Marketing Channels

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					Marketing Channels




Prof. Rushen Chahal
TYPES OF MARKETING
CHANNELS
   Marketing channel: system of marketing
    institutions that promotes the physical
    flow of goods and services, along with
    ownership title, from producers to
    consumer or business user; also called a
    distribution channel
    STRATEGIC IMPLICATIONS: THE ROLE OF MARKETING CHANNELS
    IN MARKETING STRATEGY


 Channels provide the means by which the firm moves the
  goods and services it produces to ultimate users
 Channels perform four important functions. They:
     ◦
TYPES OF MARKETING
CHANNELS
 Marketing intermediary: wholesaler or
  retailer that operates between producers
  and consumers or business users; also
  called a middleman
 Wholesaler:
TYPES OF MARKETING
CHANNELS
   Logistics: process of coordinating the flow of
    information, goods, and services among members of
    the distribution channel
   Physical distribution:
     TYPES OF MARKETING CHANNELS




Figure 13.2:
Alternative
Marketing
Channels
Direct Selling
 Direct channel: marketing channel that
  moves goods directly from a producer to
  ultimate user
 Direct selling: strategy designed to
  establish direct sales contract between
  producer and final user
Dell

Dell Computer:
A Direct Seller
of Computers
 DUAL DISTRIBUTION
        Dual distribution:




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CHANNEL STRATEGY DECISIONS



 Selection of a         Channel design includes
 Marketing Channel       decisions concerning channel
                         length and channel width
                        Factors which impact the
                         selection of a marketing
                         channel include:
                          ◦
Table 13.1: Factors Influencing Marketing Channel Strategies

             Characteristics of Short Characteristics of Long
             Channels                 Channels
 Market      Business users               Consumers
 factors
             Geographically               Geographically diverse
             concentrated
             Extensive technical          Little technical knowledge
             knowledge and regular        and regular servicing not
             servicing required           required
             Large orders                 Small orders
 Product     Perishable                   Durable
 factors
             Complex                      Standardized
             Expensive                    Inexpensive

                                     Continued on next slide . . .
Table 13.1: Factors Influencing Marketing Channel
Strategies (Continued)
                       Characteristics of Short Characteristics of Long
                       Channels                 Channels
 Producer              Manufacturer has adequate     Manufacturer lacks
 factors               resources to perform          adequate resources to
                       channel functions             perform channel functions

                       Broad product line            Limited product line
                       Channel control important     Channel control not
                                                     important
 Competitive factors   Manufacturing feels           Manufacturer feels
                       satisfied with marketing      dissatisfied with marketing
                       intermediaries’ performance   intermediaries’ performance
                       in promoting products         in promoting products
CHANNEL STRATEGY DECISIONS

                            Distribution intensity:
                             number of intermediaries
Determining                  through which a manufacturer
Distribution Intensity       distributes its goods
                            Intensive distribution: channel
(LengthXWidth)               policy in which a manufacturer
                             of a convenience product
                             attempts to saturate the
                             market
CHANNEL STRATEGY DECISIONS

                            Exclusive distribution:
                             channel policy in which a firm
Determining                  grants exclusive rights to a
Distribution Intensity       single wholesaler or retailer to
                             sell its products and a
                             particular geographic area
                            Selective distribution: channel
                             policy in which a firm chooses
                             only a limited number of
                             retailers to handle its product
                             line
CHANNEL STRATEGY DECISIONS
                            Legal problems of
                             exclusive distribution
Determining                  ◦ Exclusive-dealing
                               agreement: arrangement
Distribution Intensity         between manufacturer and e-
                               marketing intermediary that
                               prohibits the intermediary
                               from handling competing
                               product lines
                             ◦ Tying agreement:
                               Arrangement that requires a
                               marketing intermediary to
                               carry items other than those
                               they want to sell
Channel Management


 Once channels have been designed,
  the challenge becomes effectively
  managing all the relationships
 The challenge is to set up a system or
  method for assigning responsibilities,
  controlling behaviors, and monitoring
  performance
 Various forms of Vertical Marketing
  Systems allow us to do this
 VERTICAL MARKETING SYSTEMS

      Vertical marketing system (VMS):
       planned channel system designed to
       improve distribution efficiency and cost
       effectiveness by integrating various
       functions throughout the distribution chain
      Four types of VMS:


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VERTICAL MARKETING SYSTEMS
                  Corporate marketing
                   system: a VMS in which a
 Corporate         single owner operates at
 Systems           each stage in its marketing
                   channel
                  Example:
VERTICAL MARKETING SYSTEMS
                   Administered marketing
                    system: VMS that achieves
                    channel coordination when
Administered        a dominant channel member
  Systems           exercises its power
                   Example:
CHANNEL MANAGEMENT AND
LEADERSHIP



   Channel Captain: a dominant and
    controlling member of a marketing
    channel
VERTICAL MARKETING SYSTEMS
                 Contractual marketing
                  system:
                  VMS that coordinates
Contractual       channel activities through
 Systems          formal agreements among
                  channel members like:
                   ◦ Wholesaler-Sponsored
                     Voluntary Chains
                   ◦ Retail Cooperatives
                   ◦ Franchises
THE ROLE OF LOGISTICS IN DISTRIBUTION
STRATEGY

   Supply (value) chain: sequence of
    suppliers that contributes to the creation
    and delivery of a good or service

Ryder

Ryder, a Member of the Supply Chain,
Helps
Firms Control Their Delivery Costs




                                       Copyright © 2001 by Harcourt, Inc. All rights reserved.
  PHYSICAL DISTRIBUTION
         A company’s physical distribution system
          contains the following elements:
              ◦   Customer Service
              ◦   Transportation
              ◦   Inventory Control
              ◦   Protective packaging and materials handling
              ◦   Order Processing
              ◦   Warehousing



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Transportation
   Common                              Private carriers
    carriers move                        do not offer
    freight via all                      services for hire,
    modes of                             but provide
    transportation
    for the general                      transportation
    public                               services solely for
                        Classes of
                                         internally generated
   Contract             Carriers
    carriers do not                      freight
    serve the general
    public
Transportation
   Railroads                       Freight
   Motor                            Forwarders and
    Carriers                         Supplemental
   Water         Major Modes of
                                     Carriers
    Carriers      Transportation    Intermodal

   Pipelines                        Coordination
   Air Freight
FedEx

FedEx: Now Offering a Form of Multinational
Intermodal Coordination for Freight When
Speed Is Needed




                                       Copyright © 2001 by Harcourt, Inc. All rights reserved.
   Table 13.2: Comparison of Transport Modes
 Mode        Speed      Depend-     Frequency of   Availabil-    Flexibility     Cost
                       ability in    Shipments       ity in     in Handling
                        Meeting                    Different
                       Schedules                   Locations

Rail       Average     Average      Low            Low          High           Average
Water      Very slow   Average      Very low       Limited      Very high      Very low
Truck      Fast        High         High           Very         Average        High
                                                   extensive
Pipeline   Slow        High         High           Very         Very low       Low
                                                   limited
Air        Very fast   High         Average        Average      Low            Very high
Warehousing
 Storage Warehouse: warehouse that
  holds goods for moderate to long periods
  prior to shipment, usually to buffer
  seasonal demand
 Distribution Warehouse:
      Protective Packaging and Materials
      Handling

   Unitizing: process of combining individual
    materials into large loads for easy handling
   Containeriztion:

				
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Description: Prof. Rushen notes for MBA and BBA students