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Marketing Channel

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Asaf Rajput
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36 views52 pages

Marketing Channel

Uploaded by

Asaf Rajput
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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MARKETING CHANNELS

MARKETING CHANNELS ( TRADE


CHANNELS ) ( DISTRIBUTION CHANNELS )

THEY ARE INTERDEPENDENT ORGANIZATIONS


INVOLVED IN PROCESS OF MAKING A
PRODUCT OR SERVICE AVAILABLE FOR USE
OR CONSUMPTION .
MERCHANTS
SOME INTERMEDIARIES BUY , NEGOTIATE
ON BEHALF OF PRODUCER AND TAKE
TITLE TO GOODS , THEY ARE CALLED
MERCHANTS .

e.g.

WHOLESALERS , RETAILERS .
AGENTS
SOME SEARCH FOR CUSTOMERS AND
NEGOTIATE ON THE BEHALF OF
PRODUCER BUT DON’T TAKE TITLE
TO GOODS .

e.g.

BROKERS , SALES AGENTS .


FACILITATORS
SOME INTERMEDIARIES NEITHER
NEGOTIATE PURCHASES NOR TAKE
TITLE TO GOODS , BUT ASSIST IN THE
DISTRIBUTION PROCESS .

e.g.

BANKS , ADVERTISING AGENCIES .


ROLE OF MARKETING CHANNELS
1. INTERMEDIARIE’S BRING IN FINANCIAL
RESOURCES .

2. MANY SMALL VALUE ITEMS LIKE


CHOCOLATES , BALL PENS CANNOT BE
SOLD THROUGH DIRECT MARKETING DUE
TO COST PROBLEMS .

3. BECAUSE OF REDUCED NUMBER OF


CONTACTS , INTERMEDIARIES BRING
DOWN COST OF MANUFACTURERS .
ROLE OF MARKETING CHANNELS
CASE 1:-
1
M1 2 C1

3
4
5 C2
M2
6

7
8
M3 9 C3

NUMBER OF CONTACTS = 9
ROLE OF MARKETING
CHANNELS
CASE 2 :-
M1 , M2 , M3 ARE 3
DIFFERENT MANUFACTURERS .

M1 C1
4 D IS DISTRIBUTOR .
1

2 5 C1 , C2 , C3 ARE 3 DIFFERENT
M2 D C2 CUSTOMERS .

3 6

M3 C3

NUMBER OF CONTACTS = 6
ROLE OF MARKETING CHANNELS
4. INTERMEDIARIES GATHER INFORMATION
ABOUT CURRENT AND POTENTIAL
CUSTOMERS AND COMPETITORS .

5. THEY PERSUADE CUSTOMERS TO BUY .

6. THEY PROVIDE FOR STORAGE AND


DELIVERY OF GOODS .
VALUE NETWORK
IT IS A SYSTEM OF COOPERATIONS THAT A FIRM
CREATES TO SOURCE , AUGMENT AND DELIVER
ITS OFFERINGS . VALUE NETWORK INCLUDES ,

1. FIRM’S SUPPLIERS AND SUPPLIERS’ SUPPLIERS

2. CUSTOMERS AND CUSTOMERS’ CUSTOMERS

3. UNIVERSITY RESEARCHERS

4. GOVERNMENT APPROVAL AGENCIES


VALUE NETWORK
ULTIMATE AIM OF VALUE NETWORK IS TO GIVE
SUPERIOR VALUE TO THE TARGET MARKET .

e.g.

SOUTH KOREAN FORTUNE 100 COMPANY


SAMSUNG HAS TIED UP WITH IIT DELHI TO SET UP
A ‘ USABILITY LAB ’ WHERE ALL ITS PRODUCTS
ARE STUDIED FOR CUSTOMIZATION FOR INDIA .
OUTCOMES ARE UNIQUE FEATURES IN WASHING
MACHINES LIKE SAREE WASH COURSE AND
MEMORY RESTART ( TO DEAL WITH FREQUENT
POWER CUTS IN WASHING MACHINES ) .
CHANNEL LEVELS
IT TALKS ABOUT NUMBER OF INTERMEDIARIES
BETWEEN MANUFACTURER AND CONSUMERS .

TYPES OF CHANNEL LEVELS :-

1. ZERO – LEVEL CHANNEL ( DIRECT MARKETING


CHANNEL )

2. ONE – LEVEL CHANNEL

3. TWO – LEVEL CHANNEL


1. ZERO – LEVEL CHANNEL
(DIRECT MARKETING CHANNEL )

MANUFACTURER CONSUMER

HERE MANUFACTURER DIRECTLY SELLS TO


CUSTOMER .

e.g.

EUREKA FORBES .
2. ONE – LEVEL CHANNEL

MANUFACTURER RETAILER CONSUMER

HERE THERE IS ONLY ONE INTERMEDIARY .

e.g.

