Professional Documents
Culture Documents
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Marketing Channels
Marketing channel is a set of interdependent organizations involved in the process of making a product or service available for use or consumption. These interdependent organizations, intermediaries. These are of two types: also called as
Merchants, such as wholesalers and retailers who buy, take title to and resell the goods. Brokers, such as sales agents who represent the manufacturers and search for the customers, negotiate on the producers behalf but do not take title of the goods.
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Marketing Channels
The Importance of Channels
Convert potential buyers into profitable orders Marketing Channels serve companys markets Marketing Channels create markets
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Value Networks
Value Networks
A system of partnerships and alliances that a firm creates to source, augment, and deliver its offerings.
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Lack of Financial Resources to set up own distribution channels More return on investment from the core competency business. Not feasible to set up retail channels for just one product line. Intermediaries achieve superior efficiency in making goods widely available and accessible to target markets through their contacts, experience, specialization and scale of operation.
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Bulky products such as building material require channels that minimize the shipping distance and the amount of handling. Perishable products require more direct marketing. Non standard products such as custom-built machinery are sold by the company representatives directly.
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Types of Intermediaries
Companies need to look at the intermediaries abilities to use them for distributing their products which could range from simple products to highly complicated technical products.
Number of Intermediaries
Companies have to decide on the number of intermediaries to use at depending upon the distribution strategy. There are three stages are available: Exclusive distribution means severely limiting the number of intermediaries to exercise control over the service level and outputs. Selective distribution involves the use of more than a few but less than all of the intermediaries who are willing to carry a particular of product. This is done to gain market coverage with more control and lesser cost. Intensive distribution consists of the manufacturer placing the goods or services in as many outlets as possible. Generally done for tobacco products, confectionary and calling cards.
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Price policy calls for the producer to establish a price list and schedule of discounts and allowances that intermediaries see as a equitable and sufficient. Condition of sale refers to payment terms and producer guarantees. Distributors territorial rights define the distributors territory and the terms under which the producer will grant franchise to other distributors. Mutual service and responsibilities must be carefully spelled out, especially in franchise and exclusive agency channels.
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Sales Force
Sales
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Selecting Channel Members Training Channel Members Motivating Channel Members Evaluating Channel Members Modifying Channel Members
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Coercive Power Reward Power Legitimate Power Expert Power Referent Power
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Channel Conflict
Channel conflict is generated when one channel members actions prevent the channel as a whole in achieving its goal.
Vertical Channel Conflict - Vertical channel conflict is a conflict between different levels within the same channel. This could be between different stakeholders up or down the distribution line trying to exercise greater control. Horizontal Channel Conflict - This involves a conflict between members at the same level within the channel. This would mean conflict between selling practices of various dealerships. Multi-channel conflict exists when the manufacturer has established two or more channel that sell to the same market. This would be predominantly seen when one of the channels may get lower price, such as internet banking for banking products rather than the financial intermediaries. 17
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Channel Conflict
Causes of Channel Conflict
Following are the most prevalent causes of channel conflict.
Goal incompatibility Differences in the goals of the manufacturer and the intermediary. Difference in perception - Manufacturer may be looking at the environment as optimistic and may want the dealers to carry higher inventory but the dealers may not want to do so, considering the economic scenario.
Dependence - The dependence of the intermediaries on the manufacturer and his policies such as in the case of automobiles may cause channel conflict.
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Channel Conflict
Managing Channel Conflict
There are several ways for effective channel conflict management. They are as follows:
Co-optation This is an effort by one organization to win the support of the leaders of another organisation by including them in the advisory councils, boards of directors etc. Diplomacy This takes place when each side sends a person or a group to meet with its counterpart to resolve the conflict. Mediation This means resorting to a neutral third party who is skilled in conciliating the two parties interests. Arbitration This occurs when the parties agree to present their arguments to one or more arbitrators and accept the arbitration decision.
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Channel Conflict
Legal and Ethical Issues in Channel Relations Many producers likes to develop exclusive channels for their products. Exclusive dealing often includes exclusive territory agreements. The producer may agree not to sell to other dealers in a given area. Producers are free to select their dealers, but their right to terminate dealers is somewhat restricted.
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E-business describes the use of electronic means and platforms to conduct a companys business. There are various possible situations such as:
E-commerce means that a company or site offers to transact or facilitate the selling of its products and services online. E-purchasing means companies decide to purchase goods, services and information from various online suppliers. E-marketing describes companys efforts to inform buyers communicate, promote and sell its product and services over the internet.
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