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Transcript of Markma Group 4 Chapter 15 Presentation
GROUP # 4CRISOSTOMO, KATHLEEN LIZETTE
GALICANO, SITONJONGCO, KRISTOFFER
PIÑON, RAYMUND
CHAPTER 15:DESIGNING AND MANAGING INTEGRATED
MARKETING CHANNELS
CHAPTER 15:DESIGNING AND MANAGING INTEGRATED MARKETING CHANNELS
Crisostomo, Kathleen Lizette C.MARKMA
Top 10 Concepts
1. Marketing Channel System: Push and Pull2. Categories of Buyers3. Decisions in Designing a Marketing Channel System4. Analyzing customer needs: Channel Service Outputs5. Identifying Channel Alternatives: Three Elements6. Channel-Management Decisions7. Channel Power8. Channel Integration and Systems9. Channel Coordination / Channel Conflict10. E-Commerce Marketing Practices
Top 10 Concepts
1. Marketing Channel System: Push and Pull2. Categories of Buyers3. Decisions in Designing a Marketing Channel System4. Analyzing customer needs: Channel Service Outputs5. Identifying Channel Alternatives: Three Elements6. Channel-Management Decisions7. Channel Power8. Channel Integration and Systems9. Channel Coordination / Channel Conflict10. E-Commerce Marketing Practices
• Push strategy uses the manufacturer’s sales force, trade promotion money, and other means to induce intermediaries to carry, promote, and sell the product to end users.- used for low brand loyalty in categories or impulse items
• A pull strategy uses advertising, promotion, and other forms of communication to persuade consumers to demand the product from intermediaries.- used when consumers can differentiate brands well and brand are chosen prior to purchase
Top 10 Concepts
1. Marketing Channel System: Push and Pull2. Categories of Buyers3. Decisions in Designing a Marketing Channel System4. Analyzing customer needs: Channel Service Outputs5. Identifying Channel Alternatives: Three Elements6. Channel-Management Decisions7. Channel Power8. Channel Integration and Systems9. Channel Coordination / Channel Conflict10. E-Commerce Marketing Practices
Categories of Buyers
• Habitual Buyers• Same place, same manner
• High value deal seekers• They know what they need and they
surf before buying at the lowest possible price
Categories of Buyers• Variety-loving shoppers
• Gather info through various channels, take advantage of high-touch services, then buy in their favorite channel regardless of price
• High-involvement shoppers• Gather info through alls channels and
purchase in a low cost channel but takes advantage of customer support from a high-touch channel
Top 10 Concepts
1. Marketing Channel System: Push and Pull2. Categories of Buyers3. Decisions in Designing a Marketing Channel System4. Analyzing customer needs: Channel Service Outputs5. Identifying Channel Alternatives: Three Elements6. Channel-Management Decisions7. Channel Power8. Channel Integration and Systems9. Channel Coordination / Channel Conflict10. E-Commerce Marketing Practices
A. Analyze customer needs* Greater service = greater channel costs = higher prices
Decisions in Designing a Marketing Channel System
A. Analyze customer needs* Greater service = greater channel costs = higher prices
B. Establish channel objectives* Which market segment to serve and what best
channel to use
Decisions in Designing a Marketing Channel System
A. Analyze customer needs* Greater service = greater channel costs = higher prices
B. Establish channel objectives* Which market segment to serve and what best
channel to use
C. Identify major channel alternatives* Each channel reaches a different segment and delivers
the right product at the least cost
Decisions in Designing a Marketing Channel System
A. Analyze customer needs* Greater service = greater channel costs = higher prices
B. Establish channel objectives* Which market segment to serve and what best channel to
use
C. Identify major channel alternatives* Each channel reaches a different segment and delivers the
right product at the least cost
D. Evaluate major channel alternative* vs. economic, control and adaptive criteria
Decisions in Designing a Marketing Channel System
Top 10 Concepts
1. Marketing Channel System: Push and Pull2. Categories of Buyers3. Decisions in Designing a Marketing Channel System4. Analyzing customer needs: Channel Service Outputs5. Identifying Channel Alternatives: Three Elements6. Channel-Management Decisions7. Channel Power8. Channel Integration and Systems9. Channel Coordination / Channel Conflict10. E-Commerce Marketing Practices
Analyzing customer needs:Channel Service Outputs
– Lot size: How many can be purchased on 1 occasion?
