2nd revised mark man v57 prof. de ungria chap15 designing and managing integrated marketing channels...
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Marketing Management V57 PPT presentation on Designing and Managing Integrated Marketing Channels
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- 1. Chap. 15Designing and Managing Integrated Marketing Channels
Raymund C. Pion Marketing Management V57 Prof. Bong De Ungria
- 2. Outline 6th Task of Marketing Delivering Customer Value
Marketing channels: definition, importance, examples Functions of
marketing channels Flows and levels of marketing channels Value
networks a broader view of customer value delivery How to design
marketing channels Challenges in managing channels Integrated
marketing channels a new development Channel conflicts and how they
are managed Key issues with e-commerce
- 3. Recall: Marketing is A system of profitably creating,
DELIVERING and communicating superior VALUE to satisfy customers
needs, wants and demands better than competition.
- 4. To achieve this,the 6th Task of Marketing is Developing
marketing strategies and plans Capturing marketing insights and
performance Connecting with customers Building strong brands
Shaping the marketing offer Delivering and communicating value
Creating successful long-term growth
- 5. 1st some definitions Marketing Channels, Trade Channels,
Distribution Channels A set of interdependent organizations
involved in the process of making products or services available
for use or consumption A set of pathways a product or service
follows after production, culminating in purchase and use by the
final end-user Intermediaries performing a variety of functions
Value-delivery network A companys supply chain and how it partners
with specific suppliers and distributors to make products and bring
them to markets Value-delivery system All the expectancies the
customers will have on the way to obtaining and using the offering
Value networks A system of partnerships and alliances that a firm
creates to source, augment and deliver its offerings
- 6. Examples of Intermediaries Merchants Wholesalers and
Retailers Buy, take title to goods, resell Agents Brokers,
manufacturers representatives, sales agents Look for customers,
negotiate for producer, dont take title to goods Facilitators
Transportation companies, warehouses banks, advertising agencies
Assist in the distribution process but dont take title to goods nor
negotiate on purchases or sales
- 7. Why are Channels Important?Channel functions and flows
Gather marketing information Develop and disseminate persuasive
communications Reach agreement on prices and terms to effect
transfer of ownership or possession of goods Place order with
manufacturers Acquire funds to finance inventory Assume risks for
carrying out channel functions Provide for storage and movement of
physical products Provide for buyers payment of bills through banks
Oversee actual transfer of ownership of goods Convert potential
buyers into profitable customers
- 8. Why are Channels Important?Marketing channel system Choice
of particular set of marketing channels a firm employs is critical
They account for 30% to 50% of SRP They can convert potential
buyers to profitable customers Channel decisions affect all other
marketing decisions Pricing Sales force and advertising decisions
Involve long-term commitments with other firms as well as a set of
policies and procedures Channel decisions must align with overall
strategy
- 9. So (again) Step #1 isUnderstanding Customer NeedsConsumers
choose where to buy based on: Price Product assortment Convenience
Personal shopping goals Marketers using different channels must be
aware that different consumers have different needs during the
buying process
- 10. There are 5 marketing flows in a marketing channelPhysical
Flow Transporters, Transporters, Suppliers Manufacturer Dealers
Transporters Customers Warehouses WarehousesTitle Flow Suppliers
Manufacturer Dealers CustomersPayment Flow Suppliers Banks
Manufacturer Banks Dealers Banks CustomersInformation Flow
Transporters, Transporters, Transporters, Suppliers Warehouses,
Manufacturer Warehouses, Dealers Customers Banks Banks
BanksPromotions Flow Advertising Advertising Suppliers Manufacturer
Dealers Customers agencies agencies
- 11. Channel Levels (Paths) There are different levels of
marketing channels in consumer and industrial markets Consumer
Marketing Channels Industrial Marketing Channels 0-level 1-level
2-level 3-level 0-level 1-level 2-level 3-levelManufacturer
Manufacturer Manufacturer Manufacturer Manufacturer Manufacturer
Manufacturer Manufacturer Wholesaler Wholesaler Manufacturers
Manufacturers Representative Sales Branch Jobber Industrial
distributor Retailer Retailer Retailer Industrial Industrial
