MGT301 MGT301 Principles of Principles of Marketing Marketing Lecture-28 Lecture-28
Dec 28, 2015
MGT301MGT301Principles of Principles of MarketingMarketing
Lecture-28Lecture-28
SummarySummaryof of
Lecture-27Lecture-27
Today’s TopicsToday’s Topics
Place….Distribution Place….Distribution Channel….Marketing Channel….Marketing
ChannelChannel
Marketing ChannelMarketing Channel
A set of interdependent organizations A set of interdependent organizations involved in the process of making a product involved in the process of making a product or service available for use or consumption or service available for use or consumption
by the consumer or business userby the consumer or business user. .
Simple Marketing SystemSimple Marketing System
Producer/Seller Consumer
Communication
Product/Service
Money
Feedback
How Intermediaries How Intermediaries Minimize Transactions?Minimize Transactions?
20 Contacts
Manufacturer
Manufacturer
Manufacturer
Manufacturer
Manufacturer
Customer
Customer
Customer
Customer
9 Contacts
Manufacturer
Manufacturer
Manufacturer
Manufacturer
Manufacturer
Customer
Customer
Customer
Customer
Wholesaling Intermediary
Why are Marketing Why are Marketing Intermediaries Used?Intermediaries Used?
Greater efficiency in making goods Greater efficiency in making goods available to target markets.available to target markets.
Offer the firm more than it can achieve on Offer the firm more than it can achieve on it’s own through the intermediaries:it’s own through the intermediaries:
– ContactsContacts
– ExperienceExperience
– SpecializationSpecialization
– Scale of operationScale of operation
Match supply and demand.Match supply and demand.
Channel members add value by bridging Channel members add value by bridging the major time, place and possession the major time, place and possession gaps that separate goods and services gaps that separate goods and services from those who would use them.from those who would use them.
How Channel Members Add Value?How Channel Members Add Value?
ContactContact
FinancingFinancing
InformationInformationRisk TakingRisk Taking
PromotionPromotion
MatchingMatchingNegotiationNegotiation
PhysicalDistribution
PhysicalDistribution
Distribution Channel FunctionsDistribution Channel Functions
Direct Channel: when a producer and Direct Channel: when a producer and ultimate consumer deal directly with each ultimate consumer deal directly with each other.other.
-e.g. electronic marketing channels-e.g. electronic marketing channels
Indirect Channel: when intermediaries are Indirect Channel: when intermediaries are inserted between the producer and consumers inserted between the producer and consumers and perform numerous channel functionsand perform numerous channel functions..
Direct and Indirect ChannelsDirect and Indirect Channels
MM WW JJ RR CC
MM WW RR CC
MM RR CC
MM CC
Channel 1
Channel 2
Channel 3
Channel 4
Direct
In-Direct
Marketing Channels for Marketing Channels for Consumer GoodsConsumer Goods
ProducerAgent/Broker
Wholesaler Retailer Consumer
Producer Wholesaler Retailer Consumer
Producer Retailer Consumer
Producer Consumer
ProducerAgent/Broker
WholesalerBusiness
User
Producer WholesalerBusiness
User
ProducerBusiness
User
ProducerBusiness
User
Agent/Broker
Marketing Channels for Business Marketing Channels for Business GoodsGoods
Industrialdistributors
Man
ufa
ctu
rer
Co
nsu
mer
Manufacturer’srepresentative
Manufacturer’ssales branch
Industrial Marketing Industrial Marketing ChannelsChannels
The channel will be most effective when..The channel will be most effective when..
Each member is assigned tasks it can do best.Each member is assigned tasks it can do best.
All members cooperate to attain overall channel All members cooperate to attain overall channel goals and satisfy the target market.goals and satisfy the target market.
Channel Behavior & ConflictChannel Behavior & Conflict
When this doesn’t happen, conflict When this doesn’t happen, conflict occurs..occurs..
Horizontal Conflict occurs among firms Horizontal Conflict occurs among firms at the same level of the channel.at the same level of the channel.
Vertical Conflict occurs between Vertical Conflict occurs between different levels of the same channel.different levels of the same channel.
For the channel to perform well, conflict For the channel to perform well, conflict must be managed.must be managed.
Conventional Distribution Channel Conventional Distribution Channel vs. Vertical Marketing Systemsvs. Vertical Marketing Systems
VerticalVerticalMarketingMarketingChannelChannel
Manufacturer
Retailer
ConventionalConventionalMarketingMarketingChannelChannel
Consumer
Manufacturer
Consumer
Retailer
Wholesaler
Wh
ole
sale
r
Vertical marketing systems are Vertical marketing systems are professionally managed and centrally professionally managed and centrally coordinated marketing channels coordinated marketing channels designed to achieve channel designed to achieve channel economies and maximum marketing economies and maximum marketing impact.impact.
Types of Vertical Marketing Types of Vertical Marketing SystemsSystems
CorporateCommon Ownership at Different
Levels of the Channel
CorporateCommon Ownership at Different
Levels of the Channel
ContractualContractual Agreement Among
Channel Members
ContractualContractual Agreement Among
Channel Members
AdministeredLeadership is Assumed by One or
a Few Dominant Members
AdministeredLeadership is Assumed by One or
a Few Dominant Members
Franchising is a contractual arrangement Franchising is a contractual arrangement between a parent company (a franchisor) between a parent company (a franchisor) and an individual or firm (a franchisee) and an individual or firm (a franchisee) that allows the franchisee to operate a that allows the franchisee to operate a certain type of business under an certain type of business under an established name according to specific established name according to specific rules.rules.
