MM II Dec.2011 Sem.

2

INTERNAL OPERATIONS

suppliers
PRODUCTS & SERVICES

EXTERNAL SERVICES

orders production shipments revenues finance expenses Marketing manager

fees programs

Ad. Agencies, Sales promo firms

reports Market research advertising promotions

ideas
R&D products Products & services Orders payments

dealer

customer

information

MARKETING MANAGEMENT PROCESS

Adopt a philosophy
Customer analysis Estimate mkt. potential Develop a strategy Segmentation Positioning Competitor analysis

Consider societal concerns

Consider Global factors

Design marketing mix

Forecast sales

Plan & implement Mktg.programs

Obtain feedback

rural *socio-cultural: religion. language. benefits sought. urban. South. income *geographic: North. gender. interests. tradition *psychographic: Life style-(activities. .Developing new market offering • Conventional Bases for segmentation : *demographics :age. purchase occasion. opinions) .Buying behavior – usage status.

New & emerging segments • Multilevel segmentation.Mutual funds . focused and different” • Food :Amul. individual • Value orientation segmentation “segmentation now has become sharp. Saffola • Toothpaste • Tyres • Banks . niche. Maggi.local.

airlines offer different class of travel) • Segments may be characterized by preferences (homogeneous.Emerging segments • Mass marketing being replaced by Micro marketing • Flexible market offering is a relatively new approach which has two parts: a naked solution and discretionary options. (automobile variants. diffused. clustered preferences) .

segmentation • Ultimate level of segmentation leads to “customized marketing” “one to one marketing”( Asian Paints .Arvind mills “ready to stitch branded jeans”) .

Key Steps in New Product Development .

Key Steps in New Product Development Idea Generation Product Screening Concept Testing Business & Financial Analysis Product Development Test Marketing Commercialization .

It involves delineating sources of new ideas and methods for generating them. .Idea Generation Idea generation is a continuous. systematic search for new product opportunities.

Methods for Generating Ideas Dimensional Analysis lists all of the physical characteristics of a product type. Having obtained such a list. "How could the product be changed?" or "'What would happen if one or more of the characteristics were removed?" . creativity can be triggered by asking questions such as: "Why is the product this way?“.

Problem Analysis is a need-assessment technique designed to develop an inventory of consumer problems in a particular product or service category and to serve as a basis for new product or service ideas. .

Benefit Structure Analysis determines what specific benefits and characteristics are desired by consumers within a particular product or service category and identifies perceived deficiencies in what is currently provided. .

.Scenario Analysis identifies opportunities by capitalizing on projected future environments and associated consumer needs.

In product screening. or otherwise unattractive ideas are weeded out from further actions. it must screen them. poor. . unsuitable.Product Screening After the firm identifies potential products.

many companies use a new-product screening checklist for preliminary evaluation. . firms list the new-product attributes considered most important and compare each idea with those attributes.• Today. • In it. • The checklist is standardized and allows ideas to be compared.

.Concept Testing Concept testing presents the consumer with a proposed product and measures attitudes and intentions at this early stage of development.

Concept testing is a quick and inexpensive way of measuring consumer enthusiasm. or oral description of a product. This enables a firm to determine initial attitudes prior to expensive. It asks potential consumers to react to a picture. written statement. . time-consuming prototype development.

.Business & Financial Analysis Business and financial analysis for the remaining product concepts is much more detailed than product screening.

• Factors considered in business analysis stage : • • • • • Demand projections Cost projections Competition Required investment Profitability .

Product Development Product development converts a product idea into a physical form and identifies a basic marketing strategy. .

packaging. .It involves product construction. and usage testing. product positioning. branding.

Test Marketing Test marketing involves placing a product for sale in one or more selected areas and observing its actual performance under the proposed marketing plan. .

The purpose is to evaluate the product and pretest marketing efforts in a real setting prior to a fullscale introduction. .

. The firm can also learn about competitive reactions and the response of channel members. test marketing allows actual consumer behavior to be observed.Rather than inquire about intentions.

After testing is completed, the firm is ready to introduce the product to its full target market. This is commercialization and corresponds to the introductory stage of the product life cycle.

Commercialization involves implementing a total marketing plan and full production.

