the marketing channels
TRANSCRIPT
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“Necessity is the mother of
Invention”
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“God couldn’t be everywhere: therefore- He created mothers”
Similarly manufacturers couldn’t be omnipresent;
human needs created Distribution
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THE MARKETING CHANNELS
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KEY DEALERSDISTRIBUTORS
DIGICOMP + RCV
BTLDEMONSTRATIONS
DEALERS \ SUB DEALERSDEALERS \ SUB DEALERS
TYPE OF BUSINESS•Consumer Electronics•Cable Hard ware•Home appliances•Super Market•FMCG•Telephony
DIRECT SELLINGDIRECT SELLINGCALL CENTERDEMO VAN
RCV
CONSUMERSCONSUMERS
YOUR ROLE
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The Marketing Channels
• Marketing channel is a set of institution that transfer the ownership of and move goods from the point of production to the point of consumption
• Independent organizations are called marketing intermediaries.
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Q: Why Are Marketing Intermediaries Used?
Producer Typically produces goods:• At limited locations• In large quantities• With limited variety• Over the year
Consumer consumes goods:•All over the country at their own location•In limited quantity per consumer•With large variety/ assortment•Whenever they need
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PUSH Effect
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PULL Effect
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The push & the pull selections
Producerpromotes
aggressively
ChannelsPromotes
aggressively
RetailerPromotes
aggressivelyConsumer
Push Strategy
ProducerPromotes
aggressively to Channels Retailer Consumer
Pull Strategy
A Push strategy involves the manufacturer for using the sales force and trade promotion activities to induce intermediaries to carry, promote and thus sell the product to the end users
A Pull strategy involves the manufacturer using advertising and promotion to persuade consumers to ask intermediaries for the product, thus inducing the intermediaries to order it.
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Transportation Modes
Rail Cost-effective for shipping bulk products.
Rail Cost-effective for shipping bulk products.
WaterLow cost for shipping bulky, low-value,
non perishable goods, slowest form.
WaterLow cost for shipping bulky, low-value,
non perishable goods, slowest form.
TruckMost important carrier for consumer
goods, flexible.
TruckMost important carrier for consumer
goods, flexible.
AirHigh cost, ideal when speed is needed or
distant markets have to be reached
AirHigh cost, ideal when speed is needed or
distant markets have to be reached
PipelineCarry petroleum based products,
very low cost, requires little energy.
PipelineCarry petroleum based products,
very low cost, requires little energy.
InternetWeb sites have products available, used
especially for services.
InternetWeb sites have products available, used
especially for services.
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Role of Marketing Channels
To fill the gaps between the production and consumption process.
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The Role of Marketing Channels in Marketing Strategy
Channels provide the means by which the firm moves the goods and services it produces to ultimate users
Facilitate the exchange process by cutting the number of contacts necessary
Adjust for discrepancies in the market’s assortment of goods and services via sorting
Standardize exchange transactions
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Think Efficiency and Effectiveness
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Add a Distributor
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How intermediaries improve exchange efficiencies
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Channel Intermediaries
RetailerRetailer
MerchantWholesalerMerchant
Wholesaler
Agents andBrokers
Agents andBrokers
A channel intermediary that sells mainly to customers.
A channel intermediary that sells mainly to customers.
An institution that buys goods from manufacturers, takes title
to goods, stores them, and resells and ships them.
An institution that buys goods from manufacturers, takes title
to goods, stores them, and resells and ships them.
Wholesaling intermediaries who facilitate the sale of a product by representing channel member.
Wholesaling intermediaries who facilitate the sale of a product by representing channel member.
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Channel Intermediaries
RetailersRetailersRetailersRetailers
Merchant Merchant WholesalersWholesalersMerchant Merchant
WholesalersWholesalers
Agents Agents andand
BrokersBrokers
Agents Agents andand
BrokersBrokers
Take Title to GoodsTake Title to GoodsTake Title to GoodsTake Title to Goods
Take Take TitleTitle to Goods to GoodsTake Take TitleTitle to Goods to Goods
Do NOT Take Do NOT Take TitleTitle to Goods to GoodsDo NOT Take Do NOT Take TitleTitle to Goods to Goods
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Channel functions & Flow
• Marketing Channels performs work of moving goods from producers to consumers.
• For this, they perform some key functions.
• They are:
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P
R
O
D
U
C
E
R
WHOLESELLER
RETAILER
CONSUMER
Physical Possession (PP)
Ownership (Own)
Negotiation (N)
Promotion (Pr)
Financing (F)
Risk Taking (R)Ordering (Ord)Payment (P)
Information (I)
Fig: 1.1 Marketing Flows in the marketing Channel
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Direct Vs. Indirect Channels
Direct channel- a marketing channel that does not use intermediaries to distribute the product. Why sell directly?
Indirect channel – a marketing channel where intermediaries are used to help distribute the product. Why sell indirectly?
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Channel levels
Zero Level Channel (Direct Marketing Channel):Example: Dell.
One Level Channel:Example: Automobile.
Two Level Channel:Example: White Goods/ Consumer Durables.
Three Level Channel:Example: FMCG.
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Dual Distribution: Network that moves products to a firm’s target market through more than one marketing channel
Reverse Channels: Channels designed to return goods to their producers
Example: Soft-drink Bottles/ Old Newspapers.
