Designing and Managing Integrated Marketing Channels and Value Network

Marketing Channels and Value Networks

Marketing channelssets of interdependent organizations involved in the process of making a product or service available for use or consumption Value networka system of partnerships and alliances that a firm creates to source, augment, and deliver its offerings

Channels and Marketing Decisions

Push strategy - the manufacturers sales force, trade promotion money, and other means to induce intermediaries to carry, promote, and sell the product to end users - use low brand loyalty in a category, brand choice or impulse item Pull strategy - advertising, promotion, and other forms of communication to persuade consumers to demand the product from intermediaries. - high brand loyalty and high involvement in the category, when people perceive differences between brands

Buyer Expectations for Channel Integration

Ability to order a product online and pick it up at a convenient retail location Ability to return an online-ordered product to a nearby store Right to receive discounts based on total online and offline purchases

Channel Functions and Flows

A marketing channel performs the work of moving goods from producers to consumers. It overcomes the time, place, and possession gaps that separate goods and services from those who need and want them.. Forward flow of activity from the company to the customer. Backward flow from customers to the company. Still others occur in both directions.

Channel Member Functions

Gather information
Develop and disseminate persuasive communications Reach agreements on price and terms Acquire funds to finance inventories Assume risks Provide for storage Provide for buyers payment of their bills Oversee actual transfer of ownership

Channel Levels in Consumer Markets

A zero-level channel (also called a directmarketing channel) consists of a manufacturer selling directly to the final consumer. A one-level channel contains one selling intermediary such as a retailer. A two-level channel contains two intermediariesa wholesaler and a retailer.

Reverse Flow Channels

Channels normally describe a forward movement of products from source to user. Reverse-flow channels are important in the following cases: i. To reuse products or containers ii. To refurbish products for resale iii. To recycle products iv. To dispose of products and packaging

Designing a Marketing Channel System

Analyze customer needs
Establish channel objectives Identify major channel alternatives Evaluate major channel alternatives

Channel Service Outputs

Lot sizenumber of units the channel permits a typical customer to purchase on one occasion Waiting/delivery timeaverage time customers of that channel wait for receipt of the goods Spatial conveniencedegree to which the marketing channel makes it easy for customers to purchase the product Product varietyassortment breadth provided by the marketing channel Service backupadd-on services (credit, delivery, installation, repairs) provided by the channel

Identifying Major Channel Alternatives

Types of

intermediaries

Merchants Facilitators Number of intermediaries Exclusive Selective Intensive

Terms and responsibilities of channel members

Price policy Conditions of sale Distributors territorial rights Mutual services and responsibilities

Channel-Management Decisions
Selecting channel members Training and motivating channel members Evaluating channel members Modifying channel arrangements

Evaluating the Major Alternatives

Determine whether
own sales force or a sales agency will produce more sales. Estimate the costs of selling different volumes through each channel.

Channel Integration and Systems

Vertical marketing system
Horizontal marketing system Multichannel marketing systems

Vertical Marketing Systems (VMS)

Corporate VMS Administered VMS Contractual VMS

Contractual VMSs
Wholesaler-sponsored voluntary chains Retailer cooperatives Franchise organizations

Horizontal Marketing Systems

Two or more unrelated companies put together resources or programs to exploit an emerging marketing opportunity.

e-Commerce Marketing Practices

Pure-Click Companies
Search engines Internet service providers (ISPs) Commerce sites Transaction sites Content sites Enabler sites

Brick-and-Click Companies Strategies for gaining acceptance from intermediaries when selling through intermediaries and online:
Offer different brands or products on the Internet. Offer offline partners higher commissions to cushion the negative impact on sales. Take orders on the Web site but have retailers deliver and collect payment.

