lecture 7 designing and managing value networks and marketing channels prof. mundy gonzalez rcbc...

Lecture 7Designing and Managing Designing and Managing

Value Networks and Value Networks and Marketing ChannelsMarketing Channels

Prof. Mundy GonzalezRCBC CampusAugust 2, 2006

Establish channels Establish channels for different target for different target markets and aim for markets and aim for efficiency, control, efficiency, control, and adaptability.and adaptability.

Kotler on Kotler on MarketingMarketing

No. of Contacts = 3 x 3 = 9

Manufacturer-CustomerManufacturer-Customer ContactsContacts

M C

M

M

C

C

D

M

M

M

C

C

C

No. of Contacts = 3 +3 = 6

Contacts with DistributorContacts with Distributor

Value Network and Marketing-Value Network and Marketing-Channel SystemChannel System

Value NetworkValue Network Marketing channelMarketing channel


““Go-to-market” or Go-to-market” or hybridhybrid channels channels IBM’s sales force sells to large accounts, outbound IBM’s sales force sells to large accounts, outbound

telemarketing sells to medium-sized accounts, direct mail telemarketing sells to medium-sized accounts, direct mail sells to small accounts, retailers sell to still smaller sells to small accounts, retailers sell to still smaller accounts, and the Internet to sell specialty itemsaccounts, and the Internet to sell specialty items

Charles Schwab enables its customers to do transactions Charles Schwab enables its customers to do transactions in branch offices, over the phone, or via the Internetin branch offices, over the phone, or via the Internet

Staples markets through traditional retail, direct-response Staples markets through traditional retail, direct-response Internet site, virtual malls, and 30,000 linked affiliated sitesInternet site, virtual malls, and 30,000 linked affiliated sites


Channel integration characteristics:Channel integration characteristics: Ability to order a product online, and Ability to order a product online, and

pick it up at a convenient retail locationpick it up at a convenient retail location Ability to return an online-ordered Ability to return an online-ordered

product to a nearby storeproduct to a nearby store Right to receive discounts based on Right to receive discounts based on

total of online and off-line purchasestotal of online and off-line purchases

Work Performed by Marketing Work Performed by Marketing ChannelsChannels

Many producers lack the financial Many producers lack the financial resources to carry out direct marketingresources to carry out direct marketing

In some cases direct marketing In some cases direct marketing simply is not feasiblesimply is not feasible

Producers who do establish their own Producers who do establish their own channels can often earn a greater return channels can often earn a greater return by increasing their investment in their main by increasing their investment in their main business.business.


Channel Functions and FlowsChannel Functions and Flows Key functions include:Key functions include:

Gather information about potential and Gather information about potential and current customers, competitors, and otherscurrent customers, competitors, and others

Develop and disseminate persuasive Develop and disseminate persuasive communications to stimulate purchasingcommunications to stimulate purchasing

Reach agreements on price and other terms Reach agreements on price and other terms so that transfer of ownership or possession so that transfer of ownership or possession can be effectedcan be effected

Place orders with manufacturersPlace orders with manufacturers


Acquire funds to finance inventories at different Acquire funds to finance inventories at different levels in the marketing channellevels in the marketing channel

Assume risk connected with Assume risk connected with carrying out channel workcarrying out channel work

Provide for the successive storage Provide for the successive storage and movement of physical productsand movement of physical products

Provide for buyers’ payment of their bills Provide for buyers’ payment of their bills through banks and other financial institutionsthrough banks and other financial institutions

Oversee actual transfer of ownership from one Oversee actual transfer of ownership from one organization or person to anotherorganization or person to another


Forward flowForward flow Backward flowBackward flow

Five Marketing Flows in the Five Marketing Flows in the Marketing Channel Marketing Channel for Forklift Trucksfor Forklift Trucks

Consumer Marketing ChannelsConsumer Marketing Channels

Manufacturer

Consumer

Manufacturer Manufacturer Manufacturer

Consumer Consumer Consumer

Retailer

Wholesaler

Retailer Retailer

Wholesaler

Jobber

0 - level 1 - level 2- level 3 - level

Industrial Marketing ChannelsIndustrial Marketing Channels

Manufacturer Manufacturer Manufacturer Manufacturer

IndustrialConsumer

IndustrialConsumer

IndustrialConsumer

IndustrialConsumer

Manufacturer’sRepresentative

Manufacturer’s Sales Branch

IndustrialDistributor

0 - level 1 - level 2 - level 3 - level

core


Channel levelsChannel levels Zero-level channel (a.k.a. direct-Zero-level channel (a.k.a. direct-

marketing channel)marketing channel) One-level channelOne-level channel Two-level channelTwo-level channel Three-level channelThree-level channel Reverse-flow channelReverse-flow channel

Service Sector ChannelsService Sector Channels Information Highway ChannelsInformation Highway Channels