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Channels for Consumer Products
Producer Producer Producer Producer
Consumers Consumers Consumers Consumers
Retailers Retailers Retailers
Wholesalers Wholesalers
Agents orBrokers
WholesalerWholesalerChannelChannel
RetailerRetailerChannelChannel
DirectDirectChannelChannel
Agent/BrokerAgent/BrokerChannelChannel
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Channels for Business-to-Business Products
Producer
IndustrialUser
DirectDirectChannelChannel
Producer
Govt.Buyer
DirectDirectChannelChannel
Producer Producer Producer
IndustrialUser
IndustrialUser
IndustrialUser
IndustrialDistributor
IndustrialDistributor
Agents orBrokers
Agents orBrokers
Agent/BrokerAgent/BrokerChannelChannel
IndustrialIndustrialDistributorDistributor
Agent/BrokerAgent/BrokerIndustrialIndustrialChannelChannel
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Channel Design Decisions
To design a marketing channel, procedure to be followed is:
Analysing Customers Needs
Establishing Channel Objectives
Identifying Channel Alternatives
Evaluating Channel Options
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(A) Analyzing Customer Needs:-Firstly, we try to understand:
“What”
“Where”
“Why”
“When”
“How”
Target Customer Buy ?
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What are the service outputs
Waiting time
Breaking the bulk
Spatial convenience
Product assortment
Service back-up
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Example of a service output delivered template
Service dimension Service output delivered1. Bulk-Breaking Units are delivered in ones
2. Spatial convenience There is at least one outlet for almost every
3 km radius
3. Waiting time Not more than 2 days for any model
4. Assortment Other consumer goods items including that of other competitors are available at all
theOutlets.
5. Installation support Available
6. After sales support Free for first two years, but available on payment afterwards. Also available at
every city from where the product was bought.
7. Consumer financing Available
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(B) Establishing Channel Objectives:
•Channel objectives need to be stated in terms of targeted service output levels.
•Channel objectives vary with product characteristic. Product could be:
Perishable (bread, butter, newspaper etc) Bulky (building materials) Requiring Installation/maintenance services (Computer, AC) High Unit Value (generators & turbines)
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• Channel design should take into account strengths and weakness of different types of intermediaries.
• Also, competitive channels should be understood & analysed.
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(C ) Identifying Channel Alternatives:
Channel alternatives are described by:
• Types of Intermediaries Available.• Number of Intermediaries Needed.• Terms/ Responsibilities of each Channel Members.
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Types of Intermediaries Company Sales Force, Manufacturer’s Agents, and Industrial
Distributors
Number of Intermediaries Intensive distribution Exclusive distribution Selective distribution
Terms & Responsibilities of Channel Members Price Policy Conditions of sale Distributor’s territorial rights Mutual services and responsibilities
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Types of Intermediaries Company Sales Force, Manufacturer’s Agents, and
Industrial Distributors
Example: sale of food grains to rural market.1. Mobile vans for direct distribution2. Periodic markets (haats)3. Agricultural markets (mandis)
HUL’s Operation shakti, involves self-help groups(SHGs) of women to distribute its products in ruralareas.
ITC’s e-Choupal.
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Number of Intermediaries
Exclusive distribution What is it? When is it used?
Selective distribution What is it? When is it used?
Intensive distribution What is it? When is it used?
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Exclusive distribution
*
*
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Exclusive Distribution:
• Involves limiting the number of intermediaries
• Used when company desires more control over services provided by intermediaries
• Intermediaries may agree not to carry competitive brands (Exclusive Dealing)
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Exclusive Distribution:
• Example: Textile mills like Mafatlal group, Delhi cloth and General Mills & Bombay Dyeing
•Tata Engineering & Locomotive Co. Ltd (TELCO) and Ashok Leyland
•Pioma Industries, Ahmedabad, manufacturer of Rasna soft drink
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Selective distribution
**
*
***
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Selective Distribution:
• Involves use of more than a few, but less than all intermediaries who are willing to carry a particular product
• This enables producer to have just right amount of outlets to cover territory
• In turn helps producer to control services to customer better coverage. Coverage cost is lower for company.
• Example: Stihl company dealing with power equipment
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Intensive distribution
****
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***** * *****
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Intensive Distribution:
• Manufacturer places goods in as many outlets as possible
•Marketers of convenience products like cigarettes, chewing gum, salt, biscuits, bread, soaps, detergents & soft drinks want intensive distribution
•Example: Titan Watches, Asian Paints, HUL etc.
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Intensive Distribution:
• Asian Paints distribution network consists of 21 sales offices, 3 agencies and 6000 dealers
•HUL network consists of 4000 redistribution stockists and 3,00,000 dealers spread over the entire country
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Intensity of Distribution
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Terms & Responsibilities of Channel Intermediaries
Producer must clearly indicate rights/ duties of each channel member. Each channel member’s profitability is to be ascertained & they should be treated with respect.
Elements of terms could be:
•Price policy:•Conditions of sale:•Distributor’s territorial rights:•Mutual services & responsibilities:
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(D) Evaluating Channel Alternatives:
Channel alternatives evaluated against:
• Economic Criteria.• Control Criteria.• Adaptive Criteria.
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Evaluating Channel Alternatives:
Lets take an examples: A Jodhpur based branded furniture manufacturer wants to sell furniture in the Southern markets. The manufacturer has to decide between two alternatives:
First Channel alternative is:-•Hiring Ten new sales representatives who will operate from offices in Bangalore, Chennai, and Hyderabad. They would receive a base salary plus commissions. Also, the company will have to meet the expenses of setting up the office-cum-residence for these employees
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Evaluating Channel Alternatives:
Second Channel alternative is:-•Using a Bangalore based industrial distributor dealing in furniture with offices in Chennai and Hyderabad. The distributor has 30 sales representatives, who would receive commissions based on their respective sales.
???
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DISCUSSION