MM:Chapter 17 Managing Marketing Channels

Marketing Channels are sets of interdependent organizations involved in the process of making a product or service available for use of consumption

Tasks of Marketing Channels Gather marketing information for supplies Develop and disseminate persuasive communication to consumers Facilitate transfer of ownership Place orders with manufacturers Acquire funds to finance inventories Assume risks connected with inventory Provide storage and PD activities Settle the payment through fin. Institutions Oversee actual transfer of ownership

Channel Functions and Flows Forward flow (physical, title, promotion) Backward flow (ordering, payment) Two-way Flow (negotiation, finance, risk taking and information)

Channel Levels Zero-level (direct-marketing) One-level channel Two-level Three-level channel Backward/ reverse-flow channels: e.g., dispose of batteries at DTAC

Channel-Design Decisions: 4 steps of designing a channel system 1.Analyze Customers Desired Service Output Level 2.Establish Objectives and Constraints 3.Identify Major Channel Alternatives 4.Evaluate Major Alternatives

1. Analyze Customers Desired Service Output Level 1. Analyze Customers Desired Service Output Level Channels produce 5 service outputs: Lot Size Waiting Time Spatial Convenience Product Variety Service Backup

2. Establish Objectives and Constraints Channel Objectives : Should be stated in terms of targeted service output levels Would vary with product characteristics Channel Constraints : e.g., Size of pdt, Perishability,

3. Identify Major Channel Alternatives Type of intermediaries Number of intermediaries: Exclusive distribution: Image Selective distribution: adequate mkt coverage Intensive distribution Terms & Responsibilities of Channel Members price policy, conditions of sale, distributor’s territorial rights, mutual services and responsibilities

4. Evaluate Major Alternatives 4. Evaluate Major Alternatives Each channel alternative needs to be evaluated against the following factors: Economic Criteria (compare the cost and expected sales of different intermediaries) Control Criteria Adaptive criteria

Channel-Management Decisions Selecting channel members Training channel members Motivating channel members Coercive power Reward power Legitimate power Expert power Referent power Evaluating channel members Modifying channel arrangement

Channel Dynamics 1.Vertical marketing systems 1. Vertical marketing systems 2. Horizontal marketing systems 3. Multi-channel marketing system 4. Conflict, co-operation and competition 5. Legal and ethical issues in channel relations

1. Vertical Marketing Systems A unified working system of channel members from different levels. 1. Corporate VMS: single ownership e.g., Dapper 2. Administered VMS: through size and power 3. Contractual VMS 3.1 Wholesaler-sponsored voluntary chains 3.2 Retailer cooperatives 3.3 Franchise organizations Manufacturer-sponsored retailer franchise Manufacturer-sponsored wholesaler franchise Service-firm-sponsored retailer franchise

2. Horizontal Marketing Systems “Symbiotic marketing” --- Two or more unrelated companies put together resources or programs to exploit an emerging marketing opportunity. e.g., VISA credit cards and Convenience store with the Counter service

3. Multi-Channel Marketing System Multichannel marketing: using more than one channels to reach one or more segments Roles of individual firms: Insiders --- members of dominant channel Strivers --- firms seeking to be members of dominant channel Complementers --- not part of dominant channel, but serving smaller segments of the market Transients--- firms going in and out of the mkt Outside innovators--- real disrupters of the dominant channels

4. Conflict, Cooperation and Competition Types of conflict Vertical channel conflict Horizontal channel conflict Multi-channel conflict Cause of channel conflict Goal incompatibility Unclear roles and rights Managing conflicts (superordinate goals, exchange persons, cooptation, joint membership, diplomacy, mediation, arbitration)

5. Legal, Ethical Issues in channel Relations Exclusive dealing: not handling competitors’ products Exclusive territories: selling pdt only in its own territory Tying agreements: full-line forcing Dealers’ rights: producer cannot drop dealers easily