11.distribution strategy

8/8/2019 11.Distribution Strategy

http://slidepdf.com/reader/full/11distribution-strategy 1/34

MARKETING STRATEGY

11. Designing and managing

Integrated Marketing Channels



CH APTER QUESTIONS

´ What is a marketing channel system and value

network?

´ What work do marketing channels perform?

´ How should channels be designed?

´ What decisions do companies face in managing their

channels?

´ How should companies integrate channels andmanage channel conflict?

´ What are the key issues with e-commerce?



WH AT IS A MARKETING CH ANNEL?

marketing channel system is the particular

set of interdependent organizations involved in

the process of making a product or service

available for use or consumption.

Marketing channels must not just markets, they mustalso markets



BUYER EXPECTATIONS FOR

CH ANNEL INTEGRATION

´ Ability to order a product online and pick it up at a

convenient retail location

´ Ability to return an online-ordered product to a nearby

store

´ Right to receive discounts based on total online and

offline purchases

EX: HARLEY DAVIDSON



C ATEGORIES OF BUYERS

´

Habitual shoppers: purchase from the sameplaces in the same manner over time´ High value deal seekers: know their needs and

channel surf a great deal before buying at thelowest possible price

´

Variety-loving shoppers: gather information inmany channels and take advantage of high touchservices ,and then buy in their favorite channel,regardless of price

´ High-involvement shoppers: gather information inall channels make their purchase in a low costchannel, but take advantage of customer supportfrom a high touch channel



TYPES OF SHOPPERS

´ Service/quality customers

´ Price/value customers

´ Affinity customers-a tight bond between

customers and company ,when affinity is

high cost of new product launch goes down



SHOULD THE 4 P¶S BE

REPLACED?

´ Solutions

´ Information

´ Value

´ Access



INCREASING EFFICIENCY

DIRECT MARKETING

REDUCE THE NUMBER OF CONTACTS AND THE WORK



CH ANNEL MEMBER

FUNCTIONS

´ Gather information

´ Develop and disseminate persuasive communications

´ Reach agreements on price and terms

´ Assume risks

´ Provide for storage

´ Provide for buyers· payment of their bills

´ Oversee actual transfer of ownership



FIGURE MARKETING CH ANNEL FLOWS



FIGURE

CONSUMER MARKETING

CH ANNELS



FIGURE INDUSTRIAL

MARKETING CH ANNELS



DESIGNING A

MARKETING CH ANNEL SYSTEM

´ Analyze customer needs

´ Establish channel objectives

´ Identify major channel alternatives´ Evaluate major channel alternatives



CH ANNEL SERVICE OUTPUTS

´ Lot size: the number of units the channel permits atypical customer to purchase on one occasion

´ Waiting/delivery time: customers prefer fasterdelivery channels

´ Spatial convenience: customers prefer convenience-BATA retail outlet

´ Product variety: customers prefer greater assortmentbecause more choices increase the chance of

finding their need´ Service backup: the add on services like ²

credit,delivery,installation,repairs provided by thechannel



IDENTIFYING CH ANNEL ALTERNATIVES

´ Types of intermediaries-SHGs,-OPERATION

SHAKTI,e-choupal

´

Number of intermediaries´ Terms and responsibilities



NUMBER OF INTERMEDIARIES

´ Exclusive-more dedicating and knowledgeableselling Involves limiting distribution to a singleoutlet. The product is usually highly priced, andrequires the intermediary to place much detail in itssell. An example of would be the sale of vehicles

through exclusive dealers.

´ Selective-limited number of outlets orintermediaries ²DISNEY ²videos through rental

store,online,catalogs ,TITANW

ATCHES

´ Intensive-PLACING the goods in as many outlets aspossible- tobacco products, snack foods,soap



FIGURE 15.4 THE VALUE-ADDS VERSUS COSTS OF

DIFFERENT CH ANNELS



FIGURE BREAK-EVEN CH ART FOR THE CHOICE BETWEEN A

COMPANY SALES FORCE AND MANUFACTURER¶S SALES AGENCY



TERMS AND RESPONSIBILITIES

OF CH ANNEL MEMBERS

´ Price policy-price lists, schedule of

discounts for intermediaries

´ Condition of sale-payment terms andproducer guarantees

´ Distributors· territorial rights

´Mutual services and responsibilities-McDonald's franchisees



CH ANNEL-MANAGEMENT DECISIONS

´ Selecting channel members

´ Training channel members

´ Motivating channel members

´ Evaluating channel members

´ Modifying channel members



MOTIVATING-CH ANNEL POWER

´ Coercive-manufacturer threaten to withdrawrelationship if intermediaries fail to co-operate

