Going to Mkt

8/11/2019 Going to Mkt

1/68

Business Marketing

PGDM MamallasTerm IV

GREAT LAKES


2/68

Session 6

GOING TO THE MARKET

TNS - GLAKES 2

August 9, 2013


3/68

Establish channels for different targetmarkets and aim for efficiency, control,

and adaptability.

Kotler

TNS 06 3

The ability to make smart decisionsabout going to the market depends on

how well you understand your customer.Lawrence Friedman


4/68

Channel Transformation

Channels are not a series of product &information flow from manufacturer to the

customer. Instead, it is the customer who

demands certain services and it is theproviders responsibility to meet those needs

by developing roles and rewards to meetthem.

V.Kasturi Rangan - Harvard


5/68

Discussion

Do Organisations buy all products the sameway ?

What has been the recent changes in behaviouror buying habits

If you are a marketer what would you do ?

What is going to market ?

What is a channel ?

Why do we use different channels?

Can we use a hybrid of channels?

What is channel conflict ?

TNS 06 5


6/68

Distribution / Channel

The link between the manufacturer and thecustomer is called the Channel of Distribution

The channel accomplishes all the tasksnecessary to get the product/service to

market

Tasks can be performed by the manufacturer

or be delegated throughout the channel

The question is: What is the best way toexecute the tasks?


7/68

Channel Tasks Include:

Contacting potential buyers

Contracting

Financing / Transferring title

Servicing the product Storage /Inventorying

Transporting

Training


8/68

TNS 06 8

Importance marketing channels?

1. The explosion of information technologyand E-commerce

2. A greater difficulty in gaining asustainable competitive advantage

3. The growing power of distributors,especially retailers in marketing channels

4. The need to reduce distribution costs


9/68

Value Network and Marketing-

Channel System?

Value Network

A system of partnerships andalliances that a firm creates to

source, augment and deliverand support its offering

TNS 06 9


10/68

Value Chain

TNS 06 10

Value Network

A system of partnerships and alliances that afirm creates to source, augment and deliverand support its offering.

value networkcontains both

directandsupport

activities.

Direct activitiescontribute directly

to the offering.

Support activitiesmakes it possible toperform the direct

activities.


11/68

Value Network and Offering

TNS 06 11

Added value

Infrastructure

Human resources

ProcurementTechnology &technology development

Support activities

Direct activities

Offering:

Product

ServiceImageAvailabilityQuantity

Evaluated Price

TargetCustomers

Creates

Perceives


12/68

What is a Value Network and

Marketing-Channel System? Marketing channel

Most producers do not sell their

goods directly to end user;between them are a number ofintermediaries performing a varietyof functions

The intermediaries constitutemarketing channel

TNS 06 12


13/68


14/68

Work Performed by MarketingChannels

Many producers lack thefinancial resources to carry outdirect marketing

In some cases direct marketingsimply is not feasible

Producers who do establish theirown channels can often earn a

greater return by increasing theirinvestment in their main business.

TNS 06 14


15/68

What Work is Performed byMarketing Channels?

Channel Functions and Flows

Key functions include:

Gather information about potential and

current customers, competitors, and

others

Develop and disseminate persuasive

communications to stimulate purchasing

Reach agreements on price and otherterms so that transfer of ownership or

possession can be effected

Place orders with manufacturersTNS 06 15


16/68


Acquire funds to finance inventories at differentlevels in the marketing channel

Assume risk connected with carrying out channel

work

Provide for the successive storage and movement

of physical products

Provide for buyers payment of their bills throughbanks and other financial institutions

Oversee actual transfer of ownership from one

organization or person to another

TNS 06 16


17/68

Five Marketing Flows in the Marketing Channelfor Forklift Trucks

TNS 06 17


18/68


Forward flow

Physical

Title

Promotions

service

Backward flow Order

Payment

complaint

TNS 06 18


19/68

What Work is Performed by

Marketing Channels?

