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Week 3 Marketing Channels and Value Networks

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Diego Ochoa
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78 views

Week 3 Marketing Channels and Value Networks

Uploaded by

Diego Ochoa
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Designing and Managing

Integrated Marketing Channels

Trade Marketing and Category


Management
Janitza Ariza S.
Jessica Machado L.
Channel Member Functions

The question for marketers is not whether various


channel functions need to be performed but rather, who
is to perform them.

All channel functions have three things in common:


• They use up scarce resources
• They can often be performed better through
specialization
• they can be shifted among channel members.

Shifting some functions to intermediaries lowers the producer’s


costs and prices, but the intermediary must add a charge to cover
its work.
Copyright © 2011 Pearson Education, Inc.  Publishing as Prentice Hall 15-2
Channel Member Functions

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Industrial Markets

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Designing a Marketing Channel System

• Analyze customer needs


• Establish channel objectives
• Identify major channel alternatives
• Evaluate major channel alternatives

Copyright © 2011 Pearson Education, Inc.  Publishing as Prentice Hall 15-5


Analyze customer needs

Consumers may choose the channels they prefer


based on price, product assortment, and
convenience, as well as their own shopping goals
(economic, social, or experiential).

As with products, segmentation exists, and marketers


must be aware that different consumers have
different needs during the purchase process.

Copyright © 2011 Pearson Education, Inc.  Publishing as Prentice Hall 15-6


What European Consumers Value

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Analyzing Customer Needs and Wants

Consumers may choose different channels for different


functions in a purchase

Some consumers are willing to “trade up” to retailers


offering higher-end goods such as TAG Heuer watches
or Callaway golf clubs and “trade down” to discount
retailers for private-label paper towels, detergent, or
vitamins.

Copyright © 2011 Pearson Education, Inc.  Publishing as Prentice Hall 15-8


Service Outputs of Channels

1. Lot size— The number of units the channel permits a


typical customer to purchase on one occasion. (PriceMart
Vs. Buying a home)
2. Waiting and delivery time—The average time customers
wait for receipt of goods. Customers increasingly prefer
faster delivery channels.
3. Spatial convenience —The degree to which the marketing
channel makes it easy for customers to purchase the
product. (Toyota vs. Lexus)
4. Product Variety – The options customers have when going
to a store or the variety of categories and lines available.
5. Service Backup – the support that is available to customers

Copyright © 2011 Pearson Education, Inc.  Publishing as Prentice Hall 15-9


Identifying Major Channel Alternatives

Each channel (sales forces to agents, distributors, dealers, direct mail,


telemarketing, and the Internet) has unique strengths and weaknesses.

1. Types of intermediaries
2. Number of intermediaries
3. Terms and responsibilities

Copyright © 2011 Pearson Education, Inc.  Publishing as Prentice Hall 15-10


Identifying Major Channel Alternatives

2. Number of intermediaries:
• Intensive
• Selective
• Exclusive

Copyright © 2011 Pearson Education, Inc.  Publishing as Prentice Hall 15-11


Exclusive Distribution

• means severely limiting the number of intermediaries.


• It’s appropriate when the producer wants to maintain control
over the service level and outputs offered by the resellers, and
it often includes exclusive dealing arrangements.
• The producer hopes to obtain more dedicated and
knowledgeable selling.
• It requires a closer partnership between seller and reseller.
• Exclusive deals are becoming a mainstay for specialists looking
for an edge in markets increasingly driven by price

Copyright © 2011 Pearson Education, Inc.  Publishing as Prentice Hall 15-12


Selective Distribution

• Relies on only some of the


intermediaries willing to carry a
particular product.
• Whether established or new,
the company does not need to
worry about having too many
outlets; it can gain adequate
market coverage with more
control and less cost than
intensive distribution.

