MARKETING CHANNEL

A set of independent organisations involved in the process of making a product or service available for use or consumption by the consumer or business user.

FUNCTION OF MARKETING CHANNEL

Carrying of inventory Demand generation Physical Distribution After – sale service Extending credit to customer

MARKETING CHANNEL STRATEGY GROWING IN IMPORTANCE. WHY???

Search for sustainable competitive advantage. Growing power of retailers in marketing channel. Need to decrease the cost of distribution. Increased role and power of Technology. New stress on growth.

CHANNEL FUNCTIONS & FLOW

Physical Flow Title Flow Payment Flow Promotion Flow Information Flow

CHANNEL LEVELS

CHANNEL INTEGRATION SYSTEM

VMSAdministere

d VMS

Corporate VMS

Contractual VMS

CHANNEL CONFLICT

“Channel conflict is generated when channel member’s actions prevent another channel from achieving its goals.”

TYPES OF CHANNEL CONFLICT

Vertical Channel Conflict.Horizontal Channel Conflict.Multi – Channel Conflict.

VERTICAL CHANNEL CONFLICT

Conflict between different levels with in the same channel.

e.g.- HUL came into conflict with its distributers in Kerala on the issue of commission.

HORIZONTAL CHANNEL CONFLICT

Conflict between members at the same level with in the channel.

e.g.- Conflict between two same retail outlets.

MULTI-CHANNEL CONFLICT

Conflict exists when the manufacturer has established two or more channels that sale same product.

e.g.- Reebok has its own store and other licensed store who also sale Reebok products.

CAUSES OF CHANNEL CONFLICT

Goal incompatibility. Role ambiguity. Differences in perception. Intermediaries' dependence on the

manufacture.

STRATEGIES TO MANAGE CHANNEL CONFLICT

Adoption of super ordinate goals. Exchange of employees. Joint membership in trade association. Co-optation. Diplomacy, mediation, or arbitration. Legal recourse.

DISTRIBUTION CHANNEL

The process or channel or flow which makes the product or service available for use by the customer can be regarded as a distribution channel.

DISTRIBUTION FUNCTION

To meet the satisfaction level of the consumer by delivery of products to different types of customers when and where they required at a reasonable cost can be considered as one of the major function of distribution.

TYPICAL CHANNELS OF DISTRIBUTION

DISTRIBUTION FUNCTIONS Bridge the gap between production and

consumption. Responsible for promoting, awareness regarding

the produce. Creating contacts and maintaining liaison with

existing one. Understanding customer need and adjusting the

offer accordingly. Price negotiation as per the customer demand of

the product.

WHY INTERMEDIARIES?

Contacts Experience Socialisation Scale of operation Purpose – Match supply from producers to

demand from consumers.

STEPS IN DISTRIBUTION PLANNINGDevelop Distribution Objective

Evaluate Internal and External Environmental influences

Choose a Distribution Strategy • Conventional, Vertical, or Horizontal system• Intensive, exclusive or selective distribution

• No. Of channel levels

Develop Distribution Tactics• Selecting channel members• Managing the channel

• Physical distribution planningOrder processing

WarehousingTransportation

Inventory Control

CHOOSING A DISTRIBUTION SYSTEM

Intensive Distribution

Exclusive Distribution

Selective Distribution

Distribution Intensity

MARKETING INTERMEDIARIES• MIDDLEMAN – independent link between producers and consumers• MERCHANT MIDDLEMAN – actually buys goods and takes title/ownership• AGENT – business unit that negotiates purchases and sales but does not take

ownership• WHOLESALER – a merchant who primarily stores and handles goods in

large quantities • RETAILER – merchant middleman who sells to final consumers • BROKER – middleman who serves as a go-between for the buyer and seller• MANUFACTURER’S AGENT – an agent who operates by contract serving a

geographic territory• DISTRIBUTOR – wholesale middleman in lines with selective or exclusive

distribution• JOBBER – a middleman who buys from manufacturers and sells to retailers • FACILITATING AGENT – a firm that performs distribution tasks other than

buying, selling and transferring

CHANNEL EFFICIENCY: HOW INTERMEDIARIES REDUCE THE NUMBER

OF CHANNEL TRANSACTIONS

CHANNELS OF DISTRIBUTION OF CONSUMER GOODS

TYPES OF DISTRIBUTION STRATEGIES

1. Exclusive distribution

2. Selective distribution

3. Intensive distribution

1. EXCLUSIVE DISTRIBUTIONSITUATION

WHERE SUPPLIERS AND DISTRIBUTORS ENTER INTO AN EXCLUSIVE AGREEMENT THAT

ONLY ALLOWS THE NAMED DISTRIBUTOR TO SELL A SPECIFIC PRODUCT.

