7/28/2019 Mktg Chapter 16
1/36
Designing and ManagingIntegrated
Marketing Channels andValue Network
7/28/2019 Mktg Chapter 16
2/36
Marketing Channels andValue Networks
Marketing channelssets ofinterdependent organizations involved inthe process of making a product or serviceavailable for use or consumption
Value networka system of partnershipsand alliances that a firm creates to source,augment, and deliver its offerings
7/28/2019 Mktg Chapter 16
3/36
Channels andMarketing Decisions
Pull strategy - advertising,promotion, and other
forms of communication topersuade consumers todemand the product fromintermediaries.
- high brand loyalty and
high involvement in thecategory, when peopleperceive differencesbetween brands
Push strategy - themanufacturers sales force,
trade promotion money,and other means to induceintermediaries to carry,promote, and sell theproduct to end users
- use low brand loyalty in acategory, brand choice orimpulse item
7/28/2019 Mktg Chapter 16
4/36
Buyer Expectations forChannel 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 totalonline and offline purchases
7/28/2019 Mktg Chapter 16
5/36
Channel Functions andFlows
A marketing channel performs the work ofmoving goods from producers to consumers. Itovercomes the time, place, and possession
gaps that separate goods and services fromthose who need and want them..
Forward flow of activity from the company to
the customer. Backward flow from customers to the
company.
Still others occur in both directions.
7/28/2019 Mktg Chapter 16
6/36
Channel Member Functions
Gatherinformation Develop and disseminate persuasive
communications
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
7/28/2019 Mktg Chapter 16
7/36
Channel Levels in ConsumerMarkets
A zero-level channel (also called a direct-marketing channel) consists of a
manufacturer selling directly to the finalconsumer.
A one-level channel contains one sellingintermediary such as a retailer.
A two-level channel contains twointermediariesa wholesaler and a retailer.
7/28/2019 Mktg Chapter 16
8/36
Reverse Flow Channels
Channels normally describe a forwardmovement of products from source to user.
Reverse-flow channels are important in thefollowing cases:
i. To reuse products or containers
ii. To refurbish products for resaleiii. To recycle products
iv. To dispose of products and packaging
7/28/2019 Mktg Chapter 16
9/36
Designing aMarketing Channel System
Analyze customer needs
Evaluate major channel alternatives
Identify major channel alternatives
Establish channel objectives
7/28/2019 Mktg Chapter 16
10/36
Channel Service Outputs
Lot sizenumber of units the channel permits atypical customer to purchase on one occasion
Waiting/delivery timeaverage time customers ofthat channel wait for receipt of the goods
Spatial conveniencedegree to which themarketing channel makes it easy for customers topurchase the product
Product varietyassortment breadth provided bythe marketing channel
Service backupadd-on services (credit, delivery,
installation, repairs) provided by the channel
7/28/2019 Mktg Chapter 16
11/36
Identifying Major ChannelAlternatives
Types ofintermediaries
Merchants Facilitators
Number ofintermediaries Exclusive Selective Intensive
Terms andresponsibilities of
channel members Price policy Conditions of sale Distributors
territorial rights Mutual services
andresponsibilities
7/28/2019 Mktg Chapter 16
12/36
Channel-ManagementDecisions
Selecting channel members
Training and motivating channelmembers
Evaluating channel members
Modifying channel arrangements
7/28/2019 Mktg Chapter 16
13/36
Evaluating the MajorAlternatives
Determine whetherown sales force or a
sales agency willproduce more sales.Estimate the costs of
selling different
volumes through eachchannel.
7/28/2019 Mktg Chapter 16
14/36
Channel Integration andSystems
Horizontalmarketing system
Vertical marketingsystem
Multichannelmarketing systems
7/28/2019 Mktg Chapter 16
15/36
Vertical Marketing Systems(VMS)
Administered VMS
Corporate VMS
Contractual VMS
7/28/2019 Mktg Chapter 16
16/36
Contractual VMSs
Retailer cooperatives
Wholesaler-sponsored voluntarychains
Franchise organizations
7/28/2019 Mktg Chapter 16
17/36
Horizontal MarketingSystems
Two or more unrelated companies
put together resources orprograms to exploit an emergingmarketing opportunity.
7/28/2019 Mktg Chapter 16
18/36
e-Commerce MarketingPractices
Pure-Click Companies Search engines Internet service providers (ISPs) Commerce sites Transaction sites
Content sites Enabler sites
7/28/2019 Mktg Chapter 16
19/36
Brick-and-Click Companies
Strategies for gaining acceptance fromintermediaries when selling through
intermediaries and online:
Offer different brands or products on the
Internet.
Offer offline partners higher commissions to
cushion the negative impact on sales.
Take orders on the Web site but have
retailers deliver and collect payment.