Key Success Factors in New Product Development

An investigation of new product practices in 700 firms by Booz-Allen & Hamilton identified the existence of common characteristics in companies that were successful at product innovation .

. Operating Philosophy Successful companies are more committed to growth through new products developed internally.1.

. They are more likely to have a strategic plan that includes a certain portion of company growth from new products.They are more likely to have had a formal new product process in place for a longer period of time than unsuccessful companies.

. Organizational Structure Successful companies are more likely to house the new product organization in R&D or engineering and are more likely to allow the marketing and R&D functions to have greater influence on the new product process.2.

3. The Experience Effect Experience in introducing new products enables companies to improve new product performance. .

the more efficient you become at doing it.New product development costs conform to the experience curve: The more you do something. This experience advantage stems from the acquisition of a knowledge of the market and of the steps required to develop a new product. .

4. Management Style Successful companies appear not only to select a management style appropriate to immediate new product development needs but also to revise and tailor that approach to changing new product opportunities .

An empirical research by Robert Cooper found three key factors that distinguish winning projects from the losers .

three key factors for effective three key factors product development: Factor 1: A High-Quality New Product Process Factor 2: A Clear and WellCommunicated New Product Strategy for the Business Factor 3: Adequate Resources for New Products .

after sales service • Intel-product designing • Ikea• Hero motorcycles • Sony.globally standardised components • Toyota.Competitive Advantage • “ a position of advantage/superiority in any of the functions or activities performed by an organisation” • Caterpillar.flexible production systems .

Competitive Advantage • (a) (b) • • • • CA is manifested in the form of either: Cost advantage Differentiation advantage Sources of CA are : Marketing. HR. Corporate CA helps a firm to deliver superior value to the customer. Finance. Manufacturing. . This superior value delivery is possible the firm has to have a superior strength.

Competitive advantage • • • • • • • HUL – distribution Infosys –technically competent manpower ITC – diversified businesses Intel – designing Core parentals – production process Apple –technology Nirma – price .

2. It has application in a wide variety of markets 3. . 1. It is a source of competitive advantage which makes a significant contribution to perceived customer benefits. • Core competency has three characteristics.Competitive advantage • Core competency is a special technical and manufacturing expertise . It is difficult for competitors to imitate.

Core competencies • • • • Hero Honda-production costs control Dupont –chemical technology Honda – ic engine manufacturing 3M – surface coating and adhesive technology • Nike – shoe design and merchandising .

• Southwest airlines. IKEA.Competitive advantage • Competitive advantage ultimately comes from how well an enterprise has fitted its core competencies and distinctive capabilities into a tightly interlocking activities that competitors cannot easily imitate. Dell. .

Competitor analysis • Conventionally a competitor was perceived as someone who threatened a firms position or market share in a market. • Five forces : . • Michael Porter first developed the idea of defining a competitor as someone who impacted a firms profits.

Indian Railways.(Air Deccan. Qualis ) • Industry : All companies making the same products or class of products (Bajaj Auto .Tata.Bajaj Auto) • Generic :All companies that compete for the consumer’s Rupee.(LG . Scorpio . Hero Honda ) • Form : companies that try to satisfy the same customer need thru their products.Competitor analysis • Brand : companies offering similar products and services to the same customers at similar prices (Safari. Cox and Kings ) .

Competitor analysis • To prepare an effective marketing strategy. • A company‟s closest competitor are those seeking to satisfy the same customers and needs and making similar offers . a company must study competitors – present and potential.

Competitor identification • Starts with identifying current and potential competitors. since the customer makes the choice among the competitors. (colgate – pepsodent – babool – anchor.( Nirma – wheel – rin) .meswak) (surf – tide – ariel) . • Two approaches of identifying current competitors: First way is the customer‟s perspective.

• Have similar characteristics ( e. same price/quality position. aggressiveness) • Have similar competencies ( national or global presence.g size. similar communication strategies. • Strategic groups are those that follow similar strategies such as same distribution channels. R&D .Competitor analysis • 2nd approach attempts to place competitors in strategic groups on the basis of their competitive strategies.

feasible and more useable .Competitor analysis • The Strategic grouping of a large number of competitors helps in making the analysis compact.

strategies. strengths and weaknesses and response patterns. • Questions about each competitor that needs to be answered: On OBJECTIVES: Is the competitor pursuing market share growth? Current profitability? Technological leadership? .Competitor analysis • What does a company need to know about its competitors? • Their objectives.