Channel levels

Service Sector Channels Information Highway Channels

TNS 06 19


20/68


Marketing Channels?

Channel levels

Zero-level ( direct-marketing channel)to four levels

Reverse-flow channel

Reuse - product or containers

Refurbish for resale

Recycle

Disposal

Special channels perishable,

hazardousTNS 06 20


21/68


Marketing Channels?

Service Sector Channels

Financial

Health care

Hospitality

Travel

Information

TNS 06 21


22/68


23/68

Direct and Indirect Channels

Who performs the TASKS?

Directis when the manufacturer performs

all the marketing functions

Indirectis when some type ofintermediary sells or handles the product


24/68

B 2B Marketing Channels

Manufacturer

Direct Channels Indirect Channels

DirectSales

OnlineMarketing

Telemarketing

ManufacturersRepresentatives

IndustrialDistributors

Customer Segments


25/68

Direct Sales Force Required When:

Sale is complex

Product/service is highly

customized

Customers are large

Products are complex

Sales involve extensivenegotiations

Professionalism is required

Customer requires directcontact

Then, seller must controlthe process to ensure

proper implementation

of total product

package and to

guarantee quickresponses to market

conditions


26/68

Indirect Distribution:Generally Found Where

Markets are fragmented and widelydispersed.

Low transaction amounts prevail.

Buyers typically purchase a number ofitems.


27/68

Typical Sales Cycle:Sales Process

Lead Generation Triggered by sales call, by customers response to direct mail, orby Web request for information; firm makes initial contact with

prospect.

Lead Qualification Potential customer screened: prospects need for product orservice, buying interest, funding, and timeframe for making the

purchase are assessed.

Bid and Proposal Bid and proposal prepared to meet customers requirements (acomplex task for large technical projects).

Negotiations andSales Closure

Negotiation of prices, terms, and conditions, followed by

agreement on a binding contract.

FulfillmentFor standardized product or service, delivery of offering to

customer. Configuration, customization, and installation for

more complex sales.

Customer Care and Support

Post-sale problem resolution, customer guidance, and ongoing

contact to ensure customer retention, loyalty, and growth.

SOURCE: Adapted from Lawrence G. Friedman, Go To Market Strategy: Advanced Techniques and Tools for Selling More Products, To More Customer, More Profitably(Boston: Butterworth-Heinemann, 2002), pp. 234-236.


28/68

Multi-Channel Integration MapSimple Example of High-Coverage Partnering Model

Salestask

Channel

Leadgeneration

Qualification Bid &proposal

Negotiation/sale closure

Fulfillment Customer care& support

Direct saleschannel(field reps)

Businesspartners

Tele-channels

Direct mail

Internet

Sales Cycle

$$$

$

Occasional supportby sales reps to

help partnersclose key

strategic deals

Fig. 11.3


29/68

Distributors

There are two primary intermediaries:

1.

Industrial distributors

2.

Manufacturersrepresentatives

These two groups handle a very

sizeable share of B2Bsales.


30/68

Distributors

Industrial Distributors are:

Most Common

They are heavy into the Maintenance,

Repair and Operations (MRO) suppliesbusinesses

Generally about 75% of all businessmarketers sell some product throughdistributors

Most are small, independent businessesserving narrow geographic markets


31/68

Distributors

Distributors are full-service intermediaries,that is they take title (carry inventory) for

the products they sell

They provide credit, deliver, offer an

assortment, offer technical skills, maintaincustomers and find new ones

They employ sales force Pool /Dedicated

31


32/68

Expanded Distributor Roles

To add more value for their customers manylarge distributors have expanded their rolesto include more services:

1.

Inventory management

2.

Automatic replenishment3.

Product assembly4.In-plant stores

5.

