Designing and Managing Integrated Marketing Channels

Transcription

1 Designing and Managing Integrated Marketing Channels

2 Marketing Channels Sets of interdependent organizations participating in the process of making a product or service available for use or consumption. Most producers do not sell their goods directly to final users. Between producers and final users stands one or more marketing channels, a host of marketing intermediaries performing a variety of functions.

3 Intermediaries Merchants Agents Facilitators

4 Merchants (wholesalers and retailers) buy, take title to, and resell merchandise. Age ts rokers, a ufa turers represe tati es, sales age ts sear h for customers and may negotiate on the producers behalf, but do not take title to the goods. Facilitators (shippers, independent warehouses, banks, ad agencies) assist in distribution, but do not take title to goods nor do the negotiate purchases or sales.

5 Importance of Channels Ultimate Selling Price 30% - 50% Channel Members 5% - 7% Advertising

6 Marketing channel decisions are among the most critical decisions fa i g a age e t. The o pa y s hose ha el s profou dly affect all other marketing decisions. In the United States, channel members collectively have earned margins that account for 30 percent to 50 percent of the ultimate selling price. In contrast, advertising typically has accounted for less than 5 percent to 7 percent of the final price.

7 Importance of Channels Push strategy Pull strategy

8 A push strategy uses the a ufa turer s resour es to i du e intermediaries to carry, promote, and sell the product to end users. A push strategy is appropriate when there is low brand loyalty in a category, brand choice is made in the store, the product is an impulse item, and product benefits are well understood. In a pull strategy the manufacturer persuades consumers to demand the product from intermediaries, thus inducing the intermediaries to order it. Pull strategy is appropriate when there is high brand loyalty and high involvement in the category, when consumers are able to perceive differences between brands, and when they choose the brand before they go to the store. A push strategy is more effective when accompanied by a pull strategy that activates consumer demand. Top marketing companies such as CocaCola, Intel, and Nike employ both push and pull strategies.

9 Multichannel Marketing (Hybrid) Internet Sales Force Telemarketin g Direct Mail

10 Firm use multiple marketing channels to reach customer segments. HP has used its sales force to sell to large accounts, outbound telemarketing to sell to medium-sized accounts, direct mail with an inbound number to sell to small accounts, retailers to sell to still smaller accounts, and the Internet to sell specialty items. Companies that manage hybrid channels must make sure their channels work ell together a d at h ea h target usto er s preferred ays of doi g business. Customers expect channel integration, which allows them to: Order a product online and pick it up at a convenient retail location Return an online-ordered product to a nearby store of the retailer

11 Value Networks A value network is a system of partnerships and alliances that a firm creates to source, augment, and deliver its offeri gs. It i ludes a fir s suppliers a d its suppliers suppliers, and its immediate customers and their end customers, as well as relationships with others such as

12 Role of Marketing Channels Merchants Agents Facilitators Contacts Experience Specialization Scale of operation Companies use intermediaries when they lack the financial resources to carry out direct marketing, when direct marketing is not feasible, and when they can earn more by doing so. The most important functions performed by intermediaries are

13 Channel Functions and Flows Forward Flow Transportation, communication Information, negotiation, finance, risk taking Backward Flow Ordering, payment Time Place Possessio n

14 Members of the marketing channel perform a number of key functions. Some of these functions (storage and movement, title, and communications) constitute a forward flow of activity from the company to the customer; other functions (ordering and payment) constitute a backward flow from customers to the company. Still others (information, negotiation, finance, and risk taking) occur in both directions.

15 Five Marketing Flows in the Marketing Channel

16 Channel Levels Zero-level (Direct marketing) channel

17 Manufacturers have many alternatives for reaching a market. They can sell direct or use one-, two-, or three-level channels. Deciding which type(s) of channel to use calls for analyzing customer needs, establishing channel objectives, and identifying and evaluating the major alternatives, including the types and numbers of intermediaries involved in the channel. The most basic marketing channel is the zero-level or direct marketing channel. Includes telemarketing, direct mail, door-to-door, TV selling (infomercials), and home parties (such as Avon, Tupperware, etc.). A one-level channel contains one selling intermediary, such as a retailer. A two-level channel contains two intermediaries. In consumer markets, these are typically a wholesaler and a retailer.

