Designing & managing value networks & channels.

Successful value creation needs successful value delivery. Holistic marketers are
increasingly taking a value network view of their businesses. Instead of limiting their
focus on their immediate suppliers, distributors, and customers, they are examining the
whole supply chain that links raw materials, components & manufactured goods & shows
how they move towards the final consumers. Companies are looking at their supplier’s
suppliers upstream & at their distributor’s customers down stream. They are looking at
customer segments & how company resources can best be organized to meet needs.
Failure to coordinate the value network properly can have dire consequences.

Marketing channels.

Marketing channels are set of interdependent organizations involved in the process of

making a product or service available for the use or consumption.

Types of intermediaries.

1-Merchants.
• Buy goods & services.
• Take title to the product/services.
• Resell goods/services.
Examples.
• Wholesalers
• Distributors
• Retailers.
2-Agents.
• Search for customers
• May negotiate on producer’s behalf
• Do not take title to the goods/services.
Examples.
• Brokers
• Manufacturer’s representatives
• Sales agents
3-Facilitators
• Assist in distribution process
• Neither take title
• Nor negotiate purchases or sales.

Examples.
• Transportation companies.
• Independent warehouses
• Banks
• Advertising agencies.
Marketing channel system.

A marketing channel system is a particular set of marketing channels employed by a

firm.

The importance of channels.

1. Marketing channel system decisions are the most critical facing management.
2. Channel members collectively earn margins that account for 30% to 50% of final
consumer price.
3. Marketing channels represent a substantial opportunity cost.
4. Marketing channels convert potential buyers into profitable orders.
5. Marketing channels not just serve markets they also make markets.
6. Channels chosen affects all other marketing decisions. The company’s pricing
depends upon whether it uses mass merchandisers or high quality boutiques.
7. In managing its intermediaries, the firm must decide how much effort to devote to
push Vs pull marketing.

Channel Development.
A new firm typically starts as a local operation selling in a limited market, using existing
intermediaries. The number of such intermediaries is apt to be limited; a few
manufacturer’s representatives, a few wholesalers, several established retailer a few
trucking companies and a few warehouses.
If the firm is successful, it might branch in to new markets & use different channels in
different markets. In one part of the country, it might grant exclusive franchises; in other,
it might sell through all outlets willing to handle the merchandise.
To develop a channel, a firm must understand the needs of the customers during purchase
process. Nunes & Cespendes argue that in many markets, buyers fall into one of the four
categories.

1. Habitual shoppers. Purchase from the same places in same manner over time.
2. High value deal seekers. Know their needs & “channel surf” a great before
buying at the lowest possible price.
3. Variety-loving shoppers. Gather information in many channels, take advantage
of high-touch services & then buy in their favourite channel, regardless of price.
4. High-involvement shoppers. Gather information in all channels, make their
purchase in a low cost channel, but take advantage of customer support from a
high touch channel.