ManagingManaging Marketing Marketing ChannelsChannels

2

Previewing concepts Previewing concepts (1)(1)• Explain why companies use marketing

channels and discuss the functions these channels perform

• Discuss how channel members interact and how they organise the work of the channel

• Identify the major channel alternatives open to a company and how companies select, motivate, and evaluate channel members

3

Previewing concepts Previewing concepts (2)(2)• Explain the roles of retailers and

wholesalers in the distribution channel• Discuss the importance of marketing

logistics and integrated supply chain management

4

What is a value What is a value delivery network?delivery network?

A value delivery network is a network made up of the company, suppliers, distributors and customers who ‘partner’ with each other to improve the performance of the entire system.

5

What is a marketing What is a marketing channel?channel?

A marketing channel (also known as a distribution channel) is a set of interdependent organisations involved in the process of making a product or service available for use or consumption by the consumer or business user.

6

Figure 19.1 How a Figure 19.1 How a marketing marketing intermediary reduces intermediary reduces the number of channel the number of channel transactionstransactions

7

Key functions performed Key functions performed by channel membersby channel members

Information

Promotion

Contact

Matching

Negotiation

Distribution

Financing

Risk taking

8

Figure 19.2aFigure 19.2aCustomer marketing Customer marketing channelschannels

9

Figure 19.2bFigure 19.2bBusiness marketing Business marketing channelschannels

10

What is a channel What is a channel conflict?conflict?

A channel conflict is a disagreement among marketing channel members on goals and roles. Horizontal conflict is conflict at the same channel level. Vertical conflict is conflict between different levels.

11

Figure 19.3 Comparison Figure 19.3 Comparison of of conventional marketing conventional marketing channel channel with vertical marketing with vertical marketing systemsystem

Manufacturer

Wholesaler

Retailer

Consumer Manufacturer

Retailer

ManufacturerW

holesaler

12

Figure 19.4 Main types Figure 19.4 Main types of VMSof VMS

13

What is a franchise?What is a franchise?

A franchise organisation is the most common type of contractual relationship, which exists between a manufacturer, wholesaler or service organisation and independent businesspeople (franchisees) who buy the right to own and operate one or more units in the franchise system.

14

Types of franchisesTypes of franchises

Manufacturer-sponsored

retailer franchise system

Manufacturer-sponsored

wholesaler franchise system

Service-firm-sponsored

retailer franchise system

15

Advantages to Advantages to franchiseesfranchisees• Buying into a proven system• Limited capital required• Benefit of centralised purchasing power• Instant expertise available

16

Disadvantages to Disadvantages to franchiseesfranchisees• Lack of control• Inconsistencies in service levels and

operating standards• Fees required plus royalties and payment

for management services

17

Figure 19.5 Figure 19.5 Multichannel distribution Multichannel distribution systemsystem

18

What is What is disintermediation?disintermediation?

Disintermediation is the elimination of a layer of intermediaries from a marketing channel or the displacement of traditional resellers by radically new types of intermediaries.

19

Channel design Channel design decisionsdecisions

Analysing customer needs

Setting channel objectives

Identifying channel alternatives

Evaluating channel alternatives

20

Channel alternativesChannel alternatives

Company sales force

Manufacturer’s agency

Intermediaries

21

Wholesaler functionsWholesaler functions

• Selling and promoting

• Buying and assortment building

• Bulk-breaking• Warehousing• Transportation

• Financing• Risk bearing• Market information• Management

services and advice

22

Types of wholesalers Types of wholesalers (1)(1)• Merchant wholesalers• Full-service

wholesalers– Wholesale

merchants– Industrial

distributors• Manufacturer’s and

retailers’ branches and offices

• Agents– Manufacturer’s

agents– Selling agents– Purchasing

agents– Commission

merchants• Brokers

23

Types of wholesalers Types of wholesalers (2)(2)• Limited-service wholesalers

– Cash-and-carry– Truck– Drop shippers– Rack jobbers– Producers’ cooperatives– Mail-order

24

What is retailing?What is retailing?

Retailing includes all the activities involved in selling goods and services directly to final consumers for their personal, non-business use.

25

Classifying retailersClassifying retailers

Amount of serviceBreadth and depth of

product lines

Relative prices Organisation

26

Retailers by service Retailers by service levellevel• Self-service retailers cater for

customers who are willing to perform their own ‘locate-compare-select’ process to save money

• Limited-service retailers provide more sales assistance because they carry more shopping goods about which consumers need information

• Full-service retailers carry more specialty goods for which customers like to be waited on

27

Retailers by product Retailers by product assortmentassortment• Specialty store• Department store• Supermarkets• Convenience stores• Superstores

• Hypermarkets• Discount stores• Off-price retailer• Factory outlet• Warehouse club

28

Types of retail Types of retail organisationsorganisations

Corporate chains

Voluntary chains

Retailer cooperatives

Franchise organisations

Merchandising conglomerates

29

What strategies for What strategies for channel breadth channel breadth are used?are used?• Intensive distribution means stocking

the product in all possible outlets

• Exclusive distribution is giving a limited number of dealers the exclusive right to distribute the company’s products in their territories

• Selective distribution is the use of more than one, but less than all intermediaries willing to carry the product

30

Channel management Channel management decisionsdecisions

Selecting channel members

Managing and motivating channel members

Evaluating channel members

31

What is What is marketing marketing logisticslogistics??

Market logistics includes all the tasks involved in planning, implementing and controlling the physical flow of goods, services and related information from points of origin to points of consumption or use to meet customer requirements at a profit.

32

Figure 19.6 Figure 19.6 Supply chain Supply chain managementmanagement

Suppliers Company Resellers Customers

Inbound

logistics

Outbound

logistics

Reverse

logistics

33

Major logistics Major logistics functionsfunctions• Warehousing• Inventory management• Transportation• Logistics information management

34

Transportation modesTransportation modes

Road

Rail

Water

Pipeline

Air

Internet

35

What is What is integrated integrated logistics managementlogistics management??

Integrated logistics management is the logistics concept that emphasizes teamwork, both inside the company and among all the marketing channel organisations to maximise the performance of the entire distribution system.

36

Channel trendsChannel trends• New retail forms and short life cycles• Growth of non-store retailing• Retail convergence• Rise of mega-retailers• Growing importance of retail technology• Global expansion of retailers• Blurring of lines between retailers and

wholesalers

37

Discussing the Discussing the concepts (1)concepts (1)

• What do you understand to be a firm’s supply chain and how is it different from its value delivery network?

• Why do firms employ multi-channel distribution systems?

• What are the main challenges facing retailers and wholesalers who wish to remain a viable part of the marketing channel?

38

Discussing the Discussing the concepts (2)concepts (2)

• Identify the primary challenges an organisation faces in managing its channel members. What are some of the methods companies use to motivate channel partners?

• What factors might govern international expansion for European retailers? Why might local retailers be well positioned for global expansion? How will online retailing affect global retail expansion?