Marketing Channels:

Delivering Consumer Value

 Meet The Team

II BM(60)- Phyu Sin Nyein Pyae

II BM(53)-Thadar Hnin Suu

II BM(58)- Hla Yamin Oo

II BM(92)- Soe Min Paing

II BM(11)- Aung Myo Myat

 Contents

➢ Supply Chains and the Value Delivery Network

➢ Channel Behaviour and Organization

➢ Channel Design Decisions

➢ Channel Management Decisions

➢ Marketing Logistics and Supply Chain

Management
 Supply Chain & the Value Delivery Network
What is supply chain and its partners?

● Building relationships between a company

and its supplier to final consumers
Upstream Partners; supply raw
materials, components, parts, infos,
finances & expertises to produce
The Supply Chain consists of product ( supplier)

Downstream Partners: look toward to

customers (wholesalers, retailers)
Value Delivery Network
Value delivery network is made up of the company, suppliers, distributors, and
ultimately, customers who “partner” with each other to improve the performance of the
entire system delivering customer value.

Company

Suppliers Marketing Consumers

Competitors
Nature & Importance of Marketing
What is Marketing Channels?
Channels
A marketing channel is

● Help business reach its intended

target audience. Help the brand build ● (Also called distribution channel) the path
relationships with customers. behalf of or the route a company’s products and
the manufacturer services take from the point of production
● Affect every other marketing decisions to the end-user.
● includes a mix of people, organisations,
● Pricing also depends on whether
company works with national discount and activities that enable the company to
chains, uses high quality…or sell bring its product or service to market..
directly to consumers
● Sales force also depends on how
much persuasion, training, motivation,
and support its channel partners need
How Channel Members Add Value
By using intermediaries, can create greater efficiency in making goods available to target market.
Number of Channel Levels
CHANNEL BEHAVIOR AND
TYPE OF ORGANIZATION
CHANNEL
BEHAVIOR
A marketing channel
interacts with the firms that
they’re the partner with each
other. Every member
depends on others.
CHANNEL
CONFLICT
Disagreements among marketing
channel members on goals, roles,
and rewards- who should do what
and for what rewards.
There are two types of channel
conflict.
● Horizontal conflict
● Vertical conflict
 CHANNEL CONFLICT

Horizontal
Horizontalconflict
conflict Vertical CONFLICT
CHANNEL conflict

Horizontal conflict is the Vertical conflict is that

disagreements among firms disagreements among
at same levels of the different levels of the same
channel. channel.
CONVENTIONAL DISTRIBUTION CHANNEL

Conventional distribution channel consisting of one or

more independent producers, wholesalers & retailers
operate a separate business seeking to maximize its
profits. It has lacking leadership, power, having many
conflict & poor performance.
VERTICAL Vertical marketing system has a
unified relationship with
MARKETING
producers, wholesalers, retailers
SYSTEMS (VMS) each other. One operates other
having contracts with them. It
provides channel leadership.
There’re three main types of VMS
● Corporate VMS
● Contractual VMS
● Administered VMS
CORPORATE VMS
A vertical marketing system that has production & distribution
under single ownership. It offers channel leadership through
common leadership.

CONTRACTUAL VMS
A vertical marketing system that operates independent firms
at different levels of production & distribution systems. They
join together through contractual agreements.
Franchise organization
A vertical marketing system that offers the contractual
relationship with channel member called franchisor, works
together in the production & distribution process.

Administered VMS
A vertical marketing system in which the production &
distribution process can be done through the power & size
of the one parties.
HORIZONTAL MARKETING In this system, two or more
SYSTEMS companies join together to
adopt a new marketing
strategy. They can combine
their financial, production,
resources to accomplish
their target.
 MULTICHANNEL DISTRIBUTION SYSTEMS

A distribution system in which a

single firm sets up two or more
marketing channels to reach one or
more customers segments. These
distribution systems offer some
advantages like –Large market
segment.
But this system is very hard to
control. They often generate
conflict & huge completion.
Changing Channel The cutting out of marketing
channel intermediaries by
Organization
product or service producers or
the displacement of traditional
resellers by radical new types of
Disintermediation
intermediaries.
● The internet can be a
powerful tool for
disintermediation.
Channel Design Decisions
 Channel Design Decisions

