Designing and Managing Integrated Marketing Channels

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Patience Pierce
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1 Designing and Managing Integrated Marketing Channels

2 OVER THE PAST THREE DECADES, THE OVERWHELMING EMPHASIS IN THE MARKETING MIX HAS BEEN ON: PRODUCT STRATEGY WITH PRICING STRATEGY AND PROMOTIONAL STRATEGY ALSO BEING STRESSED. BUT...

3 MARKETING CHANNEL STRATEGY (PLACE); THE FOURTH P IN THE MARKETING MIX HAS BEEN LARGELY NEGLECTED BUT THIS IS CHANGING...

4 MARKETING CHANNEL STRATEGY IS GROWING IN IMPORTANCE, WHY? REASONS Search for Sustainable Competitive Advantage Growing Power of Retailers in Marketing Channels The Need to Reduce Distribution Costs The Increased Role and Power of Technology

5 MARKETING CHANNELS The Internal (Own Sales force) or External(all kind of channel partners) organizations that management operates to achieve its distribution objectives (reaching the product to the end user).

6 WHAT IF YOU WANT TO BUY A TOOTHPASTE?

7 MAJOR ROLE OF AN INTERMEDIARY Time Place Possession

8 MARKETING CHANNEL LEVELS Manufacturer Manufacturer Manufacturer Retailer Distributor Retailer End User End User End User Zero Level One- Level Two- Level

9 MARKETING CHANNEL MEMBERS Carrying & Forwarding Agents (C&FAs) Distributors/Dealers Wholesalers Retailers

10 CARRYING &FORWARDING AGENTS Collecting the product Breaking the bulk & Dispatching it to the Distributor Take physical possession of the good but don t pay for it On contract of the company Remit value of the goods sold to the company

11 DISTRIBUTORS Invest in product by buying it form the company Work on margins. They may or may not get credit from the company but they give credit to wholesalers or retailers May be exclusive or shared with others

12 WHOLESALERS Deal with bulks They chose and decide what product they will sell Customers are; other wholesalers, retailers and institutions They negotiate about 15 days credit from the distributor and special offer on giving purchase request more than once a week Cash & Carry

13 RETAILERS French word - Retaillier to Break Bulk Shopkeepers set up shops at market place. Acts as a salesman Possesses more knowledge on customer needs and aspirations Strength lies in Availability & Visibility of the products they sell Extend credit to only 25% of their customers Also provides home delivery Helps in creating time, place and possession utility.

14 PATTERNS OF DISTRIBUTION Intensive Distribution: Product is made available in as many as outlets possible. Selective Distribution: Few Select outlets would be permitted to keep company s products. Exclusive Distribution: only one outlet will have the product also the outlets set up by the companies for their own products.

15 PROMINENT CHANNEL SYSTEMS Vertical Marketing System (VMS) Horizontal Marketing System Multi-channel Marketing System

16 Channel Management Decisions

17 SELECTING CHANNEL PARTNERS Through advertisements in the press Getting sales people to visit the markets & speak to the promising candidates. References from existing channel partners

18 CARRYING & FORWARDING AGENTS Location of the Warehouse Past Experience Financial Strength Transportation Facility Attitude, Commitment

19 DISTRIBUTORS Own Sales force Current Business Market Coverage Credit Extended in the market Infrastructure Availability Sales Performance

20 TRAINING CHANNEL PARTNERS On the job field training to the channel sales people. Classroom training to the distributor and his staff. Special meetings on the launch of new products. Training on submitting reports & maintaining records. Care of Co. products in the custody of the channel members.

21 MOTIVATING CHANNEL PARTNERS Referent Power Expert Power Legitimate Power Reward Power Coercive Power

22 EVALUATING CHANNEL MEMBERS Sales quota attainment Average inventory levels Treatment of Damaged goods, and cooperation in promotional and training programs. Underperformers need to be counseled, retrained, motivated or terminated

23 MODIFYING CHANNEL ARRANGEMENTS & DESIGNS Consumer buying patterns change, The market expands, Innovative distribution channels emerge and the product moves into the later stages in the PLC.

24 CHANNEL CONFLICT A situation of discord or disagreement between channel members for the same marketing channel system.

25 REASONS FOR CHANNEL CONFLICT Goal Incompatibility Unclear Role definition New Channel Partner Target Fixing exercise Extension of credit

26 TYPES OF CHANNEL CONFLICT Vertical channel conflict Conflict between two members at different levels within the same channel. A manufacturer having a conflict with a distributor is an example of vertical. Horizontal channel Conflict Involves conflict between members at the same level with in the channel. Multichannel conflict When the manufacturer has established two or more channels that sell to the same market.

27 SOME TERMS YOU SHOULD KNOW E-Commerce Use of electronic means & platforms to conduct a company s business. Pure-Click Companies Brick-and-Click Companies M-Commerce

15 Designing and Managing Integrated Marketing Channels

1 15 Designing and Managing Integrated Marketing Channels Chapter Questions What is a marketing channel system and value network? What work do marketing channels perform? How should channels be designed?