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8/2/2019 28854780 Designing and Managing Integrated Marketing Channels
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Designing and Managing
Integrated Marketing Channels
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Objectives
To Describe the Nature and Functions of Marketing Channels
To Identify the Types of Marketing Channels
To Examine the Major Levels of Marketing Coverage
To Explore the Concepts of Leadership, Cooperation, andConflict in Channel Relationships
To Specify How Channel Integration Can Improve ChannelEfficiency
To Examine the Legal Issues Affecting Channel Management
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.Marketers realize that if they were to make
the brands available in the right size, at the
right time and at the right price, the Indian
consumer can be motivated to buy it andconsume it..
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Definitions
Value Delivery Network The network made up of the company, suppliers,
distributors, and ultimately customers who partner witheach other to improve the performance of the entire system.
Marketing channel Set of interdependent organizations involved in the process
of making a product or service available for use orconsumption by the consumer or business user
Goal 1: Know why companies use channels and understand their functions
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What is a Marketing Channel?
Marketing channel (a.k.a. distribution
channel) - network of organizations thatcreate time, place, and possession utilitiesfor consumers
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TIME
PLACE
POSSESSION
Marketing Channels Create Utility
The Nature of
Marketing Channels
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The Role of Marketing Channel
Channel Functions and Flows
Channel LevelsService Sector Channels
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a) Provide information about the market to the
manufacturer
b) Maintain price stability in the market
c) Promotion of the products in his territory
d) Financing by providing the necessary working capital in
the form of advance payments for goods and services
e) Middlemen also take the title of the goods and services
and trade in their own name
Marketing Channel Functions
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Marketing Channel Flows
Product Flow
The movement of the product frommanufacturer through all parties who
take physical possession Negotiation Flow
Interplay of buying/selling tasks
associated with title transfer
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Marketing Channel Flows
Ownership Flow Movement of title of the product
Information Flow
Information to and from themanufacturer
Promotion Flow
Flow of persuasive communication(advertising, personal selling, etc.)
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Marketing Channel Flows
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Channel Levels
Manufacturer Manufacturer Manufacturer Manufacturer
Consumer Consumer Consumer Consumer
Retailer Retailer Retailer
Wholesaler Wholesaler
Agent
1 level 2 level 3 level 4 level
Length of marketing channel
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Channel Level
Decisions that a firm must take regarding the number of
channel levels appropriate to serve a given market
From zero-directly from the manufacturer to the
customer- to as high as 4 to 5 levels involved in
distribution.
Zero level in industrial product marketing, project
marketing
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Channel level:
Firm adopts a one channel level when:
a) Number of customers is high
b) Customers in specific geographical area
c) Order lot size not uniformd) Firm sells goods to wholesaler or a large dealer
2, 3 or even 4 levels in case of:
a) Consumer productsb) Customers spread across the country
c) Market is large
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Factors determining the length of the Channel
a) Size of the market-larger it is more economical it isto serve it directly
b) Order lot size-if it is small, better to have longer
channel
c) Service requirements-if higher level of service is required,
then it is better to have a shorter level
d) Product variety-if customers shop for product assortment,
a wider channel of distribution is required
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Manufacturer
Customer
Customer
Wholesaler/Dealer
Manufacturer
Zero Level One Level
(a) (b)
Length of channel distribution
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Wholesaler/
Dealer
Retailer
Distributor
Customer
Manufacturer Manufacturer
Wholesaler
Retailer
Customer
Two Level Three Level
(c) (d)
Length of channel distribution
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Manufacturer
Market 1
Dealer Dealer DealerDealerDealerDealerDealer
A B C D E F G
Retailers
Customers Customers Customers
Width of channel of distribution
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Market
Market
Market
Market
Market
Market
Market
Market
Market
Market
Market
MarketMarket
Market
Market
Market
Market
Market
Market
Market
Market
Market
Market
Market
Market
Market
Market Market
Market
Market
Market
Market
Market
Market
Market
Market
Retail spokes-restaurants,
soft drink kiosks, panwalsa,
sweetmarts
Dealer/wholesaler
Dealer Hub
Franchise
Major Hub of
Parent Company
Hub and spoke pattern of distribution of a soft drink firm
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Wholesalers Retailers ConsumersProducerAgents orBrokers
Producer
Wholesalers Retailers
Consumers
Producer Retailers Consumers
Producer Consumers
Types of Marketing ChannelsChannels for Consumer Products
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Types of Marketing ChannelsChannels for Industrial Products
AgentsIndustrialDistributor
Business/Organizational
BuyerProducer
Industrial
Distributor
Business/Organizational
Buyer
Producer
ProducerBusiness/
OrganizationalBuyer
AgentsBusiness/
OrganizationalBuyer
Producer
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Channel design Decisions
Analyzing Customers Desired Service Outputlevels
Establishing Objectives and Constraints
Identifying and Evaluating major ChannelAlternatives
Evaluating the Major Alternatives
A l i C D i d S i
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Analyzing Customers Desired Service
Output levels
Cost and feasibility of meeting needs must beconsidered
Lot Size
Waiting & Delivery Time
Spatial Convenience
Product Variety
Service Backup
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Establishing Objectives and Constraints
Set channel objectives in terms of targeted level ofcustomer service
Product Characteristics
Strength & weakness of intermediaries
Adaptability to larger environment
Id if i d E l i j
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Identifying and Evaluating major
Channel Alternatives
Types of intermediaries
Company sales force, manufacturers agency, industrial
distributors
Number of marketing intermediaries Intensive, selective, and exclusive distribution
Responsibilities of channel members
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Types of intermediaries
Functional
MiddlemenMerchantMiddlemen
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Types of intermediaries
Functional
Middlemen
Do not take title to products;
they simply facilitate theexchange process by performing
buying and/or selling functions.