Competitor analysis • ON STRATEGIES: how is the competitor trying to win: lower prices? higher quality? Better service? Lower costs? • ON STRENGTHS and WEAKNESSES: which are the strengths relative to us? Which are the weaknesses that we can exploit? • On RESPONSE PATTERNS: how will the competitor response if we raise our prices? Lower our prices? Increase our sales force size? .

Brands and brand building
• Branding is an important aspect of business strategy • Branding is not merely advertising nor is it about managing the product image • Branding is central to creating customer value, not just images. • Anew product launched by a new company has a product name, a logo or even a trademark, and maybe even unique features yet it is not a brand

Brands and branding
• Names and logos and designs are the material markers but because the product has no history these markers are “empty”. They are devoid of meaning. • Look at famous brands, they have markers too: a name (McDonalds, IBM), a logo ( the Nike “swoosh”), a distinctive product feature (Harley‟s engine sound). These markers have been filled with customer experiences, conversations with friends and colleagues and over years ideas about the product accumulate. • A brand culture is formed

BRAND BUILDING
• Role of Brands: • identify the source or maker of a product. • Simplifies decision making and product handling or tracing. • Offers legal protection for unique features or aspects of the product. • Signals a certain level of quality • Is a means of competitive advantage

• Branding creates mental structures that help consumers organize their knowledge about products and services • For successful branding consumers must be convinced there are meaningful differences among brands .Scope of branding • Branding is all about creating differences between products.

Tata Nano. Splendour) services (ICICI bank. Jet airways) retail stores (Bigbazar. Shoppers‟stop) persons (AamirKhan. family planning.Westside.Scope of branding • • • • Branding can apply to physical goods (Lux soap. CRY) ideas (polio eradication.Mahableshwar) an organization (UNICEF.Pantaloon. RTI) commodities (Ashirwad ) .Sachin) places (Goa.

The 12 Rules for creating a successful brand experience .

The first rule • Recognize that any interaction with the consumer is an interaction with the brand – However direct or indirect the interaction .

.The second rule • Recognize that any communication of any kind to the customer is marketing and brand communication – E.g. the Mont blanc rejection mail – The call from the lady at the call centre asking you about the unpaid credit card bill .

The third rule • “Respect the context. but deliver the core”…Geoffrey Moore Core Context Burgers Actors Ideas Gift Bun Stage PowerPoint Wrapping • Core & context interact to create the brand experience • Core is actually context in another location… .

Nikon & National Geographic – Think long term.The fourth rule • Seek out & build close. think shared customer base – Look for partners who mirror your philosophy: show evidence of long-termism • Pay attention to the match between your brand values and personality and those of your partner/s . durable external partnerships to feed & grow the brand experience – Coca-Cola & FIFA.

The fifth rule • Identify all possible points of interaction. . • And plan for all such interactions. and all possible channels of customer interaction.

The seventh rule • Codify and document all the customer interaction. processes and solutions that you desire to be followed • Also codify and document those that you don‟t wish to deliver .

empower and refresh . training and retraining is imperative – Create usable and easily digestible training modules – Train all relevant staff in detailed processes and experience delivery interactions • Also.The eighth rule • All members in the value delivery chain are responsible for the brand experience – all are ambassadors • Hence.

The ninth rule • Co-opt the consumer in creating opportunities for brand experience: “Customer intimacy is every marketer’s dream” .

.The tenth rule • Document the brand values and expressions thereof.

The eleventh rule • Record brand experience history & learn from it to evolve brand personality & values – All great brands have a history department: Sunlight. Coke. IBM. Marlboro – An opportunity to document customer response and learn from it .

The twelfth rule • Communicate brand successes to all constituents – Reinforce their alignment with brand strategy. their commitment to delivering the brand experience – Don‟t gloss over but have an explanation for any failures .

Experiencing the brand • Brand is about relationships • Hence. saliency is key – and so are all possible interactions with the brand – in order to retain the brand in the evoked set . indeed without even a sale • A “Just do it” exhortation to your child is part of the Nike experience! • In the age of too many choices. one can experience the brand outside the product context.

