Topic 10

Place

Girish Ketkar

MM-I @ BIIB 2014-16 (Semester I)

Topic 10

Agenda

Definition and functions of channels of distribution

Channel design decisions, channel levels
Channel conflicts and resolution
Integrated marketing channels

Girish Ketkar

MM-I @ BIIB 2014-16 (Semester I)

Topic 10

Reading
Marketing Management: A South Asian Perspective
(Kotler, Keller, Koshy, Jha)

Chapter 14: Designing and Managing Integrated Marketing

Channels

Girish Ketkar

MM-I @ BIIB 2014-16 (Semester I)

Topic 10

Marketing Channels
(a.k.a. Channels of Distribution)

Girish Ketkar

MM-I @ BIIB 2014-16 (Semester I)

Topic 10

Marketing Channels

(a.k.a. Channels of Distribution)

Sets of interdependent organizations participating in

the process of making a product or service available
for use or consumption

Source: Marketing Management: A South Asian Perspective (14 th edition) by Kotler, Keller, Koshy, Jha

Girish Ketkar

MM-I @ BIIB 2014-16 (Semester I)

Marketing Channels

Topic 10

(a.k.a. Channels of Distribution)

The link between manufactures (or service providers)

and customers

Accomplish all the tasks necessary to effect a sale

and deliver products to the customer

Girish Ketkar

MM-I @ BIIB 2014-16 (Semester I)

Topic 10

Supply Chain
B2C
B2B

Suppliers

Direct
Suppliers

B2C
Consumer
Products
Manufacturer
(or Service
Provider)

Channels
Consumers
Intermediaries
Marketing channels
Distribution channels

Value creation/addition at each stage

Girish Ketkar

MM-I @ BIIB 2014-16 (Semester I)

Topic 10

Supply Chain or Demand Chain?

Supply Chain

Girish Ketkar

Demand Chain

MM-I @ BIIB 2014-16 (Semester I)

Topic 10

Marketing Channels

(a.k.a. Channels of Distribution)

Merchants
Buy, take title to, and resell the merchandise

Wholesalers, dealers,
retailers, etc.

Agents
Brokers, manufacturers
representatives, sales agents,
etc.

Facilitators
Transportation companies,
independent warehouses,
banks, etc.

Girish Ketkar

Search for customers,

Negotiate on producers behalf
Do not take title to the goods

Assist in the distribution process

Do not take title to goods
Do not negotiate on producers behalf

MM-I @ BIIB 2014-16 (Semester I)

Topic 10

Importance of Marketing Channels

Read
Chapter 14: Designing and Managing Integrated Marketing
Channels
The Importance of Channels
Page 376
Interconnectedness of channel decisions with
other marketing decisions
Push strategy
Pull strategy

Girish Ketkar

MM-I @ BIIB 2014-16 (Semester I)

Topic 10

Push Strategy / Pull Strategy

Push strategy
Inducing intermediaries to carry, promote and sell the
product to end users

Pull strategy
Persuading customers to demand the product from
intermediaries, thus inducing the intermediaries to order it

In which situations are these strategies appropriate?

Source: Marketing Management: A South Asian Perspective (14 th edition) by Kotler, Keller, Koshy, Jha

Girish Ketkar

MM-I @ BIIB 2014-16 (Semester I)

Topic 10

Channel Functions and Flows

Girish Ketkar

MM-I @ BIIB 2014-16 (Semester I)

Topic 10

Types of Functions and Flows

Promotion/Communication
Information

Manufacturer

Consumers

Negotiation
Ordering
Storage and Movement (Delivery of Product/Service)
Title (Ownership)
Payment
Finance
Risk taking
Support
Girish Ketkar

MM-I @ BIIB 2014-16 (Semester I)

Topic 10

Types of Functions and Flows

Functions constitute
either a forward flow,
or a backward flow,
or a two-way flow.

Marketing channels can be used for any one or more

of these functions/flows.

Girish Ketkar

MM-I @ BIIB 2014-16 (Semester I)

Topic 10

Channel Functions
Read
Chapter 14: Designing and Managing Integrated Marketing
Channels
Table 14.1: Channel Member Functions
Page 379

Girish Ketkar

MM-I @ BIIB 2014-16 (Semester I)

Topic 10

Channel Functions: One Key Decision

Which functions will be performed by the firm, and
which functions will be performed by channel
members?

Girish Ketkar

MM-I @ BIIB 2014-16 (Semester I)

Topic 10

Reverse-Flow Channels
What are these??