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Types of intermediaries
MerchantMiddlemen
Take title to products andresell them.
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Exclusive
Distribution
SelectiveDistribution
IntensiveDistribution
Number of marketing intermediaries
Intensity at various levels
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Practiced when a manufacturer restricts product distribution to asingle retailer in a particular market or just a relatively fewretailers
Products that are expensive, infrequently purchased, are soughtafter by consumers (i.e. specialty goods), or which require
considerable after-sale servicing are the most likely candidates forexclusive distribution
Exclusive Distribution
Number of marketing intermediaries
Intensity at various levels
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Selectively distributed bands are available in multipleretail outlets in a particular market
Shopping products, or those that consumers seek out,are sold through selective distribution
Selective Distribution
Number of marketing intermediaries
Intensity at various levels
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Used when convenience products are sold throughvirtually every available retail outlet in a particularmarket, e.g. soft drinks, candy, gum, cigarettes
Intensive Distribution
Number of marketing intermediaries
Intensity at various levels
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Price policy-the middlemen have to ensure that everyoneinvolved gets a fair and equitable deal
Payment terms-the manufacturing firm stipulates the mode and
terms of payment
Returns policy-this indicates the warranty that the manufacturerextends to the intermediary
Territorial rights-the territorial jurisdiction should be spelt spelt
out to avoid territory jumping
Mutual services and responsibilities-should be spelt
out,particularly in case of franchised and exclusive agency
channels
Terms and Responsibilities of
Intermediaries
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Evaluating the Major Alternatives
Economic criteria
Control issues
Adaptive criteria
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Criteria for Evaluating Channel Alternatives
Evolution of Channels
Growth
Dedicated stores:
Computer point
Shoppers stop
Mature
Department Stores like
Akbarallys
Decline
Discount Store
Low cost alternatives like
Discount Sales
Introductory
Specialist Channels like
boutiques in fashion/
designer wear
Value Added by Channel Members
High
Low
MarketGrowth
Rate
Marketing channels across product life cycle
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Eight Steps in Designing the Market Driven
Distribution are:
1. Know what the customers want
2. Decide on the outlet
3. Determine the costs4. Bound the ideal
5. Compare the alternatives
6. Review assumptions in the list of research
7. Confront the gap between the ideal and the actualdistribution system
8. Implement changes in the system, if required
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Channel Behavior and
Organization
Channel Conflict
Occurs when channel members disagree on roles,activities, or rewards.
Types of Conflict: Horizontal conflict: occurs among firms at the same
channel level
Vertical conflict: occurs among firms at different channellevels
Goal 1: Know why companies use channels and understand their functions
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Channel Behavior and
Organization Conventional Distribution Channels
Consists of one or more independent channel members
Lack leadership and power
Often result in poor performance Vertical Marketing Systems
Consists of members acting as a unified system
Use contracts, ownership or power
Goal 1: Know why companies use channels and understand their functions
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Channel Behavior and
Organization
Corporate VMS Contractual VMS Administered VMS
Corporation ownsproduction anddistribution
Coordination andconflict through regularorganizational channels
Vertical MarketingSystems
Goal 2: Learn how channel members interact and how they organize
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Channel Behavior and
Organization
Corporate VMS Contractual VMS Administered VMS
Individual firms who jointhrough contracts
Franchise organizations
Manufacturer-sponsored retailerfranchise system
Manufacturer-sponsoredwholesaler franchise system
Service-firm-sponsored retailerfranchise system
Vertical MarketingSystems
Goal 2: Learn how channel members interact and how they organize
Ch l h i d
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Channel Behavior and
Organization
Corporate VMS Contractual VMS Administered VMS
Leadership through thesize and power ofdominant channel
members Leadership could be
manufacturer or retailer
Vertical MarketingSystems
Goal 2: Learn how channel members interact and how they organize
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THANK YOU