Design services

Many charge a separate fee for additionalservices


33/68

Primary Distributor Classifications

General-Line DistributorsStock extensive variety of low tech

(commodity) products

SpecialistsFocus on one or few related lines geared

around high tech or industries demandingcomplex customer requirements

Combination House

Operates in two markets: industrial andconsumer


34/68

Choosing a Distributor

Attributes1.

Financially strong

2.

Good functional operations

3.Skills & technical expertise

4.

Contacts and networking

In other words,What can they do & who do they

know?

E-collaboration between manufacturer and distributor

from planning to servicing is a critical strategic force inthe B2B arena


35/68

Expanded Role of B 2B

Outsourcing of manufacturing, highcost of salaries and overheads

This leads us into the next type of B2B

player

ManufacturersRepresentatives


36/68

ManufacturersReps

ManufacturersReps fill a different rolethan Industrial Distributors.

They perform a much higher level of

service. They:

1. Are more technically advanced2. Know in depth territory & Customer

3. Are able to sell professionally

4.

Are experienced in the industry5. Usually represent several companies


37/68


38/68

Manufacturers Reps are used when:

Product is not standardcloser to made-to-order

Reps do not take title nor hold inventory

Commission/ Retainer basis

Relatively few customers or concentratedgeographically or concentrated in few industries

Customers order relatively infrequently and allow

fairly long lead times


39/68

Channel design is a dynamic process:

1.

They can be developed (new channels)where none existed (i.e., Internet)

2.

Or modify existing channels

Channel Design Process


40/68


41/68

Channel-Design Decisions

Push strategy

Manufacturer using its sales force & tradepromotions to induce intermediaries tocarry , promote and sell product to end

users

Pull strategy

Manufacturer us ing advert is ing &promotions to induce consumers to ask

intermediaries to carry and sell product

TNS 06 41

B2BV/SB2C


42/68


Designing a channel systeminvolves four steps:

Analyzing customer needs

Establishing channel objectives

Identifying major channel alternatives

Evaluating major channel alternatives

TNS 06 42


43/68


Analyze CustomersDesiredService Output Levels

Lot size

Waiting time Spatial convenience

Product variety

Service backup

TNS 06 43


44/68


Establish Objectives andConstraints

Output levels ( Quota)

Service capability

Financial capacity

Costs

Special product requirements

Perishable,hazard,refrigeration etc.

TNS 06 44


45/68


Major Channel AlternativesTypes of Intermediaries

C & F As /Warehousers

Commission Agents

Distributors / Stockists

Dealers / Retailers

Manufacturers Representatives

TNS 06 45


46/68


Major Channel AlternativesNumber of Intermediaries

Exclusive distribution Specialty Exclusive dealing

Selective distribution

Intensive distribution Spares /Low Value

TNS 06 46


47/68


Terms and Responsibilities ofChannel Members

Price policy

Conditions of sale

Distributorsterritorial rights

Evaluate the Major Alternatives

Economic Criteria

minimising cost per transaction

TNS 06 47


48/68

Disintermediation i.e. disappearance ofintermediaries is a very important development with

far reaching consequences on the society.

E-commerce covers marketing and trading goodsand/or services. The activities d include, solicitation

of enquiries, promotions, buying and sellingthrough company websites, e-portals and e-

markets.

48

E COMMERCE FORBUSINESS MARKETING CHANNELS


49/68

Indiamart.com

Metaljunction.com

Some more Examples - Tata Motors, Dabur,Crompton Greaves and the Dalmia Group,

Ariba

49

E COMMERCE IN INDIA FORBUSINESS MARKETING


50/68

Reduction in purchasing cycle time

Enhanced information flow & transparency

Consolidation of Supplier base

Reduction in procurements overheads

Rationalization of supply conditions, quality norms &purchasing practices across multiple locations

50

IMPACT OF E COMMERCE IN INDIA FORBUSINESS MARKETS


51/68

Enhanced supply volumes through consolidation ofspend volumes

Surety of business through pre defined contact

period

Fair & transparent process with an equal

opportunity for all the suppliers

Opportunity to revisit cost structure and improve

competitiveness

51

IMPACT OF E COMMERCE IN INDIA FORBUSINESS MARKETS


52/68

The Value-Adds versus Costs of Different Channels

TNS 06 52


53/68

Break-evenCost Chart

Channel advantage

Control and Adaptive Criteria

TNS 06 53



54/68


55/68

Successful ChannelsNeeds communication and trust. To

manifest this:1.Members offer benefits and resources

superior to what other partners couldoffer.

