist Channels like
boutiques in fashion/designer wear
Value Added by Channel Members
High
Low
MarketGrowth Rate
Marketing channels across product life cycle
Eight Steps in Designing the Market Driven Distribution are:
1. Know what the customers want2. Decide on the outlet3. Determine the costs4. Bound the ‘ideal’5. Compare the alternatives6. Review assumptions in the list of research7. Confront the gap between the ideal and the actual
distribution system8. Implement changes in the system, if required
Channel Behavior and Channel Behavior and OrganizationOrganization
Channel ConflictChannel Conflict Occurs when channel members Occurs when channel members
disagree on roles, activities, or rewards.disagree on roles, activities, or rewards. Types of Conflict:Types of Conflict:
Horizontal conflict: occurs among firms at Horizontal conflict: occurs among firms at the same channel levelthe same channel level
Vertical conflict: occurs among firms at Vertical conflict: occurs among firms at different channel levelsdifferent channel levels
Goal 1: Know why companies use channels and understand their functions
Channel Behavior and Channel Behavior and OrganizationOrganization
Conventional Distribution ChannelsConventional Distribution Channels Consists of one or more independent channel Consists of one or more independent channel
membersmembers Lack leadership and powerLack leadership and power Often result in poor performanceOften result in poor performance
Vertical Marketing SystemsVertical Marketing Systems Consists of members acting as a unified Consists of members acting as a unified
systemsystem Use contracts, ownership or powerUse contracts, ownership or power
Goal 1: Know why companies use channels and understand their functions
Channel Behavior and Channel Behavior and OrganizationOrganization
Corporate VMSCorporate VMS Contractual VMSContractual VMS Administered Administered
VMSVMS
Corporation owns Corporation owns production and production and distributiondistribution
Coordination and Coordination and conflict through conflict through regular regular organizational organizational channelschannels
Vertical Marketing Systems
Goal 2: Learn how channel members interact and how they organize
Channel Behavior and Channel Behavior and OrganizationOrganization
Corporate VMSCorporate VMS Contractual VMSContractual VMS Administered Administered
VMSVMS
Individual firms who Individual firms who join through contracts join through contracts
Franchise Franchise organizations organizations Manufacturer-Manufacturer-
sponsored retailer sponsored retailer franchise systemfranchise system
Manufacturer-Manufacturer-sponsored wholesaler sponsored wholesaler franchise systemfranchise system
Service-firm-sponsored Service-firm-sponsored retailer franchise retailer franchise systemsystem
Vertical Marketing Systems
Goal 2: Learn how channel members interact and how they organize
Channel Behavior and Channel Behavior and OrganizationOrganization
Corporate VMSCorporate VMS Contractual VMSContractual VMS Administered Administered
VMSVMS
Leadership Leadership through the size through the size and power of and power of dominant channel dominant channel membersmembers
Leadership could Leadership could be manufacturer be manufacturer or retaileror retailer
Vertical Marketing Systems
Goal 2: Learn how channel members interact and how they organize
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