?
Analyzing customer needs:Channel Service Outputs
– Lot size: How many can be purchased on 1 occasion?
– Waiting and delivery time: The faster, the better
Analyzing customer needs:Channel Service Outputs
– Lot size: How many can be purchased on 1 occasion?
– Waiting and delivery time: The faster, the better
– Spatial convenience: how easy is it to buy the product?
Analyzing customer needs:Channel Service Outputs
– Product variety: more choices = more chances of finding what is needed
Analyzing customer needs:Channel Service Outputs
– Service back-up: add-ons
Top 10 Concepts
1. Marketing Channel System: Push and Pull2. Categories of Buyers3. Decisions in Designing a Marketing Channel System4. Analyzing customer needs: Channel Service Outputs5. Identifying Channel Alternatives: Three Elements6. Channel-Management Decisions7. Channel Power8. Channel Integration and Systems9. Channel Coordination / Channel Conflict10. E-Commerce Marketing Practices
Identifying Channel Alternatives:Three Elements
1. Types of intermediaries• Do I need a wholesaler? Retailer? Dealer?
Identifying Channel Alternatives:Three Elements
1. Types of intermediaries* Do I need a wholesaler? Retailer? Dealer?
2. Number of intermediaries* Distribution: Exclusive? Selective? Intensive?
* Risk = price wars among retailers
Identifying Channel Alternatives:Three Elements
1. Types of intermediaries* Do I need a wholesaler? Retailer? Dealer?
2. Number of intermediaries* Distribution: Exclusive? Selective? Intensive?
* Risk = price wars among retailers3. Terms and responsibilities
* Respect + Opportunity to make profits
Top 10 Concepts
1. Marketing Channel System: Push and Pull2. Categories of Buyers3. Decisions in Designing a Marketing Channel System4. Analyzing customer needs: Channel Service Outputs5. Identifying Channel Alternatives: Three Elements6. Channel-Management Decisions7. Channel Power8. Channel Integration and Systems9. Channel Coordination / Channel Conflict10. E-Commerce Marketing Practices
Channel-Management Decisions
SelectBecause to the customers, the channels are the company!
Channel-Management Decisions
Select
Train
Motivate
Because to the customers, the channels are the company!
Because intermediaries are partners in satisfying customers!
Channel-Management Decisions
Select
Train
Motivate
Evaluate
Modify
Because to the customers, the channels are the company!
Because intermediaries are partners in satisfying customers!
Is the strategy still working? (external analysis and current channels)
Top 10 Concepts
1. Marketing Channel System: Push and Pull2. Categories of Buyers3. Decisions in Designing a Marketing Channel System4. Analyzing customer needs: Channel Service Outputs5. Identifying Channel Alternatives: Three Elements6. Channel-Management Decisions7. Channel Power8. Channel Integration and Systems9. Channel Coordination / Channel Conflict10. E-Commerce Marketing Practices
• Channel Power is the ability to alter channel’s behavior
• Cooperation is a huge challenge!