7/28/2019 Mktg Chapter 16
20/36
Managing Retailing,Wholesaling, and Logistics
7/28/2019 Mktg Chapter 16
21/36
Retailing
Retailing includes all the activities involved
in selling goods or services directly to finalconsumers for personal, non business use
7/28/2019 Mktg Chapter 16
22/36
Major Retailer Types Specialty storenarrow
product line Department store several
product lines
Supermarketlarge, low-cost, low-margin, high-
volume, self-service storedesigned to meet totalneeds for food andhousehold products
Convenience storesmall
store in residential area,often open 24/7, limited lineof high-turnoverconvenience products plustake out
Discount storestandard orspecialty merchandise; low-margin, high-volume stores
Off-price retailerleftovergoods, overruns, irregularmerchandise sold at less thanretail
Superstorehuge sellingspace, routinely purchase foodand household items, plusservices (laundry, shoe repair,dry cleaning, check cashing;category killer)
Catalog showroom broadselection of high-markup, fast-moving, brand-name goodssold by catalog at discount
7/28/2019 Mktg Chapter 16
23/36
Levels of Retail Service
Self servicemany customers will to locate-compare-select process to save money
Self selectioncustomers find their own
goods, although they can ask for assistance Limited serviceretailers carry more shopping
goods and services such as credit andmerchandise-return privileges
Full servicesalespeople are ready to assist inevery phase of the locate-compare-selectprocess
7/28/2019 Mktg Chapter 16
24/36
Non store Retailing
Direct selling multilevel selling and networkmarketing selling door-to-door, or at home salesparties
Direct marketing direct mail, catalog marketing,
telemarketing, television direct-responsemarketing, electronic shopping
Automatic vending variety of merchandise,impulse goods, hosiery, cosmetics, hot food, etc.
Buying service store-less retailer servicing aspecific clienteleusually employees of a largeorganizationwho are entitled to buy from a listof retailers that have agreed to give discounts in
return for membership
M j T f C t
7/28/2019 Mktg Chapter 16
25/36
Major Types of CorporateRetail Organizations
Corporate chain store two or more outlets owned and controlled,employing central buying and merchandising, and selling similar lines ofmerchandise (GAP)
Voluntary chain wholesaler-sponsored group of independent retailersengaged in bulk buying and common merchandising (Independent GrocersAlliance)
Retailer cooperative independent retailers using a central buyingorganization and joint promotion efforts (ACE Hardware)
Consumer cooperative retail firm owned by its customers. Memberscontribute money to open their own store, vote on its policies, elect a groupto manage it, and receive dividends
Franchise organization contractual association between a franchisor andfranchisees (McDonalds)
Merchandising conglomerate corporation that combines severaldiversified retailing lines and forms under central ownership, with someintegration of distribution and management (Allied Domeq PLC with Dunkin
Donuts and Baskin-Robbins, plus a number of British retailers and a wine ands irits rou
7/28/2019 Mktg Chapter 16
26/36
New retail forms and combinations Growth of intertype competition
Competition between store-based and non-
store-based retailing Growth of giant retailers
The traditional trade is alive and we
Growing investment in technology Global profile of major retailers
Upgrading of Asian retailers
Growth of factory outlets
The 9 Keys Retail Developments
7/28/2019 Mktg Chapter 16
27/36
Private Labels
A private label (also called reseller, store,
house, or distributor brands) is one retailersand wholesalers develop
7/28/2019 Mktg Chapter 16
28/36
Role of Private Labels
Manufacturers with excess capacity who willproduce the private label at a low cost.Other costs, such as R&D, advertising, sales
promotion, and physical distribution are alsomuch lower. This means that the privatebrander can charge a lower price and yet
make a higher profit margin. Retailers develop exclusive store brands to
differentiate themselves from competitors.
7/28/2019 Mktg Chapter 16
29/36
Wholesaling
Wholesaling includes all the activities
involved in selling goods and services tothose who buy for resale or business use.Wholesaling excludes farmers,manufacturers, and retailers.
7/28/2019 Mktg Chapter 16
30/36
Major Wholesaler Types
Merchant wholesalers
Full-service wholesalers
Limited-service wholesalers Brokers and agents
Manufacturers and retailers
branches and offices
Specialized wholesalers
Wh l li F i
7/28/2019 Mktg Chapter 16
31/36
Wholesaling Functions Selling and promotingsales
force help manufacturersreach many small businesscustomers at a relatively lowcost
Buying and assortmentbuildingselect items andbuild the assortment theircustomers need
Bulk breakingbuy largecarload lots and breaking thebulk into smaller units
Warehousingholdinventories, and reduceinventory costs and risks tosuppliers and customers
Transportationprovide quickerdelivery to buyers because they
are closer to the buyers
Financinggrant credit, andfinance suppliers by orderingearly and paying bills on time
Risk bearingabsorb some risk
by taking title and bearing costof theft, damage, spoilage, andobsolescence
Market informationsupplycompetitor activities, newproducts, price developments,
etc Management services and
counselingtraining salesclerks, helping with store layoutsand displays, etc.
7/28/2019 Mktg Chapter 16
32/36
Market Logistics
Market logistics involves planning theinfrastructure to meet demand, then
implementing and controlling the physicalflows of materials and final goods frompoints of origin to points of use, to meet
customer requirements at a profit
7/28/2019 Mktg Chapter 16
33/36
Four Steps in Market Logistics
Deciding on the companys valueproposition to its customers
Deciding on the best channel designand network strategy
Developing operational excellence
Implementing the solution
7/28/2019 Mktg Chapter 16
34/36
Integrated Logistics Systems
An integrated logistics system (ILS)
includes materials management,material flow systems, and physicaldistribution, aided by information
technology
M k L i i E
7/28/2019 Mktg Chapter 16
35/36
Market Logistics EncompassSeveral Activities
Sales forecasting
The company schedules distribution,production, and inventory levels
Production plans
Materials to order
Finished goods inventory
7/28/2019 Mktg Chapter 16
36/36
Thank You