Experiencing the brand • In many products. the brand experience has little to do with the product – Retail financial products – Consultancy – Banking • In many products. the brand experience can affect brand perception more strongly than product performance – – – – Retail Durables Office automation computers .

The Brand Experience Wheel Product& presentations Visual merchandising Product performance Contests & promos Help desks Signage The Brand Member services Loyalty Program Events & contacts Retail points Sponsorships Partnerships Advertising After marketing .

Intersecting your customer • Consumer pathways Wake up Gym Breakfast Switch on PC Check email Tea Break Client lunch Agency meeting Drive home Drive to work Drive to meeting Chat with son And so to bed Watch TV Go shopping .

Signage Go shopping TV news .For a bank TV news ATM Screen saver Cheque credit via SMS Debit/credit card Direct mailer Wake up Gym Breakfast Switch on PC Check email Drive to work Drive to meeting Client lunch Agency meeting Drive home Tea Break Chat with son Watch TV And so to bed FM. Signage eNewsletter FM.

Signage eNewsletter FM. Signage Go shopping TV ad . Signage POS on table Direct mailer re event Wake up Gym Breakfast Switch on PC Check email Drive to work Drive to meeting Client lunch Agency meeting Drive home Tea Break Chat with son Watch TV And so to bed Dispenser FM.For a soft drink TV ad Dispenser Bottle on table FM.

Services marketing • Internal customer focus is as important as external customer orientation • Moments of truth • Virtually all services require supporting goods. (car repair service) (airline service) (purchase of shirt) • Helpful to think of every product as a mix of goods and services .

(in a car rental business the customer buys transportation services which is the main purpose of the transaction) 2. 1. Services that support or facilitate the sale of a good or another service( accident insurance. use of a cell phone.Services marketing • From a strategic marketing perspective it is useful to separate services into two categories. Services that are the main purpose or object of transaction.. for the customer seeking car rental ) .

intangibility: impossible to sample. place. see. feel. ) . • Strategies that could be used to reduce the effect of intangibility are: • ( visualisation: visuals. object. pictures) • (association: connecting the service with a person.Services marketing • Characteristics of services 1. or smell a service before it is bought. taste. hear.

hence direct selling is the only channel of distribution. many services are created.Services marketing • (physical representation: use of colours-credit cards. dispensed and consumed simultaneously. Inseparability: creator and seller cannot be separated.( dentist. . fast food ). hands protecting a flame-LIC) • (documentation: past performance and future capability) 2.This limits distribution.

Hetrogeneity.Services marketing 3. Consistency varies from firm to firm. Almost makes it impossible for a service operation to be 100% perfect quality on an ongoing basis.the variation in consistency from one service transaction to another. individual to individual delivering the service and even varies when interacting with the same service provider on a daily basis .

However. speed or consistency are issues of concern.possible with intensive training but not always guaranteed. increase speed and yet some consumers may perceive it as unfriendly . * Standardization. it can reduce prices.Services marketing • Possible solutions to heterogeneity : * customization-however all customers do not prefer customized service if issues such as cost.

Perishability – services cannot be inventoried. . • Without the benefit of inventory matching demand supply is the biggest challenge for a services firm. • Solution lies in managing demand and or managing supply. Unused capacity cannot be reserved.Services marketing 4.

Services marketing • Strategies for managing demand – *Creative pricing *reservation system *complementary services *developing non peak demand .

.Services marketing • Strategies for managing supplies*use of part time employees *capacity sharing *utilization of Third Parties *enhance customer participation.

Tasks in services marketing Understanding the nature of service Understanding the customer and his expectations Of the service Giving a shape to the service (developing the service product) Organizing delivery systems/channels .

Global market offering • Scope: • Necessity of global marketing • Pros and cons of marketing on a global basis. • How to decide on going global • Which markets to enter • Mode of entry .

Global market offering • Companies cannot simply sty domestic and expect to maintain their markets. European Union • Economic changes. This because of: • Political changes.Berlin wall.WTO replaced GATT. North American Free Trade Area (NAFTA) was declared by the US in 1993 . former Soviet union.

• As a result of these changes business enterprises need to have an appropriate orientation for the world market. the following orientation framework is important to understand: .satellite communication. Information technology.Global market offering • Technological changes. electronic mail and cellular phones.