● Channel design is a strategy for moving and distributing goods and services
from the producer to the consumer.
● In smaller markets-producer directly sells to retailers
● In large markets- producer chooses distributors to persuade consumers.
● Depends on
(1) analyzing consumer needs
(2) setting channel objectives
(3) identifying major alternatives
(1)Analyzing Consumer Needs

Marketing channels are the part of the overall customer value delivery network.
Designing a marketing channel, the producer needs to find out some questions like-
❏ What the target consumers want from the channel members?
❏ Does the consumer want to buy from nearby locations more distant?
❏ Do they want to buy-in person, by phone, or online?
Firm must balance needs against costs and consumer price preferences.
(2) Setting Channel Objectives

● The company should decide which segments to serve and the best channels to use in
each case.
● Objectives are also influenced by the nature of the company, its products, marketing
intermediaries, competitors & environment. (eg, companies selling perishable
products.)
● Finally environmental factors such as economic conditions and legal constraints may
affect channel objectives and design. (eg, a depressed economy)
 (3) Identifying Major Alternatives
It has too many major alternatives. Here are three major alternatives.
Types of Intermediaries
● At first, a company identifies the different channel members who can work for the producer
to carry out its channel work.
● For example, At first, Dell directly sold to final consumers as well as business buyers.
However, to reach more customers and match competitors, Dell now sells indirectly through
retailers, value-added resellers and independent distributors.
❖ The number of marketing intermediaries:
There’re three strategies available;
1. Intensive distribution- a strategy in which sellers stock their products in as many
outlets as possible. ( e.g., toothpaste, candy, etc.)
2. Exclusive distribution- a strategy in which the producer gives the right to a limited
number of dealers to distribute the company’s products.(e.g., The distribution of luxury
brands)
3. Selective distribution- a marketing strategy focusing on selling certain types of
products via intermediaries. (e.g., clothing from different bands)
❖ Responsibilities of channel members:
❖ Should agree on the terms & conditions with the producer.
❖ They should maintain their responsibilities & agree on price
policies, territory rights & sale conditions.
❖ At first, producer fixed a list price and a fair set of discounts
for the intermediaries.
(4)Evaluating the major alternatives
There’re three core factors that will affect the channel –
(1) Economic- Using economic criteria, a company compares the likely sales, costs
& profitability of different channel alternatives.
(2) Control- All companies must consider the control issues.
(3) Adaptability criteria- Channels often involve long-term commitments, so the
company wants to keep the channel flexible enough so that it can adapt to
environmental changes.
 Designing International Channels
➢ Channel design for international markets can be very challenging, because:
★ Each country has its own unique distribution system, which is sometimes hard to
penetrate.
★ Distribution systems can be very complex with many layers and a large number of
intermediaries.
★ Distribution systems in developing countries may be scattered or inefficient.
★ Customs and government regulation can restrict distribution in global markets.
Channel Management ❏ Marketing Channel Management
❏ Selecting Channel Members
Decisions ❏ Managing and Motivating Channel
Members
❏ Evaluating Channel Members
❏ Public Policy and Distribution
decisions
What is Marketing ● Selecting, Motivating and Managing individuals
channel members and evaluating their performance
Channel over time

Management?

How to select
● The company should determine what
Channel Members? characteristics will distinguish the better
ones.
● It will evaluate each channel members’
years in business,location,growth and profit
record, cooperativeness and reputation.
Managing Channel Members

● The company must sell not only through intermediaries but also to and with them
● Most companies see intermediaries as first line customers and partners.
● They practice Strong Partner Relationship Management (PRM) to have long term
relationships with them
● We now use PRM and SCM software instead of CRM to help
recruit,train,organize,manage,motivate and evaluate.
 ● It's been proven time, and again that increased
motivation leads to improved performance
Why it is important to ● When you prove to your channel how much you
value them, you are rewarded in the form of
motivate channel higher productivity, increased sales and greater
members? end-user satisfaction.

