dist channel mgt adn design

8/7/2019 Dist channel mgt adn design

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Channels of Marketing


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MARKETING CHANNEL- ?????

Marketing channel: system of marketing

institutions that promotes the physical

flow of goods and services, along with

ownership title, from producers to

consumer or business user; also called a

distribution channel


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Role of Marketing ChannelsRole of Marketing Channels Channels provide the means by which the firm

moves the goods and services it produces to

ultimate usersFacilitate the exchange process by cutting thenumber of contacts necessary

Adjust for discrepancies in the markets

assortment of goods and services via sortingStandardize exchange transactions

Facilitate searches by both buyers and sellers

Strong Channel provides Competitive Adv.

Involve Long Term Commitments to the Firm


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Types of Marketing Channels

Marketing intermediaryMarketing intermediary: wholesaler orretailer that operates between producers

and consumers or business users; alsocalled a middleman

WholesalerWholesaler: marketing intermediary thattakes title to goods and then distributesthese goods further; also called a jobber ordistributor


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Marketing ChannellevelsMarketing Channellevels --

Consumer Goods


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Zero Producer - Consumers

B2B selling ,manufacture owned retail,outlets telemarketing

One P R C

Automobile & petrol dealers

Two P-W-R-C

FMCG, durables

Three P-W-Agent R- C


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Industrial Customers

Zero P-C

One -P

I

ndustrialDist.

Cust

omers

Two - M M. Rep. ID C

Three M Sales Branch ID C

Service Customers

SP C

SP- AGENT C


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Types of Distribution Systems

Intensive

Distribute @ many outlets

TS convenience place utility Low involvement goods


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Exclusive

channel policy in which a firm grantsexclusive rights to a single wholesaler orretailer to sell its products in a particular

geographic area Limited dist. Outlets

Exclusion of comp. pdts.

Limited channel partners high servicequality


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Selective

Exclusive + other show rooms Aristocrat, Branded Wear( Levis, Arrow)

Disney 5 channels to market its videos


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Functions of Marketing Channels

Facilitates Exchange Process

Alleviating Discrepancies

Quantity Customers cant purchase the required

Q

AssortmentCustomer cant purchase the desired

combi. of goods

Solution is Grouping of activities


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Channel Design Decisions

Push- utilizing channel partners to promote & sell pdts.

- Where low brand loyalty

Pull ensure customers demand for the pdt. / specific brand

- Where high brand loyalty

Distribution intensity: number of intermediaries throughwhich a manufacturer distributes its goods

Intensive distribution: channel policy in which a manufacturerof a convenience product attempts to saturate the market


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Design Decision 4 Steps

1. Analyzing Customer Expectations

Lot Size no. of unites that customer purchase /transaction

Eg. Purchase patterns of car rentals vs ind. Customers

Convenience

Temporal time utility

Average Time a customer waits to receive pdt.

Spatial

location / place utility Ease with which customer can access pdts.

MUL & Chevrolet wide distribution network

decentralization of the network


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Selection- variety to customers

Supermarkets breadth / product assortment

Service value added services offered by service

members

Credit, installation, service


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2. Establishing Channel Objectives

Channel Obj. = f ( nature of pdt.)

No. of markets co. wants to serve

Limited Market St. / Wide Market Coverage

Level of Relationship with the Intermediary

Franchisee, Exclusive Distributors etc.

Conduct SWOT analysis of the partners

Estimate Channel Members profitability


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3. Evaluate Channel Environment & Generation

of Alternatives

Dynamic needs of customers & Changing

Trends

Types of Marketing Intermediaries

No. of Marketing Intermediaries - Intensive,

Excusive, Selective System

Responsibility of Channel Members

Terms & Conditions of Channel Partners


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4.Evaluating Channel Alternatives

Control Criteria degree of control the co.

can exercise over the distribution network

Co Sales Force vs Sales Agency

Adaptive Criteria

Adaptive nature of manufacturer and distributor


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Channel Management

1. Channel Member Selection

Screening & Selection of members

Factors efficiency, experience, knowledge, level of

investment available etc.

2. Channel Member Training

Imp. final interaction with customers Ford online training to dealers

Microsoft Engineers- Microsoft Certified Engineers


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3. Member Motivation

Relationship Marketing Reward Structure

Recognition Ceremony

Aid Distributors to improve service

Monetary Allowances- advertising etc.

4. Modifying Channel Arrangements

Required if TS purchase patterns change

+ / - an intermediary + / - an channel

Design a new marketing channel


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Legal Issues in Distribution

Exclusive-dealing agreement: arrangement betweenmanufacturer and marketing intermediary thatprohibits the intermediary from handling competing

product lines

Closed sales territories: exclusive geographic sellingregion of a distributor

Tying agreement:

Arrangement that requires amarketing intermediary to carry items other than themain pdt. line


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Dual DistributionDual Distribution:Network that moves

products to a firms target market through

more than one marketing channel

Reverse ChannelsReverse Channels:Channels designed to

return goods to their producers

Pepsi


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Channel Dynamics

study of impact of environmental forces on

marketing channels

Channel members should be

Flexible

Preparedness

Maintain Healthy Relationship


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Integration of channel is required to achieve

economies, stabilize supplies, reduce

conflicts hence

Horizontal Marketing System

Vertical Marketing System


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Conventional Marketing Channel versus a vertical marketing system


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1. Vertical Marketing System

( VMS)

Conventional Marketing Channel

Vertical Marketing System

planned channel system designed to improvedistribution efficiency and cost effectiveness

Channel captain dominant & controlling

member in the channel

Obj: reduce conflict, efficiency


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a. Corporate Vertical Marketing System

a VMS in which a single owner operates at eachstage in its marketing channel

- Parle out sources manufacturing


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b. Administered marketing system

a VMS that achieves channel coordination when

a dominant channel member exercises its power

HLL, P&G exercise BRAND power with retailers

to gain displays, shelf space, promotion, price

policies


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c. Contractual VMS

VMS that coordinates channel activities through

formal agreements among channel members like:

a. Wholesaler-Sponsored Voluntary Chains

wholesaler is the dominant member & coordinates

retailers to compete with big retail giants


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b. Retail Cooperatives

Retailers initiate & organize a new entity

Wholesaling and production could also be done

Members- share the profits

Non members can purchase- no share in profit

c. Franchises franchisor coordinates successive

stages of production & distribution

- legal, business, non business relationship


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2. Horizontal Marketing System

Sharing of resources by two / moreunrelated business

Eg. Supermarkets Banks Place Utility

Eg. KmartFleming Supply chain alliance

Kmart - retail chain

Fleming grocery wholesaler

Adv : synergy of resource, EOS Dis: Conflict, decrease in flexibility


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3.Multi Channel Marketing System

Use of 2 or more channels toreach the same TS

Hybrid marketing


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Ch

annelC

onf

licts

Vertical Channel Conflict

Members @ diff. levels in the

same channel fight for the samemarket

Ford withdraw franchise

agreements as they intended to

sell directly


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Horizontal Channel Conflict

- Conflict @ the same levelwithin a

channel

- Ford dealers complaining on

aggressive pricing

- Pizza Inn conflict on ingredients

Multi Channel Conflicts

- Conflict between channels in the

same market

- Factory outlets vs Show rooms


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Causeso

f Co

nflict

Non Congruence ofRoles

PoorRole Definition

I

nter Ch

annelC

onf

licts


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Managing Channel Conflicts Negotiation

Problem Solving Strategies

Persuasive Mechanism

Legalistic Strategies

Climate Management

Cooperation & Coordination

dist channel mgt adn design

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