Global market offering Ethnocentric Orientation. There is no significant product adaptation for foreign markets. An ethnocentric firm looks for support from the home country government. This orientation leads to exporting the product. .the firm looks for foreign markets to sell its current domestic products. or at best its surpluses.

Exporting is a more serious business in a Polycentric firm than an Ethnocentric firm. manufacturing however is still done in the home country.Such a firms reference point is still the domestic market. . A polycentric firm may expand its capacity to serve foreign markets.Global market offering • Polycentric Orientation. but looks to export to several markets and not just a single market.

understands the customers and competition in the region and evolves strategies. ( Asia specific. North America or Europe) • As a result of this orientation the firm reaches these markets. Often such an orientation involves homogenization of the product .Global market offering • Regiocentric Orientation.when a firm is focused on a specific region. • Common strategies for entry are Joint ventures or subsidiary operations.

manufacturing in low cost centres. brand franchising. Their market entry strategies are many and varied: exports. etc. joint ventures. overseas subsidiaries.Global market offering • Geocentric Orientation. strategic alliances. These are global firms. mergers.firms who consider the world as their home market. They pursue global market leadership. Such firms evolve strategies to globally maximise their resources. . acquisitions.

Methods of entering global markets • • • • • Exporting Licensing Contract manufacturing Joint venture Direct investment .

Define international marketing objectives and policies 2. Evaluate countries on the basis of: (i) market attractiveness (ii) Risks (iii) competitive advantage . Enter a few countries or many.Global market offering • Approaches o going global: 1. 3.

Reasons for going global: Higher profits than domestic markets Achieve economies of scale Reduce dependence on one market. Attack global competitors in their domestic market 5. 2. 4. Customers are going abroad . 3.Global market offering • 1.

2.Global market offering • 1. Change of laws. 5. 3. Risks of going abroad: Inability to understand foreign preferences Failure to understand business culture Underestimate foreign regulations Lack of managers with international experience. devaluation of currency 6. Political revolution . 4.

Global market offering • Methods of entering global markets: 1.gradually entering countries in sequence. Developed/ mature markets or developing/ less developed markets. Waterfall approach. . Sprinkler approach – simultaneous enter many countries 3. 2.

• To the seller price is revenue.What is price ? • To the customer it represents a monetary sacrifice. the primary source of profits .

fares. rent. premium. toll.Pricing • Price also termed: fees. duty. minimum balance. interest. • Pricing is almost always a top management decision • Often in large corporations Product managers work on pricing and seek approval of top management for implementation .

Price • Price reflects the total company philosophy: Tata Nano Bose Acoustics Nirma Parle gluco Dell Tata Docomo .

.Price Price is the only marketing variable to appear on the revenue side of profit equation: PROFIT = REVENUE – COSTS REVENUE =(PRICE x QUANTITY) (-) PRODUCT COSTS (-) PROMOTION EXPENSES (-) DISTRIBUTION EXPENSES (-) OTHER EXPENSES.

CHOOSE A STRATEGY TO HELP DETERMINE A BASE PRICE 4. ESTABLISH PRICING GOALS 2.COSTS & PROFITS 3. FINE TUNE THE BASE WITH PRICING TACTICS . ESTIMATE DEMAND.SETTING THE RIGHT PRICE • 1.

ESTABLISHING PRICING GOALS • PROFIT MAXIMISATION • SALES MAXIMISATION • STATUS QUO / COSOLIDTION .Setting the right price 1.

Setting the right price 2.COSTS &PROFITS • ESTIMATE REVENUE AT SEVERAL PRICE POINTS.ESTIMATE DEMAND. • DETERMINE COSTS FOR EACH PRICE • ESTIMATE PROFIT AND MARKET SHARE AT EACH PRICE .

3.CHOSE A STRATEGY-to determine a base price • • • • • • HIGH PRICE STRATEGY(SKIMMING) LOW PRICESTRATEGY (PENETRATION) GOING RATE PRICING (STATUS QUO) DIFFERENTIAL PRICING STRATEGY GEOGRAPHIC PRICING STRATEGY PRODUCT LINE STRATEGY .

take advantage of unique demand situations and meet promotional and positioning goals. meet any regulatory or statutory requirements. TACTICS TO FINE TUNE THE BASE PRICE. . • Fine tuning allows the firm to adjust for competition in certain markets. • Fine tuning moderates the base price for a short term.SETTING THE PRICE 4.

