Mktg Chapter 16

7/28/2019 Mktg Chapter 16

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Designing and ManagingIntegrated

Marketing Channels andValue Network


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Marketing Channels andValue Networks

Marketing channelssets ofinterdependent organizations involved inthe process of making a product or serviceavailable for use or consumption

Value networka system of partnershipsand alliances that a firm creates to source,augment, and deliver its offerings


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Channels andMarketing Decisions

Pull strategy - advertising,promotion, and other

forms of communication topersuade consumers todemand the product fromintermediaries.

- high brand loyalty and

high involvement in thecategory, when peopleperceive differencesbetween brands

Push strategy - themanufacturers sales force,

trade promotion money,and other means to induceintermediaries to carry,promote, and sell theproduct to end users

- use low brand loyalty in acategory, brand choice orimpulse item


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Buyer Expectations forChannel Integration

Ability to order a product online and pick it

up at a convenient retail location Ability to return an online-ordered product

to a nearby store

Right to receive discounts based on totalonline and offline purchases


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Channel Functions andFlows

A marketing channel performs the work ofmoving goods from producers to consumers. Itovercomes the time, place, and possession

gaps that separate goods and services fromthose who need and want them..

Forward flow of activity from the company to

the customer. Backward flow from customers to the

company.

Still others occur in both directions.


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Channel Member Functions

Gatherinformation Develop and disseminate persuasive

communications

Reach agreements on price and terms Acquire funds to finance inventories

Assume risks

Provide for storage

Provide for buyers payment of their bills

Oversee actual transfer of ownership


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Channel Levels in ConsumerMarkets

A zero-level channel (also called a direct-marketing channel) consists of a

manufacturer selling directly to the finalconsumer.

A one-level channel contains one sellingintermediary such as a retailer.

A two-level channel contains twointermediariesa wholesaler and a retailer.


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Reverse Flow Channels

Channels normally describe a forwardmovement of products from source to user.

Reverse-flow channels are important in thefollowing cases:

i. To reuse products or containers

ii. To refurbish products for resaleiii. To recycle products

iv. To dispose of products and packaging


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Designing aMarketing Channel System

Analyze customer needs

Evaluate major channel alternatives

Identify major channel alternatives

Establish channel objectives


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Channel Service Outputs

Lot sizenumber of units the channel permits atypical customer to purchase on one occasion

Waiting/delivery timeaverage time customers ofthat channel wait for receipt of the goods

Spatial conveniencedegree to which themarketing channel makes it easy for customers topurchase the product

Product varietyassortment breadth provided bythe marketing channel

Service backupadd-on services (credit, delivery,

installation, repairs) provided by the channel


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Identifying Major ChannelAlternatives

Types ofintermediaries

Merchants Facilitators

Number ofintermediaries Exclusive Selective Intensive

Terms andresponsibilities of

channel members Price policy Conditions of sale Distributors

territorial rights Mutual services

andresponsibilities


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Channel-ManagementDecisions

Selecting channel members

Training and motivating channelmembers

Evaluating channel members

Modifying channel arrangements


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Evaluating the MajorAlternatives

Determine whetherown sales force or a

sales agency willproduce more sales.Estimate the costs of

selling different

volumes through eachchannel.


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Channel Integration andSystems

Horizontalmarketing system

Vertical marketingsystem

Multichannelmarketing systems


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Vertical Marketing Systems(VMS)

Administered VMS

Corporate VMS

Contractual VMS


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Contractual VMSs

Retailer cooperatives

Wholesaler-sponsored voluntarychains

Franchise organizations


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Horizontal MarketingSystems

Two or more unrelated companies

put together resources orprograms to exploit an emergingmarketing opportunity.


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e-Commerce MarketingPractices

Pure-Click Companies Search engines Internet service providers (ISPs) Commerce sites Transaction sites

Content sites Enabler sites


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Brick-and-Click Companies

Strategies for gaining acceptance fromintermediaries when selling through

intermediaries and online:

Offer different brands or products on the

Internet.

Offer offline partners higher commissions to

cushion the negative impact on sales.

Take orders on the Web site but have

retailers deliver and collect payment.


