7 th April 2007Marketing Fundamental Mgt 1203 Marketing Mix Place

7 th April 2007Marketing Fundamental Mgt 1203 Value Networks and Marketing Channel Systems A Value Network is a system of partnerships and alliances used by a firm to source, augment, and deliver its product or service offerings. Intermediaries that help get the product from manufacturer to consumer or end users form the Marketing Channel(s).

7 th April 2007Marketing Fundamental Mgt 1203 Work Performed by Channels Producers establish marketing channels for a variety of reasons: –Producers lack financial resources necessary for direct marketing –Direct marketing is not feasible for many offerings –Using channels frees money for investment in main business –Intermediaries are more efficient

7 th April 2007Marketing Fundamental Mgt 1203 Work Performed by Channels Other key functions performed by channel members include those that flow both ways: –Forward and backward flow functions: Gather information Negotiate price and transfer of ownership Finance inventories Assume risk

7 th April 2007Marketing Fundamental Mgt 1203 Work Performed by Channels Channel levels vary according to the number of intermediaries: –Zero-level (direct marketing) channel –One, two, and three-level channels –Reverse flow channels Service sector channels use agencies and locations to access population to be served.

7 th April 2007Marketing Fundamental Mgt 1203 Channel-Design Decisions Push vs. pull strategy Analyzing consumers’ desired service output levels –Lot size, waiting time, product variety, spatial convenience, service backup Establishing objectives / constraints Identifying and then evaluating major channel alternatives

7 th April 2007Marketing Fundamental Mgt 1203 Channel-Design Decisions Channel Factors –Intermediary type Merchants- Buy, take title, and resell merchandise Agents- Find customers, negotiate, do not take title to merchandise Facilitators- Aid in distribution, do not negotiate or take title to merchandise –Number of intermediaries Exclusive distribution- Severely limited distribution Selective distribution- Some intermediaries willing to carry good are selected Intensive distribution- Offering is placed in as many outlets as possible. –Terms and responsibilities of intermediaries Price policies- Price list and schedule of discounts Conditions of sale- Payment terms and guarantees Territorial rights- Define territory / terms

7 th April 2007Marketing Fundamental Mgt 1203 Channel-Design Decisions Channel Alternative Evaluation Criteria: –Economic criteria - Sales and costs vs. added value –Control criteria –Adaptive criteria After choosing a particular channel alternative, firms take several actions

7 th April 2007Marketing Fundamental Mgt 1203 Channel-Management Decisions Channel Development Process –Select channel members –Motivate channel members –Evaluate channel members –Modify channel arrangements

7 th April 2007Marketing Fundamental Mgt 1203 Channel Dynamics Channel systems are constantly evolving and developing Vertical Marketing Systems –Corporate VMS –Administered VMS –Contractual VMS Horizontal Marketing Systems Multichannel Marketing Systems

7 th April 2007Marketing Fundamental Mgt 1203 Channel Dynamics Conflict, Cooperation, & Competition –Types of conflict Vertical, horizontal, and multichannel –Causes of conflict Major causes: Goal incompatibility; unclear roles and rights Other potential causes exist –Managing channel conflict Subordinate goal adoption Exchange people between channel levels Cooptation Diplomacy Mediation Arbitration