Price skimming • Sometimes called “market-plus” approach to pricing . • The price determined is a high price • A full cost pricing approach is used as against an incremental cost approach .”Skimming the cream off the top” • Skimming enables an organisation to recover its product development costs quickly.

• Product is protected through one or more entry barriers. • Demand is fairly inelastic.Price skimming • Suitable under following conditions: • The product has unique and distinctive features desired by the consumers. Lower prices are unlikely to produce greater total revenue. (patent) .

Skimming strategy • Suitable when…. • Product is perceived to enhance buyer‟s status • Product is perceived as a technological breakthrough. . • Competition is non existent or even when threat of potential competition is high.

• When price is a trivial expenditure penetration pricing attracts few buyers. Hyundai Elantra. (chewing gum) . but they are low relative to perceived value. ( Indigo Manza. Skoda Laura. Toyota Lexus) • Exclusive or prestige products often do not have buyers at low prices.Penetration pricing • Penetration pricing is not necessarily cheap.

banks. medical services.Differential pricing strategy • An organisation differentiates its price across different segments. consulting. (discount on cars to certain professional groups) . • Used by service providers such as airline.

. penetration strategy in another region and.Geographic pricing strategy • A strategy that combines status quo in one region. • The basis for this strategy is that markets are separated by transportation costs. lower than competition in another with the objective of exploiting economies of scale.

Product line pricing strategy • Used by multi product or multi service firms with the objective of maximizing profits across its product line .

Tactics for changing the base price • Single –price tactic: offers all goods and services at the same price. • Price bundling : Two or more products in a single package for a special price. Removes price comparisons from the buyer‟s decision making process. (PC with maintenance contract) (hotel packages) .

Pricing tactics
• Two part pricing: involves establishing two separate charges to consume a single good or service. ( club membership) (mobile hand set + service) (video library) Usually consists of a fixed charge and a variable usage charge.

Pricing tactics
• Predatory pricing: practice of charging a very low price for a product with the intent of driving competitors out of business. Once the competitor is out price is raised. • Freight absorption pricing • FOB Origin pricing • Uniform delivered pricing • Zone pricing

Pricing tactics
• Captive pricing :aimed at building customer loyalty- Gillette shaving system, West side +Axis bank-Maruti genuine spares. • Loss leader pricing: aimed to enhance foot fall at a retail outlet

Marketing channel concepts • Reasons for growing importance of channels: • Information technology & E commerce • Sustainable Competitive Advantage • Power of Retailers • Distribution costs .

augment and deliver its offerings” 118 .Value Network • “a system of partnerships and alliances that a firm creates to source.

• “set of inter dependant organizations involved in the process of making a product or service available for consumption or use. Ansary.” Stern. et al 119 .Definitions • “ A set of people and firms involved in the transfer of title to a product as it moves from producer to ultimate consumer or business user.” Stanton.

Distribution in the new scenario • “we are now re inventing our distribution system in order to strengthen our competitive advantage” M S Banga – H U L • DELL • BATA • WESTERN UNION • CATERPILLAR 120 .

Distribution as a strategic mix Marketing mix Product strategy Pricing strategy Promotion strategy Distribution strategy Channel strategy Logistics .

1.Prominent channel systems • Organizations use a variety of channel partners depending on the nature of the business and the customer service they desire to achieve. Horizontal marketing systems 3. Multi channel marketing systems 122 . Vertical marketing systems 2. • These partners can be grouped into three channel systems.

123 . • Corporate VMS :combines stages of production and distribution under single ownership. wholesaler.The principal channel member has substantial control over the other members. retailer acting as a unified system.Channel systems • Vertical Marketing Systems : comprises the manufacturer.

124 .Corporate VMS • Reliance Fresh retails Reliance milk. (Kodak. Bata shoes are retailed thru Bata stores. P&G. • Administered VMS: Manufacturers of dominant brands are able to demand and influence high levels of co operation from channels. Gillette.

( SBI and Indian Post.Horizontal marketing systems • Two or more unrelated companies put together resources to exploit an emerging market opportunity.) 125 . Maruti and Country wide finance.

