Mkt 640 LectureKotler1516 Media

8/3/2019 Mkt 640 LectureKotler1516 Media

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Designing and Managing ValueNetworks and Channels


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Marketing Channels

Sets of interdependent organizationsinvolved in the process of making aproduct or service available for use

or consumption.


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Channels andMarketing Decisions

Push

Strategy

Pull

Strategy


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Buyer Expectations forChannel Integration

Ability to order a productonline and pick it up at aconvenient retail

location Ability to return an

online-ordered productto a nearby store

Right to receivediscounts based on totalonline and offlinepurchases


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Increasing Efficiency


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Channel Member Functions

Gather information

Develop and disseminate persuasivecommunications

Reach agreements on price and terms Acquire funds to finance inventories

Assume risks

Provide for storage Provide for buyers payment of their bills

Oversee actual transfer of ownership


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Internet Makes DirectDistribution Easier

Internet Makes DirectDistribution Easier

Greater Control

Lower Cost

Direct Contact withCustomer Needs

Quicker Response orChange in Marketing Mix

Greater Control

Lower Cost

Direct Contact withCustomer Needs

Quicker Response orChange in Marketing Mix

Suitable MiddlemenNot Available

Channel System May Be Direct or Indirect

SomeSomeReasonsReasons

For ChoosingFor Choosing

Direct ChannelsDirect Channels


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Consumer Marketing Channels


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Industrial Marketing Channels


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Channel Systems Can Be Complex


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Channel Objective

Channel institutions shouldarrange their functional tasks

to minimize total channelcosts and still provide

desired levels of serviceoutputs


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Intensive

Selective

Intensive

Selective

The Best Channel System Should Achieve IdealMarket Exposure

= number of

outletsExclusive

Market

Exposure

Strategies


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Channel Power

Coercive Withdraw or terminate

relationship

Reward Extra benefit for performingspecific acts or functions

Legitimate

Contract requirements

Expert Special knowledge

Referent

Highly respected


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Vertical Marketing Systems Focus on Final Customers

Fairly goodto good

Contracts

McDonalds

Complete

Onecompany

ownership

Florsheim

Some togood

Economicpower andleadership

GeneralElectric

Characteristics

Type of channel

Little ornone

None

Typicalinde-

pendents

Amount ofcooperation

TraditionalVertical marketing systems

Administered Contractual Corporate

Control maintained

by

Examples


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Retailer Retailer Retailer

Horizontal ArrangementsAre Illegal

Limiting Market Exposure

Retailer Retailer

Producer

Vertical

ArrangementsMay Be Legal Wholesaler


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Managing Channel Conflict

Adoption of superordinate goals (joint effort to achieve goal)

Cooptation (include leaders of another

organization on advisory

councils, boards of directors) Diplomacy

(person or group to meet toresolve conflict)

Mediation (neutral third party conciliate

two parties interests) Arbitration (arbitrator makes the decision)


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Producers orMiddlemen May Be Channel Captains


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e-Commerce Marketing Practices

Pure-click (launched a website

without any previous

existence as a firmAmazon, ebay) Brick-and-click

(existing companies thathave added an onlinesite for information &/ore-commerceCompaq,Barnes & Noble)

Brick-and-mortar


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Managing Retailing, Wholesaling,and Logistics


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Retailing

Includes all the activities involved inselling goods or services directlyto final consumers for personal,

nonbusiness use.


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Major Retailer Types

Specialty store Narrow product line: Athletes Foot,

Tall Men, Department store

Several product lines: Sears, JCPenney

Supermarket Large, low-margin, high-volume,

self-service to meet needs for foodand household: Ralf's, Vons

Convenience store Small store in residential area,

often open 24/7, limited line ofhigh-turnover convenienceproducts plus takeout: 7-11, CircleK

Discount store Standard or specialty merchandise,

low-price, high-volume stores: Wal-Mart, Kmart, Circuit City

Off-price retailer Leftover goods, overruns, irregular

merchandise sold at less thanretail, factory outlets, independentoff-price retailers: FilenesBasement, T.J. Max, Price-Costco

Superstore Huge selling space, routinely

purchase food, household items,service, category killer: Petsmart,

Staples, Home Depot Catalog showroom

Broad selection of high-markup,fast moving, brand-name goodssold by catalog at discount,customer pick-up merchandise atthe store: Inside Edge Ski and Bike


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Retail Positioning Map


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Nonstore Retailing

Direct Selling(door to door, at home parties

Avon, Mary Kay, Amway)

Buying Service(store-less retailer servicing specific clientele

Employees of large organization,

get discounts for membership)

Automatic Vending

(cigarettes, soft drinks,Coffee, etc.)

Direct Marketing(Lands End, 1-800-FLOWERS,

Home Network Shopping,electronic shoppingAmazon.com )


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Retailer Services Mix

Prepurchase services(accepting telephone and mail orders, advertising, etc.)

Postpurchase services(shipping and delivery, adjustments and returns, etc.)

Ancillary services(check cashing, parking, restaurants, etc.)


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Location Decision

General business districts--downtown

Regional shoppingcenters40 to 200 stores

Community shoppingcenters20 to 40 stores

Strip mallssmall cluster ofstores

Location within a largerstoreMcDonalds in Wal-Mart


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Indicators of Sales Effectiveness

Number of people passing by

% who enter store

% of those who buy

Average amountspent per sale


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Trends in Retailing

New retail forms and combinations Bookstores feature coffee shops, gas stations include food

Growth of intertype competition Discount stores, catalog showrooms, department stores all complete for

the same consumers by carrying the same type of merchandise Competition between store-based and non-store-based retailing

Consumer receive sales offers through direct-mail letters and catalogs,and over the television, computers and telephones Growth of giant retailers

Category killersToy R Us, Home Depot, Staples, Wal-Mart Decline of middle market retailers

High end luxury or low-end discount pricing, fewer in the middleSears,JC Penney have struggled

Growing investment in technology Computers to produce better forecasts and control inventory costs

Global presence of major retailers Strong brands appearing in other countriesToys R Us, Wal-Mart


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Wholesaling Functions

Selling and promoting

Buying andassortment building

Bulk breaking

Warehousing

Transportation

Financing

Risk bearing Market information

Management servicesand counseling


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Transportation Factors

Speed

Frequency

Dependability Capability

Availability

Traceability

Cost


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A Cost Comparison of Alternative Systems


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The Transporting Function Adds Value to a Marketing Strategy


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Which Transporting Alternative Is Best?

+


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Economies of Scale in Transporting

High

HighLow

Low

ShippingCost

$

Shipping Quantity


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Achieves ProductionEconomies of Scale

Achieves ProductionEconomies of Scale

Keeps Prices SteadyKeeps Prices Steady

Needed WhenProduction DoesntMatch Consumption

Needed WhenProduction DoesntMatch Consumption

Builds ChannelFlexibility

The Storing Function and Marketing Strategy

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