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Chapter 15: DESIGNING AND MANAGING INTEGRATED MARKETINGCHANNELS
Successful
value creation
needs successful
value delivery
.Companies are looking at the suppliers’ suppliers upstream and at the distributors’ customers downstream.
MARKETING CHANNELS AND VALUE NETWORKS
•
 
Marketing channels
 
are sets of interdependent organizations involved in the process of making a product or serviceavailable for use or consumption.•
 
Merchants:
intermediaries who buy, take title to, and resell the merchandise.•
 
Agents:
search for customers and may negotiate on the producer’s behalf but do not take title to the goods.•
 
Facilitators
: assist in the distribution process but neither takes title to goods nor negotiates purchases or sales.
 The Importance of Channels
•
 
A
marketing channel system
is the particular set of marketing channels employed by a firm.•
 
Channel members collectively earn margins that account for 30 to 50 percent of the ultimate selling price.Role of channels:
o
 
Converting potential buyers into profitable orders is one of the chief roles of marketing channels.
o
 
Marketing channels must not just serve markets, they must also
make markets
.
o
 
The company’s
pricing
depends on whether it uses mass-merchandisers or high-quality boutiques.
o
 
The firm’s
sales force
and
advertising decisions
depend on how much training and motivation dealers need.
o
 
channel decisions involve relatively
long-term commitments
to other firms as well as a set of policies andprocedures.
o
 
push versus pull
marketing.
Push strategy
: manufacturer induces
intermediaries
to carry, promote, and sell the product to end user.
o
 
Push strategy is appropriate where there is low brand loyalty in a category, brand choice is made in thestores, the product is an impulse item, and product benefits are well understood.
Pull strategy:
manufacturer using induces
consumers
to ask intermediaries for the product.
o
 
Pull strategy is appropriate when there is high brand loyalty and high involvement in the category,when people perceive differences between brands, and when people choose the brand before they goto the store.
Hybrid Channels:
using multiple channels, internet, distributors etc , improving the ability to order a product online,and pick it up at a convenient retail location, return an online ordered product to a nearby store of the retailer, the rightto receive discounts based on total online and off-line purchases.
Understanding Customer Needs
•
 
Nunes and Cespedes argue that in many markets, buyers fall into one of four categories:1.
 
Habitual shoppers:
Purchase from the same places in the same manner over time.2.
 
High value deal seekers
- Know their needs and "channel surf" a great deal before buying atthe lowest possible price.3.
 
Variety-loving shoppers'
-Gather information in many channels, take advantage of high-touchservices, and then buy in their favorite channel, regardless of price.4.
 
High-involvement shoppers
- Gather information in all channels, make their purchase in a low-cost channel, but take advantage of customer support from a high-touch channel.
Value Networks
 
Demand chain planning
: A supply chain view of a firm sees markets as destination points and amounts to alinear view of the flow. Company should first think of the target market, and then design the supply chain backwardfrom that point.
 
Value network—a system of partnerships and alliances that a firm creates to source, augment, and deliver itsofferings, the company lies at its center. A value network includes a firm’s suppliers, its suppliers’ suppliers, itsimmediate customers, and their end customers.
 
Demand chain planning yields several insights:
1.
 
The company can estimate whether more money is made
upstream or downstream.
2.
 
The company is more aware of 
disturbances
anywhere in the supply chain that might cause costs,prices, or supplies to change suddenly.3.
 
Companies can go
online
with their business partners to carry on faster and more accuratecommunications, transactions, and payments to reduce costs, speed up information, and increaseaccuracy.
 
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4.
 
Managing this value network has required companies to make increasing investments in informationtechnology (IT) and software.5.
 
Marketers have traditionally focused on the side of the value network that looks
toward thecustomer.
In the future, they will increasingly participate in, influence their companies’ upstreamactivities, and become network managers.
THE ROLE OF MARKETING CHANNELS
1.
 
Many producers lack the financial resources to carry out direct marketing.2.
 
Help producers increasing investment in their main business.3.
 
In some cases, direct marketing simply is not feasible.4.
 
Making goods widely available and accessible to target markets.5.
 
Intermediaries contacts, experiences, specialization, and scale of operations, usually offer the firm more than it canachieve on its own.
Channel Functions and Flows
A manufacturer selling a physical product and services might require three channels:
o
 
A sales channel,
o
 
A delivery channel and
o
 
A service channel.All channel functions have three things in common:1.
 
They use up scarce resources.2.
 
They can often be performed better though specialization.3.
 
They can be shifted among channel members.
Channel Levels
1.
 
The producer and the final consumer are part of every channel.2.
 
A
zero-level
channel (also called a
direct-marketing
channel) manufacturer directly to final consumer.3.
 
A one-level channel contains one selling intermediary—such as a retailer.4.
 
A two-level channel contains two intermediaries—wholesaler and a retailer.5.
 
