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Establish channels for different target markets and aim for efficiency, control, and adaptability.
Physical Management
Distribution
&
Channel
Dimensions of Channel Structure One of the key characteristic of channel structure is channel length The free market economy, competitive forces and the profit incentive will tend to bend towards that length of channel which will be efficientdepending upon type of product, number of customers, geographical dispersion of customers, variety required by customers, type and range of services required etc. The second key characteristic of the channel structure concerns the relationship between channel members particularly the relationships that pertain to the power and decision - making in the channel structure.
Three broad types of channel structure can be identified on the basis of different relationships. Free flow / conventional marketing channels.
Free flow / Conventional Marketing channels In this type of a channel essentially each member in the channelproducer wholesales, retailer, etc.operates as an autonomous business unit. Each level operates with its own aims and objectives in mind and no one level of the channel has any degree of substantial control over the remaining levels. The primary force keeping the channel intact is a mutually beneficial trading arrangement which can be ended by either party should the arrangement become less beneficial.
a) Corporate Vertical Marketing System. b) Administered Vertical Marketing System. c) Contractual Vertical Marketing System.
Corporate Vertical Marketing System (CVMS) Here one of the channel members owns preceding and / or subsequent levels in the channels. CVMS combines and successive distribution stages under of
production
single
ownership.
Contractual Vertical Marketing System - is one in which coordination and cooperation in the channel are achieved thro formal contractual arrangements to obtain more economies or sales impact than they could achieve alone.
Consist of independent firms at different levels of productions and distribution integrating their programme on contractual basis.
Pull Strategy involves the manufacturer using advertising and promotion to induce consumers to ask intermediaries for the product thus inducing the intermediaries to order the product.
d) Evaluating them.
Analyzing Service output levels desired by customers. Understanding what, where, why, when and how target customers buy is the first step in designing the marketing channels. Establishing the channel objectives and constraints. Channel objectives vary with product characteristics ; Perishable, Bulky, Non - standardized, High unit value. Channel design must take into account the strengths and weaknesses of different types of intermediaries. Identifying the major channel alternatives. Sales force, agents, distributors, dealers, direct mail, telemarketing, internet etc.
Types of intermediaries Number of intermediaries Exclusive Distribution Selective Distribution Intensive Distribution. Terms and Responsibilities of channel members. The main elements in the trade - relations mix are - price policies, conditions of sale, territorial rights and specific services to be performed by each party.
Control Criteria
Adaptive Criteria
Sales quote attainment, customer delivery time, average inventory levels, cooperation in promotional and training programmes.
Modifying channel Arrangements. System will require periodic modification to meet new conditions in the market place. Modifications will be necessary when consumer buying patterns change, market expands, product matures, new competition arises and a new innovation in distribution channel emerges.
Multichannel Marketing Systems occurs when a single firm uses two or more marketing channels to reach one or more customer segments. Adding more channels, companies gain three important benefits : increased marketing coverage, channel cost and more customized selling. New channels may also introduce conflict and control problems.
Types of conflict and competition. Vertical channel conflict - between different levels. Horizontal channel conflicts - conflict between members at the same channel. Multichannel conflict. Two or more levels compete with each other in selling to the same market. Causes of channel conflict. Goal incompatibility. Unclear roles and rights . Differences in perception Dependence
Diplomacy
Mediation
Arbitration
Lawsuit