Session 25 MG 220 BBA - 10 Nov 10

MG 220 Marketing ManagementBBA 09 – Sec C

Fall 2010

Muhammad Talha Salam, Asst. [email protected]

Access it online: www.slideshare.net/talhasalam

Part 6:Delivering Value

> Marketing Channels and Value Networks> The Role of Marketing Channels: SKIM> Channel-Design decisions> Channel-Management decisions: SKIM

Class Presentation | Session 25 | 10 Nov 2010

MG 220 Marketing Management 2Access it online: www.slideshare.net/talhasalam

Marketing Channels and Value NetworksThe Importance of ChannelsMarketing Channels• Sets of independent organizations involved in the process of making a product or service

available for use or consumption

Among these ‘intermediaries’ are:• Merchants – who buy, take title to, and resell the merchandise

– Wholesalers, Retailers

• Agents – who search for consumers but do NOT take title– Brokers, Manufacturers’ representatives, sales agents

• Facilitators – assist in distribution but neither take title NOR negotiate sale/purchase– Transporters, independent warehouses, ad agencies, banks

Importance of Channels• A marketing channel system is the particular set of marketing channels employed by a firm.• Channels chosen affect all other marketing decisions• Push strategy involves manufacturers using its own sales force and trade promotion money to

include intermediaries– Appropriate when: low brand loyalty | choice is made at purchasing time | impulse item | benefits are

understood

• Pull strategy involves manufacturer using advertising and promotion to persuade consumers to ask intermediaries for the product– Appr0priate when: High brand loyalty | high involvement | people perceive differences in brands | decision

before going to store

• Top marketing companies use both strategies


Marketing Channels and Value NetworksChannel Development• A new firm typically is a local/limited operation selling in a limited market• As it grows, it moves in new markets and that is where it needs new

partners to sell for it• Channel system evolves in response to local opportunities

Hybrid channels• Consider IBM, Dell, Microsoft• Selling online (self), through retailers (intermediaries) – CONSUMERS• Selling using sales force (own) – INSTITUTIONAL SELLING• All operate parallel and in one market

• Ensuring Channel Integration – consumers would want channels to be working together

• Also understanding different needs of customers:• Habitual shoppers | High value deal seekers | Variety-loving shoppers | High-

involvement shoppers


Marketing Channels and Value NetworksValue NetworksDemand chain planning• Company first thinks of the target market and then plans it all backwards• 4Ps replaced by SIVA (Solution | Information | Value | Access)

Value Networks• An even broader view. Company at the center• A system of partnerships and alliances that a firm creates to source, augment and deliver

its offerings• A value network includes: firm’s suppliers, suppliers’ suppliers, immediate customers and

their end customers

Demand chain planning yields several insights• Company can estimate whether more money is made upstream or downstream• Company is more aware of disturbances anywhere in the supply chain that might cause

costs to change• Companies can use internet to go online to improve these processes

Concept of ERP• To manage entire value networks efficiently, different IT solutions and software is

extensively deployed. They form Enterprise Resource Planning (ERP)


The Role of Marketing ChannelsConcept

Why delegate the ‘selling job’?• Many producers lack the financial resources to carry out direct marketing• Producers who do establish their own channels can often earn a greater

returnby increasing investment in their own business (EXAMPLE)

• In some cases direct marketing simply is not feasible

Reducing number of contacts• Ref: figure• With and without “D” - Distributor


The Role of Marketing ChannelsChannel Functions and Flows

Direction of activities• Some functions have forward flow of activities• Some have backward flow• Others have two-way flow


The Role of Marketing ChannelsChannel Levels

Key Points• Producer and End Customer are there in every case• Zero-level channel is also called direct marketing channel• Different schemes for consumer marketing and industrial marketing


Channel-Design Decisions

Analyzing Customers’ Desired service output levelsService Outputs by a channel– Lot Size – number of units a channel permits a user to purchase on one occasion– Waiting & Delivery time – Avg time customers have to wait for receipt of goods– Spatial Convenience – Degree of convenience in purchasing a product– Product Variety – Assortment breadth by a marketing channel– Service Backup – Add-on services provided by a channel

Establishing Objectives & Constraints• Channel objectives should be stated in terms of targeted service output levels• Channel objectives vary with product characteristics• Channel design must take into account strengths and weaknesses of different

types of intermediaries• Channel design must also take into account economic environment. For

instance, economic depressions lead to cost-cutting thus shorter channels.


Channel-Design DecisionsIdentifying Major Channel Alternatives

Decisions of choosing from a wide variety of channels for reaching customersElements for describing channel alternative:• Type of Intermediaries

– Decisions regarding what type of intermediaries shall be used– Retailers or OEMs

• Number of Intermediaries– Exclusive Distribution– Selective Distribution– Intensive Distribution

• Terms and responsibilities of each channel member– Price Policy calls– Conditions of sale– Distributors’ territorial rights– Mutual services and responsibilities


Channel-Management Decisions

After choosing, individual intermediaries need to be trained, motivated and evaluated• Selecting Channel Members• Training Channel Members• Motivating Channel Members

– Channel Power – ability to alter channel members’ behavior– Coercive Power– Reward Power– Legitimate Power– Expert Power– Referent Power – how strongly members would like to be associated with the

partner

MG 220 Marketing ManagementBBA 09 – Sec C

Fall 2010

Muhammad Talha Salam, Asst. [email protected]

Access it online: www.slideshare.net/talhasalam

Part 6:Delivering Value

> Channel integration and systems: SKIM> E-Commerce Marketing Practices: SKIM> Retailing> Private Labels> Wholesaling> Market Logistics: SKIM

Class Presentation | Session 26 | 15 Nov 2010

Session 25 MG 220 BBA - 10 Nov 10

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Transcript of Session 25 MG 220 BBA - 10 Nov 10