Girish Ketkar

MM-I @ BIIB 2014-16 (Semester I)

Topic 10

Channel Levels

Girish Ketkar

MM-I @ BIIB 2014-16 (Semester I)

Topic 10

Channel Levels: Consumer Markets

Girish Ketkar

MM-I @ BIIB 2014-16 (Semester I)

Channel Levels: Industrial Markets

Girish Ketkar

MM-I @ BIIB 2014-16 (Semester I)

(Illustrative)

Topic 10

(Illustrative)

Topic 10

10

Channel Design Decisions

Girish Ketkar

MM-I @ BIIB 2014-16 (Semester I)

Topic 10

Channel Design Decisions

Girish Ketkar

MM-I @ BIIB 2014-16 (Semester I)

Topic 10

11

Analyzing Customer Needs and Wants

As with products, segmentation exists, and
marketers employing different types of channels
must be aware that different consumers have
different needs during the purchase process.
Even the same consumer may choose different
channels for different functions in a purchase.

Source: Marketing Management: A South Asian Perspective (14 th edition) by Kotler, Keller, Koshy, Jha

Girish Ketkar

MM-I @ BIIB 2014-16 (Semester I)

Topic 10

Analyzing Customer Needs and Wants

Service outputs

Lot size
Waiting and delivery time
Spatial convenience
Product variety
Service backup

Girish Ketkar

MM-I @ BIIB 2014-16 (Semester I)

Topic 10

12

Establishing Objectives and Constraints

Objectives in terms of
Service output levels
Associated cost and support levels

Girish Ketkar

MM-I @ BIIB 2014-16 (Semester I)

Topic 10

Establishing Objectives and Constraints

Constraints
Some factors limiting choice of channels
Availability of good intermediaries
Good intermediaries may have been locked up by competitors.

Product characteristics
Technically complex or custom-built products may need direct channels.
Perishable products will demand strict storage requirements.

Company financial resources

Company may not be able to afford sales force for direct sales.

Geographic dispersion of customers

Widely dispersed market may necessitate setting up low-cost
representation afforded by intermediaries.

Competitive strategies
If competitors sell direct, company may be forced to go direct!
Girish Ketkar

MM-I @ BIIB 2014-16 (Semester I)

Topic 10

13

Identifying Major Channel Alternatives

Each channel from sales force to agents,
distributors, dealers, direct mail, telemarketing, and
the Internet has unique strengths and
weaknesses.

Source: Marketing Management: A South Asian Perspective (14 th edition) by Kotler, Keller, Koshy, Jha

Girish Ketkar

MM-I @ BIIB 2014-16 (Semester I)

Topic 10

Identifying Major Channel Alternatives

Types of intermediaries
Number of intermediaries
Terms and responsibilities of channel members

Girish Ketkar

MM-I @ BIIB 2014-16 (Semester I)

Topic 10

14

Identifying Major Channel Alternatives

Types of intermediaries
Own sales force, distributors, dealers, retailers, online
channels, telemarketing, mail-order catalogues
Unconventional channels

Girish Ketkar

MM-I @ BIIB 2014-16 (Semester I)

Topic 10

Identifying Major Channel Alternatives

Number of intermediaries
Exclusive distribution
Severely limiting the number of intermediaries

Selective distribution
Relying on few intermediaries

Intensive distribution
Placing the goods or services in as many outlets as possible

Girish Ketkar

MM-I @ BIIB 2014-16 (Semester I)

Topic 10

15

Identifying Major Channel Alternatives

Terms and responsibilities of channel members

Price policy
Conditions of sale
Territorial rights
Mutual services and responsibilities

Girish Ketkar

MM-I @ BIIB 2014-16 (Semester I)

Topic 10

Evaluating Major Channel Alternatives

Economic criteria
Value-add of sale vs. Cost per transaction

Control and adaptive criteria

Degree of control that the marketer can exercise over
channel members
Adaptability to changing market situations
Ability to modify channel structure

Girish Ketkar

MM-I @ BIIB 2014-16 (Semester I)

Topic 10

16

Evaluating Major Channel Alternatives

Value-add of sale vs. Cost per transaction

Girish Ketkar

MM-I @ BIIB 2014-16 (Semester I)

Topic 10

Channel Conflicts and Resolution

Girish Ketkar

MM-I @ BIIB 2014-16 (Semester I)

Topic 10

17

Channel Conflicts and Coordination

Channel conflict
Generated when one channel members actions prevent
another channel member from achieving its goals

