C ONVENTIONAL M ARKETING S YSTEMS Teacher – Shahed Rahman

I NTRODUCTION Design Issues are critical in marketing channels Selecting the right members Assigning them the proper functions Having everyone fulfill their responsibilities

C ONVENTIONAL M ARKETING C HANNELS AS O RGANIZATIONAL T EAMS Most marketers work in a team Shoemakers, blacksmith and woodworkers work with their wives as their teammates While Husband take care of production, wife take care of customers and apprentice Conventional channel teams are loosely aligned teams of organization designed to bridge gaps between producers and consumers For conventional channels to succeed – each members have to work hard

C ONVENTIONAL M ARKETING C HANNEL : I SSUES AND A NSWERS Producers, Wholesalers, Other intermediaries such as agents or support servicers and retailers all face the channel design decision

W HAT IS C HANNEL D ESIGN Indicate a pattern, arrangement or structure of parts Arrangements that exist between organizations in marketing system Design also reflect the rules and regulations that system members use to create and sustain the system Channel Design refer to those decisions associated with the formation of new marketing channel or the alteration of existing channels It is a strategic decision A proper design can create a sustainable competitive advantage.

W HY ARE C HANNEL D ESIGN D ECISIONS C RITICAL ? A design effect all the marketing decisions Producers’ prices vary substantially according to whether they use mass merchandisers or high quality boutiques Channel Design decisions typically involve relatively long term commitments to other organizations and also the market that channel member serves It is the key external resource of many manufacturers It take years to build a successful channel You wont see the results instant

E NSURE T EAM WORK Channel members need to convert their special skills into a successful team performance Manufacturer >> Intermediary >>> end users linkage

M ARKETING F UNCTIONS F ACTOR INTO THE C HANNEL D ESIGN D ECISION ? Information Promotion Negotiation Ordering Financing Risk Taking Possession Billing Payment Title

W HEN IS IT TIME TO DESIGN OR R EDESIGN A C HANNEL When the nature of market change Organization's development of a new product or product line Decision to target a new market segment Do a PEST Analysis to see whether the External Environmental Changes

M AKING T HE C HANNEL D ESIGN D ECISION Organization should reach a workable compromise between what is ideal, what is adequate and what is obtainable. New manufacturers often feature small operations within a limited market area Larger firms tend to use different types of channels in different markets. Wholesale distributor for large market Direct Retailers ---- for small market

M AKING T HE C HANNEL D ESIGN D ECISION Large or small an organization’s channel design should develop in response to a SWOT Analysis SWOT Analysis should consider key success market success factors, Market attractiveness to a new entrants or a barrier to entry Technology issue – Social or culural trends

C HANNEL D ESIGN O PTION Making channel design decisions, a number of conventional channel systems are available 1. Number of level present in the Channel 2. Number of intermediaries operating at the various levels 3. Types of intermediaries used at each level

N UMBER OF L EVELS IN T HE C HANNEL Each intermediary that performs a function necessary to convey a good or service closer to final users represents a channel level A channel’s length is described by the number of intermediary levels other than producers and users that it contains Zero level channel or direct channel marketing exist when manufacturer sells directly to the final users One level channel design feature one selling intermediary. Eg. Retailers buy directly from the manufacturer Two level channel feature two selling intermediaries. Such as whole saler and retailer

N UMBER OF I NTERMEDIARIES AT E ACH L EVEL Intensive Distribution Distribute through as many outlet as possible Depends on product and consumer characteristics Low involvement product or consumers want more convenience Exclusive Distribution Places limits on the number of intermediaries operating at any given channel level Used when producers want to retain control over the quality of service levels

N UMBER OF I NTERMEDIARIES AT E ACH L EVEL Selective Distribution This lies between the two extreme. More than one but fewer than all available intermediaries are used

T YPES OF I NTERMEDIARIES AT EACH LEVEL Manufacturer’s sales force Manufacturers Representatives Industrial Distributor

E VALUATING C HANNEL D ESIGN A LTERNATIVES Expected Sales and Costs Criteria Control and Resources All companies want to control over its product and resources as possible Control often proves the deciding factor in this intermediary selection decision Flexibility Degree of commitment to the proposed relationship Respond to a changing environmental opportunities and threats

S ELECTING THE B EST C HANNEL D ESIGN Analyzing Desired Channel Output Utilities Convenience Utility Lot size Utility Selection Utility Service utility Analyzing Channel Objectives and Product Characteristics Unit Value Standardization Bulkiness Complexity Stage of Product Life Cycle Analyzing Market Behaviors and Segments

M ODIFYING E XISTING C HANNELS Organization must do more than construct a good channel design, set it in motion, and then sit back and watch. Channel adjustment – purposeful modification to intermediaries relationship- become necessary when consumers buying pattern change, market expand, new competition arise or newer innovative distribution channel options become available. Add or drop individual intermediaries Add or drop particular marketing channels Develop a total new way of distributing and selling goods within a particular market

M ODIFYING E XISTING C HANNELS Product Life Cycle Changes Introductory StageDeclining Growth stageMature Stage

M ODIFYING E XISTING C HANNELS Customer – Driven Refinement of Existing Channels Growth of Multichannel Marketing System Multichannel marketing occurs when a single firm uses two or more marketing channels to reach one or more market segments This is also know and dual distribution By pursuing more segments firms usually achieve increased market coverage Companies also establish different channels to sell different sized customers Direct sales may be best for handling larger customers