) • Whole seller sponsored • Retailer cooperatives • Franchise organizations 126 .(Value adding Partnerships.Contractual VMS • Independent firms at different levels of manufacturing and distribution integrate on a contractual basis.

Contractual VMS • Independent firms at different levels of manufacturing and distribution integrate on a contractual basis.(Value adding Partnerships.) • Whole seller sponsored • Retailer cooperatives • Franchise organizations 127 .

Channel management • Marketing focuses on the channel or Value Network which operates on the “customer side” • Intermediaries that constitute a marketing channel are also called “trade channel” or Distribution channel” 128 .

129 .sales persons. engineering. • Represents an important corporate commitment to the numerous independent distributors. Etc. research. • Represents commitment to Policies and Practices.Distribution system • Is a key external resource • Ranks in importance with internal resources such as manufacturing.

Channel flows Product flow Manufacturer Negotiation Manufacturer ownership Manufacturer Information Manufacturer Promotion Manufacturer Transportation Co.agency Wholesaler wholesaler wholesaler wholesaler wholesaler Retailers Retailer Retailer Retailer Retailer Consumer Consumer Consumer Consumer Consumer . Transportation Advt.

• Discrepancies vary at different situations. • The general discrepancies that exist are: .Distribution channel activities • Distribution channel activities arise due to discrepancies between typical manufacturing activity and consumption activity.

Distribution activities • Spatial discrepancy: Exists because of the physical distance between point of manufacture and point of consumption. limited manufacturing locations and widespread consumption locations. .

Distribution activities • Temporal discrepancies: The point of time in manufacturing is distinct from the point of time in consumption. To bridge or reduce the temporal discrepancy products have to be stocked at appropriate places and in adequate quantities .

Distribution activities • Breaking bulk: appropriate selling units. • Provide an assortment: The OSS concept .

Tourism and travel. New technology products .Distribution activities • Bridging the information discrepancy. Savings and Investment.

Channel levels TWO LEVEL Manufactuer THREE LEVEL Manufacturer FOUR LEVEL Manufacturer FIVE LEVEL Manufacturer AGENT WHOLESALER WHOLESALER RETAILER RETAILER RETAILER CONSUMER CONSUMER CONSUMER CONSUMER .

commercial. institutional. . As well as to other wholesalers.Wholesaling • They are engaged in selling goods for resale or business use to retail. industrial. professional or agricultural firms.

providing credit…. enabling wider range. buying. and communication • Helps the Retailer by breaking bulk. packaging.Whole seller /Sole Distributor • Helps the manufacturer with his expertise of the market in planning. Financing. . forecasting. suggesting strategies of pricing. storing.

Wholesaler tasks • • • • • • Market coverage Making sales contacts Holding inventory Order processing Gathering market information Offering customer support .

Wholesaling systems in India • Freelance/ independent established whole sellers who work with several non competing companies or brands. Branch offices . wholesalers stockists who are contracted by the company or brand. • Distributors.

Commission merchants: also independent but do not take title to the goods. . ”dalal” • Manufacturers‟ sales and branch offices. exporter. brokers.Wholesalers • Merchant wholesalers: independent firms also referred to as “wholesalers. selling agents. • Agents . Also known as commission agents. Brokers. jobber. distributor. importer. They are active negotiators in buying and selling on behalf of their clients.

Classification of whole sellers • • • • • • General line Specialty General merchants Cash and Carry Drop Shipper Mail Order .

• Number of levels to be included. • Type of intermediaries to employ 143 .Channel Design The decision includes : • Number of channels to employ.

6. 5. Criteria for choosing channel partners: Financial strength Sales strength Product lines Reputation Market coverage Sales performance 144 . 4. 3. 2.Implementing channel design • 1.

Developing channel design • The design should ensure that the product reaches the right segment and also reflects the product‟s positioning. Arrow. Flying Machine Newport Ruf & Tuf 145 . Lee.

Channel for Arrow ARVIND MILLS CENTRAL WAREHOUSE FRANCHISE 146 .

Channel for Ruf & Tuf • ARVIND MILLS CENTRAL WAREHOUSE DISTRIBUTORS SUB DISTRIBUTORS WHOLE SELLERS RETAILERS 147 .

