ch 15 marketing channels.ppt

7/23/2019 Ch 15 Marketing Channels.ppt

1/33

Marketing Channels


2/33

OBJECTIVES

Introduction

Functions of Marketing Channels

Channel Design Decisions

Channel Management Decisions

Managing Channel Conflict


3/33

1. What is a Marketing Channel?

This is a set of interdependent organizations

involved in the process of making a product

or service available for use or consumption.


4/33

Intermediaries involved

Agentsacting on behalf of buyer or seller

but do not take title of the goods

Facilitatorstransporters, banks.

Distributors- term more common in

business markets. Sells goods, maintains

inventory, extends credit etc.

Wholesalers- term used in consumer

markets

Retailers- sells to consumers


5/33

Structure in Industrial Market


6/33

Structure in Consumer Market


7/33

Advantages

Key external resource

Movement of goods is essential

Production & company survival depends on

goods reaching consumers.


8/33

Why would a manufacturer not

like to do his own distribution? Lacks the financial resources to do direct

marketing

Cannot have the infrastructure to make the

product widely available and near the

customer

Trading profits could be less thanmanufacturing profits


9/33

Manufactures typically produce a

large quantity of a limited variety

of goods

Consumers usually desire a small

quantity of a wide variety of goods


10/33

If all manufacturers tried to reach

all consumers

M1

M2

M3

C1

C2

C3


11/33

If they tried to go through an

intermediary

M1

M2

M3

D1 C2

C1

C3


12/33

2. Channel functions

Gathers information on customers,

competitors and other external market data

Develop and disseminate persuasive

communication to stimulate purchases

Agreement on price and other terms so that

transfer of ownership can be effected

Placing orders with manufacturers


13/33

Channel functions (contd)

Acquire funds to finance inventories and credit in

the market

Assume responsibility of all risks of the trade Successive storage and movement of products

Helps buyers in getting their payments through

with the banks

Oversee actual transfer of ownership


14/33

Channel functions (contd)

Packing and unpacking

Breaking Bulk

Developing new customers


15/33

3. Channel Design Decisions

A. Analyze customers desired service output

level

B. Establish objectives

C. Identify major channel alternatives

D. Evaluate the major alternatives


16/33

3A. Analyze customers desired

service output levelThe company needs to identify the lot size,

waiting time, spatial convenience, product

variety and service back up requirement ofconsumers.


17/33

3B. Establish objectives

Channel objectives should be stated in terms

of targeted service output levels. Channel

institutions should also try to minimizetotal channel costs to desired service level

output. Objectives vary with product

characteristics example, perishablesrequire more direct marketing


18/33

3C. Identify major channel

alternativesIt includes decisions about

types of intermediaries

no. of intermediaries

terms & responsibilities of channel

members


19/33

Types of intermediaries

Agents

Distributors

Wholesalers

Retailers


20/33

No. of Intermediaries

Exclusive

Selective

Intensive


21/33

Terms and Responsibilities

Rights and responsibilities are drawn up

Territorial rights are fixed

Pricing policies is fixed by producer by

establishing a price list & schedule of

discount

Conditions of sales refer to payment terms

& producer guarantees


22/33

3D. Evaluating major alternatives

Economic Criteria

Control & Adaptive Criteria


23/33

4.Channel management

DecisionsIt includes decision on following:

Selecting channel members

Training channel members

Motivating channel members

Modifying channel arrangements


24/33

4A. Selecting Channel Members

For consumers, the channels are the

company.

They should be evaluated on the basis of no.of years in the business, products carried,

growth & profit record, financial strength,

reputation, cooperativeness, type ofdistribution experience (one step/ two step),

expected rewards etc.


25/33

4B. Training Channel Members

Example Microsoft requires third party

service engineers to complete a set of

courses and take certification exams.Ford develops training programs that can be

delivered over internet to its dealers.


26/33

4C. Motivating channel members

Coercive (threat to end relation)

Reward (extra benefit for doing specific

functions) Legitimate (as per contract)

Expert (special knowledge of manufacturer

that is valued by intermediaries) Referent (Reputed manufacturer so

intermediaries like to be associated with it)


27/33

4D. Channel modification

With time channels need to change along

with product as it get older in the PLC

Introductioncompany showrooms

Growthchain stores, departmental stores

MaturityMass merchandisers

Declinesales stores, discount stores


28/33

Adding channels

Advantages

Increased market coverage

Lower channel costs More customised selling

Disadvantages

Increases selling costs Increases channel control

Breeds channel conflict


29/33

5. Channel conflict

Interest of different business interests do not

necessarily coincide

Conflicts can occur at various levels-vertical, horizontal or multichannel


30/33

Conflict causes

Goal incompatibility

Differences in perception

Domain conflict


31/33

Conflict Resolution

Institutional Mechanism (joint membership

in trade organizations, executive exchanges,

co-optation, dealer councils) Third party mechanisms (mediation &

arbitration)

Negotiation (aggressive, accommodating,collaborative, avoidance)


32/33

Aggressive

Only self interest is considered without givingany attention to the other party

Accommodating

The other partys interests are givenmaximum importance

Collaborative

Interests of both the parties are given highlevels of consideration


33/33

Avoidance

One party gives in to all the demands of the

other party without putting up its owndemands

ch 15 marketing channels.ppt

Documents