Designing & Managing Integrated Marketing Channels
Chapter 14
1 Marketing/ Trade/ Distribution Channel
A set of interdependent organizations that are involved in the process of making a product or service available for use or consumption by the business user or consumer.
2 Intermediaries
Merchants: those who buy, take title to, and resell the merchandise (wholesalers, retailers) Agents: search for customers and may negotiate on producer’s behalf but do not take title to the goods (brokers, DSAs, etc.) Facilitators: assist in the distribution process but neither take title to goods nor negotiate purchase or sales (banks, transporters, advertising agencies)
3 Importance of Channels A Marketing Channel System is the particular set of marketing channels a firm employs and decisions about it are among the most critical ones management faces. One of the chief roles of MCs is to convert the potential buyers in to profitable customers. They just not serve markets they also make markets. MCs also represent a substantial opportunity cost. (Next Slide) Firm’s pricing depends on whether it uses high quality boutiques or mass merchandisers. Firm’s sales force and Ad decisions depend on how much training & motivation dealers need. Channel decisions include relatively long term commitment with other firms as well.
4 Managing Intermediaries- Strategies
Push Strategy: involves manufacturer using its sales force and trade promotion money to induce intermediaries to carry, promote and sell the product to end users. Its appropriate where there is low brand loyalty, the product is an impulse item, brand choice is made in the store and the product benefits are well understood.
Pull Strategy: Involves the manufacturer using advertising & promotion to induce consumers to ask intermediaries for product. It is appropriate when there is high brand loyalty, people perceive differences between brands and they make a brand choice before they go to 5 the store. Role of Marketing Channels
Producers gain in efficiency and effectiveness by using intermediaries. - Through their contacts, experience, specialisation and scale of operation they usually offer the firm more than it can achieve on its own. - Producers may lack financial resources & expertise to sell their products on their own (Wrigley) • Bridge major time, place and possession gaps • Moves goods from producer to consumers.
6 Role of Marketing Channels
Intermediaries require fewer contacts to move products from producer to consumer (next slide) Transform the assortment of products made by producers into the assortment wanted by the consumers, hence match demand and supply
7 Contact Efficiency
8 Channel Functions
Gather information about potential customers, competitors and others. Develop and disseminate persuasive communication to stimulate purchasing Reach agreement on price & other terms so that title of ownership or possession may be effected Place order with manufacturers Assume risk connected with distribution work Successive storage and movement of physical products They oversee actual transfer of ownership
9 Channel Flows
Channel Members are connected to one another by a variety of flows Physical Flow- forward Payment Flow- backward Information Flow- both ways Promotion Flow- forward Title Flow- forward
10 Channel Levels
The number of intermediary levels indicates the length of the marketing channel Direct/ Zero-level/ Direct Marketing channel (producer selling directly to the consumer) Indirect Channel- Two-level channel – having two intermediaries Three-level channel – three intermediaries
11 Channels for Consumer Products
Direct Retailer Wholesaler Agent/Broker Channel Channel Channel Channel Producer Producer Producer Producer
Agents or Brokers
Wholesalers Wholesalers
Retailers Retailers Retailers
Consumers Consumers Consumers Consumers
12 Channel Intermediaries
A channel intermediary that Retailer sells mainly to customers.
An institution that buys goods Merchant from manufacturers, takes title Wholesaler to goods, stores them, and resells and ships them.
Agents and Wholesaling intermediaries who facilitate the sale of a product by Brokers representing channel member.
13 2 Channel Intermediaries
Retailers Take Title to Goods
Merchant Wholesalers Take Title to Goods
Agents and Do NOT Take Title to Goods Brokers
14 Corporate retailing It consists of retail stores such as a corporate chain store owned by a corporation, employing central buying, merchandising and promotion. It could also be a consumer cooperative, retailer cooperative or franchise organization It achieves economies of scale, greater purchasing power, wider brand recognition, better trained employees
15 Channel Design Decisions
Number of intermediaries
Exclusive Distribution – least no. of intermediaries
Selective Distribution – a few intermediaries
Intensive Distribution – As many outlets
16 Levels of Distribution Intensity Number of Intensity Level Objective Intermediaries
Achieve mass market Intensive selling. Many Convenience goods.