Channel Power
a. Coercive power- Withdraw resource or terminate relationshipb. Reward power- Extra benefit for performancec. Legitimate power- Behavior warranted under the contractd. Expert power- Must develop new expertise for them to cooperatee. Referent power- Respect causes intermediaries to have pride in the
association
Top 10 Concepts
1. Marketing Channel System: Push and Pull2. Categories of Buyers3. Decisions in Designing a Marketing Channel System4. Analyzing customer needs: Channel Service Outputs5. Identifying Channel Alternatives: Three Elements6. Channel-Management Decisions7. Channel Power8. Channel Integration and Systems9. Channel Coordination / Channel Conflict10. E-Commerce Marketing Practices
Channel Integration and Systems
Vertical Marketing Systems
-Producer + Wholesaler + Retailer = Unified system under channel captain- Corporate (single ownership), administered or contractual (independent firms)
Channel Integration and Systems
Vertical Marketing Systems
HorizontalMarketing Systems
- 2 or more unrelated companies put together resources to exploit an emerging market
Channel Integration and Systems
Vertical Marketing Systems
HorizontalMarketing Systems
- More marketing channels/ strategies of 1 channel reflect the strategies of other channels- Goal: maximum market coverageIntegrated Multichannel
Marketing Systems
Top 10 Concepts
1. Marketing Channel System: Push and Pull2. Categories of Buyers3. Decisions in Designing a Marketing Channel System4. Analyzing customer needs: Channel Service Outputs5. Identifying Channel Alternatives: Three Elements6. Channel-Management Decisions7. Channel Power8. Channel Integration and Systems9. Channel Coordination / Channel Conflict10. E-Commerce Marketing Practices
• Channel Coordination – channel members are brought together to advance the goals of the channel
• Channel conflict - one member’s actions prevent another channel from achieving its goal
* Can be vertical, horizontal or multichannel
Top 10 Concepts
1. Marketing Channel System: Push and Pull2. Categories of Buyers3. Decisions in Designing a Marketing Channel System4. Analyzing customer needs: Channel Service Outputs5. Identifying Channel Alternatives: Three Elements6. Channel-Management Decisions7. Channel Power8. Channel Integration and Systems9. Channel Coordination / Channel Conflict10. E-Commerce Marketing Practices
* Online retailers provide convenient, informative and personalized experiences without:
• Retail floor space• Staff• Inventory
* Customer service is critical: no social interaction
E-Commerce Marketing Practices
Pure-click
Launched a website without any previous experience as a firm
E-Commerce Marketing Practices
Pure-click
Brick-and-click
- Existing companies with an added online site- Risk: conflict with offline intermediaries
Launched a website without any previous experience as a firm
Designing and Managing Integrated Marketing Channels
Galicano SitonMarkma – v57
What is a Marketing Channel?
Product to the Consumer
Retailer
AgentProducer
A marketing channel system is the particular set of interdependent organizations involved in the process of making a product or service available for use or consumption.
Channels and Marketing Decisions
Producer
Sales Force
WholesalerRetailer
Consumer
A push strategy uses the manufacturer’s sales force, trade promotion money, and other means to induce intermediaries to carry, promote, and sell the product to end users
Channels and Marketing Decisions
A pull strategy uses advertising, promotion, and other forms of communication to persuade consumers to demand the product from intermediaries
Advertise
Demand
Pull Product
Manufacturer
Buyer Expectations for Channel Integration
Product
Expertise
Ease
Experience
• Ability to order a product online and pick it up at a convenient retail location
• Ability to return an online-ordered product to a nearby store
• Right to receive discounts based on total online and offline purchases
Category and Types of Buyers
Habitual Buyers
High Value deal Seakers
Variety Loving Shoppers
High Involvement
Shoppers
Buyers
QualityService
PriceValue
Affinity
Channel Member Functions
Gather Information• Develop and disseminate persuasive communication
Reach Agreement on price and terms• Acquire funds to finance inventories
Assume risk and Provide for storage
Provide for buyers payment of their bills• Supervise actual transfer of ownership
Designing a Marketing Channel System
Analyze customer
needs
Establish channel
objectives
Identify major
channel alternatives
Evaluate major
channel alternatives
Channel Service OutputsLot size
Waiting/delivery time
Spatial convenienceProduct variety
Service backup
Identifying Channel Alternatives
• Types of intermediaries• Number of intermediaries• Terms and responsibilities
Number of Intermediaries
• Exclusive• Selective• Intensive
Terms and Responsibilities of Channel Members
• Price policy• Condition of sale• Distributors’ territorial rights• Mutual services and responsibilities
Channel-Management Decisions
Select
Train
MotivateEvaluate
Modify
Channel Power
• Coercive• Reward• Legitimate• Expert• Referent
Channel Integration and Systems
Vertical marketing systems• Corporate VMS• Administered VMS• Contractual VMSHorizontal marketing systemsMultichannel systems
What is Channel Conflict?
• Channel conflict occurs when one member’s actions prevent another channel from achieving its goal.