Industrial Industrial Consumer Consumer Consumer Consumer customers
customers customers customers
- 12. A broader view of delivering customer value:Value
NetworksPartnerships created to source, augment & deliver
offerings From a linear view -> Supply Chain See markets as
destinations To a customer-centric view -> Demand Chain Planning
Emphasize what customers are looking for instead of what we are
selling SIVA 4-Ps Solutions Product Information Promotions Value
Price Access Placement To a broad view of customer value delivery
-> Value Networks Seeing the company at the center of a value
network Include suppliers, suppliers suppliers, immediate customers
and their end customers A company needs to orchestrate these
parties in order to deliver superior value to the target market
Managing value chains require increased investments in IT and
software SCM SAP, Oracle ERP CRM
- 13. Channel Design DecisionsWhat are key issues in designing
channels?1. Analyzing customer needs2. Establishing channel
objectives3. Evaluating major channel alternatives
- 14. In Channel Design, Step #1 isAnalyze customers desired
service output levelThere are 5 channel service outputs Lot size
customers prefer lot size of one Waiting and delivery time fast
delivery channels Spatial convenience ease of purchase Product
variety greater assortment Service back-up credit, delivery,
service, repair, training, consultingNote: increased service output
= increased channel costs, and increased prices to consumers. Some
customers are willing to accept smaller service outputs if they
could save on costs
- 15. Channel Design Decision Step #2 isEstablishing channel
objectives and constraints State channel target service output
level Arrange channel tasks to minimize total channel costs and
provide desired service level output Choose market segments to
serve and best channels for each In entering new markets, observe
what competitors are doing Adapt channel objectives to larger
environmental context E.g. During depression use shorter channels
to maintain price E.g. Note legal constraints vs. monopoly
- 16. Channel Design DecisionsIn establishing channel objectives
and constraints Vary objectives to suit product characteristics For
perishables direct marketing For bulky (building materials)
minimize shipping distance and amount of handling Nonstandard
products (custom-built machinery) sales force Products needing
installation or maintenance (heating or cooling systems) sales
force or franchised dealers High-unit value products (generators of
turbines) sales force
- 17. In Channel Design Decision, Step #3 isIdentifying and
evaluating major channel alternatives Choose a mix of channels that
reach different segments of buyers and delivers the right products
at the least cost Channel Advantages Disadvantages Sales Force or
Can handle complex products Too expensive owned branches and
transactions Internet, Less expensive Not effective with complex
telemarketing products Distributors Can create sales Customer
contact by company is lost Manufacturers Able to contact customers
at Selling effort per customer is less representatives low cost per
customer intense than if company reps did because several clients
share the selling costs
- 18. In Evaluating ChannelsConsider 3 elements of channel
alternatives1. What types of business intermediaries are
available?2. How many intermediaries are needed? Exclusive
distribution limited number of intermediaries Maintain control of
service levels and outputs offered by intermediaries Selective
distribution few but less than all Gain adequate market coverage,
more control, less cost Intensive distribution Places its products
in as many outlets as possible4. What are the terms, and what are
the responsibilities of each channel members?
- 19. In Channel DesignEvaluate major channel alternatives using
Economic criteria Control criteria Adaptive criteria
- 20. Economic criteria in channel evaluationEach channel
alternative will generate differentlevels of sales and costs high
Sales force Value- Added partners Value-Added of Sales Direct sales
Distributors channels Retail Stores Indirect channels Telemarketing
Internet Direct marketing channels low low high Cost per
TransactionTry to align customers and channels to maximize demand
at the lowest overall cost
- 21. Channel Design DecisionsControl and adaptive criteria in
evaluation Using sales agency poses control problems for you They
are independent firms seeking to maximize profits They concentrate
on customers who buy They may not master technical details of
product or handle promotions effectively In rapidly changing,
volatile, or uncertain product markets, producers need channel
structures and policies that provide high adaptability
- 22. Channel Management DecisionsAfter choosing a channel
system, the company must:1. Select individual channel members2.
