01-marketing channel concepts
TRANSCRIPT
Marketing Channel Concepts
byAnoop Kumar Gupta
MAIT1
Essence of Marketing Channels
►Making products and services conveniently available to customers when, where, and how they want them.
►It is through marketing channels that the vast array of customer demand is satisfied.
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4P’s of Marketing 4P’s of Marketing
1. Examination of the “place” as a source of competitive advantage
2. Examine “place” as a key component of Strategic Marketing, that offer to the firm an advantage that cannot be easily copied by competition
WhyWhy the growing importance of the growing importance of marketing channels?marketing channels?
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1. The explosion of information technology and E-commerce
2. A greater difficulty in gaining a sustainable competitive advantage
3. The growing power of distributors, especially retailers in marketing channels
4. The need to reduce distribution costs
Objective 1:
11.. 2. A greater difficulty in gaining a sustainable competitive
advantage 3. The growing power of distributors, especially retailers
in marketing channels 4. The need to reduce distribution costs
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Yahoo! eBay
Amazon.com
The prediction:Disintermediation — reduction of number of intermediaries
The reality:Reintermediation—evolution of a new type of intermediary
The explosion of information technology and E-commerceThe explosion of information technology and E-commerce
Occurred as new types of middlemen called infomediaries such as eBay and Yahoo! emerged to connect producers to consumers.
11Disintermediation andDisintermediation andReintermediationReintermediation
Disintermediation Reintermediation
Intermediaries becomesuperfluous because producers
gain exposure to vast numbers of customers in cyberspace
Shifting, changing, or addingmiddlemen to the channel
Objective 4:
Amazon.comebayDell
Computer Corp.
1. The explosion of information technology and E- commerce 2.2. 3. The growing power of distributors, especially retailers in marketing channels 4. The need to reduce distribution costs
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A greater difficulty in gaining a sustainable competitive advantageA greater difficulty in gaining a sustainable competitive advantage
Place (distribution), or Marketing
Channel Strategy Sustainable competitive advantage
Potential for gaining competitive advantage because place is more difficult for competitors
to copy
1. The explosion of information technology and E-commerce 2. A greater difficulty in gaining a sustainable competitive advantage 3.3. 4. The need to reduce distribution costs
The growing power of distributorsThe growing power of distributors
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Power retailers as of consumer marketsGatekeepers
Act as buying agents for customers rather than as selling agents for manufacturers
Economic power has shifted from the producers of goods to the distributors of goods. These distributors now form and play a role as “gatekeepers” for the consumers acting as buying agents and selecting what products the consumer “sees”. Examples include: Home Depot, Toys ‘R’ Us, and other “category killers”.
1. The explosion of information technology and E-commerce 2. A greater difficulty in gaining a sustainable competitive advantage 3. The growing power of distributors 4.4.
The need to reduce distribution costsThe need to reduce distribution costs
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Marketing channels are the most recent target for
reducing distribution costs.
The focus is on channel structure and management.
Distribution costs for many manufacturing firms often meet or exceed the costs of manufacturing or raw materials. In order to reduce these costs manufacturers must begin the process of focusing attention on marketing channel structure more than they have in the past.
What is a marketing channel?What is a marketing channel?
External contactual organization that management operates to achieve its distribution objectives
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Outside the firm
Firm involved in negotiatory functions
Management’s involvement in the process
Goals that change, causing variations
in contactual organization & the way in which
management operates it
Objective 2:
Producer’s perspective –“path taken to move from producer to consumer
What is a contactual organization ?
Firms or parties who are involved in negotiatory functions as a product or service moves from the producer to its ultimate user.
Negotiatory functions consists of buying, selling, and transferring title to products or services.
What is a channel manager?What is a channel manager?
Anyone in a firm or organization who is involved
in marketing channel decision making
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Objective 3: 11How does marketing channel strategy relate to How does marketing channel strategy relate to
the the rest of the marketing mix?rest of the marketing mix?
Marketing Mixor
the four Ps
Challenges
Product Limited ability to gain and hold competitive advantage
Price Price wars erode profitability & provide unstable basis for sustaining competitive
advantage
Promotion Expensive and short-lived
Place (Distribution)
Marketing channels support & enhance other Ps to meet demands of target
markets
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The change of focus to channel strategyThe change of focus to channel strategy
• Creates competitive advantage with long-term viability
• Builds strong relationships between manufacturers and channel members
• Based on trust, confidence, and people power
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Channel Strategy versus Logistics Management
• Channel strategy and logistics management comprise the distribution variable of the marketing mix.
• Channel strategy is concerned with the entire process of setting up and operating the contactual organizations that are responsible for meeting the firm’s distribution objectives.
• Logistics management more narrowly focuses on providing product availability at the appropriate place and time in the marketing channel.
• Channel strategy must first be established before logistics management should be considered. Logistic management is a subsidiary of channel management.
Channel Strategy and Logistics ManagementChannel Strategy and Logistics Management
Part of distribution variable
• Concerned with entire process of starting and operating contactual organization
• Formulated before logistics management
Focused specifically on providing product availability at appropriate time & place
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Objective 4: 11
Marketing Channel FlowsMarketing Channel Flows
Product Flow
Promotion Flow
Information Flow
Ownership Flow
Negotiation Flow
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Product FlowProduct Flow
Manufacturer
Transportation Company
Wholesalers
Retailers
Consumers
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Manufacturer
Wholesalers
Retailers
Consumers
Negotiation FlowNegotiation Flow
Ownership FlowOwnership Flow11
Manufacturer
Wholesalers
Retailers
Consumers
Information FlowInformation Flow11
Manufacturer
Wholesalers
Retailers
Consumers
Transportation Company
Promotion FlowPromotion Flow11
Manufacturer
Wholesalers
Retailers
Consumers
Advertising Agency
Distribution through intermediariesDistribution through intermediaries
Objective 5: 11
Technology the Internet
Economic Specialization &Considerations Division of Labor
Contactual Efficiency
Factors that determine the role of intermediaries
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Specialization & Division of LaborSpecialization & Division of Labor
Distribution Tasks Production Tasks
Distributed interorganizationally
Distributed intraorganizationally
Objective 6: 11
Channel Structure Channel Structure v.v. Ancillary Ancillary StructureStructure
Channel Structure
The group of channel members to which aset of distribution tasks has been
allocated
Ancillary Structure
The group of institutions that assist channel members in performing
distribution tasks
Why are single-channel
structures currentlythe exception?
Why is managing the ancillary structure
most likely to be less complex than
managing the channel structure?
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Channel Structure Channel Structure v.v. Ancillary Structure Ancillary Structure
• Channel structure: The group of channel members to which a set of distribution tasks has been allocated.
• The channel manager is faced with allocation decisions, how to allocate or structure the task of distribution.
• Multi-channel strategy is when the firm has chosen to reach its target consumer through more than one channel. With the advent of E-commerce, many firms have opted to use multi-channel strategies to reach their target market.
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Channel Structure Channel Structure v.v. Ancillary Structure Ancillary Structure
• Ancillary structure: The group of institutions (facilitating agents) that assist channel members in performing distribution tasks.
• These ancillary members provide services to the channel members after the basic channel decisions have already been made.
• Examples of ancillary members include: banks, insurance agents, storage agents, contractors, repair shops, etc.
• Channel management must also deal with these ancillary members who do not have as great a stake in the channel as channel members but who are nevertheless key components in ensuring that the product is available to the consumer.