marketing channels and value networks

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MARKETING CHANNELS AND VALUE NETWORKS

Marketing Management 2012

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Introduction

Most producers do not sell their goods directly to the final users; between them stands a set of intermeriaries performing a variety of functions

These intermediaries costitute a marketing channel (also called a trade channel or distribution channel)

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Introduction

Marketing channels are sets of interdependent organizations participating in the process of making a product or service available for use or consumption

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The Importance of Channels

o Marketing channels also represent a substantial opportunity cost

o One of their chief roles is to convert potential buyers into profitable customer,

o Marketing channels must not just serve markets, they must also make markets

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Push versus Pull Strategy1

A push strategy uses the manufacturer’s sales force, trade promotion money, or other means to induce intermediaries to carry, promote, and sell the product to end users

A push strategy is particularly 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

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Push versus Pull Strategy2

In a pull strategy the manufacturer uses adevertising, promotion, and other forms of communication to persuade consumers to demand the product from intermediaries, thus to inducing the intermediaries to order it

Pull strategy is particularly 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

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Channel Member Functions

Gather information about potential and current customers, competitors, and other actors and forces in the marketing environment

Develop and disseminate persuasive communications to stimulate purchasing

Negotiate and reach agreements on price and other terms so that transfer of ownership or possesion can be affected

Place orders with manufacturers

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Channel Member Functions

Acquire the funds to finance inventories at different levels in the marketing channel

Assume risks connected with carrying out channel work

Provide for the successive storage and movement of physical products

Provide for buyers’ payment of their bills through banks and other financial institutions

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Major Factors in Selecting a Marketingt Channel

1) Market,2) Product,3) Organizational,4) Competitive

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General Categories of Distribution Intensity

Intensive distribution seeks to distribute a product through all available channels in a trade area,

Selective distribution chooses a limited number of retailers in a market area,

Exclusive distribution grants exclusive rights to a wholesaler or retailer to sell a manufacturer’s products

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Types of Channel Conflict

Horizontal conflict results from disagreements among channel members at the same level

Vertical conflict occurs when channel members at different level disagree

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Elements of Physical Distribution

customer service, transportation, inventory control, materials handling and protective packaging, order processing, and warehousing

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The Types of Warehouse

Storage warehouses; hold goods for moderate to long periods of time to balance supply and demand

Distribution warehouse; assemble and redistribute goods as quickly as possible

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Insight : Jurnal Studi Manajemen & Organisasi

• A research article by Sri Rahayu Tri Astuti and Agustinus Prayudhanto (Juli 2006)

• Consumer loyalty : 0,203 store location + 0,260 product + 0,306 price + 0,071 advertising and promotion + 0,115 outlet athmosphere + 0,185 service

• Adjusted R square = 0,584

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rizalharimagnadi@undip.ac.idManagement Departement

Faculty of Economics and BusinessDiponegoro University

Semarang