• Types of channel conflict– Vertical– Horizontal– Multichannel
Causes of Channel Conflict
• Goal incompatibility• Unclear roles and rights• Differences in perception• Intermediaries’ dependence on manufacturer
Table 15.3 Strategies for Managing Channel Conflict
• Adoption of superordinate goals
• Exchange of employees• Joint membership in
trade associations
• Cooptation• Diplomacy• Mediation• Arbitration• Legal recourse
Designing & Managing Integrated Marketing Channels
Kristoffer Z. JongcoMarketing Management
www.kristofjongco.blogspot.com
Outline:
1. Defining Marketing Channels2. Importance of Marketing Channels 3. Understand Customer Needs4. Role of Marketing Channels 5. Channel Design Decisions 6. Establish Objectives & Constraints
www.kristofjongco.blogspot.com
Outline:
7. Identify & Evaluate Major Channel Alternatives8. Channel Management Decisions9. Channel Integration & Systems10. Channel Conflict, Cooperation & Competition
www.kristofjongco.blogspot.com
Designing and Managing Integrated Marketing Channels
(10 Things to Remember)
www.kristofjongco.blogspot.com
Outline:
1. Defining Marketing Channels2. Importance of Marketing Channels 3. Understand Customer Needs4. Role of Marketing Channels 5. Channel Design Decisions 6. Establish Objectives & Constraints
www.kristofjongco.blogspot.com
1. Marketing Channels
Means by which firms attempt to inform, persuade, and remind consumers, directly or indirectly, about the products and brands they sell
Outline:
1. Defining Marketing Channels2. Importance of Marketing Channels 3. Understand Customer Needs4. Role of Marketing Channels 5. Channel Design Decisions 6. Establish Objectives & Constraints
www.kristofjongco.blogspot.com
2. Importance of Marketing Channels
www.kristofjongco.blogspot.com
Increase ProfitsNew Ideas
Outline:
1. Defining Marketing Channels2. Importance of Marketing Channels 3. Understand Customer Needs4. Role of Marketing Channels 5. Channel Design Decisions 6. Establish Objectives & Constraints
www.kristofjongco.blogspot.com
3. Understand Customer Needs
www.kristofjongco.blogspot.com
Customers Product/Services
Outline:
1. Defining Marketing Channels2. Importance of Marketing Channels 3. Understand Customer Needs4. Role of Marketing Channels 5. Channel Design Decisions 6. Establish Objectives & Constraints
www.kristofjongco.blogspot.com
4.Role of Marketing Channels
0 Level
1 Level
2 Level
3 Level
www.kristofjongco.blogspot.com
Manufacturer
Industrial Customer
Industrial Distributor
Manufacturer’s Sales Branch
Outline:
1. Defining Marketing Channels2. Importance of Marketing Channels 3. Understand Customer Needs4. Role of Marketing Channels 5. Channel Design Decisions 6. Establish Objectives & Constraints
www.kristofjongco.blogspot.com
5.Channel Design Decisions
Analyze Customer Needs
www.kristofjongco.blogspot.com
Decisions
Outline:
1. Defining Marketing Channels2. Importance of Marketing Channels 3. Understand Customer Needs4. Role of Marketing Channels 5. Channel Design Decisions 6. Establish Objectives & Constraints
www.kristofjongco.blogspot.com
6.Establish Objectives & Constraints
Channel
Objective
Prepare for larger environment
Product
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Outline:
7. Identify & Evaluate Major Channel Alternatives8. Channel Management Decisions9. Channel Integration & Systems10. Channel Conflict, Cooperation & Competition
www.kristofjongco.blogspot.com
7.Identify & Evaluate Major Channel Alternatives
Exclusive DistributionSelective Distribution Intensive Distribution
www.kristofjongco.blogspot.com
Outline:
7. Identify & Evaluate Major Channel Alternatives8. Channel Management Decisions9. Channel Integration & Systems10. Channel Conflict, Cooperation & Competition
www.kristofjongco.blogspot.com
SelectTrainMotivateEvaluateModify
8.Channel Management Decisions
www.kristofjongco.blogspot.com
CHANNELMEMBERS
Outline:
7. Identify & Evaluate Major Channel Alternatives8. Channel Management Decisions9. Channel Integration & Systems10. Channel Conflict, Cooperation & Competition
www.kristofjongco.blogspot.com
9.Channel Integration & Systems
Vertical System Horizontal System Multi Channel System
www.kristofjongco.blogspot.com
Outline:
7. Identify & Evaluate Major Channel Alternatives8. Channel Management Decisions9. Channel Integration & Systems10. Channel Conflict, Cooperation & Competition
www.kristofjongco.blogspot.com
10. Channel Conflict, Cooperation & Competition
Conflict
Cooperate
Competition
www.kristofjongco.blogspot.com
Summary: Designing and Marketing Integration Marketing Channels
Cooperate
Think
Customer Needs
Channels
www.kristofjongco.blogspot.com
Profit
Decision
Designing & Managing Integrated Marketing Channels
Kristoffer Z. JongcoMarketing Management
www.kristofjongco.blogspot.com
Chap. 15Designing and Managing Integrated Marketing
Channels
Raymund C. PiñonMarketing Management V57
Prof. Bong De Ungria
Outline
• 6th Task of Marketing – Delivering Customer Value• Marketing channels: definition, importance, examples • Functions of marketing channels• Flows and levels of marketing channels• Value networks – a broader view of customer value delivery• How to design marketing channels• Challenges in managing channels• Integrated marketing channels – a new development • Channel conflicts and how they are managed• Key issues with e-commerce
Recall: Marketing is…
• A system of profitably creating, DELIVERING and communicating superior VALUE to satisfy customers’ needs, wants and demands better than competition.