CONSUMER DURABLE INDUSTRY .


3. TWO – LEVEL CHANNEL

MANUFACTURER WHOLESALER RETAILER CONSUMER

HERE THERE ARE TWO INTERMEDIARIES .

e.g.

FMCG INDUSTRY .
CHANNEL MANAGEMENT DECISIONS
IT INVOLVES FOLLOWING STEPS :-

1. SELECTING CHANNEL MEMBERS

2. TRAINING CHANNEL MEMBERS

3. MOTIVATING CHANNEL MEMBERS

4. EVALUATING CHANNEL MEMBERS

5. MODIFYING CHANNEL ARRANGEMENTS


1. SELECTING CHANNEL
MEMBERS
THIS IS CRUX FOR SUCCESS OF
MANUFACTURER . FOLLOWING FACTORS
ARE TAKEN INTO CONSIDERATION FOR
SELECTING A CHANNEL MEMBER .

• NUMBER OF YEARS IN BUSINESS .


• GROWTH AND PROFIT RECORD .
• FINANCIAL STRENGTH AND PAYMENT
RECORD .
• COOPERATIVENESS .
• SERVICE REPUTATION .
2. TRAINING CHANNEL MEMBERS
IT IS VERY IMPORTANT FACTOR IN
CONSUMER ELECTRONICS , AUTOMOBILE
INDUSTRIES .

e.g.

MAHINDRA & MAHINDRA HAS SEPARATE


DECENTRALIZED TRAINING INSTITUTIONS
FOR DEALERS’ PERSONS WHERE TRAINING
IS GIVEN ON REPAIRING DIFFERENT
MODELS OF THE COMPANY .
3. MOTIVATING CHANNEL
MEMBERS
HERE PRODUCERS USE CHANNEL
POWER .

CHANNEL POWER :- IT IS ABILITY OF


MANUFACTURER TO ALTER
BEHAVIOUR OF CHANNEL MEMBERS
SO THAT THEY TAKE ACTIONS WHICH
THEY WOULD NOT HAVE TAKEN
OTHERWISE .
TYPES OF CHANNEL POWER

• REWARD POWER

• COERCIVE POWER

• REFERENT POWER
REWARD POWER

A MANUFACTURER MAY GIVE


INCENTIVES TO INTERMEDIARIES FOR
A SPECIFIC PERFORMANCE . HERE
THE LIMITATION IS THAT EVERYTIME
INTERMEDIARIES MAY EXPECT
INCENTIVES .
COERCIVE POWER

IF INTERMEDIARIES DON’T COOPERATE


A MANUFACTURER THREATENS TO
STOP SUPPLIES OR TERMINATE A
RELATIONSHIP . THIS CAN WORK BUT
MAY LEAD TO RESENTMENT AND
NEGATIVE REACTIONS .
REFERENT POWER

IF MANUFACTURER IS HIGHLY RESPECTED


THEN INTERMEDIARIES ARE PROUD TO BE
ASSOCIATED WITH IT .

e.g.

APPLE
4. EVALUATE CHANNEL
MEMBERS

PRODUCERS MUST EVALUATE CHANNEL


MEMBERS IN TERMS OF TARGET
ACHIEVEMENT , COOPERATION IN
TRAINING PROGRAMMES , TREATMENT OF
DAMAGED GOODS . UNDERPERFORMERS
NEED TO BE RETRAINED , MOTIVATED OR
TERMINATED .
5. MODIFYING CHANNEL
ARRANGEMENTS
THIS IS NECESSARY WHEN DISTRIBUTION
CHANNEL IS NOT WORKING AS PLANNED .

e.g.

SONY IN INDIA HAS COME OUT WITH


EXCLUSIVE OUTLETS .
CHANNEL SYSTEMS
THERE ARE 3 CHANNEL SYSTEMS

1. VERTICAL MARKETING SYSTEMS

2. HORIZONTAL MARKETING SYSTEMS .

3. MULTICHANNEL MARKETING
SYSTEMS
1. VERTICAL MARKETING
SYSTEMS ( VMS )
CONVENTIONAL MARKETING VERTICAL MARKETING
SYSTEM SYSTEM

IT CONSISTS OF HERE PRODUCER ,


INDEPENDENT PRODUCER , WHOLESALER(S) ,
WHOLESALER(S) AND RETAILER(S) ACT AS A
RETAILER(S) . NO CHANNEL UNIFIED SYSTEM .
MEMBER HAS COMPLETE OR
SUBSTANTIAL CONTROL
OVER OTHER MEMBERS .
TYPES OF VERTICAL
MARKETING SYSTEMS

a. CORPORATE VMS

b. ADMINISTERED VMS

c. CONTRACTUAL VMS
a. CORPORATE VMS
HERE THERE IS A SINGLE OWNERSHIP .

e.g.

