marketing channel concepts; introduction to marketing channel
DESCRIPTION
Its an introduction to the concept of marketing channel.TRANSCRIPT
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Part 1Part 1
Marketing Channel Systems
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Chapter 1Chapter 1
Marketing Channel Concepts
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ObjectivesObjectives
• The growing importance of marketing channels• The definition of marketing channels• How marketing channels relate to strategic
variables in the marketing mix• The flows in the marketing channels and their
relationship to channel management• The principles of specialization, division of labor,
and contactual efficiency• The difference between the concepts of channel
structure and of ancillary structure
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You will learn about:
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WhyWhy the growing importance of the growing importance of marketing channels?marketing channels?
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1. The explosion of information technology and
E-commerce
2. A greater difficulty in gaining a sustainable competitive advantage
3. The growing power of distributors, especially retailers in marketing channels
4. The need to reduce distribution costs
Objective 1:
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11.. 2. A greater difficulty in gaining a sustainable competitive
advantage 3. The growing power of distributors, especially retailers
in marketing channels 4. The need to reduce distribution costs
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Yahoo! eBay
Amazon.com
The prediction:Disintermediation — reduction of number of intermediaries
The reality:Reintermediation—evolution of a new type of intermediary
The explosion of information technology and E-commerceThe explosion of information technology and E-commerce
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1. The explosion of information technology and E- commerce 2.2. 3. The growing power of distributors, especially retailers in marketing channels 4. The need to reduce distribution costs
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A greater difficulty in gaining a sustainable competitive advantageA greater difficulty in gaining a sustainable competitive advantage
Place (distribution), or Marketing
Channel Strategy Sustainable competitive advantage
Potential for gaining competitive advantage because place is more difficult for competitors
to copy
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1. The explosion of information technology and E-commerce 2. A greater difficulty in gaining a sustainable competitive advantage 3.3. 4. The need to reduce distribution costs
The growing power of distributorsThe growing power of distributors
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Power retailers as of consumer marketsgatekeepers
Act as buying agents for customers rather than as selling agents for manufacturers
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1. The explosion of information technology and E-commerce 2. A greater difficulty in gaining a sustainable competitive advantage 3. The growing power of distributors 4.4.
The need to reduce distribution costsThe need to reduce distribution costs
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Marketing channels are the most recent target for
reducing distribution costs.
The focus is on channel structure and management.
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What is a marketing channel?What is a marketing channel?
External contactual organization that management operates to achieve its distribution objectives
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Outside the firm
Firm involved in negotiatory functions
Management’s involvement in the process
Goals that change, causing variationsin contactual organization & the way in
which management operates it
Objective 2:
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What is a channel manager?What is a channel manager?
Anyone in a firm or organization who is involved in marketing
channel decision making
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Objective 3: 11How does marketing channel strategy relate to How does marketing channel strategy relate to
the the rest of the marketing mix?rest of the marketing mix?
Marketing Mixor
the four Ps
Challenges
Product Limited ability to gain and hold competitive advantage
Price Price wars erode profitability & provide unstable basis for sustaining competitive
advantage
Promotion Expensive and short-lived
Place (Distribution)
Marketing channels support & enhance other Ps to meet demands of target
markets
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The change of focus to channel strategyThe change of focus to channel strategy
• Creates competitive advantage with long-term viability
• Builds strong relationships between manufacturers and channel members
• Based on trust, confidence, and people power
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Channel Strategy and Logistics ManagementChannel Strategy and Logistics Management
Part of distribution variable
• Concerned with entire process of starting and operating contactual organization
• Formulated before logistics management
Focused specifically on providing product availability at appropriate time & place
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Objective 4: 11
Marketing Channel FlowsMarketing Channel Flows
Product Flow
Promotion Flow
Information Flow
Ownership Flow
Negotiation Flow
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Product FlowProduct Flow
Manufacturer
Transportation Company
Wholesalers
Retailers
Consumers
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Manufacturer
Wholesalers
Retailers
Consumers
Negotiation FlowNegotiation Flow
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Ownership FlowOwnership Flow11
Manufacturer
Wholesalers
Retailers
Consumers
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Information FlowInformation Flow11
Manufacturer
Wholesalers
Retailers
Consumers
Transportation Company
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Promotion FlowPromotion Flow11
Manufacturer
Wholesalers
Retailers
Consumers
Advertising Agency
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Distribution through intermediariesDistribution through intermediaries
Objective 5:11
Technology the Internet
Economic Specialization &Considerations Division of Labor
Contactual Efficiency
Factors that determine the role of intermediaries
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Specialization & Division of LaborSpecialization & Division of Labor
Distribution Tasks Production Tasks
Distributed interorganizationally
Distributed intraorganizationally
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Contactual EfficiencyContactual Efficiency Granada Guitar Co. Granada Guitar Co.
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Negotiation Effort Estimated Dollar Costs of Inputs
Distribution Objective
(Output)
Contactual Efficiency
100 sales visits
100 phone calls
20 magazine
ads
@ $50 = $5,000
@ 3 = 300
@1,000 = 20,000
$25,300
Get 500 music stores to carry new guitar line
Negotiation effort in dollar terms relative to achieving the distribution objective = $25,300
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Objective 6: 11
Channel Structure Channel Structure v.v. Ancillary Ancillary StructureStructure
Channel Structure
The group of channel members to which aset of distribution tasks has been allocated
Ancillary Structure
The group of institutions that assist channel members in performing
distribution tasks
Why are single-channel
structures currentlythe exception?
Why is managing the ancillary structure
most likely to be less complex than
managing the channel structure?