Designing and Managing Integrated Marketing Channels MBAmaterials

Marketing Channels Marketing channels are the formal sets of interdependent organizations participating in the process of making a product or service available for use or consumptions. MBAmaterials mbamaterials.wordpress.com

Functions of a Channel To bridge the gap between the producer of a product and the user of it. A channel performs three important functions. Not all channel members perform the same function. Transactional functions: buying, selling, and risk assumption Logistical functions: assembly, storage, sorting, and transportation Facilitating functions: post-purchase service and maintenance, financing, information dissemination, and channel coordination or leadership MBAmaterials mbamaterials.wordpress.com

Intermediaries Merchants Agents Facilitators MBAmaterials mbamaterials.wordpress.com

The Importance of Channels Channel is an important element of marketing mix- closely interrelated like pricing, promotion and product,. It enables to cut down the cost and maximize the revenue It determines when and where product will be available to ultimate consumer or users Ultimate Selling Price 30% - 50% Channel Members 5% - 7% Advertising MBAmaterials mbamaterials.wordpress.com

Managing Intermediaries 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. A pull strategy uses advertising, promotion, and other forms of communication to persuade consumers to demand the product from intermediaries. Push strategy Pull strategy MBAmaterials mbamaterials.wordpress.com

Multichannel Marketing (Hybrid) Internet Sales Force Telemarketing Direct Mail Retailer MBAmaterials mbamaterials.wordpress.com

Multichannel Marketing (Hybrid) HP has used its Sales Force: to sell to large accounts Telemarketing : to sell medium sized accounts Direct mail : to sell small accounts Retailer: to sell to still smaller accounts, and Internet : to sell specialty items MBAmaterials mbamaterials.wordpress.com

Channel Integration Customer expects channel integration, which allows them to: Order a product online and pick it up at a convenient location Return an online-ordered product to a nearby store of the retailer Receive discounts and promotional offers based on total online and offline purchase MBAmaterials mbamaterials.wordpress.com

Value Networks Value networks is a system of partnership and alliance that the firm creates to source, augment, and deliver its offerings. It Includes: Supplier Supplier’s Supplier Immediate Customer End customers MBAmaterials mbamaterials.wordpress.com

The Role of Marketing Channels Marketing channels goes very effective when one have contacts, experience, specialization, and scale of operation, intermediaries makes good widely available and accessible to target markets. The most important roles of a marketing channel, is to provide a the producer with a clear set of actions, that transforms various resources into a finished end-product, available and optimized for consumption. Marketing channels help manufacturers deliver their goods when and where its needed. It also makes goods and services available to the customer in a convenient way. It is easier to work through the extensive network. MBAmaterials mbamaterials.wordpress.com

The Role of Marketing Channels Merchants Contacts Experience Specialization Scale of operation Agents Facilitators MBAmaterials mbamaterials.wordpress.com

The Role of Marketing Channels cont… Channel Functions and Flows A marketing channel performs the work of moving goods from producers to consumers. It overcome the time, place, and possession gaps that separates goods and services from those who need or want them. Some functions constitute a forward flow of activity from the company to the customer; other functions constitute a backward flow from customer to the company. A manufacturer selling a physical product and services might require three channels: a sales channel, a delivery channel, and a service channel.  ::: The Role of Marketing Channels Channel Functions and Flowsa marketing channel performs the work of moving goods from producers to consumers.Some functions constitute a forward flow of activity from the company to the customer;other functions constitute a backward flow from customer to the company. Amanufacturer selling a physical product and services might require three channels: a saleschannel, and a service channel. Channel levels a zero level channel consist of a manufacturer selling directly to the final customer.Major examples are door to door sale, mail order.A one-level channel contains one selling intermediary; a two-level channel contains twoselling intermediaries. These intermediates could be retailers, distributors.As the no. of levels increase the level of difficulty of information sharing andcoordination also increase. Channels normally describe a forward movement of productsfrom source to user. Service Sector Channels marketing channels are not limited to the distribution of physical goods. Producer of service and ideas also face problem of making their output available and accessible totarget population MBAmaterials mbamaterials.wordpress.com

Channel Functions and Flows Time Place Possession Transportation, communication Ordering, payment Forward Flow Backward Flow Information, negotiation, finance, risk taking Members of the marketing channel perform a number of key functions. Some of these functions (storage and movement, title, and communications) constitute a forward flow of activity from the company to the customer; other functions (ordering and payment) constitute a backward flow from customers to the company. Still others (information, negotiation, finance, and risk taking) occur in both directions. MBAmaterials mbamaterials.wordpress.com 14

Marketing Flows MBAmaterials mbamaterials.wordpress.com

Commonalities Among All Channel Functions They use up scarce resources They can often be performed better through specialization They can be shifted among channel members MBAmaterials mbamaterials.wordpress.com

Channel Member Functions Gather information Develop and disseminate persuasive communications Reach agreements on price and terms Acquire funds to finance inventories Assume risks Provide for storage Provide for buyers’ payment of their bills Oversee actual transfer of ownership MBAmaterials mbamaterials.wordpress.com

