VIEWS: 92 PAGES: 21 POSTED ON: 8/17/2009
Distribution Channels What? Why? How? • Most producers do not sell their goods directly to final users • Between them stands a set of intermediaries performing a variety of functions – These constitute a marketing channel • Marketing channels are sets of interdependent firms involved in the process of making a product / service available for use or consumption Who? • Merchants – Wholesalers, retailers – Who buy, take title to and resell merchandise • Agents – Brokers, representatives, sales agents – Who search for customers but do not take title to the goods • Facilitators – Transportation companies, warehouses, banks – Who assist in the distribution process neither take title to goods nor negotiate purchases or sales Role of marketing channels • Many producers lack the financial resources to carry out direct marketing • Producers who do establish their own channels can often earn a greater return by increasing investment in their main business • In some cases, direct marketing simply is not feasible Marketing channels Sets of interdependent organizations involved in the process of making a product or service available for use or consumption Channels and marketing decisions Push Strategy Pull Strategy Categories of buyers Habitual shoppers High value deal seekers Variety-loving shoppers High-involvement shoppers Increasing efficiency Channel member functions • Gather information • 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 Consumer marketing channels Designing a marketing channel system Analyze customer needs Establish channel objectives Identify major channel alternatives Evaluate major channel alternatives 1. Analyze Customer Needs • In designing the marketing channel, the marketer must understand the service output levels desired by target customers • Channels produce five service outputs: – – – – – Lot size Waiting time Spatial convenience Product variety Service backup 2. Establish Objectives & Constraints • Channel objectives vary with product characteristics – Perishable products require more direct marketing – Bulky products require minimization of shipping distance and handling – Non-standard products viz., custom-built machinery are to be sold post detailed demos – Products requiring installation or maintenance services are usually sold and maintained by company or franchised dealers 3. Identifying channel alternatives Types of intermediaries Number of intermediaries Terms and responsibilities Number of intermediaries Exclusive Selective Intensive 4. Evaluating major alternatives • Each channel alternative needs to be evaluated against key criteria • Economic criteria – First step is to determine if a company sales force or a sales agency will produce more sales – Next step is to estimate cost of selling different volumes through each channel • Control and adaptive criteria – Ability to control internal source vs., external agents – Design structures/polices that provide high adaptability Channel-management decisions Selecting channel members Training channel members Motivating channel members Evaluating channel members Modifying channel members Channel power • Coercive • Reward • Legitimate • Expert • Referent Managing channel conflict • Adoption of superordinate goals • Cooptation • Diplomacy • Mediation • Arbitration Channel conflicts • Channel conflict is generated when a channel member’s actions prevent the channel from achieving its goal – Vertical channel conflict – Horizontal channel conflict – Multi-channel conflict • Imperative to identify causes of conflict – – – – Goal incompatibility Unclear roles and rights Differences in perception Dependence on the manufacturer Marketing channels must not just serve markets, they must also make markets!
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