designing and managing value networks and marketing channels
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Designing and Managing Value Networks and Marketing ChannelsTRANSCRIPT
To accompany A Framework for Marketing Management, 2nd Edition Slide 1 in Chapter 14©2003 Prentice Hall, Inc.
Chapter 14Chapter 14
Designing and Managing Designing and Managing Value Networks and Value Networks and Marketing ChannelsMarketing Channels
PowerPoint by Karen E. JamesPowerPoint by Karen E. JamesLouisiana State University - ShreveportLouisiana State University - Shreveport
To accompany A Framework for Marketing Management, 2nd Edition Slide 2 in Chapter 14©2003 Prentice Hall, Inc.
ObjectivesObjectives
Identify value networks and marketing-channel systems.
Learn the type of work performed by marketing channels.
Understand the decisions companies face in designing, managing, evaluating, and modifying channels.
To accompany A Framework for Marketing Management, 2nd Edition Slide 3 in Chapter 14©2003 Prentice Hall, Inc.
ObjectivesObjectives
Identify trends taking place in channel dynamics.
Learn how channel conflict can be managed.
To accompany A Framework for Marketing Management, 2nd Edition Slide 4 in Chapter 14©2003 Prentice Hall, Inc.
Value Networks and Value Networks and Marketing Channel SystemsMarketing Channel Systems
A Value Network is a system of partnerships and alliances used by a firm to source, augment, and deliver its product or service offerings.
Intermediaries that help get the product from manufacturer to consumer or end users form the Marketing Channel(s).
To accompany A Framework for Marketing Management, 2nd Edition Slide 5 in Chapter 14©2003 Prentice Hall, Inc.
Work Performed by Work Performed by ChannelsChannels
Producers establish marketing channels for a variety of reasons:
– Producers lack financial resources necessary for direct marketing
– Direct marketing is not feasible for many offerings
– Using channels frees money for investment in main business
– Intermediaries are more efficient
To accompany A Framework for Marketing Management, 2nd Edition Slide 6 in Chapter 14©2003 Prentice Hall, Inc.
Work Performed by Work Performed by ChannelsChannels
Channel members perform a number of key functions:
– Forward flow functions:Develop / disseminate communicationStore and move the physical productsOversee transfer of ownership
– Backward flow functions:Place orders with manufacturersFacilitate payment of bills
To accompany A Framework for Marketing Management, 2nd Edition Slide 7 in Chapter 14©2003 Prentice Hall, Inc.
Work Performed by Work Performed by ChannelsChannels
Other key functions performed by channel members include those that flow both ways:
– Forward and backward flow functions:Gather informationNegotiate price and transfer of
ownershipFinance inventoriesAssume risk
To accompany A Framework for Marketing Management, 2nd Edition Slide 8 in Chapter 14©2003 Prentice Hall, Inc.
Work Performed by Work Performed by ChannelsChannels
Channel levels vary according to the number of intermediaries:
– Zero-level (direct marketing) channel– One, two, and three-level channels– Reverse flow channels
Service sector channels use agencies and locations to access population to be served.
To accompany A Framework for Marketing Management, 2nd Edition Slide 9 in Chapter 14©2003 Prentice Hall, Inc.
Channel-Design DecisionsChannel-Design Decisions
Push vs. pull strategy
Analyzing consumers’ desired service output levels
– Lot size, waiting time, product variety, spatial convenience, service backup
Establishing objectives / constraints
Identifying and then evaluating major channel alternatives
To accompany A Framework for Marketing Management, 2nd Edition Slide 10 in Chapter 14©2003 Prentice Hall, Inc.
Channel-Design DecisionsChannel-Design Decisions
Channel Factors
Intermediary type
Number of intermediaries
Terms and responsibilities of intermediaries
Merchants
– Buy, take title, and resell merchandise
Agents
– Find customers, negotiate, do not take title to merchandise
Facilitators
– Aid in distribution, do not negotiate or take title to merchandise
To accompany A Framework for Marketing Management, 2nd Edition Slide 11 in Chapter 14©2003 Prentice Hall, Inc.
Channel-Design DecisionsChannel-Design Decisions
Channel Factors
Intermediary type
Number of intermediaries
Terms and responsibilities of intermediaries
Exclusive distribution
– Severely limited distribution
Selective distribution
– Some intermediaries willing to carry good are selected
Intensive distribution
– Offering is placed in as many outlets as possible.
To accompany A Framework for Marketing Management, 2nd Edition Slide 12 in Chapter 14©2003 Prentice Hall, Inc.
Channel-Design DecisionsChannel-Design Decisions
Channel Factors
Intermediary type
Number of intermediaries
Terms and responsibilities of intermediaries
Price policies
– Price list and schedule of discounts
Conditions of sale
– Payment terms and guarantees
Territorial rights
– Define territory / terms
Services to be performed by party
To accompany A Framework for Marketing Management, 2nd Edition Slide 13 in Chapter 14©2003 Prentice Hall, Inc.
Channel-Design DecisionsChannel-Design Decisions
Channel Alternative Evaluation Criteria:
– Economic criteria Sales and costs vs. added value
– Control criteria– Adaptive criteria
After choosing a particular channel alternative, firms take several actions
To accompany A Framework for Marketing Management, 2nd Edition Slide 14 in Chapter 14©2003 Prentice Hall, Inc.
Channel-Management Channel-Management DecisionsDecisions
Motivate channel members
Evaluate channel members
Modify channel arrangements
Channel Development Process
Select channel members
Train channel members
To accompany A Framework for Marketing Management, 2nd Edition Slide 15 in Chapter 14©2003 Prentice Hall, Inc.
Channel DynamicsChannel Dynamics
Channel systems are constantly evolving and developing
Vertical Marketing Systems
– Corporate VMS– Administered VMS– Contractual VMS
Horizontal Marketing Systems
Multichannel Marketing Systems
To accompany A Framework for Marketing Management, 2nd Edition Slide 16 in Chapter 14©2003 Prentice Hall, Inc.
Channel DynamicsChannel Dynamics
Conflict, Cooperation, & Competition
– Types of conflictVertical, horizontal, and multichannel
– Causes of conflictMajor causes: Goal incompatibility;
unclear roles and rightsOther potential causes exist
– Managing channel conflict
To accompany A Framework for Marketing Management, 2nd Edition Slide 17 in Chapter 14©2003 Prentice Hall, Inc.
Channel-Management Channel-Management DecisionsDecisions
Cooptation
Diplomacy
Mediation
Arbitration
Managing Channel Conflict
Subordinate goal adoption
Exchange people between channel levels
To accompany A Framework for Marketing Management, 2nd Edition Slide 18 in Chapter 14©2003 Prentice Hall, Inc.
Channel DynamicsChannel Dynamics
Legal and Ethical Issues in Channel Relations
– Two common distribution practices are legal as long as they don’t substantially lessen competition:
Exclusive dealingTying agreements