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Managing Retailing,Wholesaling, and Logistics


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Retailing

Retailing includes all the activities involved

in selling goods or services directly to finalconsumers for personal, non business use


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Major Retailer Types Specialty storenarrow

product line Department store several

product lines

Supermarketlarge, low-cost, low-margin, high-

volume, self-service storedesigned to meet totalneeds for food andhousehold products

Convenience storesmall

store in residential area,often open 24/7, limited lineof high-turnoverconvenience products plustake out

Discount storestandard orspecialty merchandise; low-margin, high-volume stores

Off-price retailerleftovergoods, overruns, irregularmerchandise sold at less thanretail

Superstorehuge sellingspace, routinely purchase foodand household items, plusservices (laundry, shoe repair,dry cleaning, check cashing;category killer)

Catalog showroom broadselection of high-markup, fast-moving, brand-name goodssold by catalog at discount


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Levels of Retail Service

Self servicemany customers will to locate-compare-select process to save money

Self selectioncustomers find their own

goods, although they can ask for assistance Limited serviceretailers carry more shopping

goods and services such as credit andmerchandise-return privileges

Full servicesalespeople are ready to assist inevery phase of the locate-compare-selectprocess


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Non store Retailing

Direct selling multilevel selling and networkmarketing selling door-to-door, or at home salesparties

Direct marketing direct mail, catalog marketing,

telemarketing, television direct-responsemarketing, electronic shopping

Automatic vending variety of merchandise,impulse goods, hosiery, cosmetics, hot food, etc.

Buying service store-less retailer servicing aspecific clienteleusually employees of a largeorganizationwho are entitled to buy from a listof retailers that have agreed to give discounts in

return for membership

M j T f C t


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Major Types of CorporateRetail Organizations

Corporate chain store two or more outlets owned and controlled,employing central buying and merchandising, and selling similar lines ofmerchandise (GAP)

Voluntary chain wholesaler-sponsored group of independent retailersengaged in bulk buying and common merchandising (Independent GrocersAlliance)

Retailer cooperative independent retailers using a central buyingorganization and joint promotion efforts (ACE Hardware)

Consumer cooperative retail firm owned by its customers. Memberscontribute money to open their own store, vote on its policies, elect a groupto manage it, and receive dividends

Franchise organization contractual association between a franchisor andfranchisees (McDonalds)

Merchandising conglomerate corporation that combines severaldiversified retailing lines and forms under central ownership, with someintegration of distribution and management (Allied Domeq PLC with Dunkin

Donuts and Baskin-Robbins, plus a number of British retailers and a wine ands irits rou


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New retail forms and combinations Growth of intertype competition

Competition between store-based and non-

store-based retailing Growth of giant retailers

The traditional trade is alive and we

Growing investment in technology Global profile of major retailers

Upgrading of Asian retailers

Growth of factory outlets

The 9 Keys Retail Developments


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Private Labels

A private label (also called reseller, store,

house, or distributor brands) is one retailersand wholesalers develop


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Role of Private Labels

Manufacturers with excess capacity who willproduce the private label at a low cost.Other costs, such as R&D, advertising, sales

promotion, and physical distribution are alsomuch lower. This means that the privatebrander can charge a lower price and yet

make a higher profit margin. Retailers develop exclusive store brands to

differentiate themselves from competitors.


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Wholesaling

Wholesaling includes all the activities

involved in selling goods and services tothose who buy for resale or business use.Wholesaling excludes farmers,manufacturers, and retailers.


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Major Wholesaler Types

Merchant wholesalers

Full-service wholesalers

Limited-service wholesalers Brokers and agents

Manufacturers and retailers

branches and offices

Specialized wholesalers

Wh l li F i


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Wholesaling Functions Selling and promotingsales

force help manufacturersreach many small businesscustomers at a relatively lowcost

Buying and assortmentbuildingselect items andbuild the assortment theircustomers need

Bulk breakingbuy largecarload lots and breaking thebulk into smaller units

Warehousingholdinventories, and reduceinventory costs and risks tosuppliers and customers

Transportationprovide quickerdelivery to buyers because they

are closer to the buyers

Financinggrant credit, andfinance suppliers by orderingearly and paying bills on time

Risk bearingabsorb some risk

by taking title and bearing costof theft, damage, spoilage, andobsolescence

Market informationsupplycompetitor activities, newproducts, price developments,

etc Management services and

counselingtraining salesclerks, helping with store layoutsand displays, etc.


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Market Logistics

Market logistics involves planning theinfrastructure to meet demand, then

implementing and controlling the physicalflows of materials and final goods frompoints of origin to points of use, to meet

customer requirements at a profit


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Four Steps in Market Logistics

Deciding on the companys valueproposition to its customers

Deciding on the best channel designand network strategy

Developing operational excellence

Implementing the solution


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Integrated Logistics Systems

An integrated logistics system (ILS)

includes materials management,material flow systems, and physicaldistribution, aided by information

technology

M k L i i E


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Market Logistics EncompassSeveral Activities

Sales forecasting

The company schedules distribution,production, and inventory levels

Production plans

Materials to order

Finished goods inventory


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Thank You

Documents

Mktg Chapter 16