To achieve this, the 6th Task of Marketing is…
1. Developing marketing strategies and plans2. Capturing marketing insights and
performance3. Connecting with customers4. Building strong brands5. Shaping the marketing offer6. Delivering and communicating value7. Creating successful long-term growth
1st some definitions
• Marketing Channels, Trade Channels, Distribution Channels– A set of interdependent organizations involved in the process of making products or services
available for use or consumption
– A set of pathways a product or service follows after production, culminating in purchase and use by the final end-user
– Intermediaries performing a variety of functions
• Value-delivery network– A company’s supply chain and how it partners with specific suppliers and distributors to make
products and bring them to markets
• Value-delivery system– All the expectancies the customers will have on the way to obtaining and using the offering
• Value networks– A system of partnerships and alliances that a firm creates to source, augment and deliver its
offerings
Examples of Intermediaries
• Merchants– Wholesalers and Retailers– Buy, take title to goods, resell
• Agents– Brokers, manufacturers’ representatives, sales agents– Look for customers, negotiate for producer, don’t take title to
goods
• Facilitators– Transportation companies, warehouses banks, advertising
agencies– Assist in the distribution process but don’t take title to goods
nor negotiate on purchases or sales
Why are Channels Important?Channel functions and flows
• Gather marketing information• Develop and disseminate persuasive communications• Reach agreement on prices and terms to effect transfer of ownership or
possession of goods• Place order with manufacturers• Acquire funds to finance inventory• Assume risks for carrying out channel functions• Provide for storage and movement of physical products• Provide for buyers’ payment of bills through banks• Oversee actual transfer of ownership of goods
• Convert potential buyers into profitable customers
Why are Channels Important?Marketing channel system
• Choice of particular set of marketing channels a firm employs is critical – They account for 30% to 50% of SRP– They can convert potential buyers to profitable customers– Channel decisions affect all other marketing decisions
• Pricing• Sales force and advertising decisions• Involve long-term commitments with other firms
as well as a set of policies and procedures• Channel decisions must align with overall strategy
So (again) Step #1 is…Understanding Customer Needs
Consumers choose where to buy based on:
• Price
• Product assortment
• Convenience
• Personal shopping goals
Marketers using different channels must be aware that different consumers have different needs
during the buying process
There are 5 marketing flows in a marketing channel
Suppliers Transporters, Warehouses Manufacturer Dealers Transporters CustomersTransporters,
Warehouses
Suppliers
Suppliers
Suppliers
Suppliers Manufacturer
Manufacturer
Manufacturer
Manufacturer
Banks
Transporters, Warehouses,
Banks
Transporters, Banks
Transporters, Warehouses,
BanksDealers Customers
Customers
Customers
Customers
Banks BanksDealers
Advertisingagencies
Advertisingagencies Dealers
Dealers
Physical Flow
Title Flow
Payment Flow
Information Flow
Promotions Flow
Channel Levels (Paths)There are different levels of marketing channels in
consumer and industrial markets
Manufacturer ManufacturerManufacturer Manufacturer Manufacturer Manufacturer
Wholesaler Wholesaler Manufacturer’sRepresentative
Industrialdistributor
Jobber
Retailer Retailer Retailer
Manufacturer Manufacturer
Manufacturer’sSales Branch
Industrialcustomers
Industrialcustomers
Industrialcustomers
IndustrialcustomersConsumer Consumer Consumer Consumer
0-level 1-level 2-level 3-level 0-level 1-level 2-level 3-level
Consumer Marketing Channels Industrial Marketing Channels
A broader view of delivering customer value: Value Networks
Partnerships created to source, augment & deliver offerings • From a linear view -> Supply Chain
– See markets as destinations
• To a customer-centric view -> Demand Chain Planning– Emphasize what customers are looking for instead of what we are selling– SIVA 4-Ps
• Solutions Product• Information Promotions• Value Price• Access Placement
• To a broad view of customer value delivery -> Value Networks– Seeing the company at the center of a value network – Include suppliers, suppliers’ suppliers, immediate customers and their end customers– A company needs to orchestrate these parties in order to deliver superior value to the target
market– Managing value chains require increased investments in IT and software
• SCM• SAP, Oracle• ERP• CRM
Channel Design DecisionsWhat are key issues in designing channels?