18 Channel Levels Consumer

19 Channel Levels B2B

20 Channel-Design Decisions Customer wants and needs Objectives and constraints Identifying and evaluate alternatives To design a marketing channel system, marketers analyze customer needs and wants, establish channel objectives and constraints, and identify and evaluate major channel alternatives.

21 Customer Needs and Wants Price Product Assortment Convenience Shopping Goals Economic Social Experiential

22 Different consumers have different needs during the purchase process. One study of European costumers found that (1)Service/quality customers cared most about the variety and performance of products and service; (2)Price/value customers were most concerned about spending wisely; (3)Affinity customers primarily sought stores that suited people like themselves or groups they aspired to join.

23 What do European Consumers Value Figure shows that customer profiles differ across three markets: In France, shoppers stressed service and quality, in the United Kingdom, affinity,

24 Channels Service Outputs Spatial Convenience Waiting/ Deliver Time Service Backup Product Variety Lot Size

25 Channels produce five service outputs: 1.Lot size The number of units the channel permits a typical customer to purchase on one occasion. 2.Waiting and delivery time The average time customers wait for receipt of goods. 3.Spatial convenience The degree to which the marketing channel makes it easy for customers to purchase the product. 4.Product variety The assortment provided by the marketing channel.

26 Objectives and Constraints Service Costs Nonstandard Products Bulky Products Installation /

27 Marketers should state their channel objectives in terms of service output levels and associated cost and support levels. They can identify several market segments based on desired service and choose the best channels for each. Channel objectives vary with product characteristics. Marketers must adapt their channel objectives to the larger environment.

28 Identify Channel Alternatives Sales Force Distributors Direct Mail Channel Alternatives Telemarketing Type of Intermediaries Number of Intermediaries Terms and Responsibilities

29 Each channel from sales forces to agents, distributors, dealers, direct mail, telemarketing, and the Internet has unique strengths and weaknesses. Sales forces can handle complex products and transactions, but they are expensive. The Internet is inexpensive but may not be as effective with complex products. Distributors can create sales, but the company loses direct contact with customers. Several lie ts a share the ost of a ufa turers reps, ut the selli g effort is less intense than company reps provide. Channel alternatives differ in three ways: types of intermediaries, number needed, and terms and responsibilities of each.

30 Identify Channel Alternatives Channel Alternatives Type of Intermediaries Number of Intermediaries Terms and Responsibilities

31 Each channel from sales forces to agents, distributors, dealers, direct mail, telemarketing, and the Internet has unique strengths and weaknesses. Sales forces can handle complex products and transactions, but they are expensive. The Internet is inexpensive but may not be as effective with complex products. Distributors can create sales, but the company loses direct contact with customers. Se eral lie ts a share the ost of a ufa turers reps, ut the selling effort is less intense than company reps provide. Channel alternatives differ in three ways: types of intermediaries, number needed, and terms and responsibilities of each.

32 Types of Intermediaries Satellite Radio Manufacturer Dealers OEMs Ray s Cars Direct to Consumers Satellite radio manufacturer have multiple options to sell its product. OEMs (Car manufacturers); dealers; or consumers through various channels such as direct mail,

33 Number of Intermediaries Exclusive Distribution Intensive Distribution Selective Distribution

34 Exclusive distribution limits the number of intermediaries. Exclusive deals are becoming a mainstay for specialists looking for an edge in markets increasingly driven by price. Selective distribution relies on only some of the intermediaries willing to carry a particular product. Company does not need to worry about having too many outlets; while gaining adequate market coverage. Intensive distribution places the goods or services in as many outlets as possible. This strategy serves well for products consumers buy frequently or in a variety of locations.

35 Evaluating Channel Alternatives Economic Criteria $4.07 (Face-to-Face Transaction) $0.27 (ATM Transaction) $0.54 $0.01 (Phone Transaction) (Online Transaction)

36 Each channel alternative needs to be evaluated against economic, control, and adaptive criteria. Economic Criteria: Each channel alternative will produce a different level of sales and costs. Firms will try to align customers and channels to maximize demand at the lowest overall cost. The first step is to estimate how many sales each alternative will likely generate. The next step is to estimate the costs of selling different volumes through each channel. The final step is comparing sales and costs.