Channel-Design DecisionsChannel-Design Decisions

Push strategyPush strategy Pull strategyPull strategy

Designing a channel system Designing a channel system involves four steps:involves four steps: Analyzing customer needsAnalyzing customer needs Establishing channel objectivesEstablishing channel objectives Identifying major channel alternativesIdentifying major channel alternatives Evaluating major channel alternativesEvaluating major channel alternatives


Analyze Customers’ Desired Analyze Customers’ Desired Service Output LevelsService Output Levels Lot sizeLot size Waiting timeWaiting time Spatial convenienceSpatial convenience Product varietyProduct variety Service backupService backup


Establish Objectives and ConstraintsEstablish Objectives and Constraints Identify Major Channel AlternativesIdentify Major Channel Alternatives

Types of IntermediariesTypes of Intermediaries Number of IntermediariesNumber of Intermediaries

Exclusive distributionExclusive distribution Exclusive dealingExclusive dealing

Selective distributionSelective distribution Intensive distributionIntensive distribution


Terms and Responsibilities of Terms and Responsibilities of Channel MembersChannel Members Price policyPrice policy Conditions of saleConditions of sale Distributors’ territorial rightsDistributors’ territorial rights

Evaluate the Major AlternativesEvaluate the Major Alternatives Economic CriteriaEconomic Criteria

The Value-Adds versus Costs of The Value-Adds versus Costs of Different ChannelsDifferent Channels

Break-even Break-even Cost ChartCost Chart

Channel-Design Decisions

Channel advantageChannel advantage

Control and Adaptive CriteriaControl and Adaptive Criteria

Channel-Management Channel-Management DecisionsDecisions

Selecting Channel MembersSelecting Channel Members Training Channel MembersTraining Channel Members Motivating Channel MembersMotivating Channel Members

Producers can use:Producers can use: Coercive powerCoercive power Reward powerReward power Legitimate powerLegitimate power Expert powerExpert power Referent power Referent power

Channel-Management Channel-Management DecisionsDecisions

Distribution programmingDistribution programming Distributor-relations planningDistributor-relations planning

Evaluating Channel MembersEvaluating Channel Members Modifying Channel Arrangements Modifying Channel Arrangements

Channel Value Added and Market Channel Value Added and Market Growth RateGrowth Rate

Channel DynamicsChannel Dynamics

Vertical Marketing SystemsVertical Marketing Systems Conventional marketing channelConventional marketing channel Vertical marketing systems (VMS)Vertical marketing systems (VMS)

Corporate and Administered VMSCorporate and Administered VMS Corporate VMSCorporate VMS Administered VMSAdministered VMS


Contractual VMSContractual VMS Wholesaler-sponsored voluntary chainsWholesaler-sponsored voluntary chains Retailer cooperativesRetailer cooperatives Franchise organizationsFranchise organizations

Manufacturer-sponsored retailer franchiseManufacturer-sponsored retailer franchise Manufacturer-sponsored wholesaler Manufacturer-sponsored wholesaler

franchisefranchise Service-firm-sponsored retailer franchiseService-firm-sponsored retailer franchise


The New Competition in RetailingThe New Competition in Retailing

Horizontal Marketing SystemsHorizontal Marketing Systems Multichannel Marketing SystemsMultichannel Marketing Systems


Planning Channel ArchitecturePlanning Channel Architecture

The Hybrid GridThe Hybrid Grid


Roles of Individual FirmsRoles of Individual Firms InsidersInsiders StriversStrivers ComplementersComplementers TransientsTransients Outside innovatorsOutside innovators


Conflict, Cooperation, and CompetitionConflict, Cooperation, and Competition Types of Conflict and CompetitionTypes of Conflict and Competition

Vertical channel conflictVertical channel conflict Horizontal channel conflictHorizontal channel conflict Multichannel conflictMultichannel conflict

Causes of Channel ConflictCauses of Channel Conflict Goal incompatibilityGoal incompatibility Unclear roles and rightsUnclear roles and rights

Differences in perceptionDifferences in perception


By adding new channels, a company faces By adding new channels, a company faces the possibility of channel conflict which the possibility of channel conflict which may include:may include: Conflict between the national account Conflict between the national account

managers and field sales forcemanagers and field sales force Conflict between the field sales Conflict between the field sales

force and the telemarketersforce and the telemarketers Conflict between the field sales Conflict between the field sales

force and the dealersforce and the dealers


Managing Channel ConflictManaging Channel Conflict DiplomacyDiplomacy MediationMediation ArbitrationArbitration

Legal and Ethical Issues Legal and Ethical Issues in Channel Distributionin Channel Distribution

Exclusive distributionExclusive distribution Exclusive dealingExclusive dealing Tying agreementsTying agreements

lecture 7 designing and managing value networks and marketing channels prof. mundy gonzalez rcbc...

Documents

marketing slide

cases direct marketing

c c slide

direct mail sells

flows channel functions

large accounts

small accounts

smaller accounts