MARKETING CHANNELS in marketing management.pptx

Distribution channels in marketing

1. UNIT- 7 DESIGNING AND MANAGING INTEGRATED MARKETING CHANNELS Presented By Prof . VENKATESHWAR RAO Department of Management Dilla University.

2. Nature / Importance of Channels Most businesses use third parties or intermediaries to bring their products to market . " Distribution Channel" which can be defined as “All the organizations through which a product must pass between its point of production and consumption“ Intermediaries are specialists in selling. They have the contacts, experience and scale of operation which means that greater sales can be achieved than if the producing business tried to run a sales operation itself.

3. Marketing Channels and Value Networks A Marketing channel Is sets of interdependent organizations involved in the process of making a product or service available for use or consumption . Value network IS a system of partnerships and alliances that a firm creates to source, augment, and deliver its offerings .

4. HOW TOYOTA CHANNEL WORKS A Toyota dealer depends on the Motor company to design cars that meet consumer needs. In turn, Toyota depends on the dealer to attract consumers, persuade them to buy Toyota cars, and service cars after the sale . The Toyota company also depends on other dealers to provide good sales and service that will uphold the reputation of Toyota and its dealer body. In fact, the success of individual Toyota dealers depends on how well the entire Toyota distribution channel compete with the channels of other automobile manufacturers .

5. Push Strategy Push Strategy:- Producers induce intermediaries to carry, promote and sell products and services to end users through its sales force, trade promotions and other means. Appropriate when:- Brand loyalty is high. Brand selection at the spot. Product is an impulse item. Product benefits are well understood.

6. Pull Strategy Pull Strategy:- Customers are persuaded through promotional and advertising campaigns to demand the product, which induces intermediaries to order it from producer. Appropriate when:- Brand loyalty is high. High involvement product. Brand distinction is possible. Brand selection prior to purchase.

7. Channel Development Deciding on best channel is not a problem but convincing the available intermediaries to handle firm’s product is a difficult task. Smaller markets – Directly Through Retailers. Larger markets – Through Distributors. Rural markets – Through Local Merchants. Channel system evolves as a function of - Local opportunities. Emerging threats. company’s resources and capabilities .

8. Hybrid Channels Example : HP Computers uses :- Sales force – large accounts. Outbound telemarketing – medium size accounts. Direct mail – small accounts. Retailers – still smaller accounts. Internet – specialty item orders .

9. To mange hybrid channels, company must make sure that these channels:- Work well together. Match each target customer’s preferred way of doing business. Features expected by customers in a hybrid channel:- Ability to order online and pick it up from a convenient retail store. ability to return the ordered product back to a nearby retail store. Right to discounts and promotional offers.

10. Channel Function and Flows Gathers information about potential and current customers and competitors. Develop and disseminate persuasive information to stimulate purchasing. Place orders with manufacturers. Reach agreements on price and other terms so that transfer of ownership or possession can be affected. Assume risk connected with channel work. Provide for storage and movement of goods. Provide for buyer’s payment of their bills through banks and other financial institutions .

11. Marketing Flows

12. Channel Levels The producers and final customers are part of every channel . A zero level channel: consists of a manufacturer selling directly to final customers.(Tupperware, Dell ) The one level channel: contains one selling intermediary such as retailer. Two level channel: contains two intermediaries such as wholesalers and retailers. Three level channel: contains three intermediaries such as distributors, wholesalers and retailers.

13. Channel Levels

14. Channel-Design Decisions Designing a marketing channel requires 4 steps. These are Analyzing customer needs (a) Lot size (b) Waiting and delivery time (c) Spatial convenience ( d) Product variety (e) Service backup 2 . Establishing channel objectives Channel objectives should be stated in terms of targeted service output levels. Channel design must take into account the strengths and weaknesses of different types of intermediaries. 3 . Identifying major channel alternatives A channel alternative is described by three elements : (a)the types of available business intermediaries, (b) the number of intermediaries needed, (c) and the terms and responsibilities of each channel member. 4 . Evaluating major channel alternatives

15. Analyzing Customer Needs Lot size : the number of units the channel permits a typical customer to purchase on one occasion . In buying cars for its fleet, Hertz prefers a channel from which it can buy a large lot size. A Household wants a channel that permits buying a lot size of one.

