Integrated Marketing Channel

Unit 1

Chapter Focuses on

What is the nature of Marketing channel and why are they important?

How do channel firms interact and organize to do the work?

What problems do companies face in designing and managing the channel?

What role do physical distribution and supply chain management play in attracting and satisfying customers?

Value delivery network

The network made up of company, suppliers, distributors and ultimately customers who partner with each other to improve the performance of the entire system in delivering customer value.

What do you know about-

Supply chain Management Physical distribution Marketing channels

Distribution

Distribution is about getting the product or service to the customer as conveniently as possible; it deals with access and availability

Marketing channel

Marketing channels are set of interdependent organizations involved in the process of making a product or service available for use or consumption

Types of Intermediaries

Merchant intermediariesMerchant intermediaries actually take title to physical products that they distribute( sell) to consumers.

AgentsAgents do not ever own the products, but they arrange the transfer of title. They negotiate on behalf of producer.

Facilitators- Assist in distribution process but neither take to goods not negotiate purchase or sales

How channel members add value The role of distribution entails:

Arranging for its sale and transfer of title Promoting the product Storing the product Assuming some risk during distribution. Financing

Intermediaries often perform these activities for producer or consumer.

• Provides market information• Interprets consumers’ wants• Promotes producers’ products• Creates assortments• Stores products• Negotiates with customers• Provides financing• Owns products• Shares risks

• Anticipates wants• Subdivides large quantities of a product• Stores products• Transports products• Creates assortments• Provides financing• Makes products readily available• Guarantees products• Shares risks

SALES SPECIALISTFOR PRODUCERS

PURCHASING AGENTFOR BUYERS I

NTERMEDIARY

The Distribution Functions

Channel functions and flows

Physical flow-Forward Title flow- forward Payment flow- backward Information flow- Bidirectional

Channel levels

A layer of intermediaries that perform some work in bringing the product and its ownership closer to the final buyer .

1. Direct Marketing channel2. Indirect Marketing Channel

ULTIMATE CONSUMERS

PRODUCERS OF CONSUMER GOODS

Retailers Retailers Retailers Retailers

Merchantwholesalers

Merchantwholesalers

Agents Agents

Consumer Channels

BUSINESS USERS

PRODUCERS OF BUSINESS GOODS

Merchant wholesalers(industrial distributors)

Agents Agents

Merchant wholesalers(industrial distributors)

Business Channels

ULTIMATE CONSUMERS OR BUSINESS USERS

PRODUCERS OF SERVICES

Agents

Service Channels

Factors determining length of channel

Size of the market Order lot size Service requirements Product variety

Channel Integrations and systems

Vertical marketing

system

Horizontal marketing

system

Multi channel marketing

system

A tightly coordinated distribution channel designed to improve operating efficiency and marketing effectiveness.

This reflects the combination of two or more non related companies to put together resources to exploit the markets.

Vertical Marketing Systems (VMS)

Corporate VMS:Corporate VMS: One firm owns other firms in channel or the entire channel.

Bata, Raymond's Contractual VMS:Contractual VMS: Independents work

together for much greater effectiveness. Coca-Cola, McDonalds, NIIT

Administered VMS:Administered VMS: Relies on economic power of one channel member.

Maruti, HUL

Horizontal Marketing system

This reflects the combination of two or more non related companies to put together resources to exploit the markets.

Banks and Malls McDonalds and Wall Mart Coca cola and Nestle

Multichannel Distribution System

Some firms will use several distribution channels to reach specific markets or segments.

Dual distribution is used, for example, to reach business and consumer markets, or to carry different groups of products

or may be used to reach different segments of the seller’s market; different sizes of buyers or different regions of the country

some companies operate their own stores

Multichannel Distribution

7 channels- world of Titan, Time zone, Value mart, sonata stores , Titan signet club ,Tanishq boutique ,Private multi brand outlets

Channel design decisions

1. Analysing customers’ desired service output level

2. Establishing objective and constraints3. Identifying and evaluating

alternatives

Channel design decisions

1.Analysing customers’ desired service output level

Lot size Waiting time Spatial convenience Product variety Service backup

Channel design decisions

3.Identifying major channel alternatives Types of intermediaries Number of intermediaries Terms and responsibilities of channel

member

INTENSIVE SELECTIVE EXCLUSIVEDistribution

through everyreasonableoutlet in a

market

Distributionthrough multiple,

but not all,reasonableoutlets in a

market

Distributionthrough a single

wholesalingmiddleman

and/or retailerin a market

Intensity of Distribution

Evaluating major channel alternatives

Evaluating major channel alternatives

Company sales force

Sales agency

Channel Management decisions Selecting channel members Training and motivating channel

members Coercive power Reward power Legitimate power Expert power Referent power

-continued………………..

Evaluating channel members Modifying channel Design and

Arrangements

Marketing channels across product life cycle

INTRODUCTORY Specialist channel like boutique

GROWTH

Dedicated stores. Shoppers’ stop

MATURE

Department stores

DECLINE

Discount stores, sales etc

Value added by channel membersHigh LowLow

High

Market growth rate

Considerations in Channel Choice

Market Considerations: Type of market, concentration, potential customers, order size.

Product Considerations: Consider unit value, perishability, technical nature of product.

Intermediaries Considerations: Services offered, availability, attitude, dominance.

Company Considerations: Desire for channel control, management, money and services seller can provide to support sales.

Conflict and Control in Channels Channel conflictChannel conflict exists when channel members

interfere with each others’ objectives. Horizontal conflictHorizontal conflict involves firms on same level--

grocery store vs. drug store. Vertical conflictVertical conflict involves firms at different levels

producer versus wholesaler producer versus retailer

Channel PowerChannel Power is the ability to influence or determine behaviour of others in channel. Based on expertise, rewards and

sanctions.

Managing channel conflict

Communication Dealer council Legal resources Arbitration Super ordinate goal

Assignment

What is channel conflict? How it can be controlled? State the powers used for motivating the channel

members. Explain different marketing channels across the PLC

with help of appropriate diagram. Write a essay on newly evolved distribution channels. Marketing Debate- Does it matter Where you sold? Case -P & G’s new sales and distribution system in

India