FranchisingFranchising
Innovations in Marketing Innovations in Marketing SystemsSystems
Two or More Companies at One Channel Two or More Companies at One Channel Level Join Together to Follow a New Level Join Together to Follow a New Marketing Opportunity.Marketing Opportunity.
Example: Banks in Grocery StoresExample: Banks in Grocery Stores
Horizontal MarketingHorizontal MarketingSystemSystem
Hybrid MarketingHybrid MarketingSystemSystem
A Single Firm Sets Up Two or More A Single Firm Sets Up Two or More Marketing Channels to Reach One or Marketing Channels to Reach One or More Customer Segments.More Customer Segments.
Example: Retailers, Catalogs, and Sales Example: Retailers, Catalogs, and Sales ForceForce
Channel Design DecisionsChannel Design Decisions
Channel Design ConsiderationsChannel Design Considerations
1. Length and width of distribution strategy1. Length and width of distribution strategy-Number and types of intermediaries-Number and types of intermediaries-Direct vs. indirect channels -Direct vs. indirect channels
2. Type of arrangement2. Type of arrangement-Conventional vs. vertical marketing -Conventional vs. vertical marketing
systemssystems
3. Distribution coverage strategy3. Distribution coverage strategy-Exclusive, selective or intensive-Exclusive, selective or intensive-Service quality-Service quality
Channel Design DecisionsChannel Design Decisions
Analyzing Consumer Service NeedsAnalyzing Consumer Service Needs
Setting Channel Objectives & Constraints Setting Channel Objectives & Constraints
ExclusiveDistributionExclusive
DistributionSelective
DistributionSelective
DistributionIntensive
DistributionIntensive
Distribution
Identifying Major AlternativesIdentifying Major Alternatives
Evaluating the Major AlternativesEvaluating the Major Alternatives
Intensive Distribution
Selective Distribution
Exclusive Distribution
Analyzing Consumer Service NeedsAnalyzing Consumer Service Needs
Setting Channel Objectives & Constraints Setting Channel Objectives & Constraints
ExclusiveDistributionExclusive
DistributionSelective
DistributionSelective
DistributionIntensive
DistributionIntensive
Distribution
Identifying Major AlternativesIdentifying Major Alternatives
Evaluating the Major AlternativesEvaluating the Major Alternatives
Evaluation of Channel AlternativesEvaluation of Channel Alternatives
Economic CriteriaEconomic Criteria
-Potential sales, costs and profits of -Potential sales, costs and profits of channelschannels
Control CriteriaControl Criteria
-Amount of control company has over sales -Amount of control company has over sales effortsefforts
Adaptive CriteriaAdaptive Criteria
-flexibility of channel to adapt to changing -flexibility of channel to adapt to changing situationssituations
ChannelCapabilities
andCosts
ChannelCapabilities
andCosts
ChannelCompatibility
ChannelCompatibility
AvailabilityAvailability
Channel Management DecisionsChannel Management Decisions
SelectingSelecting
MotivatingMotivating
EvaluatingEvaluating
FE
ED
BA
CK
SelectingSelecting
FE
ED
BA
CK
MotivatingMotivating
TrainingTraining
EvaluatingEvaluating
Managing Marketing ChannelsManaging Marketing Channels
Evaluate Channel
Per-formance
Evaluate Channel
Per-formance
Implement Channel Strategy
Implement Channel Strategy
Determine Channel Structure
Determine Channel Structure
Evaluate Channel
Alter-natives
Evaluate Channel
Alter-natives
Develop Channel Strategy
and Objectives
Develop Channel Strategy
and Objectives
FormulateFirm’s
MarketingObjectives& Strategy
FormulateFirm’s
MarketingObjectives& Strategy
Enough for today. . Enough for today. . ..
SummarySummary
20 Contacts
Manufacturer
Manufacturer
Manufacturer
Manufacturer
Manufacturer
Customer
Customer
Customer
Customer
9 Contacts
Manufacturer
Manufacturer
Manufacturer
Manufacturer
Manufacturer
Customer
Customer
Customer
Customer
Wholesaling Intermediary
ProducerAgent/Broker
Wholesaler Retailer Consumer
Producer Wholesaler Retailer Consumer
Producer Retailer Consumer
Producer Consumer
Marketing Channels for Marketing Channels for Consumer GoodsConsumer Goods
ProducerAgent/Broker
WholesalerBusiness
User
Producer WholesalerBusiness
User
ProducerBusiness
User
ProducerBusiness
User
Agent/Broker
Marketing Channels for Business Marketing Channels for Business GoodsGoods
Channel Design DecisionsChannel Design Decisions
Analyzing Consumer Service NeedsAnalyzing Consumer Service Needs
Setting Channel Objectives & Constraints Setting Channel Objectives & Constraints
ExclusiveDistributionExclusive
DistributionSelective
DistributionSelective
DistributionIntensive
DistributionIntensive
Distribution
Identifying Major AlternativesIdentifying Major Alternatives
Evaluating the Major AlternativesEvaluating the Major Alternatives
Channel Management DecisionsChannel Management Decisions
SelectingSelecting
MotivatingMotivating
EvaluatingEvaluating
FE
ED
BA
CK
Nature and Importance of Nature and Importance of Marketing LogisticsMarketing Logistics
Next….Next….
MGT301MGT301Principles of Principles of MarketingMarketing
Lecture-28Lecture-28