CONVENTIONAL MARKETING SYSTEMS Teacher – Shahed Rahman
INTRODUCTION
Design Issues are critical in marketing channels
Selecting the right members Assigning them the proper functions Having everyone fulfill their responsibilities
CONVENTIONAL MARKETING CHANNELS AS ORGANIZATIONAL TEAMS
Most marketers work in a team Shoemakers, blacksmith and woodworkers
work with their wives as their teammates While Husband take care of production, wife
take care of customers and apprentice Conventional channel teams are loosely
aligned teams of organization designed to bridge gaps between producers and consumers
For conventional channels to succeed – each members have to work hard
CONVENTIONAL MARKETING CHANNEL: ISSUES AND ANSWERS
Producers, Wholesalers, Other intermediaries such as agents or support servicers and retailers all face the channel design decision
WHAT IS CHANNEL DESIGN
Indicate a pattern, arrangement or structure of parts
Arrangements that exist between organizations in marketing system
Design also reflect the rules and regulations that system members use to create and sustain the system
Channel Design refer to those decisions associated with the formation of new marketing channel or the alteration of existing channels
It is a strategic decision A proper design can create a sustainable
competitive advantage.
WHY ARE CHANNEL DESIGN DECISIONS CRITICAL?
A design effect all the marketing decisions Producers’ prices vary substantially
according to whether they use mass merchandisers or high quality boutiques
Channel Design decisions typically involve relatively long term commitments to other organizations and also the market that channel member serves
It is the key external resource of many manufacturers
It take years to build a successful channel You wont see the results instant
ENSURE TEAM WORK
Channel members need to convert their special skills into a successful team performance
Manufacturer >> Intermediary >>> end users linkage
MARKETING FUNCTIONS FACTOR INTO THE CHANNEL DESIGN DECISION?
Information Promotion Negotiation Ordering Financing Risk Taking Possession Billing Payment Title
WHEN IS IT TIME TO DESIGN OR REDESIGN A CHANNEL
When the nature of market change Organization's development of a new product
or product line Decision to target a new market segment Do a PEST Analysis to see whether the
External Environmental Changes
MAKING THE CHANNEL DESIGN DECISION
Organization should reach a workable compromise between what is ideal, what is adequate and what is obtainable.
New manufacturers often feature small operations within a limited market area
Larger firms tend to use different types of channels in different markets.
Wholesale distributor ----- for large market Direct Retailers ---- for small market
MAKING THE CHANNEL DESIGN DECISION
Large or small an organization’s channel design should develop in response to a SWOT Analysis
SWOT Analysis should consider key success market success factors, Market attractiveness to a new entrants or a barrier to entry
Technology issue – Social or culural trends
CHANNEL DESIGN OPTION
Making channel design decisions, a number of conventional channel systems are available1. Number of level present in the Channel 2. Number of intermediaries operating at
the various levels3. Types of intermediaries used at each
level
NUMBER OF LEVELS IN THE CHANNEL
Each intermediary that performs a function necessary to convey a good or service closer to final users represents a channel level
A channel’s length is described by the number of intermediary levels other than producers and users that it contains
Zero level channel or direct channel marketing exist when manufacturer sells directly to the final users
One level channel design feature one selling intermediary. Eg. Retailers buy directly from the manufacturer
Two level channel feature two selling intermediaries. Such as whole saler and retailer
NUMBER OF INTERMEDIARIES AT EACH LEVEL
Intensive Distribution Distribute through as many outlet as possible Depends on product and consumer
characteristics Low involvement product or consumers want
more convenience Exclusive Distribution
Places limits on the number of intermediaries operating at any given channel level
Used when producers want to retain control over the quality of service levels
NUMBER OF INTERMEDIARIES AT EACH LEVEL
Selective Distribution This lies between the two extreme. More than one but fewer than all available
intermediaries are used
TYPES OF INTERMEDIARIES AT EACH LEVEL
Manufacturer’s sales force Manufacturers Representatives Industrial Distributor
EVALUATING CHANNEL DESIGN ALTERNATIVES
Expected Sales and Costs Criteria Control and Resources
All companies want to control over its product and resources as possible
Control often proves the deciding factor in this intermediary selection decision
Flexibility Degree of commitment to the proposed
relationship Respond to a changing environmental
opportunities and threats
SELECTING THE BEST CHANNEL DESIGN
Analyzing Desired Channel Output Utilities Convenience Utility Lot size Utility Selection Utility Service utility
Analyzing Channel Objectives and Product Characteristics Unit Value Standardization Bulkiness Complexity Stage of Product Life Cycle
Analyzing Market Behaviors and Segments
MODIFYING EXISTING CHANNELS
Organization must do more than construct a good channel design, set it in motion, and then sit back and watch.
Channel adjustment – purposeful modification to intermediaries relationship- become necessary when consumers buying pattern change, market expand, new competition arise or newer innovative distribution channel options become available. Add or drop individual intermediaries Add or drop particular marketing channels Develop a total new way of distributing and
selling goods within a particular market
MODIFYING EXISTING CHANNELS
Product Life Cycle Changes
Introductory Stage
Declining
Growth stage Mature Stage
MODIFYING EXISTING CHANNELS
Customer – Driven Refinement of Existing Channels
Growth of Multichannel Marketing System Multichannel marketing occurs when a single
firm uses two or more marketing channels to reach one or more market segments
This is also know and dual distribution By pursuing more segments firms usually
achieve increased market coverage Companies also establish different channels to
sell different sized customers Direct sales may be best for handling larger
customers
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