Unit - V Designing and Managing

Value Networks and Channels

What is a marketing channel system and value network?

What work do marketing channels perform? How should channels be designed? What decisions do companies face in

managing their channels? How should companies integrate channels

and manage channel conflict? What is the future for e-commerce?

Chapter Questions

Sets of interdependent organizationsinvolved in the process of making a product or service available for use

or consumption.

Marketing Channels

A very critical decision for the management as it involves a substantial cost

A long term commitment Converting potential buyers into profitable

orders Not only SERVE markets but MAKE markets

PUSH VS PULL Strategy

Importance of Channels

Hybrid channels

Categories of buyers ◦ Habitual buyers◦ High value deal seekers◦ Variety loving shoppers◦ High involvement shoppers

Channel Development

Ability to order a product online and pick it up at a convenient retail location

Ability to return an online-ordered product to a nearby store

Right to receive discounts based on total online and offline purchases

Buyer Expectations for Channel Integration

A system of partnerships and alliances that a firm creates to source, augment and deliver its offerings

It includes suppliers, its suppliers supplier, immediate customers and also the end customers

Supply chain planning Demand chain planning

Value networks

Channel functions and flows

Channel levels

Service sector channels

Role of marketing channels

◦Gather information◦Develop and disseminate persuasive communications

◦Reach agreements on price and terms◦Place orders with manufacturers◦Acquire funds to finance inventories◦Assume risks◦Provide for storage◦Provide for buyers’ payment of their bills

◦Oversee actual transfer of ownership

Channel members functions

Forward Flow Physical Title PromotionBackward Flow Payment Information

Channel Flows in marketing

Zero Level channel One level channel Two level channel Three level channel

SERVICE SECTOR CHANNELS Education dissemination systems Health delivery system

Channel Levels

Analyze customer needs Establish channel objectives Identify major channel alternatives Evaluate major channel alternatives

Designing a Marketing Channel System

Channel service output Lot size Waiting/delivery time Spatial convenience Product variety Service backup

Analyzing customer’s desired service output level

Should be stated in terms of targets output levels May vary with product characteristics Strengths and weaknesses of intermediaries

should be taken into consideration Competitors channels Legal regulations

Establishing objectives and constraints

Types of intermediaries

Identifying Channel Alternatives

Number of intermediaries◦ Exclusive◦ Selective◦ Intensive

Terms and responsibilities◦ Price policy◦ Conditions of sale◦ Distributers territorial rights◦ Mutual services & responsibilities

Identifying Channel Alternatives

Economic criteria – Channel advantage◦ Will they sell◦ Cost of selling

Low cost alternatives – internet, telemarketing, retail stores

High or med cost -distributors, value added partners, direct sales

Control and adaptive criteria – ◦ Ex. sales agency –less control

Evaluating the major alternatives

Selecting channel members Training channel members Motivating channel members

◦ Channel power –coercive, reward, legitimate , expert & referent

Evaluating channel members Modifying channel members

Channel-Management Decisions

Vertical marketing systems Corporate VMS Administered VMS Contractual VMSHorizontal marketing systemsMultichannel systems

Channel Integration and Systems

Types of conflict and competition◦ Vertical –diff level within the channel◦ Horizontal – between members of same level

within the channel◦ Multi channel - between two channels

Causes of conflict◦ Goal incompatibility◦ Unclear roles rights◦ Differences in perception◦ Dependence on manufacturer

Channel Conflict

Adoption of super ordinate goals Cooptation Diplomacy Mediation Arbitration

Legal and ethical issues in channel relations

Managing Channel Conflict