Limiting the use of intermediaries Not allowing competing brands Maintain control

**MARUTI

Exclusive dealers Huge investments by dealers

2. SELECTIVE DISTRIBUTIONTYPE OF PRODUCT DISTRIBUTION THAT LIES BETWEEN INTENSIVE

DISTRIBUTION AND EXCLUSIVE DISTRIBUTION, AND IN WHICH ONLY A FEW RETAIL OUTLETS COVER A SPECIFIC GEOGRAPHICAL AREA. CONSIDERED MORE SUITABLE FOR HIGH-END ITEMS SUCH

AS 'DESIGNER' OR PRESTIGE GOODS. Use of more intermediaries compared to exclusive Need more visibility More control Less cost

**SHAHNAZ HUSSAIN HERBAL PRODUCTS

Not available in every Grocery Shop Available at selected outlets Maintain image

3. INTENSIVE DISTRIBUTIONA MARKETING STRATEGY UNDER WHICH A COMPANY SELLS THROUGH AS MANY OUTLETS AS POSSIBLE, SO

THAT THE CONSUMERS ENCOUNTER THE PRODUCT VIRTUALLY EVERYWHERE THEY GO: SUPERMARKETS,

DRUG STORES, GAS STATIONS, AND THE LIKE.

As many outlets as possible Multiple channels Consumers widespread Problems of control

**LUX SOAPS, LIFEBUOY, COLGATE, SOFT DRINKS

CHANNEL MANAGEMENT

CHANNEL MANAGEMENT

Channel Management involves the strategy, development and alignment of channels, or customer interfaces, across your marketing, sales and service processes. Channels typically include the Internet, call centers, retail stores, phones and text messaging.

FUNCTIONS OF INTERMEDIARIES IN DISTRIBUTION CHANNEL MANAGEMENT?

The functions of intermediaries are :

1. Availability.2. Information.3. Communication.4. Negotiation.5. Order.6. Payment collection.7. Financing.8. Risk taking.9. Title transfer.

SUCCESS CHANNEL MANAGEMENT

Outline

34

Vertical Integration: Owning the Channel

Selection Criteria

Channel Structure and Membership

Issues

Channel Implementation

Building Channels

35

Managing Conflict to Increase Channel

Coordination

Channel Power: Getting It, Using

It, Keeping It

Bargaining for Influence with

Channel Members

Key Account Management in Collaborative Relationship

Building

Partner Relationship Management

Managing

Channels

36

Selection and Termination

Policies

Making the Plan Work Effectively

Performance Measurement

Implementation

MANAGEMENT TECHNIQUES 37

38

Value and Resource Scarcity Value and Market

Information

Cooperation

Information: The Core of

Transaction Costs

Transaction-Specific Assets

Specific Human Assets

Brand Capital

Time Specificity

Preparing a Marketing Plan for Channels

Factors in Deriving Economic Value

39

Marketing Channels Creating Customer Value via Channels of Distribution

Components of Customer Value

form, place,

possession, and time

Marketing Channels:

Structure and Functions

Demand-Side Factors Facilitation of Search, Adjustment of Assortment Discrepancy, Routinisation of Transactions Reduction in Number of Contacts.

What Is The Work Of The Marketing

Channel?

Marketing Channel

Membership

Customer Relationship ManagementThree types of channel relationships exist:Supplier Relationships.Customer Relationships.Lateral Relationships.

Sifting the cycle

Marketing Channels

40

Channel Design and

Implementation

Channel Design: Segmentation

Channel Selection

Channels Type Options:

Establish New Channels or

Refine Existing Channels?

Channel Access

Formats

41

Distributor and Agent Selection

CriteriaRecruiting and Screening New

Prospects

Recruiting as a Continuous Process.

ScreeningCredit

Personality

Business and Operational Criteria

Final Selection Criteria

Channel Candidate Inducements

Business Policies that Bond Your Channel to You

Preparing a Business Policy

Statement

Distributor and Agent Selection

Criteria

42

Managing Conflict to

Increase Channel Coordination

Forms of Channel Conflict Assessing the

Degree and Nature of Channel Conflict

Measuring Conflict

When Conflict Is Desirable

When Is Conflict Functional?

Major Sources of Conflict

Competing Goals

Differing Perceptions of

Reality

Clashes Over Domains

Multiple Channels

Fuelling Conflict

Conflict Resolution Strategies

Co-optation

Third-Party Mechanisms

Building Relational Norms

Information Exchange

Styles of Conflict Resolution

Accommodation

Repeated Compromise

Competition

Collaboration

Managing Conflict to Increase Channel

Coordination

43

Legal Constraints on Marketing

Channel Policies

Market Coverage Policies

Pricing Policies

Discounts

Product Policies

Exclusive Dealing

Product Line Policies

Promotional Allowances and

Services

Legal Issues

44

Channels for Services

Direct Delivery of Value

Delivery of Value via Intermediaries

Independent Service

ChannelsInnovations in

Methods of Distributing Services

Channels for Services

IBM Marketing channel Management Clips….

CAMPUS OVERVIEW

907/A Uvarshad, GandhinagarHighway, Ahmedabad – 382422.

Ahmedabad

Kolkata

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Mumbai

Goldline Business Centre Linkway Estate, Next to Chincholi Fire Brigade, Malad (West), Mumbai – 400 064.