Market Channels and Value Networks

Arild Aspelund

IØT, NTNU

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Outline

• What are Market Channels?

• What does a market channel look like and how can you design and manage it for your purposes

• Some typical examples of problems and conflict in market channel management

• Value Networks

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Market Channels

Sets of interdependent organizationsinvolved in the process of making a product or service available for use

or consumption.

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What Shall a Market Channel Deliver?

• Information about buyer needs and behavior– Market research, sales information, contacts, competitive behavior, price sensitivity

• Information to potential buyers about market offer– Attention, communication, promotion and branding, customization, and price

negotiation

• Physical distribution– Physical flow at customer convenience

• Financing– Payment, risk-taking

• Maintenance and control of exchange process– Service, repair, rebuy

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A Market Channel Needs to Be a Suitable Carrier of Your Marketing Mix

The four P’s• Product• Price• Place• Promotion

The four C’s• Customer solution• Customer cost• Convenience• Communication

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Market Channel Development

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…and with the multiple tasks it tends to become rather complex…

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Designing a Market Channel

Analyze customer needs

Evaluate major channel alternatives

Identify major channel alternatives

Establish channel objectives

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Some Market Channel Alternatives and Their Characteristics

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Channel Management Decisions

• Selecting channel members– To customers, the channel is the company..

• Training channel members– Reduce variation of offers and services

• Motivation channel members– Do you have the power to change the channel’s behavior?

• Evaluating channel members– Goal achievements and growth opportunities

• Modifying channel arrangements– Life-cycle perspectives and simply change a loosing team

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Channel Integration and Systems

• Vertical Marketing Systems (VMS)– Corporate VMS

– Administered VMS

– Contractual VMS

• Horizontal Marketing Systems

• Multi-channel Marketing Systems

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Typical Market Channel Problems

• Principal – agent issues– Information asymmetry– Moral hazard

• Resource dependence– What if your channel is far bigger than you…?– Make others dependent on you, but never depend on others…

• Channel conflicts– Can you prioritize channels?– What if you decide to establish new channels, and your old ones

don’t agree?

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E-commerce Channel Conflicts

• Pure-click

• Brick-and-click

• Brick-and-mortar

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What are Value Networks• Some argue that the market channel scope is insufficient to

explain the behavior and decision-making of a value chain

• They conceptualize the company as the center of a value network

• Value Network – a system of partnerships and alliances that a firm creates to source, augment, and deliver its offerings

• The value network includes suppliers, sub-suppliers, customers, end-users and all governmental and facilitation organizations

• Lifts the focus of the company out of the market channels which is has direct control

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Summary and continuation

• Summary– Defined what you want from a marketing channel and how you can

design them for your own purposes– Some typical market channels and their characteristics– Review of some of the major challenges of market channel

management – Considered some perspectives of value networks

• Continuation– Market communication