MGT301 Principles of Marketing Lecture-28

Summary of Lecture-27

Today’s Topics

Place….Distribution Channel….Marketing Channel

Marketing Channel A set of interdependent organizations involved in the process of making a product or service available for use or consumption by the consumer or business user.

Simple Marketing System Producer/SellerConsumer Communication Product/Service Money Feedback

How Intermediaries Minimize Transactions?

20 Contacts Manufacturer Customer

9 Contacts Manufacturer Customer Wholesaling Intermediary

Why are Marketing Intermediaries Used?

 Greater efficiency in making goods available to target markets.  Offer the firm more than it can achieve on it’s own through the intermediaries: –Contacts –Experience –Specialization –Scale of operation  Match supply and demand.

Channel members add value by bridging the major time, place and possession gaps that separate goods and services from those who would use them. How Channel Members Add Value?

Contact Financing Information Risk Taking Promotion Matching Negotiation Physical Distribution Physical Distribution Distribution Channel Functions

 Direct Channel: when a producer and ultimate consumer deal directly with each other. -e.g. electronic marketing channels  Indirect Channel: when intermediaries are inserted between the producer and consumers and perform numerous channel functions. Direct and Indirect Channels

M M W W J J R R C C  M M W W R R C C  M M R R C C  M M C C Channel 1 Channel 2 Channel 3 Channel 4 Direct In-Direct

Marketing Channels for Consumer Goods

Producer Agent/ Broker WholesalerRetailerConsumer Producer WholesalerRetailerConsumer ProducerRetailerConsumer ProducerConsumer

Producer Agent/ Broker Wholesaler Business User ProducerWholesaler Business User Producer Business User Producer Business User Agent/ Broker Marketing Channels for Business Goods

Industrial distributors Manufacturer Consumer Manufacturer’s representative Manufacturer’s sales branch Industrial Marketing Channels

The channel will be most effective when..  Each member is assigned tasks it can do best.  All members cooperate to attain overall channel goals and satisfy the target market. Channel Behavior & Conflict

When this doesn’t happen, conflict occurs..  Horizontal Conflict occurs among firms at the same level of the channel.  Vertical Conflict occurs between different levels of the same channel. For the channel to perform well, conflict must be managed.

Conventional Distribution Channel vs. Vertical Marketing Systems

VerticalMarketingChannel Manufacturer Retailer ConventionalMarketingChannel Consumer Manufacturer ConsumerRetailer Wholesaler

Vertical marketing systems are professionally managed and centrally coordinated marketing channels designed to achieve channel economies and maximum marketing impact.

Types of Vertical Marketing Systems

Corporate Common Ownership at Different Levels of the Channel Corporate Common Ownership at Different Levels of the Channel Contractual Contractual Agreement Among Channel Members Contractual Contractual Agreement Among Channel Members Administered Leadership is Assumed by One or a Few Dominant Members Administered Leadership is Assumed by One or a Few Dominant Members

Franchising is a contractual arrangement between a parent company (a franchisor) and an individual or firm (a franchisee) that allows the franchisee to operate a certain type of business under an established name according to specific rules. Franchising

Innovations in Marketing Systems

Two or More Companies at One Channel Level Join Together to Follow a New Marketing Opportunity. Example: Banks in Grocery Stores Horizontal Marketing System

Hybrid Marketing System A Single Firm Sets Up Two or More Marketing Channels to Reach One or More Customer Segments. Example: Retailers, Catalogs, and Sales Force

Channel Design Decisions

Channel Design Considerations 1. Length and width of distribution strategy -Number and types of intermediaries -Direct vs. indirect channels 2. Type of arrangement -Conventional vs. vertical marketing systems 3. Distribution coverage strategy -Exclusive, selective or intensive -Service quality

Channel Design Decisions

Analyzing Consumer Service Needs Setting Channel Objectives & Constraints Exclusive Distribution Exclusive Distribution Selective Distribution Selective Distribution Intensive Distribution Intensive Distribution Identifying Major Alternatives Evaluating the Major Alternatives

Intensive Distribution Selective Distribution Exclusive Distribution

Analyzing Consumer Service Needs Setting Channel Objectives & Constraints Exclusive Distribution Exclusive Distribution Selective Distribution Selective Distribution Intensive Distribution Intensive Distribution Identifying Major Alternatives Evaluating the Major Alternatives

Evaluation of Channel Alternatives

 Economic Criteria -Potential sales, costs and profits of channels  Control Criteria -Amount of control company has over sales efforts  Adaptive Criteria -flexibility of channel to adapt to changing situations

Channel Capabilities and Costs Channel Capabilities and Costs Channel Compatibility Channel Compatibility Availability

Channel Management Decisions

Selecting Motivating Evaluating FEEDBACK

Selecting FEEDBACK Motivating Training Evaluating

Managing Marketing Channels Evaluate Channel Per- formance Implement Channel Strategy Determine Channel Structure Evaluate Channel Alter- natives Develop Channel Strategy and Objectives Formulate Firm’s Marketing Objectives & Strategy Formulate Firm’s Marketing Objectives & Strategy

Enough for today...

Summary

20 Contacts Manufacturer Customer

9 Contacts Manufacturer Customer Wholesaling Intermediary

Producer Agent/ Broker WholesalerRetailerConsumer Producer WholesalerRetailerConsumer ProducerRetailerConsumer ProducerConsumer Marketing Channels for Consumer Goods

Producer Agent/ Broker Wholesaler Business User ProducerWholesaler Business User Producer Business User Producer Business User Agent/ Broker Marketing Channels for Business Goods

Channel Design Decisions

Analyzing Consumer Service Needs Setting Channel Objectives & Constraints Exclusive Distribution Exclusive Distribution Selective Distribution Selective Distribution Intensive Distribution Intensive Distribution Identifying Major Alternatives Evaluating the Major Alternatives

Channel Management Decisions

Selecting Motivating Evaluating FEEDBACK

Nature and Importance of Marketing Logistics Next….

MGT301 Principles of Marketing Lecture-28