Work with selected intermediaries. Several Selective Shopping and some specialty goods. Work with single intermediary. Specialty One Exclusive goods and industrial equipment.
17 E-commerce
E-Commerce uses a website to transact or facilitate the sale of products and services online. On-line retailers compete in three aspects of a transaction: Customer interaction with the website Delivery Ability to address problems when they occur
18 Pure click companies
Search engines Internet service providers Commerce sites Sells goods (flipkart) and services (makemytrip)to consumers Transaction sites Content sites Enabler sites
19 Brick-and-click companies Biggest Challenge is Backlash from intermediaries Offer different brands or products on the internet Offer offline partners higher commissions to cushion the negative impact on sales Take order on the website but have retailers deliver and collect payment
20 Challenges in e-commerce Low conversion rate – failure to complete a transaction for a selected item Absence of pleasurable shopping experience, social interaction, personal consultation with a company representative Fear of security and privacy
21 M-Commerce
The phrase mobile commerce was originally coined in 1997 by Joseph Creedon at the launch of the Global Mobile Commerce Forum, to mean "the delivery of electronic commerce capabilities directly into the consumer’s hand, anywhere, via wireless technology Mobile commerce services were first delivered in 1997, when the first two mobile-phone enabled Coca-Cola vending machines were installed in the Helsinki area in Finland. The machines accepted payment via SMS text messages. The first mobile phone-based banking service was launched in 1997 by Merita Bank of Finland, also using SMS.
22 Products & Services offered through m-commerce Mobile Money Transfer Mobile ticketing Mobile vouchers, coupons and loyalty cards Content purchase and delivery Location-based services Information services – News, Stock quotes, Sports scores, Financial records, Traffic Reporting Mobile Banking Auctions Mobile browsing Mobile purchase In-application mobile phone payments 23 Mobile marketing and advertising Supply Chain Management
A management system that coordinates and integrates all of the activities performed by supply chain members into a seamless process, from the source to the point of consumption. Starts before physical distribution and means strategically procuring the right inputs (raw materials, components and capital equipment), converting them efficiently into finished products and dispatching them to the final destination Supply chain perspective helps companies to identify superior suppliers and distributors and help them improve productivity and reduce costs.
•A management system that coordinates and integrates all of the activities performed by supply chain members into a seamless process, from the source to the point of consumption. •Starts before physical distribution and means strategically procuring the right inputs (raw materials, components and capital equipment), converting them efficiently into finished products and dispatching them to the final destination •Supply chain perspective helps companies to identify superior suppliers and distributors and help them improve productivity and reduce costs.
25 Market Logistics Systems Market logistics calls for Integrated Logistics Systems (ILS) which include materials management, material flow systems and physical distribution, aided by IT. Information systems play a critical role in managing market logistics, especially via computer's point-of-sale terminals, uniform product bar codes, satellite tracking, electronic data interchange and electronic funds transfer. This shortens order cycle time, reduced clerical labor, reduced errors and provided improved control of operations.
26 Activities in market logistics Sales forecasting which helps scheduling distribution, production and inventory levels Making production plans Ordering of materials Receipt and storage of materials Conversion into finished goods Using finished goods inventory as a link between customers orders and manufacturing activity Tracking finished goods as they flow off the assembly line and pass through packaging, in-pant warehousing, shipping-room processing, outbound transportation, field warehousing and customer delivery and servicing. 27 Market logistics decisions
How should we handle orders (order processing) Where should we locate our stock (warehousing) How much stock should we hold (inventory) How should we ship goods (transportation)
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