Train and motivate channel members3. Evaluate individual channel
members4. Modify channel design and arrangements over time
- 23. Channel Management Decisions After choosing a channel
system, the company must:1. Set criteria for selection of channel
members Number of years in business Other lines carried Growth and
profit records Financial strength Cooperativeness Service
reputation Size and quality of sales force Location Type of
clientele Future growth potential
- 24. Channel Management Decisions After choosing a channel
system, the company must:1. Train and motivate channel members
Understand intermediaries needs and wants Construct a channel
positioning Implement capacity-building programs Training Market
research Exercise channel power to compel action
- 25. Channel Management Decisions After choosing a channel
system, the company must:1. Train and motivate channel members
Types of power to elicit cooperation Coercive power Threaten to
withdraw a resource or terminate a relationship Reward power Higher
margins, deals, premiums, cooperative advertising allowances,
display allowances, sales contest, bonuses Legitimate power Use
contract agreements to force compliance Expert power Posses special
knowledge the intermediary values Referent power Intermediary feels
proud to be associated with producer
- 26. Channel Management Decisions In motivating channel
members1. Forge long-term partnerships by clarifying expectations
Market coverage Inventory levels Marketing development Account
solicitation Technical advise and services Marketing
information
- 27. Channel Management Decisions In motivating channel members
Streamline supply chain and cut costs: ECR Efficient Consumer
Response practices help organize relationship in 3 areas:
Demand-side management Stimulate demand with joint sales and
marketing activities Supply-side management Focus on logistics and
supply chain activities to optimize supply Enablers and integrators
Use IT and process improvement tools to support joint
activities
- 28. Channel Management DecisionsAfter choosing a channel
system, the company must:1. Evaluate individual channel members on
Sales quota achievement Average inventory levels Customer delivery
time Treatment of damaged and lost goods Cooperation in training
and promotions programs Note: underperformers need to be counseled,
retrained, motivated or terminated
- 29. Channel Management DecisionsAfter choosing a channel
system, the company must:1. Modify channel design and arrangements
over time when: Channel is not working as planned Consumer buying
patterns change Market expands New competition arises Innovative
distribution channels emerge Product moves into later stages of PLC
Note: change may mean adding or dropping individual channel
members, adding or dropping market channels, or developing totally
new ways to sell goods
- 30. In managing channels, how mucheffort to devote to push or
pull? Push strategy for low-involvement, impulse products Use sales
force, trade promo to induce intermediaries to carry, promote and
sell products to end-users Pull strategy For high-involvement,
differentiated offers Use advertising, consumer promotions and
other forms of communication to persuade consumers to demand the
product from intermediaries
- 31. Channel Integration and SystemsSome of the recent
developments in channels Vertical Marketing Systems Corporate VMS
Administered VMS Contractual VMS New competition in retailing
Horizontal Marketing Systems Integrating Multi-channel Marketing
Systems
- 32. Channel Integration and SystemsSome of the recent
developments in channels Vertical Marketing Systems Producer,
wholesaler(s) and retailer(s) acting as a unified system Channel
captain owns others or franchises them or has so much power that
they all cooperate Strong channel members attempts to control
channel behavior and eliminate conflict Achieve economies of scale
via size, bargaining power, and elimination of duplicate services
Provides extensive exchange of information
- 33. Channel Integration and SystemsSome of the recent
developments in channels New competition in retailing Is no longer
between independent business units but between whole systems of
centrally-planned networks (Corporate, administered, and
contractual) competing against one another to achieve the best
economies and customer response
- 34. Channel Integration and SystemsSome of the recent
developments in channels Horizontal Marketing Systems Two or more
unrelated companies put together resources or programs to exploit
an emerging marketing opportunity Each company lacks capital,
know-how, production or marketing resources to venture alone or is
afraid of the risks Arrangements may be temporary, permanent or
result in joint-venture company
- 35. Channel Integration and SystemsSome of the recent
developments in channels Integrating Multi-channel Marketing
Systems Multi-channel marketing A company uses two or more channels
to reach one or more customer segments Integrated marketing channel