37 Value-Adds vs. Costs of Different Channels Figure shows how six different sales channels stack up in terms of the value added per sale and the cost per transaction.

38 Break-Even Cost Chart: Company Sales Force vs. Sales Agency

39 Channel-Management Decisions Training and Motivating Selecting Channel Members Modifying Evaluating

40 Effective channel management calls for selecting intermediaries and training and motivating them. The goal is to build a long-term partnership that will be profitable for all channel members. When select channel members, producers should determine what characteristics distinguish the better intermediaries. Carefully implemented training, market research, and other capabilityuildi g progra s a oti ate a d i pro e i ter ediaries performance. Produ ers ust periodi ally e aluate i ter ediaries perfor a e agai st set standards in promotional and training programs.

41 Channel Integration and Systems Horizontal Marketing Systems Integrating Multichannel Marketing Systems Best Buy Blockbuster Disney Amazon Vertical Marketing Systems.com Disney Store

42 Marketing channels are characterized by continuous and sometimes dramatic change. Three important trends are: A vertical marketing system (VMS) includes the producer, wholesaler(s), and retailer(s) acting as a unified system. One channel member, the channel captain, owns or franchises the others or has so much power that they all cooperate. In a horizontal marketing system, two or more unrelated companies put together resources or programs to exploit an emerging marketing opportunity. The companies might work together on a temporary or permanent basis or create a joint venture company. In an integrated marketing channel system, the strategies and tactics of selling through one channel reflect the strategies and tactics of selling

43 The Hybrid Grid Companies need to think through their channel architecture and determine which channels should perform which functions. Figure shows a simple grid to help make channel architecture decisions.

44 Conflict, Cooperation & Competition Channel Coordination Channel coordination occurs when channel members are brought together to advance the goals of the channel, as opposed to their own potentially incompatible goals. Channel Conflict Channel conflict is generated when o e ha el e er s a tio s pre e t another channel from achieving its

45 Channel Conflict Multichannel Conflict Vertical Channel Conflict Horizontal Channel Conflict

46 Horizontal Channel Conflict occurs between channel members at the same level. Some Pizza Inn franchisees complained about others cheating on ingredients, providing poor service, and hurting the overall brand image. Vertical Channel Conflict occurs between different levels of the channel. When Estée Lauder set up a Web site to sell its Clinique and Bobbi Brown brands, the department store Dayton Hudson reduced its space for Estée Lauder products Multichannel Conflict exists when the manufacturer has established two or more channels that sell to the same market. When Goodyear began selling its popular tire brands through Sears, Walmart, and Discount Tire, it angered its independent dealers and eventually placated them by

47 Managing Channel Conflict Employee Exchange Dual Compensation Legal Recourse Mediation

48 All marketing channels have the potential for conflict and competition resulting from such sources as goal incompatibility, poorly defined roles and rights, perceptual differences, and interdependent relationships. There are a number of different approaches companies can take to try to manage conflict.

49 E-Commerce Marketing Practices Brick-and-Click Firms B2B E-Commerce Pure-Click

50 E-commerce has grown in importance as companies have adopted ri k-and- li k ha el syste s. Cha el i tegratio ust recognize the distinctive strengths of online and offline selling and maximize their joint contributions. There are several kinds of pure-click companies: search engines, Internet service providers (ISPs), commerce sites, transaction sites, content sites, and enabler sites. B2B sites make markets more efficient, giving buyers easy access to a great deal of information, change the supplier customer relationship in profound ways. Adding an e-commerce channel creates the possibility of a backlash from retailers, brokers, agents, and other intermediaries. Managing

51 M-Commerce Marketing Practices M-Commerce Text Promotions GPS Features

52 An area of increasing importance is m-commerce and marketing through cell phones and PDAs that allow people to connect to the Internet and place online orders on the move. The existence of mobile channels and media can keep consumers connected and interacting with a brand throughout their day-to-day lives. GPS-type features can help identify shopping or purchase opportunities for consumers for their favorite brands.