MBA-I 2014-16

MBA-I 2014-16

Marketing Management - II

Module 3

Channel Management

Marketing Channel

• Network of all parties involved in moving

products/services from producers to

consumers or customers

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Distribution

• Essential part of

marketing: Making the

product/service

available to the

buyer/user

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July 21, 2007 12 million copies Worldwide launch at the stroke of midnight

Flow

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Manufacturer Channel

member/s Customer

Information

Material

Money

Material

Channel Functions

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• Storing and transporting products

• Financing

• Breaking the bulk

• Place order on manufacturers

• Gather information – customers,

competition, environment

• Develop communications

Value Networks • Channels add value through

o Gathering and processing information to

encourage transactions

o Creating efficient infrastructure to exploit

economies of scope and scale

o Absorbing risks

o Reducing information overload – collaborative

filtering

o Product level

• Delayed differentiation

• Kitting

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Contact Efficiency

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M1 M2 M3 M4 M5 M6

C1 C2 C3 C4 C5 C6

36 contacts

Contact Efficiency

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M1 M2 M3 M4 M5 M6

C1 C2 C3 C4 C5 C6

12 contacts

R1

Channel Organisation

• Conventional o Each member is independent

o Self-regulating according to market forces

• Vertical Marketing System (VMS) o The producer takes the role of another member

o By acquisition or by creating its own capabilities

• Horizontal o Two or more members at the same level form alliance

– share resources and services for better

performance

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Channel Strategies

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• Considerations on: o Number of levels of intermediaries

o Form of organisation – owned by the same firm or

interconnected individual firms

o Intensity of distribution – how many distribution points in any geographical area

• Number of levels No. of levels Control Reach Margins

Low

High

Distribution Intensity • Convenience products – high intensity

• Shopping products – selective distribution

• Luxury or high-ticket items – exclusive

distribution

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Channel Design • All channel decisions must be aimed at

delighting the customer

• Multichannel design

• Balance between ‘bricks and clicks’ -

convergence

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Channel Structures

Producer Consumer

Producer Consumer Intermediaries

Producer Consumer Intermediaries

Direct

Indirect

Hybrid

Intermediaries

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• Agents

• Distributors

• Wholesalers

• Franchises

• Retailers

• Infomediaries

Channel Considerations

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• Channel efficiencies o Automation of back-office sales functions

o Personnel and accuracy enhancements

• Current marketing intermediaries o Disintermediation

o Re-intermediation

o Channel advantages for potential buyers

• Customise contact as per buyer’s needs

• Wide range of referral sources

• Always open

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Effect of Internet

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• Pricing o Buyer’s bargaining power

o Geographical advantages

o Commodification – service-enrichment / branding

• Sales force o Complimentarity

o Customise product presentations

o Incentivise online initiatives

• Promotion o Search-engine marketing

Channel Management • Conflict

o Power

o Trust

• Goal-setting

• Incentives

o Cash

o Non-cash

o Training

• Channel leadership

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Channel Conflicts • Situation in which one member perceives

another member to be engaged in a

behaviour that is impeding from achieving

the goals

• Vertical o Across levels

• Horizontal o Along the same level

• Multichannel o Across channels

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Power

• Ability to evoke change in another’s

behaviour o One channel member controls the decision variables in the

marketing strategy of another member operating at a different level

• Types o Coercive power

o Reward power

o Expert power

o Legitimate power

o Referent power

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Logistics

• Coordination of all activities related to

transportation or delivery of products /

services occurring within a single business

organisation

• Supply Chain Management (SCM) –

extension of logistics into inside and

outside the organisation

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Logistical Flows

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Suppliers

Firm Channel

intermediaries

Customers

Inbound

Logistics

Reverse Logistics

Outbound

Logistics

Logistics Management • 3PL (Third Party Logistics) firms

o Focus on core business

o Access to more sophisticated distribution networks and

technologies

o Cost reduction

o Holding inventory - warehousing

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Logistics Decisions

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PRODUCTION

What, how, when to

produce

TRANSPORATTION

How, when to move

LOCATION

Where to do

what

INVENTORY

How much to

make, store

INFORMATION Basics for

decision

making

Retailing

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Retailing Strategy

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Target Market

Atmosphere

Merchandise

Promotion

Location

Customer service

Pricing

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• Merchandise o Categories

o Quality level

o Breadth of selection

o Emphasis on any particular brand

• Promotion o Positioning

o Media to be used – broadcast, print, internet

• Location o Multiple or single?

o Distribution channels

o Online?

Dimensions

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• Atmosphere o Environment

o Colours and materials

o Music

o Aisles – wide or narrow

• Customer service o Full service or self-service?

o Return policy

o Training needs of sales personnel

• Pricing o With respect to competition

o Frequency of price promotions/sales

o Bargaining

o Credit cards

Sephora

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Champs Elysees, Paris

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Target Market

Atmosphere

Merchandise

Promotion

Location

Customer service

Pricing

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Sephora

Open-sell; touch and

feel; black & white

scheme

Exclusive

Word-of-mouth

Prime

Beauty coaches; made-to-

order cosmetics

High; at par with

dept stores

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Retailer Categories Categories Description Examples

Departmental

stores

Assortment of all types of goods; variety

in categories and breadth

Spencers

Discount stores Wide range of products; compete on

prices; less fashion-oriented brands

Brand

Factory

Kirana stores

(mom-and-pop)

Owned by individuals; personalised

services

Specialty stores Focuses on a particular category Body Line

Hypermarkets Variety and huge volumes of

merchandise at low margins

Spencers

Hyper

Supermarkets Self-service; grocery & limited non-food

products; follow EDLP pricing

Easyday

Category killers Single category; very low prices ??

E-tailers Online order booking; door delivery;

with or without COD ∞

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Thank You!

MBA-I 2014-16