1. Analyzing customer needs
2. Establishing channel objectives
3. Evaluating major channel alternatives
In Channel Design, Step #1 is…Analyze customers’ desired service output level
There are 5 channel service outputs
• Lot size – customers prefer lot size of one
• Waiting and delivery time – fast delivery channels
• Spatial convenience – ease of purchase
• Product variety – greater assortment
• Service back-up – credit, delivery, service, repair, training, consulting
Note: increased service output = increased channel costs, and increased prices to consumers. Some customers are willing to accept smaller service outputs if they could save on costs
Channel Design Decision Step #2 is…Establishing channel objectives and constraints
• State channel target service output level
• Arrange channel tasks to minimize total channel costs and provide desired service level output
• Choose market segments to serve and best channels for each
• In entering new markets, observe what competitors are doing
• Adapt channel objectives to larger environmental context– E.g. During depression – use shorter channels to maintain price– E.g. Note legal constraints – vs. monopoly
Channel Design DecisionsIn establishing channel objectives and constraints
• Vary objectives to suit product characteristics
– For perishables – direct marketing
– For bulky (building materials) – minimize shipping distance and amount of handling
– Nonstandard products (custom-built machinery) – sales force
– Products needing installation or maintenance (heating or cooling
systems) – sales force or franchised dealers
– High-unit value products (generators of turbines) – sales force
In Channel Design Decision, Step #3 is…Identifying and evaluating major channel alternatives
Channel Advantages Disadvantages
Sales Force or owned branches
Can handle complex products and transactions
Too expensive
Internet, telemarketing
Less expensive Not effective with complex products
Distributors Can create sales Customer contact by company is lost
Manufacturer’s representatives
Able to contact customers at low cost per customer because several clients share costs
Selling effort per customer is less intense than if company reps did the selling
Choose a mix of channels that reach different segments of buyers and delivers the right products at the least cost
In Evaluating Channels Consider 3 elements of channel alternatives
1. What types of business intermediaries are available?
2. How many intermediaries are needed?– Exclusive distribution – limited number of intermediaries
• Maintain control of service levels and outputs offered by intermediaries
– Selective distribution – few but less than all• Gain adequate market coverage, more control, less cost