Copyright © 2011 Pearson Education, Inc.  Publishing as Prentice Hall 15-13


Intensive Distribution

• places the goods or services in


as many outlets as possible.
• This strategy serves well for
products consumers buy
frequently or in a variety of
locations. (location and time
convenience)

Copyright © 2011 Pearson Education, Inc.  Publishing as Prentice Hall 15-14


Pros and Cons

• Manufacturers are constantly


tempted to move from exclusive
or selective distribution to more
intensive distribution to increase
coverage and sales.
• This strategy may help in the short
term, but if not done properly, it
can hurt long-term performance
by encouraging retailers to
compete aggressively.
• Price wars can then erode
profitability, dampening retailer
interest and harming brand equity.

Copyright © 2011 Pearson Education, Inc.  Publishing as Prentice Hall 15-15


Terms and Responsibilities of Channel Members

Each channel member must be treated respectfully and given


the opportunity to be profitable. The main elements in the
“trade-relations mix” to be performed by each party are:

• Price policy
• Condition of sale
• Distributors’ territorial rights
• Mutual services and responsibilities

Copyright © 2011 Pearson Education, Inc.  Publishing as Prentice Hall 15-16


Terms and Responsibilities of Channel Members

• Price policy the producer to


establish a price list and schedule of
discounts and allowances.
• Conditions of sale payment terms
and producer guarantees.
• Distributors’ territorial rights
distributors’ territories and the terms
under which the producer will
enfranchise other distributors.
• Mutual services and responsibilities
must be carefully spelled out,
especially in franchised and exclusive-
agency channels.

Copyright © 2011 Pearson Education, Inc.  Publishing as Prentice Hall 15-17


Evaluating Major Channel Alternatives

Each channel alternative needs to be evaluated against economic,


control, and adaptive criteria.

Economic Criteria: Each channel alternative will produce a


different level of sales and costs. Firms will try to align customers
and channels to maximize demand at the lowest overall cost.
Control and adaptive criteria: Agents may concentrate on the
customers who buy the most, not necessarily those who buy the
manufacturer’s goods. To develop a channel, members must
commit to each other for a specified period of time.

Copyright © 2011 Pearson Education, Inc.  Publishing as Prentice Hall 15-18


Economic Criteria Example

In the sale of industrial An study showed that the


products costing between average transaction at a
$2,000 and $5,000, the cost per full-service branchcosts
transaction has been estimated the bank $4.07, a phone
at: transaction costs $.54,
• $500 (field sales) and an ATM transaction
• $200 (distributors) costs $.27, but a typical
• $50 (telesales) Web-based transaction
• $10 (Internet). costs only $.01.30

Copyright © 2011 Pearson Education, Inc.  Publishing as Prentice Hall 15-19


Economic Criteria Example

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Channel-Management Decisions

Selecting Channel Members


To facilitate channel member selection, producers should
determine what characteristics distinguish the better
intermediaries.

If the intermediaries are sales agents, producers should evaluate


the number and character of other lines carried and the size and
quality of the sales force.

If the intermediaries are department stores that want exclusive


distribution, their locations, future growth potential, and type of
clientele will matter.

Copyright © 2011 Pearson Education, Inc.  Publishing as Prentice Hall 15-21


Channel-Management Decisions

Training and Motivating Channel Members


A company needs to view its intermediaries the same way it
views its end users.
It should determine their needs and wants and tailor its channel
offering to provide them with superior value.
Carefully implemented training, market research, and other
capability-building programs can motivate and improve
intermediaries’ performance.
The company must constantly communicate that intermediaries
are crucial partners in a joint effort to satisfy end users of the
product.

Copyright © 2011 Pearson Education, Inc.  Publishing as Prentice Hall 15-22


Channel Power

Coercive

Reward

Legitimate

Expert

Referent

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Channel Integration and Systems

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Channel Integration and Systems

Vertical marketing systems Horizontal marketing


• Corporate VMS systems
• Administered VMS • Multichannel systems
• Contractual VMS

Copyright © 2011 Pearson Education, Inc.  Publishing as Prentice Hall 15-25

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