Managing Retailing, Wholesaling, and Logistics

Retailing
Retailing includes all the activities involved in selling goods or services directly to final consumers for personal, non business use

Major Retailer Types

Specialty storenarrow product line Department store several product lines Supermarketlarge, lowcost, low-margin, highvolume, self-service store designed to meet total needs for food and household products Convenience storesmall store in residential area, often open 24/7, limited line of high-turnover convenience products plus take out Discount storestandard or specialty merchandise; lowmargin, high-volume stores Off-price retailerleftover goods, overruns, irregular merchandise sold at less than retail Superstorehuge selling space, routinely purchase food and household items, plus services (laundry, shoe repair, dry cleaning, check cashing; category killer) Catalog showroom broad selection of high-markup, fastmoving, brand-name goods sold by catalog at discount

Levels of Retail Service

Self servicemany customers will to locatecompare-select process to save money Self selectioncustomers find their own goods, although they can ask for assistance Limited serviceretailers carry more shopping goods and services such as credit and merchandise-return privileges Full servicesalespeople are ready to assist in every phase of the locate-compare-select process

Non store Retailing

Direct selling multilevel selling and network marketing selling door-to-door, or at home sales parties Direct marketing direct mail, catalog marketing, telemarketing, television direct-response marketing, electronic shopping Automatic vending variety of merchandise, impulse goods, hosiery, cosmetics, hot food, etc. Buying service store-less retailer servicing a specific clienteleusually employees of a large organizationwho are entitled to buy from a list of retailers that have agreed to give discounts in return for membership

Major Types of Corporate Retail Organizations

Corporate chain store two or more outlets owned and controlled, employing central buying and merchandising, and selling similar lines of merchandise (GAP) Voluntary chain wholesaler-sponsored group of independent retailers engaged in bulk buying and common merchandising (Independent Grocers Alliance) Retailer cooperative independent retailers using a central buying organization and joint promotion efforts (ACE Hardware) Consumer cooperative retail firm owned by its customers. Members contribute money to open their own store, vote on its policies, elect a group to manage it, and receive dividends Franchise organization contractual association between a franchisor and franchisees (McDonalds) Merchandising conglomerate corporation that combines several diversified retailing lines and forms under central ownership, with some integration of distribution and management (Allied Domeq PLC with Dunkin Donuts and Baskin-Robbins, plus a number of British retailers and a wine and spirits group

The 9 Keys Retail Developments

New retail forms and combinations Growth of intertype competition Competition between store-based and nonstore-based retailing Growth of giant retailers The traditional trade is alive and we Growing investment in technology Global profile of major retailers Upgrading of Asian retailers Growth of factory outlets

Private Labels

A private label (also called reseller, store, house, or distributor brands) is one retailers and wholesalers develop

Role of Private Labels

Manufacturers with excess capacity who will produce the private label at a low cost. Other costs, such as R&D, advertising, sales promotion, and physical distribution are also much lower. This means that the private brander can charge a lower price and yet make a higher profit margin. Retailers develop exclusive store brands to differentiate themselves from competitors.

Wholesaling
Wholesaling includes all the activities involved in selling goods and services to those who buy for resale or business use. Wholesaling excludes farmers, manufacturers, and retailers.

Major Wholesaler Types

Merchant wholesalers Full-service wholesalers Limited-service wholesalers Brokers and agents Manufacturers and retailers branches and offices Specialized wholesalers

Wholesaling Functions
Selling and promotingsales force help manufacturers reach many small business customers at a relatively low cost Buying and assortment buildingselect items and build the assortment their customers need Bulk breakingbuy large carload lots and breaking the bulk into smaller units Warehousinghold inventories, and reduce inventory costs and risks to suppliers and customers
Transportationprovide quicker delivery to buyers because they are closer to the buyers Financinggrant credit, and finance suppliers by ordering early and paying bills on time Risk bearingabsorb some risk by taking title and bearing cost of theft, damage, spoilage, and obsolescence Market informationsupply competitor activities, new products, price developments, etc Management services and counselingtraining sales clerks, helping with store layouts and displays, etc.

Market Logistics
Market logistics involves planning the infrastructure to meet demand, then implementing and controlling the physical flows of materials and final goods from points of origin to points of use, to meet customer requirements at a profit

Four Steps in Market Logistics

Deciding on the companys value proposition to its customers Deciding on the best channel design and network strategy Developing operational excellence Implementing the solution

Integrated Logistics Systems

An integrated logistics system (ILS) includes materials management, material flow systems, and physical distribution, aided by information technology

Market Logistics Encompass Several Activities

Sales forecasting The company schedules distribution, production, and inventory levels Production plans Materials to order Finished goods inventory

Thank You