´ Reward-manufacturer offer intermediate an extrabenefit for performing specific acts butintermediaries may ask for reward every time for

certain behavior´ Legitimate-manufacturer requests a behavior that is

warranted under the contract

´ Expert-the manufacturer has special knowledgethat the intermediaries value but if this expertisepassed to intermediaries then power weakens

´ Referent-intermediaries are proud to be associatedwith manufacturer ²IBM,CATERPILLAR



CH ANNEL INTEGRATION AND SYSTEMS

Vertical marketing systems

´ Corporate VMS-UNDER a single ownership-BPCL

´ Administered VMS-co-ordinates successive stages of production and distribution through the size and power of one of the members-P&G

´ Contractual VMS-wholesaler sponsored voluntary chains,retailer co-operatives, franchise organizations

Horizontal marketing systems-two or more unrelatedcompanies put together resources to exploit an emerging marketing opportunity-HLL with Pepsi for Lipton's ready to

drink and other beverages Multichannel systems-when a single firm uses 2 or more

marketing channels to reach one or more customersegments



FIGURE 15.6 THE HYBRID GRID



WH AT IS CH ANNEL

CONFLICT?

´

Channel conflict occurs when one member·s actionsprevent another channel from achieving its goal.

´ Types of channel conflict

« Vertical-conflict between different levels within the samechannels ²PETROLEUM COMPANIES on commission

« Horizontal-members with in the same level within thechannel-dealers in operation of area conflict

« Multichannel -two or more channels that sell to the samemarket-ESCORTS trying to create parallel dealership for a

line of tractors in the early 1980s



C AUSES OF CH ANNEL CONFLICT

´ Goal incompatibility-manufacturer and dealeron profits

´ Unclear roles and rights-manufacturer salesforce and dealer·s sales force servicing same

territory-HP-personal computers

´ Differences in perception-manufacturer may beoptimistic about the short term economicoutlook and wants dealers to carry high

inventory´ Intermediaries· dependence on manufacturer-

AUTO dealers on pricing



TABLE STRATEGIES FOR MANAGING

CH ANNEL CONFLICT

´ Adoption of super ordinategoals-joint goals of members

´ Exchange of employees-GM·sdealer policy

´ Cooptation-support of otherorganization·s leaders as a board of directors

´ Diplomacy-to meet the counter partto resolve the conflicts

´ Mediation-by neutral 3rd party

´ Arbitration-to arbitrators- It is asettlement technique in which athird party reviews the case andimposes a decision that is legally

binding for both sides´ Legal recourse



Marketing mix in E-MARKETING

PRODUCT: LIMITED LIFE OF THE PRODUCT

PRICE: CONSTANT INNOVATION IN PRODUCTS,ONLINE

SAVES COST,TIME

PLACE: SAFE DELIVERY OF GOODS ,GLOBALISATION

PROMOTION: DIRECT INTERACTION BETWEEN

CONSUMERS AND SELLERS:



brick and mortar

businesses are

companies which have

a physical presence

(for example, a building

made of bricks andmortar) ³ which offer

face-to-face consumer

experiences.



Bricks-and-clicks is a business model by which a

company integrates both offline (bricks) and online(clicks) presences. It is also known as click-and-mortar

or clicks-and-bricks, as well as bricks, clicks and flips,

flips referring to catalogs.

For example, an electronics store may allow the user toorder online, but pick up their order immediately at a

local store, which the user finds using locator software.

Conversely, a furniture store may have displays at a

local store from which a customer can order an item

electronically for delivery.

BRICKS AND CLICKS FIRMS



1.Ranbaxy

2.Nokia

3.Samsung

4.LG

5.Imax

6.Indian railways

7.Airlines ²kingfisher,JET,INDIGO



CLICK ONLY FIRMS



B2B E-COMMERCE

´ SUPPLIERWEBSITES

´ Infomediaries-information about alternatives

´ Market makers-third parties create market by

linking buyers and sellers

´ Customer communities-websites where

buyers can swap stories about suppliers

products and services



TYPES OF E-COMMERCE

11.distribution strategy

Documents