Channel coordination
Occurs when channel members are brought together to
advance the goals of the channel, as opposed to their own
potentially incompatible goals

Girish Ketkar

MM-I @ BIIB 2014-16 (Semester I)

Topic 10

Types of Conflicts
Horizontal channel conflict
Conflict between channel members at the same level

Vertical channel conflict

Conflict between different levels of the channel

Multichannel conflict
Conflict between two or more channels that sell to the
same market

Girish Ketkar

MM-I @ BIIB 2014-16 (Semester I)

Topic 10

18

Causes of Channel Conflict

Goal incompatibility
Unclear roles and rights
Differences in perception
Intermediaries dependence on the manufacturer

Girish Ketkar

MM-I @ BIIB 2014-16 (Semester I)

Topic 10

Resolution of Channel Conflicts

Strategic justification
Dual compensation
Superordinate goals
Employee exchange
Joint memberships
Co-optation
Diplomacy, mediation, arbitration
Legal recourse

Girish Ketkar

MM-I @ BIIB 2014-16 (Semester I)

Topic 10

19

Resolution of Channel Conflicts

Girish Ketkar

MM-I @ BIIB 2014-16 (Semester I)

Topic 10

Integrated Marketing Channels

Girish Ketkar

MM-I @ BIIB 2014-16 (Semester I)

Topic 10

20

Hybrid Channels
Using multiple channels in a market area
For example:
Allen Solly

Own stores
Own website
Malls like Shoppers Stop
Online stores like Flipkart
Apparel stores

Girish Ketkar

MM-I @ BIIB 2014-16 (Semester I)

Topic 10

Hybrid Channels
Important
Companies must ensure that these channels
work well together, and
match each target customers preferred ways of purchasing

In other words
Marketing channels need to be integrated.

Girish Ketkar

MM-I @ BIIB 2014-16 (Semester I)

Topic 10

21

Integrated Marketing Channels

An integrated marketing channel system is one in
which the strategies and tactics of selling through
one channel reflect the strategies and tactics of
selling through one or more other channels.

Source: Marketing Management: A South Asian Perspective (14 th edition) by Kotler, Keller, Koshy, Jha

Girish Ketkar

MM-I @ BIIB 2014-16 (Semester I)

Topic 10

Integrated Marketing Channels

What are the benefits and trade-offs of having
multiple channels?

Girish Ketkar

MM-I @ BIIB 2014-16 (Semester I)

Topic 10

22

Integrated Channels Architecture

The hybrid grid

Girish Ketkar

MM-I @ BIIB 2014-16 (Semester I)

Integrated Channels Architecture

Girish Ketkar

MM-I @ BIIB 2014-16 (Semester I)

Topic 10

(Example)

Topic 10

23

What We Covered in this Topic

Girish Ketkar

MM-I @ BIIB 2014-16 (Semester I)

Topic 10

What We Covered in this Topic

Marketing channels (a.k.a. distribution channels)
Definitions
Supply chain; Demand chain
Types of marketing channels
Merchants
Agents
Facilitators

Interconnectedness of channel decisions with other

marketing decisions
Push strategy
Pull strategy

Girish Ketkar

MM-I @ BIIB 2014-16 (Semester I)

Topic 10

24

What We Covered in this Topic

(Contd.)

Channel functions and flows

Types of functions and flows

Channel functions
One key decision
Reverse-flow channels

Channel levels
In consumer markets
In industrial markets

Girish Ketkar

MM-I @ BIIB 2014-16 (Semester I)

What We Covered in this Topic

Topic 10

(Contd.)

Channel design decisions

Analyzing customer needs and wants
Segmentation on the basis of customers' channel preferences
Service outputs by channels

Establishing objectives and constraints

Identifying major channel alternatives
Types of intermediaries
Number of intermediaries
Terms and responsibilities of channel members

Evaluating major channel alternatives

Economic criteria
Control and adaptive criteria

Girish Ketkar

MM-I @ BIIB 2014-16 (Semester I)

Topic 10

25

What We Covered in this Topic

(Contd.)

Channel conflicts and resolution

Channel conflict
Channel coordination
Types of conflict
Horizontal channel conflict
Vertical channel conflict
Multichannel conflict

Resolution of channel conflicts

Girish Ketkar

MM-I @ BIIB 2014-16 (Semester I)

What We Covered in this Topic

Topic 10

(Contd.)

Integrated marketing channels

What are they?
Benefits and trade-offs
Architecture
The hybrid grid

Girish Ketkar

MM-I @ BIIB 2014-16 (Semester I)

Topic 10

26