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Designing & managing value networks & channels.

Successful value creation needs successful value delivery. Holistic marketers areincreasingly taking a value network view of their businesses. Instead of limiting their

focus on their immediate suppliers, distributors, and customers, they are examining the

whole supply chain that links raw materials, components & manufactured goods & showshow they move towards the final consumers. Companies are looking at their suppliers

suppliers upstream & at their distributors customers down stream. They are looking at

customer segments & how company resources can best be organized to meet needs.Failure to coordinate the value network properly can have dire consequences.

Marketing channels.

Marketing channels are set of interdependent organizations involved in the process of

making a product or service available for the use or consumption.

Types of intermediaries.

1-Merchants.

Buy goods & services.

Take title to the product/services.

Resell goods/services.Examples.

Wholesalers

Distributors

Retailers.

2-Agents.

Search for customers May negotiate on producers behalf

Do not take title to the goods/services.Examples.

Brokers

Manufacturers representatives

Sales agents3-Facilitators

Assist in distribution process

Neither take title

Nor negotiate purchases or sales.

Examples.

Transportation companies.

Independent warehouses

Banks

Advertising agencies.

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Marketing channel system.

A marketing channel system is a particular set of marketing channels employed by afirm.

The importance of channels.

1. Marketing channel system decisions are the most critical facing management.

2. Channel members collectively earn margins that account for 30% to 50% of finalconsumer price.

3. Marketing channels represent a substantial opportunity cost.

4. Marketing channels convert potential buyers into profitable orders.

5. Marketing channels not just serve markets they also make markets.6. Channels chosen affects all other marketing decisions. The companys pricing

depends upon whether it uses mass merchandisers or high quality boutiques.

7. In managing its intermediaries, the firm must decide how much effort to devote to

push Vs pull marketing.

Channel Development.A new firm typically starts as a local operation selling in a limited market, using existing

intermediaries. The number of such intermediaries is apt to be limited; a few

manufacturers representatives, a few wholesalers, several established retailer a few

trucking companies and a few warehouses.If the firm is successful, it might branch in to new markets & use different channels in

different markets. In one part of the country, it might grant exclusive franchises; in other,

it might sell through all outlets willing to handle the merchandise.To develop a channel, a firm must understand the needs of the customers during purchase

process. Nunes & Cespendes argue that in many markets, buyers fall into one of the four

categories.

1. Habitual shoppers. Purchase from the same places in same manner over time.

2. High value deal seekers. Know their needs & channel surf a great beforebuying at the lowest possible price.

3. Variety-loving shoppers. Gather information in many channels, take advantage

of high-touch services & then buy in their favourite channel, regardless of price.

4. High-involvement shoppers. Gather information in all channels, make theirpurchase in a low cost channel, but take advantage of customer support from a

high touch channel.