Evaluating Channel
Members
Public policy and distribution decisions

(1)For the most part, companies are legally free to develop (4)Exclusive dealing often includes
whatever channel arrangements suit them. In fact, the laws
affecting channels seek to prevent the exclusionary tactics of
exclusive territorial agreements. The producer
some companies that might keep another company from using may agree not to sell to other dealers in a given
a desired channel. area, or the buyer may agree to sell only in
its own territory.
(2)When the seller allows only certain outlets to carry its
products, this strategy is called
exclusive distribution
(5)Producers of a strong brand sometimes sell
it to dealers only if the dealers will take
(3)When the seller requires that these dealers not handle some or all of the rest of its line. This is called
competitors’ products, its strategy is called exclusive dealing.
full-line forcing
.
Nature and Importance ❏ Marketing logistics involves
of Marketing Logistics planning, implementing, and
controlling the physical flow
of goods, services, and related
information from points of
consumption.

❏ Getting the right customer in

the right place at the right time
profitably.
❏ They started with products at the plant and then tried
to find low-cost solutions to get them to customers.

❏ Today's customer-centered logistics starts with the

marketplace and words backward to the factory or
even to sources of supply.
 Sustainable Supply Chains
Companies green up their supply chains through greater efficiency which means
lower costs and higher profits. Developing a sustainable supply chain is not only
environmentally responsible but also profitable.

Goals of the Logistics System

Some companies state their logistics objective as providing maximum
customer service at the least cost. Maximum customer service implies rapid
delivery, large inventories, flexible assortments, liberal returns policies, and
other services. Minimum distribution costs imply slower delivery, smaller
inventories, and larger shipping lots.
Major Logistics Functions

1. Warehousing
2. Inventory management
3. Transportation
4. Logistics information management

1.Warehousing
❖ Overcoming differences in needed quantities and timing.
❖ Ensuring that products are available when customers are ready to buy them.
❖ Need to decide how many and what types of warehouses it needs and where
they will be located.
❖ The company might use either storage warehouses or distribution
centers. Distribution centers are designed to move goods rather than
just store them.

A. Warehouse B. Distribution Center

2.Inventory Management
❖ Firms must balance the costs of carrying larger inventories against
resulting sales and profits.
❖ Just-in-time logistics systems; producers and retailers carry only small
inventories of parts or merchandise, often enough for only a few days of
operations. New stock arrives exactly when needed rather than being
stored in inventory until being used.
❖ These systems result in substantial savings in inventory-carrying and
inventory-handling costs.
3.Transportation

❖ It affects the pricing of products, delivery performance, and the

condition of goods when they arrive.
❖ In shipping goods to its warehouses, dealers, and customers, they can
use main five transportation moods: truck, rail, water, pipeline,
and air along with an alternative mode for digital products–the
internet.

4.Logistics Information Management

❖ Channel partners often link up to share information and make better

joint logistics decisions.
❖ Customer transactions, billing, shipment and inventory levels, and
even customer data, are closely linked to channel performance.
❖ Need simple, accessible, fast, and accurate processing, and sharing
channel information.
 Integrated Logistics Management
➢ This concept recognizes that providing better customer
service and trimming distribution costs require
teamwork, both inside the company and among all the
marketing channel organizations.

➢ Inside, the company’s various departments must work

closely together to maximize its own logistics
performance.

➢ Outside, the company must integrate its logistics system

with those of its suppliers and customers to maximize
the performance of the entire distribution network.
Cross-Functional Teamwork inside the Company
★ Companies assign responsibility for various logistic activities to different
departments–marketing, sales, finance, operations, and purchasing.
★ Transportation, inventory, warehousing, and information management
activities interact, often in an inverse way.
★ Lower inventory levels reduce inventory-carrying costs. But they may
also reduce customer service and increase costs from stockouts,
backorders, special production runs, and costly fast-freight shipments.
 Building Logistic Partnerships
❖ Companies must do more than improve their own logistics.
❖ Channel members are closely linked in creating customer value
and building customer relationships
❖ One company’s distribution system is another company’s
supply system
❖ Both suppliers and customers benefit from partnerships
❖ Must work together in the cause of bringing value to final
consumers
 Third-Party Logistics (3PL)
❖ Companies detest the bundling, loading, unloading, sorting,
storing, reloading, transporting, customs clearing, and
tracking required to supply their factories and get products to
their customers.

Why should companies use 3PL providers?

1) Can do it more efficiently and at lower cost and can result in a
10 to 25 percent cost savings.
2) Outstanding logistics frees a company to focus more intensely
on its core business.