2.

Corporate values are similar throughoutthe chain.

3.Members share information onexpectations, markets andperformance.

4.

Members dont take advantage ofeach other.


56/68

Channel-Management Decisions

Selecting Channel Members

Training Channel Members

Motivating Channel Members

Producers can use:

Coercive power - Muscle

Reward power - Compensations

Legitimate power -Professional

Expert power

Referent power - Status

TNS 06 56


57/68


Distribution programming

Distributor-relations planning

Consider distributors / channel

members more as partners thancustomers or subservient associates

Phillips

Old organisations in India

TNS 06 57


58/68


Evaluating Channel Members

Periodic evaluation part of SalesManagement job function

Modifying ChannelArrangements Channels do not remain effective

forever

PLC will necessitate modifications

TNS 06 58


59/68

Channel Dynamics

Marketing Systems

Conventional marketing channel

Each member is an independent entity

Vertical marketing systems (VMS)

Acting as an unified & integrated system

Corporate and Administered VMS Corporate VMS being a stake holder with

associates

Administered VMS exerting influence throughpower

TNS 06 59


60/68

Channel Dynamics

Contractual VMS

Wholesaler-sponsored voluntary chains

Retailer cooperatives

Franchise organizations

Manufacturer-sponsored retailer franchise dealerships

Manufacturer-sponsored wholesaler

franchise - Bottlers

Service-firm-sponsored retailer franchise Service Centres/ Call Centres

TNS 06 60


61/68

Channel Dynamics

Conflict, Cooperation, and Competition

Types of Conflict and Competition

Vertical channel conflict ( company & associate)

Horizontal channel conflict ( between associates)

Multichannel conflict

Causes of Channel Conflict

Goal incompatibility

Unclear roles and rights

Differences in perception

TNS 06 61


62/68

Channel Dynamics

By adding new channels, a companyfaces the possibility of channel conflict

whichmay include:

Conflict between the national accountmanagers and field sales force

Conflict between the field sales

force and the telemarketers

Conflict between the field salesforce and the dealers

TNS 06 62


63/68

Channel Dynamics

Managing Channel Conflict

Diplomacy

Mediation

Arbitration

Legal and Ethical Issuesin Channel Distribution

Exclusive distribution

Exclusive dealing

Tying agreements

TNS 06 63


64/68

Market Logistics Supply chain management (SCM)

Value network Demand chain planning

Market logistics

Market logistics planning has four steps:

Deciding on the companys value

proposition to its customers

Deciding on the best channel design andnetwork strategy for reaching the customers

Developing operational excellence in sales forecasting,warehouse management, transportation management,

and materials management

Implementing the solution with the best informationsystems, equipment, policies, and procedures

Integrated logistics systems (ILS)

TNS 06 64


65/68

Market Logistics

Market-logistics Objectives

Market-logistics Decisions

Order Processing

Order-to-payment cycle

Warehousing

Storage warehouses

Distribution warehouses

Automated warehouses

TNS 06 65


66/68


67/68

Market Logistics

Just-In-Time production (JIT)

Transportation

Containerization

Piggyback

Fishyback

Trainship

Airtruck

Private carrier

Contract carrier

Common carrier

TNS 06 67


68/68

Competitive Advantage

By working together, business marketersand their channel members can enjoysustainable competitive advantage

over their rivals and their networks.

Going to Mkt

Documents

Transcript of Going to Mkt