MBA-I 2014-16

MBA-I 2014-16

Marketing Management - II
Module 3
Channel Management

Marketing Channel
Network of all parties involved in moving
products/services from producers to
consumers or customers

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Distribution
Essential part of
marketing: Making the
product/service
available to the
buyer/user

July 21, 2007

12 million copies
Worldwide launch at the stroke of midnight
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Flow
Material

Material

Manufacturer

Channel
member/s

Money
Information
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Customer

Channel Functions
Storing and transporting products
Financing
Breaking the bulk
Place order on manufacturers
Gather information customers,
competition, environment
Develop communications

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Value Networks
Channels add value through
o Gathering and processing information to
encourage transactions
o Creating efficient infrastructure to exploit
economies of scope and scale
o Absorbing risks
o Reducing information overload collaborative
filtering
o Product level
Delayed differentiation
Kitting

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Contact Efficiency
M1

M2

M3

M4

M5

M6

C1

C2

C3

C4

C5

C6

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36 contacts

Contact Efficiency
M1

M2

M3

M4

M5

M6

C4

C5

C6

R1

C1

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C2

C3

12 contacts

Channel Organisation
Conventional
o Each member is independent
o Self-regulating according to market forces

Vertical Marketing System (VMS)

o The producer takes the role of another member
o By acquisition or by creating its own capabilities

Horizontal
o Two or more members at the same level form alliance
share resources and services for better
performance

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Channel Strategies
Considerations on:
o Number of levels of intermediaries
o Form of organisation owned by the same firm or
interconnected individual firms
o Intensity of distribution how many distribution points in any
geographical area

Number of levels
No. of levels Control Reach
Low
High
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Margins

Distribution Intensity
Convenience products high intensity
Shopping products selective distribution
Luxury or high-ticket items exclusive
distribution

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Channel Design
All channel decisions must be aimed at
delighting the customer
Multichannel design
Balance between bricks and clicks convergence

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Channel Structures
Producer

Consumer
Direct

Producer

Intermediaries

Consumer

Indirect

Producer

Hybrid

Consumer
Intermediaries

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Intermediaries

Agents
Distributors
Wholesalers
Franchises
Retailers
Infomediaries

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Channel Considerations
Channel efficiencies
o Automation of back-office sales functions
o Personnel and accuracy enhancements

Current marketing intermediaries

o Disintermediation
o Re-intermediation
o Channel advantages for potential buyers
Customise contact as per buyers needs
Wide range of referral sources
Always open

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Effect of Internet
Pricing
o Buyers bargaining power
o Geographical advantages
o Commodification service-enrichment / branding

Sales force
o Complimentarity
o Customise product presentations
o Incentivise online initiatives

Promotion
o Search-engine marketing
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Channel Management
Conflict
o Power
o Trust

Goal-setting
Incentives
o Cash
o Non-cash
o Training

Channel leadership
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Channel Conflicts
Situation in which one member perceives
another member to be engaged in a
behaviour that is impeding from achieving
the goals
Vertical
o Across levels

Horizontal
o Along the same level

Multichannel
o Across channels
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Power
Ability to evoke change in anothers
behaviour
o One channel member controls the decision variables in the
marketing strategy of another member operating at a
different level

Types
o
o
o
o
o

Coercive power
Reward power
Expert power
Legitimate power
Referent power

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Logistics
Coordination of all activities related to
transportation or delivery of products /
services occurring within a single business
organisation
Supply Chain Management (SCM)
extension of logistics into inside and
outside the organisation

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Logistical Flows
Suppliers
Inbound
Logistics

Outbound
Logistics
Firm

Channel
intermediaries

Customers

Reverse Logistics
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Logistics Management
3PL (Third Party Logistics) firms
o Focus on core business
o Access to more sophisticated distribution networks and
technologies
o Cost reduction
o Holding inventory - warehousing

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Logistics Decisions
INVENTORY
How much to
make, store

PRODUCTION
What, how, when to
produce

INFORMATION
Basics for
decision
making

TRANSPORATTION
How, when to move
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LOCATION
Where to do
what

Retailing

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Retailing Strategy
Merchandise

Customer
service

Pricing

Target
Market
Atmosphere

Promotion

Location

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 Merchandise
o
o
o
o

Categories
Quality level
Breadth of selection
Emphasis on any particular brand

Promotion
o Positioning
o Media to be used broadcast, print, internet

Location
o Multiple or single?
o Distribution channels
o Online?
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Dimensions
Atmosphere
o
o
o
o

Environment
Colours and materials
Music
Aisles wide or narrow

Customer service

o Full service or self-service?

o Return policy
o Training needs of sales personnel

Pricing

o With respect to competition

o Frequency of price
promotions/sales
o Bargaining
o Credit cards

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Sephora

Champs Elysees, Paris

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Merchandise

Customer
service

Pricing

Target
Market
Atmosphere

Promotion

Location

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Exclusive
Beauty
coaches;
made-toorder
cosmetics

High; at
par with
dept stores

Sephora
Open-sell;
touch and
feel; black &
white
scheme

Word-ofmouth

Prime

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Retailer Categories
Categories

Description

Departmental
stores

Assortment of all types of goods; variety Spencers

in categories and breadth

Discount stores

Wide range of products; compete on

prices; less fashion-oriented brands

Kirana stores
(mom-and-pop)

Owned by individuals; personalised

services

Specialty stores

Focuses on a particular category

Body Line

Hypermarkets

Variety and huge volumes of

merchandise at low margins

Spencers
Hyper

Supermarkets

Self-service; grocery & limited non-food

products; follow EDLP pricing

Easyday

Category killers

Single category; very low prices

??

E-tailers

Online order booking; door delivery;

with or without COD

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Examples

Brand
Factory

Thank You!

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