Designing and Managing Value Network and Channels Chapter 15.

Designing and Managing Value Network and

ChannelsChapter 15

Marketing Process

2

What is a Marketing Channel?

• A marketing channel system is the particular set of interdependent organizations involved in the process of making a product or service available for use or consumption

Buyer Expectations for Channel Integration

• Ability to order a product online and pick it up at a convenient retail location

• Ability to return an online-ordered product to a nearby store

• Right to receive discounts based on total online and offline purchase

Example: customers of online store in Taiwan can easily pick up the goods in 7-11

Categories of Buyers

• Habitual shoppers • High value deal seekers• Variety-loving shoppers• High-involvement shoppers

Types of Shoppers

• Service/quality customers• Price/value customers• Affinity customers

Five Marketing Flows in the Marketing Channel

Flow

• Forward Flow:Activity from the company to the customer constituted by physical, title, promotion functions.

• Backward Flow:Activity from customer to the company constituted by ordering and payment functions.

Consumer and Industrial Marketing Channels

Channel Levels

• Zero-Level Channel (a.k.a. Direct Marketing Channel): consists of a manufacturer selling directly to the final customer

• One-Level Channel: contains one selling intermediary, such as retailer

• Two-Level Channel: contains two intermediaries• Three-Level Channel: contains three

intermediaries• Multi Channel: use several level at the same time

Channel Design Decision

• Push Strategy: involves manufacturer using its sales force to sell the product to end user

• Pull Strategy: involves manufacturer using advertising and promotion to induce consumers to ask intermediaries for the product, thus inducing the intermediaries to order it

• Designing a Channel System involves 4 steps:1. Analyze customers’ desired service output levels2. Establish objective and constraints3. Identify major channel alternatives4. Evaluate the major alternatives

Analyze Customers’ Desired Service Output levels

• Lot Size: the number of units the channel permits a typical customer to purchase on one occasion

• Waiting Time: the average time customers of that channel wait for receipt of the goods

• Spatial Convenience: the degree to which the marketing channel makes it easy for customers to purchase the product

• Product Variety: the assortment breadth provided by the marketing channel

• Service backup: the add-on service provided by the channel

Identify Major Channel Alternatives

• Types of Intermediaries:

- Company sales force

- Manufacturer’s Agency- Industrial Distributor

• Number of Marketing Intermediaries:

- Exclusive Distribution: giving a limited number of dealers the exclusive right to distribute the company’s products in their territories- Selective Distribution: the use of more than one, but fewer

than all, of the intermediaries who are willing to carry the company’s products- Intensive Distribution: stocking the product in as many outlets as possible

Terms of Responsibilities of Channel Members

• Price Policy: calls for the producers to establish a price list and schedule of discounts and allowances that intermediaries see as equitable and sufficient

• Conditions of Sale: payment terms and producer guarantees

• Distributors’ Territorial Rights: the distributors’ territories and the terms under which the producer will enfranchise other distributors

Channel Value Added and Market Growth Rate

Types of Conflict and Competition:- Vertical channel Conflict: conflict between

different levels within the same channels- Horizontal channel Conflict: conflict between

members at the same level within the channel- Multi channel Conflict: exist when the

manufacturer has established two or more channels that sell to the same market

Conflict, Cooperation & Competition

Thank You