Channel levels Zero-level (Direct marketing) channel A zero level channel consist of a manufacturer selling directly to the final customer. Major examples are door to door sale, mail order, Internet selling etc. MBAmaterials mbamaterials.wordpress.com

One level Channel One-level channel contains one selling intermediary, such as retailer.. MBAmaterials mbamaterials.wordpress.com

Two level Channel A two-level channel contains two selling intermediaries. These intermediates could be retailers, distributors . MBAmaterials mbamaterials.wordpress.com

Three level Channel It contains three intermediaries. MBAmaterials mbamaterials.wordpress.com

Consumer and Industrial Marketing Channels MBAmaterials mbamaterials.wordpress.com

Service Sector Channels As internet and other technologies advance, service industries such as banking, insurance, travel, and stock buying and selling are operating through new channels. marketing channels are not limited to the distribution of physical goods. Producer of service and ideas also face problem of making their output available and accessible to target population. MBAmaterials mbamaterials.wordpress.com

Analyzing customer need and want Customers may choose the channels for different products based on price, products assortment, convenience and other factors like economic social or experiential. MBAmaterials mbamaterials.wordpress.com

Fives service outputs produced by channels Lot size Waiting and delivery time Spatial Convenience Product Variety Service backup (credit, delivery, installation, repair) MBAmaterials mbamaterials.wordpress.com

Establishing objectives and constraints Marketers should set their channel objectives on the basis of service output levels, associated cost and support levels. On the basis of these channel is set. Channel objective vary with product characteristics. MBAmaterials mbamaterials.wordpress.com

Marketers must adapt their channel objectives to larger environment. Channels are also affected by legal regulations and restrictions. MBAmaterials mbamaterials.wordpress.com

Identifying major channel alternatives Channels may vary from sales force to agents, dealers, direct mail, telemarketing. They have advantages and disadvantages. Sales force are expensive, through dealers company wont have direct contact, internet mat not be effective. MBAmaterials mbamaterials.wordpress.com

Channel alternatives differ in three ways: Types of intermediaries Number of Channel members Terms and responsibilities of Channel members MBAmaterials mbamaterials.wordpress.com

Types of intermediaries It may vary from direct sales force, mail-order catalog, mass merchandiser, company stores, dealers, agents etc. It depends on: cost Difficulty in operation Desired level of service time MBAmaterials mbamaterials.wordpress.com

Number of intermediaries Three strategies based on number of intermediaries are Exclusive distribution Selective distribution Intensive distribution MBAmaterials mbamaterials.wordpress.com

Exclusive distribution Number of outlets are very low Done when producer want to maintain control over service level and output. They want more knowledgeable selling Creates high loyalty and considerable sales support. MBAmaterials mbamaterials.wordpress.com

Selective distribution It is a strategy in which the producers try to have right number of intermediaries on the basis of market potential, density of population, dispersion of sales, and competitors distribution policy. MBAmaterials mbamaterials.wordpress.com

Intensive distribution Marketers place goods and services in many outlets as possible Marketers move from exclusive of selective to intensive to increase coverage and sales. Low price, low margin and small order size may result. Retailers may compete aggressively. MBAmaterials mbamaterials.wordpress.com

Terms and Responsibilities of Channel Members The producers and intermediaries must agree on the terms and responsibilities of each channel member. They should agree on price policies, conditions of sale, territorial rights, and specific services to be performed by each party.

Terms and Responsibilities of Channel Members There are mainly four elements involved: 1. Price policy: The producers should establish a list price and a fair set of discounts and allowances for intermediaries. 2. Conditions of Sale: It refers to payment terms and producer guarantees. Most producers grant cash discounts to distributors for early payments. They might also offer a guarantee against defective merchandise or price declines, creating an incentive to buy larger quantities. MBAmaterials mbamaterials.wordpress.com

Terms and Responsibilities of Channel Members 3. Distributor’s territorial rights: It consists of the terms under which the producer will enfranchise other distributors. Distributors normally expect to receive full credit for all sales in their territory, whether or not they did the selling. Also, the producers must be careful about where it places its new resellers. Example: Sipradi Energy 4. Mutual services and responsibilities: It must be carefully spelled out, especially in franchised and exclusive-agency channels. For example: McDonald and its franchisee. MBAmaterials mbamaterials.wordpress.com

Evaluating the Major Alternatives Economic criteria: Using economic criteria, a company compares the likely sales, costs and profitability of different channel alternatives. What will be the investment required by each channel alternative, and what returns will result? Control criteria: The company must also consider control issues. Using intermediaries usually meant giving them some control over the marketing of the product, and some intermediaries take more control than others. Other things being equal, the company prefers to keep as much control as possible. MBAmaterials mbamaterials.wordpress.com

Evaluating the Major Alternatives Adaptive criteria: Finally the company must apply adaptive criteria. Channels often involve long term commitments, yet the company wants to keep the channel flexible so that it can adapt to environmental changes. Thus, to be considered, a channel involving long term commitments should be greatly superior on economic and control grounds. MBAmaterials mbamaterials.wordpress.com

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