16. Waiting & Delivery Time The average time customers of that channel wait for receipt of the goods. Customers increasingly prefer faster and faster delivery channels.

17. Spatial Convenience : The degree to which the marketing channel makes it easy for customers to purchase the product. Example : Chevrolet offers greater spatial convenience than Cadillac, because there are more Chevrolet dealers. Bata and Exide batteries have made it easier for consumers to access them. the greater market decentralization helps customers save on transportation and search costs in buying and repairing an automobile .

18. Product Variety The assortment breadth provided by the marketing channel. Normally, customers prefer a greater assortment because more choices increase the chance of finding what they need. United Spirits Limited (USL) is the largest spirits company in the world by volume, selling 114 million cases of different beverages in the year 2011 .

19. Service Backup : The add-on services are the credit, delivery, installation, repairs and others provided by the channel. The greater the service backup, the greater the work provided by the channel.

20. 2. Establishing Channel Objectives Channel objectives are a part of and result from the company‘s marketing objectives that need to be stated in terms of targeted service output levels. It should be the Endeavour of the channel members to minimize the total channel costs and still provide with the desired level of service outputs. For example , Perishable products require more direct marketing because of the dangers associated with delays and repeated handling. Products requiring installation and/or maintenance services are usually sold and maintained by the company or exclusively branches dealers. Custom-built machinery and specialized business forms are sold directly by company sales representatives because middlemen lack the requisite knowledge .

21. 3. Identifying and Evaluating major Channel Alternatives A firm can choose from a wide variety channels for reaching customers:- Sales force – complex product and transactions. Internet – less expensive but not effective with complex products. Distributors – can create sales but contact with customers is lost. Manufacturer representatives – reach to different segment of customers and delivers the right product at low cost. If fails then leads to channel conflicts and excessive costs.

22. Identifying Major Channel Alternatives Types of intermediaries Merchants Facilitators Number of intermediaries Exclusive Selective Intensive Terms and responsibilities of channel members Price policy Conditions of sale Distributors’ territorial rights Mutual services and responsibilities

23. Evaluating the Major Alternatives Determine whether own sales force or a sales agency will produce more sales. Estimate the costs of selling different volumes through each channel.

24. The Value-Adds vs. Costs of Different Channels

25. Channel-Management Decisions After a channel has been chosen, company must :- Select. Train. Motivate .

26. 1. Selecting Channel Members To select a channel member producer should determine:- No. of years in business. Other lines carried out. Growth and profit record. Financial strength. Cooperativeness. Service reputation .

27. 2. Training and Motivating C hannel Members A company should view its intermediaries as end-users. Needs and wants of intermediaries are compulsory to stimulate them to top-level performance. E x .:- Microsoft.

28. Channel Power :- The ability to alter behavior of intermediaries so that they can think out-of- the box. Powers of a manufacturer posses to elicit cooperation from intermediaries:- Coercive power :- threatening intermediaries to terminate relationship if they fail to cooperate. Reward power :- offering extra benefits on performing specific act or function. Legitimate power :- request for behavior that is warranted under contract. Expert power :- having a special knowledge that intermediaries value and doesn’t posses.

29. 4 . Evaluating Channel Members Manufacturers regularly check performance against standards such as:- sales quotas, inventory levels, customer delivery time, treatment of damaged and lost goods and cooperation in promotional and training programs.

30. Modifying Channel Design A channel is modified when:- Channel is not working well as planned. Consumer buying pattern change. Market expands. New competition arises. Product moves into latter stage of its product life cycle.

31. Channel Integration and Systems Horizontal marketing system Vertical marketing system Multichannel marketing systems

32. Vertical Marketing System The producer, wholesaler and retailer acts a unified system . One channel member, the channel captain owns the others or franchises them has so much power that they all cooperate. VMS arose as a result of strong channel members’ attempt to control behavior and eliminate the conflict.