• Buyer needs • Retailers requirements • Distribution needs • Legal requirements 148 .Conceptual Framework • The framework takes a bottom up approach starting from the consumer.

Framework Target group Buyers needs Product features Retailer‟s needs Legal issues Reach and Functions to be performed Distribution needs 149 .

• Channel design: Company C & F agent STOCKIST WHOLESALER RETAILERS CONSUMERS 150 .An FMCG case….

Selection criteria 1. • • • • • • • For the Wholesaler: Reliability Loyalty Ability to service Retailers Willingness to work with Stockist Other product lines Market reach Consistency of functioning 151 .

A consumer durable case… COMPANY SHOWROOM DEALER DEALER CONSUMER RETAILER 152 .

ITC factory (7) Co.0wned Warehose DISTRIBUTORS Wholesalers Retailers 153 .

2. STAGES OF CONFLICT: Latent Perceived Felt manifest 154 . 4. 3.Channel conflict • • 1. A situation of discord or disagreement between channel members from the same channel system.

a function of goal incompatibility. 155 . domain dissension and differing perceptions of reality. to a large extent. • The amount of conflict is.Conflict… • Channel conflict is a situation in which one channel member perceives another channel member(s) to be engaged in behaviour that prevents it from achieving its goals.

• Disputes of major intensity/continuous bitter relations.Levels of conflict • Minor and infrequent disagreements • Occasional intense disagreements and flare ups. 156 .

Managing conflicts • Thru clauses of the contract • Involvement in policy decisions • Recognition and motivation 157 .

• This causes sub optimal channel performance. • Channel power is a method of inducing coordinated behaviour. 158 . • The channel members resources are their bases of power.Channel power • Channel members are not naturally inclined towards coordinated behaviour.

159 . • Allocate special allowances. (over riding commissions) • Assign exclusive territories • Best Distributor awards.Reward power • Granting bigger margins.

Clubbing supplies 160 . Recommended as a last recourse • • • • „Illegal coercion” Withholding incentive payment .Coercive power • It is the “flip side” of Reward power. Pressurising on payment terms.

Expert power
• Expert knowledge of the trade which can be beneficial to other members of the channel. • (imports, global trends, legal and technology issues etc.) (technical sales support)

161

Referent power
• Mercedes dealership vs Hyundai • Trust is a major prerequisite for building referent Power (HP is open, honest, trustworthy group to do business with)

162

Legitimate power
• Emanates from contracts or agreements usually in writing • Acceptance of standardised, time honoured and proven practices that influence policies • Legitimate power stems from the values, processes, systems, internalised by a channel member
163

• Provide a proven successful business format • Entrepreneurship for people that are not particularly entrepreneurial.What is a franchise? • License to use an established brand • Use is very restrictive – many rules to be followed. 164 .

Franchise • Customer expectations of greater CONVENIENCE and CONSISTENCY is the primary driver for growth in Franchise systems 165 .

Franchisee pays for the right to be part of the system 3.Franchise characteristics 1. The franchisor owns a trade or service mark and licenses it to franchisees in return for a royalty payment. 2. The franchisor provides the franchisee with a system for doing the business 166 .

Advantages of Franchising • • • • • • • • Buying a name/reputation Established markets Technical/management assistance Standardized procedures Quality standards Selection of location Facility design Quicker cash flow 167 .

Disadvantages of franchising • • • • • • • • • Loss of independence High initial fees High royalties and advertising allowances Contractual restrictions Inapplicable advertising Termination clauses Not receiving promised help Unsuitable products Lack of competitive advantage 168 .

training the individual franchisees and obtaining an „override‟ on all sales in the territory ( McDonalds + Connaught Plaza restaurants ) 169 .Types of franchise systems • Territorial franchise – the franchise given covers several towns or cities the franchisee is responsible for developing .

( Food Court. 170 .Dosa Plaza) • Distributorship – takes title to various products and distributes them to sub franchisees (Hallmark distributed by Vintage Cards and creations ltd.) • Co ownership – franchisor and franchisee share investments and profits.Franchise Types • Operating franchise – Build Operate and Transfer model.

busines techniques.Franchise types • Leasing – allows use of Trademark. • Manufacturing. • Service – professional service ( Western Union ) 171 .enables manufacture of products with special processes.

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