chapter 14 marketing

7/30/2019 Chapter 14 Marketing

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Designing and Managing

Value Networks and MarketingChannels


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Identify value networks and marketing-

channel systems.

Learn the type of work performed bymarketing channels.

Understand the decisions companies face

in designing, managing, evaluating, andmodifying channels.


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Identify trends taking place in channel

dynamics.

Learn how channel conflict can bemanaged.


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A Value Networkis a system ofpartnerships and alliances used by a firm

to source, augment, and deliver its productor service offerings.

Intermediaries that help get the product

from manufacturer to consumer or endusers form the Marketing Channel(s).


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Producers establish marketing channelsfor a variety of reasons: Producers lack financial resources necessary

for direct marketing Direct marketing is not feasible for many

offerings

Using channels frees money for investment in

main business Intermediaries are more efficient


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Channel members perform a number ofkey functions: Forward flow functions:

Develop / disseminate communication Store and move the physical products

Oversee transfer of ownership

Backward flow functions:

Place orders with manufacturers Facilitate payment of bills


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Other key functions performed by channelmembers include those that flow bothways:

Forward and backward flow functions:Gather information

Negotiate price and transfer of ownership

Finance inventories

Assume risk


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Channel levels vary according to thenumber of intermediaries: Zero-level (direct marketing) channel

One, two, and three-level channels Reverse flow channels

Service sector channels use agencies andlocations to access population to beserved.


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Push vs. pull strategyAnalyzing consumers desired service

output levels

Lot size, waiting time, product variety, spatialconvenience, service backup

Establishing objectives / constraints Identifying and then evaluating major

channel alternatives


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Channel Factors

Intermediary type Number of

intermediaries Terms and

responsibilities ofintermediaries

Merchants

Buy, take title, and resell

merchandise

Agents

Find customers, negotiate,do not take title to

merchandise

Facilitators

Aid in distribution, do not

negotiate or take title to

merchandise


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Channel Factors




Exclusive distribution

Severely limited distribution

Selective distribution

Some intermediaries willing

to carry good are selected

Intensive distribution

Offering is placed in as

many outlets as possible.


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Channel Factors




Price policies

Price list and schedule of

discounts

Conditions of sale

Payment terms andguarantees

Territorial rights

Define territory / terms

Services to be performed

by party


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Channel Alternative Evaluation Criteria: Economic criteria Sales and costs vs. added value

Control criteriaAdaptive criteria

After choosing a particular channelalternative, firms take several actions


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Motivate channel

members

Evaluate channel

members

Modify channel arrangements

Channel Development Process

Select channelmembers

Train channelmembers


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Channel systems are constantlyevolving and developing

Vertical Marketing Systems Corporate VMS

Administered VMS

Contractual VMS

Horizontal Marketing SystemsMultichannel Marketing Systems


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Conflict, Cooperation, & Competition

Types of conflict

Vertical, horizontal, and multichannel

Causes of conflict

Major causes: Goal incompatibility; unclear roles

and rights

Other potential causes exist

Managing channel conflict


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Cooptation

Diplomacy

Mediation

Arbitration

Managing Channel Conflict

Subordinate goaladoption

Exchange peoplebetween channellevels


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Legal and Ethical Issues in Channel

Relations

Two common distribution practices are legal

as long as they dont substantially lessen

competition:

Exclusive dealing

Tying agreements

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