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Channel Formats.pptx

  1. Channel Formats By Faizah Qamar Khan
  2. Reference Books • Marketing Channels (7th Edition), Anne Coughlan (Author), Erin Anderson (Author), Louis W. Stern (Author), Adel El-Ansary • Marketing Channel Management: People, Products, Programs, and Markets, Russell W. McCauley, (Latest Edition) • Marketing 4.0 by Kotler • HBR Articles
  3. Learning Objectives • Be familiar with the channel formats • Retail • Wholesale • Franchise
  4. Retailing Defined • Retailing consists of the activities involved in selling goods and services to ultimate customers for personal consumption • Thus a retail sale is one in which buyer is am ultimate consumer • Wholesale sales for resale or for business purpose, industrial or institutional use • Buying motives are therefore critical in segmenting markets for both store and non-store sales
  5. Choosing A Retail Positioning Strategy • Retailer choice of positioning itself in the marketplace has the significant effects on its competitiveness and performance • Choices are Cost Side (Focus on Margin and Inventory Turnover goals) and Demand Side (Focus on Service Outputs to be provided to Shoppers)
  6. Financial And Cost-Side Positioning Margin & Inventory Turnover Goals • Turnover refers to the number of times per year inventory turns on the retail shelf • High-Service retailing systems have been categorized as high margin, low-turnover operations offering numerous personal services Contrasted with • Low-Price retailing system characterized by low margin, high inventory turnover and minimal services
  7. Financial And Cost-Side Positioning Margin & Inventory Turnover Goals • Low margins, high turn over and excellent customers are the techniques adopted by giant retailers • Lowering the cost of operating a retail company does not mean lowering its services Like the clothing retailer ZARA (Vertically integrated) • The appropriate choice is using the Strategic Profit Model (SPM) , SPM can be stated as SPM = Net Profit / Net worth
  8. Wholesaling • Wholesaling (Wholesale trade, wholesale distribution) refers to business establishments that don’t sell products to a significant degree to ultimate household consumers • These businesses sell products primarily to other business retailers, merchants, contractors, industrial users, institutional users and commercial users • Wholesaling is closely associated with tangible goods; however, creates value by adding services
  9. Wholesale-Distributors • Wholesale-Distribution are independently owned and operated firms that buy and sell products to which they have taken ownership • Generally, they operate one or more warehouse in which they receive and inventory goods for later reshipping • There is a distinction between the wholesalers and distributors, typically wholesaler refers to the company that resells product to another intermediary while distributor refers to the company that resells products to the consumers
  10. Master Distributors
  11. Difference Between Distributor And Master Distributors • Master Distributor is a type of Super-Wholesaler • This is a distributor only to other distributors • For a given manufacturer’s products, master distributor is only one contact point for all other distributors • Distributors need many services from manufacturers. Master distributor provides those services • Master distributor keeps huge assortment and distributor can use this master distributor as an invisible warehouse for required SKU
  12. Difference Between Distributor And Master Distributors • Master distributors consolidate orders from all their manufacturer, allowing manufacturer’s customers to avoid minimum quantity orders • Master distributors also assume a role of a franchisor, that is help their customers to improve their business processes • Master distributors give their distributors economies of scope and scale • Master distributors can help manufacturers expand into new channels
  13. What Is Franchising • Franchising is a marketing channel structure intended to convince end-users they are buying from a vertically integrated manufacturer, when in fact, they may be buying from a separately owned company • Franchise systems masquerade as a company subsidiaries • In reality, they are a category within classic marketing channel structure where Upstream is supplier or manufacturers and downstream is the franchisees
  14. What Is Franchising • End-users should believe they are dealing with franchisor’s subsidiary, means franchisee assumes the identity of the franchisor • This deliberate loss of separate identity is a hallmark of franchising • To accomplish this, franchisee awards the franchisor Category Exclusivity (No Competitor’s goods)
  15. What Is Franchising • To further the projection of the franchisor’s identity, franchisee purchases via contracts and by, the payment of fees, the rights to market the franchisor brand, using the name, the product, the trademarks, know-how, production techniques , marketing practices developed by the franchisor • By paying fees and signing a contract, the franchisee assumes the right to exploit a broad license and obligation to follow the franchisor’s methods
  16. What Is Franchising • It must be cleared that franchisee is a separate business with its own balance sheet and income statement • Franchising is inherently a contradictory channel. It is technically two independent businesses joining forces to perform marketing flows to their mutual benefits
  17. Multiunit Franchising • Multi-unit franchising is when a franchisor awards a franchisee the right to operate more than one outlet within a defined territory. If run successfully, a multi-unit operation can be a lucrative partnership between a franchisee and franchisor. Example KFC has more than 3500 outlets in USA and more than half of them are owned by only seventeen people • Advantages are candid communication and that customer base is likely to be served by the same owner. This curbs free riding
  18. The Franchise Contract (Three Sections Of Contract) • The payment System. Particularly the lump-sum fee to enter the system, the royalty fee and the initial investment • The franchisee usually pays a fixed fee or lump-sum to start up • The franchisee also makes an initial investment that covers acquiring inventory, obtaining and adapting the facility and , advertising the opening of the outlet
  19. The Franchise Contract The payment System • The upfront fee and the unrecoverable part of initial investment are at a risk of a franchisee. They are hostages if the franchisee does not perform, loses the hostages • Franchisor also hostages in terms of a royalty on sales. If the franchisor does not support franchisee, sales suffer and eventually the franchisor gets suffered from being paid low royalty
  20. The Franchise Contract The Real State • Financing details like who will hold the lease • An issue of particular interest to the regulators is who collects the rent of the franchisee’s premises • Many franchisors ensure that they are the landlords Or they lease with the property owner and then sublet to franchisee
  21. The Franchise Contract Termination • Franchise arrangements anticipate a possible ending of the relationship and spell out how it would be conducted • Franchisors who are landlords have a potent way to enforce termination of a franchisee
  22. Export Distribution Channels • When a manufacturer exports to a foreign market, new complications such as market strategy, product suit is not fitted there • Other issues including language, currency, customs regulation are inevitable • Profitable sales and strategic advantages emerge from a strategy of supporting a channel member responsible for exported goods
  23. Export Distribution Channels • One type of channel members for exports is the export intermediary • This is an independent firm located in the exporter’s country also called Export Management • They have abilities that they master the products they sell by taking training from manufacturers and then train the foreign customers And Secondly they are well versed about export process and foreign market
  24. Online Reverse Auctions • A reverse auction (also called procurement auction, e-auction, sourcing event, e-sourcing) is a tool used in business-to-business procurement. In this process, the role of the buyer and seller is reversed, with the primary objective to compete purchase prices downwards. In an ordinary auction (also known as a forward auction), buyers compete to obtain a product or service. In a reverse auction, sellers compete to obtain business.