– Intensive distribution• Places its products in as many outlets as possible
3. What are the terms, and what are the responsibilities of each channel members?
In Channel Design Evaluate major channel alternatives using…
• Economic criteria
• Control criteria
• Adaptive criteria
Economic criteria in channel evaluationEach channel alternative will generate different
levels of sales and costs
low high
Valu
e-Ad
ded
of S
ales
Cost per Transaction
Internet
Telemarketing
Retail Stores
Distributors
Value-Added
partners
Salesforce
low
high
Direct marketing channels
“Indirect” channels
Direct saleschannels
Try to align customers and channels to maximize demand at the lowest overall cost
Channel Design DecisionsControl and adaptive criteria in evaluation
• Using sales agency poses control problems for you– They are independent firms seeking to maximize profits– They concentrate on customers who buy– They may not master technical details of product or handle
promotions effectively
• In rapidly changing, volatile, or uncertain product markets, producers need channel structures and policies that provide high adaptability
Channel Management DecisionsAfter choosing a channel system, the company must:
1. Select individual channel members
2. Train and motivate channel members
3. Evaluate individual channel members
4. Modify channel design and arrangements
over time
Channel Management DecisionsAfter choosing a channel system, the company must:
1. Set criteria for selection of channel members– Number of years in business– Other lines carried– Growth and profit records– Financial strength– Cooperativeness– Service reputation– Size and quality of sales force– Location– Type of clientele– Future growth potential
Channel Management DecisionsAfter choosing a channel system, the company must:
2. Train and motivate channel members
– Understand intermediaries’ needs and wants– Construct a channel positioning– Implement capacity-building programs
• Training• Market research
– Exercise channel power to compel action
Channel Management DecisionsAfter choosing a channel system, the company must:
2. Train and motivate channel members– Types of power to elicit cooperation
• Coercive power– Threaten to withdraw a resource or terminate a relationship
• Reward power– Higher margins, deals, premiums, cooperative advertising
allowances, display allowances, sales contest, bonuses
• Legitimate power– Use contract agreements to force compliance
• Expert power– Posses special knowledge the intermediary values
• Referent power– Intermediary feels proud to be associated with producer
Channel Management DecisionsIn motivating channel members
2. Forge long-term partnerships by clarifying expectations – Market coverage– Inventory levels– Marketing development– Account solicitation– Technical advise and services– Marketing information
Channel Management DecisionsIn motivating channel members
2. Streamline supply chain and cut costs:ECR – Efficient Consumer Response practices help organize relationship in 3 areas:
– Demand-side management
• Stimulate demand with joint sales and marketing activities
– Supply-side management
• Focus on logistics and supply chain activities to optimize supply
– Enablers and integrators
• Use IT and process improvement tools to support joint activities
Channel Management DecisionsAfter choosing a channel system, the company must:
3. Evaluate individual channel members on…– Sales quota achievement– Average inventory levels– Customer delivery time– Treatment of damaged
and lost goods– Cooperation in training
and promotions programs
Note: underperformers need to be counseled, retrained, motivated or terminated
Channel Management DecisionsAfter choosing a channel system, the company must:
4. Modify channel design and arrangements over time when:– Channel is not working as planned
– Consumer buying patterns change
– Market expands
– New competition arises
– Innovative distribution channels emerge
– Product moves into later stages of PLC
Note: change may mean adding or dropping individual channel members, adding or dropping market channels, or developing totally new ways to sell goods
In managing channels, how much effort to devote to push or pull?
• Push strategy – for low-involvement, impulse products– Use sales force, trade promo to induce
intermediaries to carry, promote and sell products to end-users
• Pull strategy– For high-involvement, differentiated offers– Use advertising, consumer promotions
and other forms of communication to persuade consumers to demand the product from intermediaries
Channel Integration and SystemsSome of the recent developments in channels
• Vertical Marketing Systems
– Corporate VMS– Administered VMS– Contractual VMS– New competition in retailing
• Horizontal Marketing Systems
• Integrating Multi-channel Marketing Systems
Channel Integration and SystemsSome of the recent developments in channels
• Vertical Marketing Systems
– Producer, wholesaler(s) and retailer(s) acting as a unified system
– Channel captain owns others or franchises them or has so much power that they all cooperate
– Strong channel members’ attempts to control channel behavior and eliminate conflict
– Achieve economies of scale via size, bargaining power, and elimination of duplicate services
– Provides extensive exchange of information
Channel Integration and SystemsSome of the recent developments in channels
• New competition in retailing– Is no longer between independent business units
but between
• whole systems of centrally-planned networks (Corporate, administered, and contractual)
• competing against one another
• to achieve the best economies and customer response
Channel Integration and SystemsSome of the recent developments in channels
