Session 26 MG 220 Marketing Management MBA 10

1. MG 220 Marketing Management
MBA 10
Fall 2010
Muhammad Talha Salam, Asst. Professor
talha.salam@nu.edu.pk
Access it online: www.slideshare.net/talhasalam
Part 6:
Delivering Value
> Marketing Channels and Value Networks
> The Role of Marketing Channels: SKIM
> Channel-Design decisions
> Channel-Management decisions: SKIM
> Quiz 7: Part 5 (Complete)
Class Presentation | Session 26 | 11 Nov 2010

2. Access it online: www.slideshare.net/talhasalam
Marketing Channels and Value Networks
The Importance of Channels
Marketing Channels
• Sets of independent organizations involved in the process of making a product or service available for
use or consumption
Among these ‘intermediaries’ are:
• Merchants – who buy, take title to, and resell the merchandise
– Wholesalers, Retailers
• Agents – who search for consumers but do NOT take title
– Brokers, Manufacturers’ representatives, sales agents
• Facilitators – assist in distribution but neither take title NOR negotiate sale/purchase
– Transporters, independent warehouses, ad agencies, banks
Importance of Channels
• A marketing channel system is the particular set of marketing channels employed by a firm.
• Channels chosen affect all other marketing decisions
• Push strategy involves manufacturers using its own sales force and trade promotion money to include
intermediaries
– Appropriate when: low brand loyalty | choice is made at purchasing time | impulse item | benefits are understood
• Pull strategy involves manufacturer using advertising and promotion to persuade consumers to ask
intermediaries for the product
– Appr0priate when: High brand loyalty | high involvement | people perceive differnces in brands | decision before
going to store
• Top marketing companies use both strategies
MG 220 Marketing Management 2

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Marketing Channels and Value Networks
Channel Development
• A new firm typically is a local/limited operation selling in a limited market
• As it grows, it moves in new markets and that is where it needs new partners to sell for it
• Channel system evolves in response to local opportunities
Hybrid channels
• Consider IBM, Dell, Microsoft
• Selling online (self), through retailers (intermediaries) – CONSUMERS
• Selling using sales force (own) – INSTITUTIONAL SELLING
• All operate parallel and in one market
• Ensuring Channel Integration – consumers would want channels to be working together
• Also understanding different needs of customers:
• Habitual shoppers | High value deal seekers | Variety-loving shoppers | High-involvement shoppers
MG 220 Marketing Management 3

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Marketing Channels and Value Networks
Value Networks
Demand chain planning
• Company first thinks of the target market and then plans it all backwards
• 4Ps replaced by SIVA (Solution | Information | Value | Access)
Value Networks
• An even broader view. Company at the center
• A system of partnerships and alliances that a firm creates to source, augment and deliver its
offerings
• A value network includes: firm’s suppliers, suppliers’ suppliers, immediate customers and their
end customers
Demand chain planning yields several insights
• Company can estimate whether more money is made upstream or downstream
• Company is more aware of disturbances anywhere in the supply chain that might cause costs to
change
• Companies can use internet to go online to improve these processes
Concept of ERP
• To manage entire value networks efficiently, different IT solutions and software is extensively
deployed. They form Enterprise Resource Planning (ERP)
MG 220 Marketing Management 4

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The Role of Marketing Channels
Concept
Why delegate the ‘selling job’?
• Many producers lack the financial resources to carry out direct marketing
• Producers who do establish their own channels can often earn a greater return
by increasing investment in their own business (EXAMPLE)
• In some cases direct marketing simply is not feasible
Reducing number of contacts
• Ref: figure
• With and without “D” - Distributor
MG 220 Marketing Management 5

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The Role of Marketing Channels
Channel Functions and Flows
Direction of activities
• Some functions have forward flow of activities
• Some have backward flow
• Others have two-way flow
MG 220 Marketing Management 6

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The Role of Marketing Channels
Channel Levels
Key Points
• Producer and End Customer are there in every case
• Zero-level channel is also called direct marketing channel
• Different schemes for consumer marketing and industrial marketing
MG 220 Marketing Management 7

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Channel-Design Decisions
Analyzing Customers’ Desired service output levels
Service Outputs by a channel
– Lot Size – number of units a channel permits a user to purchase on one occasion
– Waiting & Delivery time – Avg time customers have to wait for receipt of goods
– Spatial Convenience – Degree of convenience in purchasing a product
– Product Variety – Assortment breadth by a marketing channel
– Service Backup – Add-on services provided by a channel
Establishing Objectives & Constraints
• Channel objectives should be stated in terms of targeted service output levels
• Channel objectives vary with product characteristics
• Channel design must take into account strengths and weaknesses of different types of
intermediaries
• Channel design must also take into account economic environment. For instance,
economic depressions lead to cost-cutting thus shorter channels.
MG 220 Marketing Management 8

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Channel-Design Decisions
Identifying Major Channel Alternatives
Decisions of choosing from a wide variety of channels for reaching customers
Elements for describing channel alternative:
• Type of Intermediaries
– Decisions regarding what type of intermediaries shall be used
– Retailers or OEMs
• Number of Intermediaries
– Exclusive Distribution
– Selective Distribution
– Intensive Distribution
• Terms and responsibilities of each channel member
– Price Policy calls
– Conditions of sale
– Distributors’ territorial rights
– Mutual services and responsibilities
MG 220 Marketing Management 9

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Channel-Management Decisions
After choosing, individual intermediaries need to be trained, motivated and
evaluated
• Selecting Channel Members
• Training Channel Members
• Motivating Channel Members
– Channel Power – ability to alter channel members’ behavior
– Coercive Power
– Reward Power
– Legitimate Power
– Expert Power
– Referent Power – how strongly members would like to be associated with the partner
MG 220 Marketing Management 10

11. MG 220 Marketing Management
MBA 10
Fall 2010
Muhammad Talha Salam, Asst. Professor
talha.salam@nu.edu.pk
Access it online: www.slideshare.net/talhasalam
Part 6:
Delivering Value
> Channel integration and systems: SKIM
> E-Commerce Marketing Practices: SKIM
> Retailing
> Private Labels
> Wholesaling
> Market Logistics: SKIM
Class Presentation | Session 27 | 15 Nov 2010