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Basic Marketing - Place

The document discusses the nature and importance of marketing channels, defining them as independent organizations that facilitate product availability. It outlines the roles of channel members, their value addition, and various distribution strategies, including direct and indirect channels. Additionally, it covers channel behavior, design decisions, and the need for adaptation in international distribution channels.

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24 views26 pages

Basic Marketing - Place

The document discusses the nature and importance of marketing channels, defining them as independent organizations that facilitate product availability. It outlines the roles of channel members, their value addition, and various distribution strategies, including direct and indirect channels. Additionally, it covers channel behavior, design decisions, and the need for adaptation in international distribution channels.

Uploaded by

Trâm Phùng
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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5.

Place
TABLE OF CONTENTS
5. 5. 5.
1
The Nature and
Importance of
2
Channel Behavior
3
Channel Design
Marketing Channels and Organization Decisions

5. 5.
4
Channel
Management
5
Public Policy and
Distribution
Decisions Decisions
5.
1
The Nature and
Importance of Marketing
Channels
5.1. The Nature and Importance of Marketing
Channels

Marketing Channel Defined


A marketing channel (or distribution channel) is a set of
independent organizations that help make a product or
service available for use or consumption by the consumer
or business users.
1. What are distribution, distribution channel, distribution
channel strategies?
2. Should producers use intermediaries? Why/why not?
3. What are agent, wholesaler, retailer?
4. Analyze advantages and disadvantages of each
contribution channel?
5.1. The Nature and Importance of Marketing
Channels

How Channel Members Add Value


● Producers use intermediaries because they create greater
efficiency in making goods available to target markets.
● Intermediaries offer the firm more than it can achieve on its
own through their contacts, experience, specialization, and
scale of operations.
● From an economic view, intermediaries transform the
assortments of products into assortments wanted by
consumers.

○ Producers – narrow assortments of products in large


quantities

○ Consumers – broad assortments of products in small


5.1. The Nature and Importance of Marketing
Channels
How Channel Members Add Value
● Information: Gathering and distributing marketing research and
intelligence
● Promotion: Development and spreading persuasive
communications about an offer
● Contact: Finding and communicating with prospective buyers
● Matching: Shaping and fitting the offer to the buyer’s needs,
including activities such as manufacturing, grading, assembling,
and packaging
● Negotiation: Reaching an agreement on price and other terms of
the offer so that ownership or possession can be transferred
● Physical distribution: Transporting and storing goods
● Financing: Acquiring and using funds to cover the costs of
carrying out the channel work
● Risk taking: Assuming the risks of carrying out the channel work
5.1. The Nature and Importance of Marketing
Channels
Number of Channel Members
● Channel level refers to each layer of marketing
intermediaries that performs some work in bringing the
product and its ownership closer to the final buyer.

– Direct marketing channel has no intermediary levels;


the company sells directly to consumers.

– Indirect marketing channels contain one or more


intermediaries.
● From the producer’s point of view, a greater number of
levels means less control and greater channel
complexity
5.2
Channel Behavior
and Organization
5.2. Channel Behavior and
Organization

Channel Behavior
● A marketing channel consists of firms that
have partnered for their common food, with
each member playing a specialized role.
● Channel conflict refers to disagreement
over goals, roles, and rewards by channel
members.
– Horizontal conflict is conflict among members at the same
channel level.

– Vertical conflict is conflict between different levels of the


same channel.
5.2. Channel Behavior and
Organization

Conventional Distribution Systems


● Consist of one or more independent producers,
wholesalers, and retailers.
● Each seeks to maximize its own profits and there is
little control over the other members.
● No formal means for assigning roles and resolving
conflict.
5.2. Channel Behavior and
Organization

Vertical Marketing Systems


● Vertical marketing systems (VMS) provide channel
leadership and consist of producers, wholesalers, and
retailers acting as a unified system and consist of:
– Corporate vertical marketing system integrates successive stages
of production and distribution under single ownership.
– Contractual vertical marketing system consists of independent
firms at different levels of production and distribution who join
together through contracts to obtain more economies or sales impact
than each could achieve alone. Most common form is the franchise
organization
– Administered vertical marketing system has a few dominant
channel members without common ownership. Leadership comes from
size and power.
5.2. Channel Behavior and
Organization

Horizontal Marketing Systems


● Horizontal marketing systems include two or more
companies at one level that join together to follow a new
marketing opportunity.
● Companies combine financial, production, or marketing
resources to accomplish more than any one company could
alone.
Multichannel Distribution Systems
● Hybrid marketing channels exist when a single firm sets
up two or more marketing channels to reach one or more
customer segments.
5.2. Channel Behavior and
Organization

A multichannel distribution system


5.2. Channel Behavior and
Organization

Hybrid Marketing Channels


● Advantages
○ Increased sales and market coverage

○ New opportunities to tailor products and services


to specific needs of diverse customer segments
● Challenges
○ Hard to control

○ Create channel conflict


5.2. Channel Behavior and
Organization

Changing Channel Organization


● Disintermediation occurs when product or
service producers cut out intermediaries and go
directly to final buyers, or when radically new
types of channel intermediaries displace
traditional ones.
5.
3
Channel
Design Decisions
5.3. Channel Design Decisions

Analyzing Consumer Needs


● Designing a channel system requires:

1. Analyzing consumer needs

2. Setting channel objectives

3. Identifying major channel alternatives

4. Evaluation
5.3. Channel Design Decisions
Analyzing Consumer Needs
● Designing a marketing channel starts with finding out what
target consumers want from the channel.
Setting Channel Objectives
in terms of:
● Targeted levels of customer service
● What segments to serve
● Best channels to sue
● Minimizing the cost of meeting customer service
requirements
Objectives are influenced by
● Nature of the company
● Marketing intermediaries
● Competitors
5.3. Channel Design Decisions

Identifying Major Alternatives


● In terms of
○ Types of intermediaries
○ Number of intermediaries
○ Responsibilities of each channel member
5.3. Channel Design Decisions

Identifying Major Alternatives


Types of intermediaries refers to channel
members available to carry out channel
work. Examples include
○ Company sales force

○ Manufacturer’s agency -are independent firms whose


sales forces handle related products from many
companies in different regions or industries.

○ Industrial distributors
5.3. Channel Design Decisions
Identifying Major Alternatives
Number of marketing intermediaries to use at each level
■ Intensive distribution - a strategy used by producers of
convenience products and common raw materials in which
they stock their products in as many outlets as possible.
■ Exclusive distribution - a strategy in which the producer
gives only a limited number of dealers the exclusive right to
distribute products in territories, e.g. Luxury automobiles and
High-end apparel
■ Selective distribution - a strategy when a producer uses
more than one but fewer than all of the intermediaries willing
to carry the producer’s products, e.g., Televisions and
Electrical appliances
5.3. Channel Design Decisions

Identifying Major Alternatives


Responsibilities of Channel Members -
Producers and intermediaries need to agree
on
○ Price policies

○ Conditions of sale

○ Territorial rights

○ Services provided by each party


5.3. Channel Design Decisions

Evaluating the Major Alternatives


Each alternative should be evaluated against
● Economic criteria compares the likely sales
costs and profitability of different channel
members.
● Control criteria refers to channel members’
control over the marketing of the product.
● Adaptive criteria refers to the ability to
remain flexible to adapt to environmental
changes.
5.3. Channel Design Decisions

Designing International Distribution


Channels
● Channel systems can vary from country to
country.
● Must be able to adapt channel strategies
to the existing structures within each
country.

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