33. Corporate Vertical Marketing System :- It combines successive stages of production and distribution under single ownership. Administered Vertical Marketing System :- It coordinates successive stages of production and distribution through size and power of one of the members . Contractual Vertical Marketing System :- It consists of independent firms at different levels of production and distribution, in order to obtain more economies or sales impact what they had achieved alone.

34. Wholesalers Sponsored Voluntary Chain :- Wholesalers organize voluntary chains of retailers to help them standardize their selling practices and help them achieve buying economies in order to compete with large chain organizations. Retailer Cooperatives :- Retailers take the initiative and organize new business entity to carry on wholesaling with some production. Members concentrate their purchases through retailer co-op and plan their advertising jointly. Profits pass back to members in proportion to their purchase. Franchisee Organization :- A channel member called franchisor might link several successive stage in the production-distribution process.

35. Horizontal Marketing System A horizontal marketing system is one in which two or more unrelated companies put together resources or programs to exploit an emerging market opportunity. Each one lacks capital, know how production, marketing resources to venture alone. Companies might work with each other on temporary or permanent basis.

36. Integrated Multichannel Marketing Systems Multichannel Marketing Occurs when a single firm uses two or more marketing channels to reach one or more customer segments . Integrated Marketing Channel System Strategies and tactics of selling through one channel reflect the strategies and tactics of selling through other channels.

37. Conflict and Cooperation Channel conflict Generated when one channel member’s actions prevent another channel member from achieving its goals. Channel coordination Channel members are brought together to advance the goals of the channel.

38. Channel Conflicts  Horizontal and Vertical Horizontal conflicts occurs among firms at the same level of the channel. For example, some Ford dealers in Chicago complained about other dealers in the city who stole sales from them by being too aggressive in their pricing and advertising or by selling outside their assigned territories . Vertical conflicts refers to conflicts between different levels of the same channel. For example, General Motors came into conflict with its dealer some years ago by trying to enforce service, pricing, and advertising policies .

39. Causes of Channel Conflict Goal incompatibility :- Manufacturers want to achieve rapid market penetration through low price policy. Unclear Roles and Rights :- HP may sell personal computers to large accounts through its own sales force, but its licensed dealers may also be trying to sell to large accounts . Differences in Perception :- Disputes between manufacturers and distributors about optimal advertising strategy. Intermediaries Dependence on Manufacturer :- Fortune of exclusive dealers depend totally upon manufacturers’ products and pricing decisions which creates high potential for conflict.

40. Strategies for Managing Channel Conflict Adoption of super-ordinate goals Exchange of employees Joint membership in trade associations Co-optation Diplomacy, mediation, or arbitration Legal recourse

41. Impact of Internet on Marketing Practices E-business E-commerce E-purchasing E-marketing E-business describes the use of electronic means and platforms to conduct a company’s business. E-commerce means that the company or site transacts or facilitates the online selling of products and services. E-commerce has given rise to e-purchasing and e-marketing . E-purchasing means companies decide to buy goods, services, and information from various online suppliers. E-marketing describes company efforts to inform buyers, communicate, promote, and sell its offerings online .

42. Pure-Click Companies pure-click companies , those that have launched a Web site without any previous existence as a firm, Examples: Search engines ,Internet service providers (ISPs) ,Commerce sites ,Transaction sites ,Content sites, Enabler sites. brick-and-click companies , existing companies that have added an online site for information and/or e-commerce . M-commerce (m for mobile) is another emerging trend in e-commerce.

43. Brick-and-Click Companies Strategies for gaining acceptance from intermediaries when selling through intermediaries and online: Offer different brands or products on the Internet. Offer offline partners higher commissions to cushion the negative impact on sales. Take orders on the Web site but have retailers deliver and collect payment.

44. Why E-Commerce Succeeds Convenience – 24/7 Ease of use Trust Availability

45. THE END THANK YOU