biib 14-16 - mm i - 10 place (students' copy)

8/9/2019 BIIB 14-16 - MM I - 10 Place (Students' Copy)

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Girish Ketkar Topic 10MM-I @ BIIB 2014-16 (Semester I)

Place

Topic 10


Agenda

• Definition and functions of channels of distribution

• Channel design decisions, channel levels

• Channel conflicts and resolution

• Integrated marketing channels


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Reading

• Marketing Management: A South Asian Perspective(Kotler, Keller, Koshy, Jha)

» Chapter 14: Designing and Managing Integrated Marketing

Channels


Marketing Channels

(a.k.a. Channels of Distribution)


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Marketing Channels (a.k.a. Channels of Distribution)

• Sets of interdependent organizations participating in

the process of making a product or service available

for use or consumption

Source: “Marketing Management: A South Asian Perspective (14th edition)” by Kotler, Keller, Koshy, Jha



• The link between manufactures (or service providers)

and customers

• Accomplish all the tasks necessary to effect a sale

and deliver products to the customer


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Supply Chain

Direct

SuppliersSuppliers

Consumer

Products

Manufacturer

(or Service

Provider)

Channels

B2B B2C

B2C

ConsumersIntermediaries

Marketing channels

Distribution channels

Value creation/addition at each stage


Supply Chain or Demand Chain?

Supply Chain Demand Chain


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• Buy, take title to, and resell the merchandise

MerchantsWholesalers, dealers,

retailers, etc.

• Search for customers,

• Negotiate on producer’s behalf

• Do not take title to the goods

AgentsBrokers, manufacturers’

representatives, sales agents,

etc.

• Assist in the distribution process

• Do not take title to goods

• Do not negotiate on producer’s behalf

Facilitators

Transportation companies,

independent warehouses,

banks, etc.


Importance of Marketing Channels

• Read


Channels

• The Importance of Channels

» Page 376

» Interconnectedness of channel decisions with

other marketing decisions

» Push strategy

» Pull strategy


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Push Strategy / Pull Strategy

• Push strategy

» Inducing intermediaries to carry, promote and sell the

product to end users

• Pull strategy

» Persuading customers to demand the product from

intermediaries, thus inducing the intermediaries to order it

• In which situations are these strategies appropriate?



Channel Functions and Flows


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Types of Functions and Flows

Promotion/Communication

Information

Storage and Movement (Delivery of Product/Service)

Title (Ownership)

Risk taking

Support

Payment

Ordering

Finance

Negotiation

Manufacturer Consumers


Types of Functions and Flows

• Functions constitute

» either a forward flow,

» or a backward flow,

» or a two-way flow.

• Marketing channels can be used for any one or more

of these functions/flows.


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Channel Functions

• Read


Channels

• Table 14.1: Channel Member Functions

» Page 379


Channel Functions: One Key Decision

• Which functions will be performed by the firm, and

which functions will be performed by channel

members?


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Reverse-Flow Channels

• What are these??


Channel Levels


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Channel Design Decisions


Channel Design Decisions


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Analyzing Customer Needs and Wants

• “As with products, segmentation exists, and

marketers employing different types of channels

must be aware that different consumers have

different needs during the purchase process.”

• “Even the same consumer may choose different

channels for different functions in a purchase.”



Analyzing Customer Needs and Wants

• Service outputs

» Lot size

» Waiting and delivery time

» Spatial convenience

» Product variety

» Service backup


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Establishing Objectives and Constraints

• Objectives in terms of

» Service output levels

» Associated cost and support levels


Establishing Objectives and Constraints

• Constraints

» Some factors limiting choice of channels

• Availability of good intermediaries

» Good intermediaries may have been ‘locked up’ by competitors.

• Product characteristics

» Technically complex or custom-built products may need direct channels.

» Perishable products will demand strict storage requirements.

• Company financial resources

» Company may not be able to afford sales force for direct sales.

• Geographic dispersion of customers

» Widely dispersed market may necessitate setting up low-cost

representation afforded by intermediaries.

• Competitive strategies

» If competitors sell direct, company may be forced to go direct!


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Identifying Major Channel Alternatives

• Types of intermediaries

» Own sales force, distributors, dealers, retailers, online

channels, telemarketing, mail-order catalogues…

» Unconventional channels



• Number of intermediaries

» Exclusive distribution

• Severely limiting the number of intermediaries

» Selective distribution

• Relying on few intermediaries

» Intensive distribution

• Placing the goods or services in as many outlets as possible


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• Terms and responsibilities of channel members

» Price policy

» Conditions of sale

» Territorial rights

» Mutual services and responsibilities


Evaluating Major Channel Alternatives

• Economic criteria

» Value-add of sale vs. Cost per transaction

• Control and adaptive criteria

» Degree of control that the marketer can exercise over

channel members

» Adaptability to changing market situations

• Ability to modify channel structure


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Evaluating Major Channel Alternatives

• Value-add of sale vs. Cost per transaction


Channel Conflicts and Resolution


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Channel Conflicts and Coordination

• Channel conflict

» Generated when one channel member’s actions prevent

another channel member from achieving its goals

• Channel coordination

» Occurs when channel members are brought together to

advance the goals of the channel, as opposed to their own

potentially incompatible goals


Types of Conflicts

• Horizontal channel conflict

» Conflict between channel members at the same level

• Vertical channel conflict

» Conflict between different levels of the channel

• Multichannel conflict

» Conflict between two or more channels that sell to the

same market


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Resolution of Channel Conflicts


Integrated Marketing Channels


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Hybrid Channels

• Using multiple channels in a market area

• For example:

» Allen Solly

• Own stores

• Own website

• Malls like Shoppers Stop

• Online stores like Flipkart

• Apparel stores


Hybrid Channels

• Important

» Companies must ensure that these channels

• work well together, and

• match each target customer’s preferred ways of purchasing

• In other words

» Marketing channels need to be “integrated”.


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• “An integrated marketing channel system is one in

which the strategies and tactics of selling through

one channel reflect the strategies and tactics of

selling through one or more other channels.”




• What are the benefits and trade-offs of having

multiple channels?


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What We Covered in this Topic (Contd.)

• Channel functions and flows

» Types of functions and flows

» Channel functions

» One key decision

» Reverse-flow channels

• Channel levels

» In consumer markets

» In industrial markets



• Channel design decisions

» Analyzing customer needs and wants

• Segmentation on the basis of customers' channel preferences

• Service outputs by channels

» Establishing objectives and constraints

» Identifying major channel alternatives

• Types of intermediaries• Number of intermediaries

• Terms and responsibilities of channel members

» Evaluating major channel alternatives

• Economic criteria

• Control and adaptive criteria


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• Channel conflicts and resolution

» Channel conflict

» Channel coordination

» Types of conflict

• Horizontal channel conflict

• Vertical channel conflict

• Multichannel conflict

» Resolution of channel conflicts



• Integrated marketing channels

» What are they?

» Benefits and trade-offs

» Architecture

• The hybrid grid

biib 14-16 - mm i - 10 place (students' copy)

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