Download - Sem II Unit I Distribution
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Marketing Channels:Delivering Customer Value
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Chapter Overview
• What is Marketing Channel?
–Types of Intermediaries
• Push vs Pull Marketing
• Functions of Marketing Intermediaries
• Understanding Marketing Channel flows
• Levels of Distribution Channel
– Retail Consumers – Industrial Consumers
• Marketing Channel Integration and Systems
– Vertical Marketing Systems
– Horizontal Marketing Systems
– Hybrid Marketing Channel
• Designing a Marketing Channel
• Managing Marketing Channel Members
• Managing Channel Conflicts
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HUL’s Distribution Strength
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Supply Chains and the
Value Delivery Network
Upstream partners include raw material
suppliers, components, parts, information,finances, and expertise to create a productor service
Downstream partners include the marketingchannels or distribution channels that looktoward the customer
Supply Chain Partners
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Supply Chains and the
Value Delivery Network
Supply chain “make and sell” view includes the firm’s
raw materials, productive inputs, and factory
capacity
Demand chain “sense and respond” view suggests that
planning starts with the needs of the target
customer, and the firm responds to these needs byorganizing a chain of resources and activities withthe goal of creating customer value
Supply Chain Views
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Supply Chains and the
Value Delivery Network
Value delivery network is the firm’s suppliers,
distributors, and ultimately customers who partner
with each other to improve the performance of theentire system
Value Delivery Network
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The Nature and Importance of Marketing
Channels
Intermediaries offer producers greater
efficiency in making goods available totarget markets. Through their contacts,
experience, specialization, and scale of
operations, intermediaries usually offerthe firm more than it can achieve on its
own.
How Channel Members Add Value
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The Nature and Importance of Marketing Channels
– Availability
– Economies
– Product Assortment
•intermediaries transform the assortment of productsinto assortments wanted by consumers
(Channel members add value by bridging themajor time, place, and possession gaps that
separate goods and services from those who
would use them)
How Channel Members Add Value
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The Nature and Importance of
Marketing ChannelsHow Channel Members Add Value
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The Nature and Importance of
Marketing Channels
How Channel Members Add Value
Information Promotion Contact
Matching NegotiationPhysical
distribution
Financing Risk taking
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The Nature and Importance of
Marketing Channels
Number of Channel Levels
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The Nature and Importance of Marketing Channels
Connected by types of flows:
• Physical flow of products
• Flow of ownership
•Payment flow
• Information flow
• Promotion flow
Number of Channel Levels
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Marketing Channel Flows
19
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Channel Behavior and Organization
Marketing channel consists of firms that havepartnered for their common good with
each member playing a specialized roleChannel conflict refers to disagreement over
goals, roles, and rewards by channelmembers
• Horizontal conflict• Vertical conflict
Channel Behavior
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Channel Behavior and Organization
Conventional distributionsystems consist of oneor more independent
producers, wholesalers,and retailers. Eachseeks to maximize itsown profits, and thereis little control over the
other members and noformal means forassigning roles andresolving conflict.
Conventional Distributions Systems
Distributor
Wholesaler
Retailer
Customer
Producer
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Channel Behavior and Organization
Vertical marketing systems (VMSs) provide channel leadership andconsist of producers,
wholesalers, and retailers actingas a unified system and consistof:
• Corporate marketing systems• Contractual marketing systems
• Administered marketing systems
Vertical Marketing Systems
Distributor Wholesaler
Retailer
Producer
Customer
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Channel Behavior and Organization
Corporate vertical
marketing system
integrates successivestages of production and
distribution under single
ownership
Vertical Marketing Systems
Ray-Ban, Polo Ralph Versace, Gabbana
LensCrafter & Sunglass Hut
Luxottica
Retailer
Customer
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Channel Behavior and Organization
• Contractual vertical marketing system
– consists of independent firms at different levels of
production and distribution who join together through
contracts to obtain more economies or sales impact than
each could achieve alone.
– The most common form is the franchise organization.
Vertical Marketing Systems
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• Franchise organization links several stages in
the production distribution process
– Manufacturer-sponsored Retailer Franchise System• Ex: Ford and its network of Independent Franchised
dealers.
– Manufacturer-sponsored Wholesaler Franchise
System
• Coca-Cola license bottlers- Brindavan Bottlers, Amrit
Bottler’s Pvt. Ltd.
–
Service-firm-sponsored Retailer Franchise System-• McDonald’s , Pizza Hut
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Channel Behavior and Organization
Administered vertical marketing system has a fewdominant channel members without commonownership. Leadership comes from size andpower.
Ex: Parle, Amul, Dabur, Gillette can command
unusual cooperation and support from resellers,regarding displays, shelf space, promotion andprice policies.
Vertical Marketing Systems
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Channel Behavior and Organization
Horizontal marketing systems arewhen two or more companies at onelevel join together to follow a new
marketing opportunity. Companiescombine financial, production, ormarketing resources to accomplishmore than any one company couldalone.