• Horizontal Marketing Systems
– Two or more unrelated companies put together resources or programs to exploit an emerging marketing opportunity
– Each company lacks capital, know-how, production or marketing resources to venture alone or is afraid of the risks
– Arrangements may be temporary, permanent or result in joint-venture company
Channel Integration and SystemsSome of the recent developments in channels
• Integrating Multi-channel Marketing Systems
– Multi-channel marketing
• A company uses two or more channels to reach one or more customer segments
– Integrated marketing channel system
• Strategies and tactics of selling through one channel reflects the strategies and tactics of selling through other channels
Channel Integration and Systems3 benefits of multi-channel marketing systems
• Increased market coverage– Customers can shop for company
products in more places – Multi-channel shoppers are
more profitable customers
• Lower channel cost– Selling by phone is cheaper than selling
by personal visit to small customers
• More customized selling– Adding a technical sales force to
sell more complex products
Channel Integration and SystemsDisadvantages of multi-channel marketing systems
• Channel conflicts
– Channels competing for same customer
– New channels independent and makescooperation difficult
• Problems with control
– Execution of merchandizing and promotions programs
– Market coverage and frequency of visits to customers
– Inventory levels
– Handling of customer complaints, returns and damaged goods
– Allocation of effort to other principals served by intermediaries
In Channel ArchitectureDetermine which channels should perform which functionsBetter
InformationDisseminateinformation
Reach price
agreement
Pace orders
Acquire funds for
inventories
Assume risks
Facilitate product
storage & movement
Facilitate payment
Oversee ownership
terms
Internet
National account management
Direct sales
Tele-marketing
Direct mail
Retail stores
Distributors
Dealers and value-added resellers
Advertising
Vend
or
Cus
tom
er
Demand-generation Tasks
Mar
ketin
g ch
anne
ls a
nd M
etho
ds
Multi-channel architecture optimizes coverage, customization and control, while minimizing costs and conflict
Conflict, Cooperation and CompetitionCauses of channel conflicts
• Goal incompatibility– Low-price market penetration strategy vs.
high-margin, short-run profitability
• Unclear roles and rights– Territorial boundaries– Sales crediting
• Differences in perception– Optimistic vs. pessimistic views on business prospects– Differences in perception about advertising strategy
• Intermediaries’ dependence on the manufacturer– Exclusive dealers are at the mercy of manufacturers’
product and pricing policies
Conflict, Cooperation and CompetitionManagement of channel conflicts
• As companies add channels to grow sales, they risk creating channel conflicts
• Too much conflict is dysfunctional
• The challenge is not to eliminate conflicts but to manage them through
– Adoption of super-ordinate goals – agree on goals they jointly seek
– Exchange of employees – e.g. between manufacturer and dealer
– Joint membership in trade associations – manufacturers and marketers
– Co-optation – include leaders in boards, advisory councils
– Diplomacy, mediation, or arbitration – conflict resolution methods
– Legal recourse
E-Commerce Marketing PracticesSome definitions
• E-business– Use of electronic means and platforms to conduct a company’s
business
• E-commerce– Company or site offers to transact or facilitate the selling of products
and services online
• E-purchasing– Purchase of goods, services and information from online sources
• E-marketing– Efforts to inform buyers, communicate, promote and sell company
products and services over the internet
E-Commerce Marketing PracticesSome advantages
• Provides convenient, informative and personalized experiences for different types of customers
• Allows online retailers to sell low-volume products to niche markets at lesser or no cost in maintaining retail floor space, staff, and inventory
E-Commerce Marketing Practices3 Aspects of online transactions in retailing competition
• Customer interaction with the Website
• Delivery of the product
• Ability to address problems when they occur
E-Commerce Marketing Practices2 Types of Online Competitors
• Pure-Click Companies– Launched a website without previous existence as a company
• Search engines• ISPs• Commerce sites – amazon.com, buy.com
– sell all types of products and services – books, music, toys, stocks, clothes, insurance, financial services
• Transaction sites• Content sites• Enabler sites
• Brick-and-Click Companies– Existing companies that have added an online site for information or
e-commerce
E-Commerce Marketing PracticesIssues of using online channels for Brick-and-Click
and how to handle them
• Potential channel conflict with retailers, brokers, agents and branch outlets
• How to sell both to intermediaries and online?
– Offer different brands or products online
– Offer off-line partners higher commissions to offset negative impact on sales
– Take orders on the web but have retailers deliver and collect payment
M-Commerce
• Wireless internet-connectivity to do business • Location-based services
Summary of Top 10 Concepts
• 6th Task of Marketing – Delivering Customer Value• Marketing channels: definition, importance, examples • Functions of marketing channels• Flows and levels of marketing channels• Value networks – a broader view of customer value delivery• How to design marketing channels• Challenges in managing channels• Integrated marketing channels – a new development • Channel conflicts and how they are managed• Key issues with e-commerce