IN INDIA BPCL OWNS PETROLEUM


REFINERIES AND MANY PETROL PUMPS .
b. ADMINISTERED VMS
MANUFACTURERS OF DOMINANT
BRANDS ARE ABLE TO OBTAIN
STRONG SUPPORT FROM
RESELLERS .

e.g.

HUL , GILLETE .
c. CONTRACTUAL VMS
MANUFACTURERS SELL ON CONTRACT
BASIS .

e.g.

MCDONALD WHO APPOINTS FRANCHISEES .


2. HORIZONTAL MARKETING SYSTEMS
( SYMBIOTIC MARKETING SYSTEMS )
HERE 2 OR MORE COMPANIES AT ONE
LEVEL JOIN HANDS TO EXPLOIT A NEW
MARKETING OPPORTUNITY . COMPANIES
MAY JOIN FORCES WITH EACH OTHER ON
TEMPORARY OR PERMANENT BASIS .

e.g.

MCDONALD’S RESTAURANTS IN WALMART


STORES .
3. MULTICHANNEL MARKETING
SYSTEMS
THIS HAPPENS WHEN A SINGLE FIRM SELLS
THROUGH 2 OR MORE MARKETING CHANNELS TO
DIFFERENT CONSUMER SEGMENTS .

e.g.
MANUFACTURER

INTERNET RETAILER DISTRIBUTOR

RETAILER

CONSUMER CONSUMER CONSUMER


SEGMENT 1 SEGMENT 2 SEGMENT 3
CHANNEL CONFLICT

IT OCCURS WHEN ONE CHANNEL


MEMBER’S ACTIONS PREVENT THE
OTHER CHANNEL MEMBER FROM
ACHIEVING ITS GOAL .
TYPES OF CHANNEL CONFLICT
THERE ARE BASICALLY 3 TYPES OF
CHANNEL CONFLICT .

1. VERTICAL CHANNEL CONFLICT .

2. HORIZONTAL CHANNEL CONFLICT .

3. MULTICHANNEL CONFLICT .
1. VERTICAL CHANNEL
CONFLICT
IT IS A CONFLICT BETWEEN
DIFFERENT LEVELS WITHIN SAME
CHANNEL .

e.g.

COMPANY MAY HAVE CONFLICT WITH


RETAILERS OVER MARGINS .
2. HORIZONTAL CHANNEL
CONFLICT
IT IS A CONFLICT BETWEEN MEMBERS AT
THE SAME LEVEL WITHIN THE CHANNEL .

e.g.

DEALERS MAY FREQUENTLY HAVE


CONFLICTS WITH EACH OTHER OVER
UNDERCUTTING AND AREA OF OPERATION .
3. MULTICHANNEL CONFLICT
HERE THERE COULD BE CONFLICT
BETWEEN DIFFERENT CHANNELS .

e.g.

ESTABLISHED DEALERS MAY


PROTEST IF COMPANY SELLS
DIRECTLY THROUGH INTERNET .
MANAGING CHANNEL CONFLICT
FOLLOWING ARE METHODS TO
MANAGE CHANNEL CONFLICT .

1. CO – OPTATION .
2. DIPLOMACY .
3. MEDIATION .
4. ARBITRATION .
5. LAWSUIT .
1. CO - OPTATION

HERE ONE ORGANIZATION TRIES TO


WIN SUPPORT OF LEADERS OF
ANOTHER ORGANIZATION BY
INCLUDING THEM IN ADVISORY
COUNCILS , BOARDS OF DIRECTORS
etc.
2. DIPLOMACY

HERE EACH PARTY SENDS A PERSON


OR GROUP TO MEET ITS
COUNTERPART TO RESOLVE THE
CONFLICT .
3. MEDIATION

IT IS NEGOTIATION BETWEEN 2
PARTIES SUPERVISED BY A THIRD
PERSON . HERE SESSIONS ARE
OUTSIDE COURT OFTEN IN
MEDIATOR’S OFFICE . DURING
MEDIATION SIDES IN CONFLICT HAVE
PART IN FINAL DECISION .
4. ARBITRATION

WHEN MEDIATION FAILS , THEN


CONFLICT COULD BE PLACED UNDER
ARBITRATION . ARBITRATOR HAS
SAME POWERS OF JUDGE . IN
ARBITRATION PARTIES CAN PRESENT
THEIR CLAIMS BUT HAVE NO PART IN
FINAL DECISION .
5. LAWSUIT
WHEN NONE OF THE ABOVE MENTIONED
METHODS PROVE EFFECTIVE , A COMPANY
MAY OPT TO FILE A LAWSUIT .

e.g.

LEVI STRAUSS FILED A LAWSUIT AGAINST


U.K. RETAILER TESCO .

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