Horizontal Marketing System
McDonaldsWal-Mart
Coca-Cola Nestle
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Channel Behavior and Organization
Multichannel Distribution systems (Hybrid
marketing channels) are when a single firm
sets up two or more marketing channels to
reach one or more customer segments
Multichannel Distribution SystemsHybrid Marketing Channels
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Channel Behavior and Organization
Multichannel Distribution System
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Channel Behavior and Organization
Disintermediation occurs when product or
service producers cut out intermediariesand go directly to final buyers, or when
radically new types of channel
intermediaries displace traditional ones
Changing Channel Organization
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Channel Design Decisions
a) Analyzing
consumerneeds
b) Setting
channelobjectives
c) Identifying
majorchannel
alternatives
d) Evaluation
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a) Analyzing customer Needs
Lot size
Waiting/delivery time
Spatial convenience
Product variety
Service backup
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b) Setting Channel Objectives
Examples:
• Targeted levels of customer service
• What segments to serve
• Best channels to use
• Minimizing the cost of meeting customer service requirements
• Availability• Variety
• Cost
• Quality• Service
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c) Identifying Major Alternatives
– Offline and online
– Types of Intermediaries
– Number of marketing intermediaries
– Responsibilities of channel members
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• Merchants (Wholesalers and retailers)
–
buy, take title to, and resell the merchandise; they are called merchants.
• Agents (Brokers, manufacturers' representatives, sales agents)
– search for customers and may negotiate on the producer's behalf but do nottake title to the goods; they are called agents.
• Facilitators (Transportation companies, independent warehouses, banks,advertising agencies)
– assist in the distribution process but neither take title to goods nor negotiatepurchases or sales; they are called facilitators.
• Ex: Dell- – Directly to consumers
– Direct Sales force ( to large corporate)
– Through Retailers ( Croma, E-zone)
– Value Added Resellers
c. 1) Types of Intermediaries
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C.2 Identifying number of intermediaries
Intensive distribution- To all
• Candy and toothpaste
Exclusive distribution- Limited no. of dealers
• Luxury automobiles and prestige clothing
Selective distribution- Who are willing to carryCompany’s product
• Television and home appliance
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c. 3 Responsibilities of Intermediaries
– Availability
– Economies
– Product Assortment
Terms and conditions – Price policy
– Condition of sale
–Distributors’ territorial rights
– Mutual services and responsibilities
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d. Evaluating the Major Alternatives
Each alternative should be evaluated against:
– Economic criteria
– Control
– Adaptive criteria
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The Value-Adds vs. Costs of Different Channels
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Channel-Management Decisions
Selecting channel members
Training channel members
Motivating channel members
Evaluating channel members
Modifying channel members
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What is Channel Conflict?
• Channel conflict occurs when one member’s
actions prevent another channel from
achieving its goal.
• Types of channel conflict
– Vertical
– Horizontal
– Multichannel
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Causes of Channel Conflict
Goal incompatibility
Unclear roles and rights
Differences in perception
Intermediaries’ dependence
on the manufacturer
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Strategies for Managing Channel Conflict
• Adoption of super-
ordinate goals
• Exchange of employees
• Joint membership in
trade associations
• Cooptation
• Diplomacy
• Mediation
• Arbitration
• Legal recourse
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• Superordinate goals. Channel members come to an agreement on the
fundamental goal they are jointly seeking, whether it is survival, market share,
high quality, or customer satisfaction.
• Co-optation is an effort by one organization to win the support of the leaders of
another organization by including them in advisory councils, boards of directors,
and the like.
• Diplomacy takes place when each side sends a person or group to meet with its
counterpart to resolve the conflict.
• Mediation means resorting to a neutral third party who is skilled in conciliating the
two parties' interests.
• Arbitration occurs when the two parties agree to present their arguments to one
or more arbitrators and accept the arbitration decision.
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Marketing Logistics and
Supply Chain Management
Marketing logistics (physical distribution) involves
planning, implementing, and controlling the physical
flow of goods, services, and related information from
points of origin to points of consumption to meet
consumer requirements at a profit
Nature and Importance of MarketingLogistics
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Marketing Logistics and
Supply Chain ManagementNature and Importance of Marketing Logistics
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Marketing Logistics and
Supply Chain Management
Supply chain management is the process of
managing upstream and downstream value-added
flows of materials, final goods, and relatedinformation among suppliers, the company, resellers,
and final consumers
Nature and Importance of Marketing Logistics
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Marketing Logistics and
Supply Chain Management
Major Logistics Functions
Warehousing Inventorymanagement
TransportationLogistics
informationmanagement
M k ti L i ti d
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Marketing Logistics andSupply Chain Management
• How many
• What types
• Location
•
Distribution centers
Warehousing Decisions
M k ti L i ti d
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Marketing Logistics andSupply Chain Management
• Just-in-time systems
•
RFID – Knowing exact product location
• Smart shelves
–
Placing orders automatically
Inventory Management
k i i i d
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Marketing Logistics and
Supply Chain Management
Major Logistics FunctionsTransportation affects the
pricing of products, delivery
performance, and condition of
the goods when they arrive
Truck Rail Water
Pipeline Air Internet
k i L i i d
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Marketing Logistics and
Supply Chain Management
Logistics information management is the management
of the flow of information, including customer
orders, billing, inventory levels, and customer data • EDI (electronic data interchange)
• VMI (vendor-managed inventory)
Logistics Information Management
M k i L i i d
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Marketing Logistics and
Supply Chain Management
Integrated logistics management is the
recognition that providing customer serviceand trimming distribution costs requires
teamwork internally and externally
Integrated Logistics Management
M k i L i i d
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Marketing Logistics and
Supply Chain Management
Third-party logistics is the outsourcing of logistics functions to third-partylogistics providers (3PLs)
Integrated Logistics Management
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CASE STUDY
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• End of Module-I