system Strategies and tactics of selling through one channel
reflects the strategies and tactics of selling through other
channels
- 36. Channel Integration and Systems3 benefits of multi-channel
marketing systems Increased market coverage Customers can shop for
company products in more places Multi-channel shoppers are more
profitable customers Lower channel cost Selling by phone is cheaper
than selling by personal visit to small customers More customized
selling Adding a technical sales force to sell more complex
products
- 37. Channel Integration and SystemsDisadvantages of
multi-channel marketing systems Channel conflicts Channels
competing for same customer New channels independent and makes
cooperation difficult Problems with control Execution of
merchandizing and promotions programs Market coverage and frequency
of visits to customers Inventory levels Handling of customer
complaints, returns and damaged goods Allocation of effort to other
principals served by intermediaries
- 38. In Channel Architecture Determine which channels should
perform which functions Demand-generation Tasks Better Disseminate
Reach Pace Acquire Assume Facilitate Facilitate Oversee Information
information price orders funds for risks product payment ownership
agreement inventories storage & terms movement
InternetMarketing channels and Methods National account management
Direct sales Customer Tele- marketing Vendor Direct mail Retail
stores Distributors Dealers and value-added resellers Advertising
Multi-channel architecture optimizes coverage, customization and
control, while minimizing costs and conflict
- 39. Conflict, Cooperation and CompetitionCauses of channel
conflicts Goal incompatibility Low-price market penetration
strategy vs. high-margin, short-run profitability Unclear roles and
rights Territorial boundaries Sales crediting Differences in
perception Optimistic vs. pessimistic views on business prospects
Differences in perception about advertising strategy Intermediaries
dependence on the manufacturer Exclusive dealers are at the mercy
of manufacturers product and pricing policies
- 40. Conflict, Cooperation and CompetitionManagement of channel
conflicts As companies add channels to grow sales, they risk
creating channel conflicts Too much conflict is dysfunctional The
challenge is not to eliminate conflicts but to manage them through
Adoption of super-ordinate goals agree on goals they jointly seek
Exchange of employees e.g. between manufacturer and dealer Joint
membership in trade associations manufacturers and marketers
Co-optation include leaders in boards, advisory councils Diplomacy,
mediation, or arbitration conflict resolution methods Legal
recourse
- 41. E-Commerce Marketing PracticesSome definitions E-business
Use of electronic means and platforms to conduct a companys
business E-commerce Company or site offers to transact or
facilitate the selling of products and services online E-purchasing
Purchase of goods, services and information from online sources
E-marketing Efforts to inform buyers, communicate, promote and sell
company products and services over the internet
- 42. E-Commerce Marketing PracticesSome advantages Provides
convenient, informative and personalized experiences for different
types of customers Allows online retailers to sell low-volume
products to niche markets at lesser or no cost in maintaining
retail floor space, staff, and inventory
- 43. E-Commerce Marketing Practices3 Aspects of online
transactions in retailing competition Customer interaction with the
Website Delivery of the product Ability to address problems when
they occur
- 44. E-Commerce Marketing Practices2 Types of Online Competitors
Pure-Click Companies Launched a website without previous existence
as a company Search engines ISPs Commerce sites amazon.com, buy.com
sell all types of products and services books, music, toys, stocks,
clothes, insurance, financial services Transaction sites Content
sites Enabler sites Brick-and-Click Companies Existing companies
that have added an online site for information or e-commerce
- 45. E-Commerce Marketing PracticesIssues of using online
channels for Brick-and-Clickand how to handle them Potential
channel conflict with retailers, brokers, agents and branch outlets
How to sell both to intermediaries and online? Offer different
brands or products online Offer off-line partners higher
commissions to offset negative impact on sales Take orders on the
web but have retailers deliver and collect payment
- 46. M-Commerce Wireless internet-connectivity to do business
Location-based services
- 47. Summary of Top 10 Concepts 6th Task of Marketing Delivering
Customer Value Marketing channels: definition, importance, examples
Functions of marketing channels Flows and levels of marketing
channels Value networks a broader view of customer value delivery
How to design marketing channels Challenges in managing channels
Integrated marketing channels a new development Channel conflicts
and how they are managed Key issues with e-commerce