Marketing Management

1st of June 2011

Marketing Channels

Channel Design Decisions

• Where do we sell our goods and to whom?• Which intermediaries do we use, and are they going to

agree to handle our goods?• Do we sell direct or do we use resellers?• Do we have distributors?• What other channel systems do we use?• Marketing channel systems have to continuously evolve

to meet market opportunities and prevalent conditions.• Marketing Channel Design: designing effective

marketing channels by analysing consumer needs, setting channel objectives, identifying major channel alternatives, and evaluating them.

Channel Design Decisions

Analysing Consumer Needs• Marketing channels are part of the customer-value

delivery network– All channel members add value for the customer

• Designing a marketing channel starts with knowing what consumers want from the channel

• What do they want to buy, where from, and how?• The swifter the delivery, the greater the assortment, and

more add-ons, the greater the channel’s service levels• Providing higher service levels may result in higher costs

for the channel and higher customer prices• The company needs to balance consumer needs against

feasibility, costs as well as consumer price preference

Channel Design Decisions

Setting Channel Objectives• A company needs to identify which segments to serve

and channels to use• The idea to minimise channel costs of meeting customer

service requirements• Company Channel Objective Influences:

– Nature of the company– Company Products and Services– Marketing Intermediaries– Competitors– Operating Environment

Channel Design Decisions

Identifying Major Channel Alternatives• Types of Intermediaries

– Channel members to carry out the work– Many types of members may pose advantages and drawbacks

• Number of Intermediaries– Intensive Distribution, Exclusive Distribution and Selective Distribution– Intensive Distribution: stocking the product in as many outlets as possible– Exclusive Distribution: limited number of outlets have the right to distribute

the company’s product in the territory– Selective Distribution: selecting a few intermediaries who are willing to carry

the products

• Responsibilities of Channel Members– Terms and responsibilities need to be agreed between producer and

intermediaries– Price policies, terms of sale, territorial rights and services must be agreed

Channel Design Decisions

Evaluating Major Alternatives• Channel alternatives should be evaluated against

economic, control and adaptive criteria– Economic Criteria: sales, costs and profitability of channel

alternatives– Control Issues: who will control intermediaries and product flow– Adaptive Criteria: channel must be flexible to adapt to

environmental changes

• A channel involving long-term commitments must be superior on economic and control grounds to be considered

Channel Design Decisions

Designing International Distribution Channels• Channel systems vary widely from country to country• Marketers need to adapt their channel strategies to

structures prevalent in each individual country• Some countries will have complex distribution systems

with multi-layered intermediaries • Sometimes you can profitably access small portions of a

population cause of immature distribution channels• Customs and Government regulations play a crucial role

in how a company distributes products globally

Channel Design Decisions

Channel Management Decisions

Marketing Channel Management: the selection, management and motivation of individual channel members and evaluating their performance over a period

Selecting Channel Members• A company should always evaluate channel member’s

– experience, – lines carried, – growth and profit records, – cooperativeness and – reputation

• Sales Agents: evaluate the number and character of lines carried and size and quality of sales force

• Retail Stores: store’s customers, locations, and growth potential

Channel Management Decisions

Managing and Motivating Channel Members• The company has to continuously motivate channel

members to do their best• Company has to sell to the intermediaries and with them

– they’re 1st line customers and partners• Partner relationship management is practised to forge

long-term partnerships with channel members• This ensures that we meet the needs of both the

company and its marketing partners• PRM and SCM software is now being used to plan and

manage relationships with channel partners

Channel Management Decisions

Evaluating Channel Members• Producers must regularly check channel member

performance • Standards such as:

– Sales quotas– Average inventory levels– Customer delivery time– Damaged and lost goods– Promotion and Training involvement– Customer services

• Intermediaries which perform well and add great value should be rewarded

• Poor performing intermediaries should be assisted or replaced

• Producers must be sensitive how they treat dealers

Marketing Logistics and SCM

Marketing Logistics and SCM

Marketing Logistics and SCM

Nature and Importance• Marketing Logistics: planning, implementing and controlling the

physical flow of materials, final goods and related information from origin to consumption to meet customer requirements at a profit

• This means getting the right product to the right customer in the right place at the right time

• Marketing logistics involves outbound, inbound and reverse distribution– Outbound Distribution: from factory to resellers to consumers– Inbound Distribution: from suppliers back to the factory– Reverse Distribution: moving unwanted, returned or excess products

• Supply Chain Management: managing upstream and downstream value-added flows of materials, final goods, and related information amongst suppliers, resellers, the company and consumers

Marketing Logistics and SCM

Nature and Importance• There’s a greater emphasis on logistics for

the following reasons:– Powerful competitive advantage: better

service at lower prices– Cost savings to company and customers– Greater and increased product variety– Technology improvements making it easier– Environmental sustainability efforts: green

supply chain to be responsible and profitable

Marketing Logistics and SCM

Goals of the Logistics System• Difficult to offer efficient distribution, maximum customer

services at a lower cost • Goal should be to provide a targeted level of service at

the least cost• Research into various distribution services is important

before service levels are set• Objective is to maximise profits and not sales• Can offer less services at a reduced price• Alternatively, offer higher prices for more services to

cover higher costs

Marketing Logistics and SCM

See you next time.

Cheers Guys!