A three-level channel contains—wholesalers, jobbers, and retailers.
Direction of flow:
1.
 
Forward
movement of products from source to user.2.
 
Reverse-flow
channels (through several intermediaries) are important in the following cases:a.
 
To reuse products or containersb.
 
To refurbish products for resalec.
 
To recycle productsd.
 
To dispose of products and packaging
Service Sector Channels
•
 
Marketing channels are not limited to the distribution of physical goods.•
 
As the Internet and other technologies advance, service industries are operating through new channels.
CHANNEL-DESIGN DECISIONS
Designing a marketing channel system involves analyzing customer needs, establishing channel objectives,identifying major channel alternatives, and evaluating major channel alternatives.
1.
 
Analyzing Customers’ Desired Service Output Levels
Channels produce five service outputs:1.
 
Lot size: min qty2.
 
Waiting and delivery time3.
 
Spatial convenience: geographic coverage4.
 
Product variety5.
 
Service backupThe marketing-channel designer knows that providing
greater service outputs
means increased channel costsand higher prices for customers.
2. Establishing Objectives and Constraints
1.
 
Channel institutions should minimize total
channel costs
and still provide desired levels of service outputs.
2.
 
Planners can identify several
market segments.3.
 
Channel objectives vary with
product characteristics.
4.
 
Channel design must take into account the
strengths and weaknesses
of different types of intermediaries.
3.
 
Identifying and Evaluating Major Channel Alternatives
 
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•
 
Alternatives are: sales forces, to agents, distributors, dealers, direct mail, telemarketing, and the Internet.•
 
Each channel has unique strengths as well as weaknesses.•
 
Most companies now use a mix of channels.•
 
Each channel hopefully reaches a different segment of buyers and delivers the right products to each at the leastcost.•
 
A channel alternative is described by three elements:
o
 
The types of available business intermediaries
o
 
The number of intermediaries needed.
o
 
The terms and responsibilities of each channel member.
Marketing Insight: How Carmax is transforming the auto business
Details the way Carmax sells used cars in changing the business model for the entire auto business.
Number of Intermediaries
•
 
Exclusive distribution:
 
o
 
Means severely limiting the number of intermediaries.
o
 
Maintain producers control over the service level and outputs offered by the resellers.•
 
Selective distribution
involves the use of more than a few, but less than all, of the intermediaries who are willingto carry a particular product•
 
Intensive distribution
consists of the manufacturer placing goods or services in as many outlets as possibleaiming at increase coverage and sales.
Terms and Responsibilities of Channel Members
The producer must determine the rights and responsibilities of participating channel members.The main elements in the “trade-relations mix” are:1.
 
Price policy2.
 
Conditions of sale3.
 
Distributors’ territorial rights4.
 
Mutual services and responsibilities
4. Evaluating the Major Alternatives
Each channel alternative needs to be evaluated against economic, control, and adaptive criteria.1.
 
Economic Criteria:
Each channel will produce a different level of sales and costs.2.
 
Control and Adaptive Criteria:
Using a sales agency poses a control problem. To develop a channel,members must make some degree of commitment to each other for a specified period of time
lead toa decrease in the producer’s ability to respond and adapt to a changing marketplace.
CHANNEL-MANAGEMENT DECISIONS
After a company has chosen a channel alternative, individual intermediaries must be selected, trained, motivated, andevaluated. Channel arrangements must be modified over time.
A. Selecting Channel Members
•
 
They should evaluate the:1.
 
Number of years in business2.
 
Other lines carried3.
 
Growth and profit records4.
 
Financial strength5.
 
Cooperativeness6.
 
Service reputation•
 
If the intermediaries are sales agents, producers should evaluate the:1.
 
Number and character of other lines carried.2.
 
Size and quality of the sales force.•
 
If the intermediaries are department stores that want exclusive distribution, the producer should evaluate:1.
 
Locations2.
 
Future growth potential3.
 
Type of clientele
B. Training and Motivating Channel Members
•
 
The company should provide training programs and to improve intermediaries’ performance.•
 
The company must constantly communicate its view that the intermediaries are partners.•
 
Producers vary greatly in skill in managing distributors.•
 
Channel power
can be defined as the ability to alter channel member’s behavior.•
 
Manufacturers can draw on the following types of power to elicit cooperation:1.
 
Coercive power2.
 
Reward power3.
 
Legitimate power4.
 
Expert power5.
 
Referent power
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vivekkssingh

hi friend can u provide me difficult Questions on these topics Marketing Environment Consumer Behavior Dealing with competition Retailing and Logistics Integrated Marketing Communication Event Management / Hospitality / Financial Services Marketing Segmentation, Targeting and Positioning. plz mail me these Q asap by tom 10am at vivekkssingh@yahoo.com

reply03 / 29 / 2009
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