Marketing Channel Vibha

8/3/2019 Marketing Channel Vibha

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MAREKTING

CHANNEL


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Marketing channel

Definition

Philip Kotler-

Every produce seeks to link togetherthe set of marketing intermediariesthat best fulfill the firms objectives.

This set of marketing intermediariesis called the marketing channel alsotrade channel or channel distribution


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Meaning

-The entire function of getting the goods into the

hands of consumer is often referred as distribution- The term channel of distributions used to denote

the middlemen engaged in moving goods from theplace of production to the place of consumption

Functions of channel of distribution

1. Help in production of function

2. Matching demand & supply

3. Financing the producer

4. Aid in communication

5. Stabilizing the prices

6. Promotional activities


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(1)(1)Search for Sustainable Competitive AdvantageSearch for Sustainable Competitive Advantage

(2)(2)Growing Power of Retailers in MarketingGrowing Power of Retailers in MarketingChannelsChannels

(3)(3)The Need to Reduce Distribution CostsThe Need to Reduce Distribution Costs(4)(4)The Increased Role and Power of TechnologyThe Increased Role and Power of Technology

(5)(5)The New Stress on GrowthThe New Stress on Growth


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A competitive advantage thatA competitive advantage that

cannot be quickly and easilycannot be quickly and easilycopied by competitorscopied by competitors


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Product StrategyProduct Strategy- rapid technology transfer enablesrapid technology transfer enables

competitors to quickly produce similarproductscompetitors to quickly produce similarproducts Pricing StrategyPricing Strategy- global economy allowsglobal economy allows

competitors to find low cost production to matchcompetitors to find low cost production to matchpricesprices

Promotion StrategyPromotion Strategy- high cost, clutter, and short lifehigh cost, clutter, and short lifepromotional campaigns limit competitive advantagepromotional campaigns limit competitive advantage


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Channel Strategy is Long TermChannel Strategy is Long Term

Requires a Channel StructureRequires a Channel Structure Depends on Relationships andDepends on Relationships and

PeoplePeople

Requires EffectiveRequires EffectiveInterorganizational ManagementInterorganizational Management


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RetailersRetailers


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Are Growing LargerAre Growing Larger

Enjoy Substantial Channel PowerEnjoy Substantial Channel Power

Act as Buying Agents for Customers Rather thanAct as Buying Agents for Customers Rather thanSelling Agents for SuppliersSelling Agents for Suppliers

Often Operate on Low Price / Low Margin ModelOften Operate on Low Price / Low Margin Model

Operate in Saturated Markets and Fight forOperate in Saturated Markets and Fight for

Market ShareMarket Share


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77.6%

22.4%

Top 50

Rest

Concentration of Sales Among theConcentration of Sales Among the

Top 50 Retail FirmsTop 50 Retail Firms


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Retailer


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Retailers Act as Buying AgentsRetailers Act as Buying Agents

for Customers Rather than asfor Customers Rather than as

Selling Agents for SuppliersSelling Agents for Suppliers


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Retailers Often Operate on LowRetailers Often Operate on Low

Price / Low Margin ModelPrice / Low Margin Model


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Retailers Operate in SaturatedRetailers Operate in Saturated

Markets and Fight for MarketMarkets and Fight for MarketShareShare


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Thus, Effective Channel StrategyThus, Effective Channel Strategy

for Dealing withfor Dealing with

Power Retailers is CrucialPower Retailers is Crucial


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DistributionDistributionCostsCosts


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Sometimes Distribution CostsSometimes Distribution Costs

areare HigherHigherthan the Manufacturingthan the Manufacturing

Cost or the Costs of RawCost or the Costs of RawMaterials and Component PartsMaterials and Component Parts


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The InternetThe Internet

Wireless CommunicationsWireless Communications

B2C and B2B EB2C and B2B E--CommerceCommerce Cell PhonesCell Phones

Global TelecommunicationsGlobal Telecommunications

Robotics & Automated WarehousingRobotics & Automated Warehousing Computerized SalespeopleComputerized Salespeople


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CompetitionCompetition


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OutOutReengineeringReengineeringRestructuringRestructuring

DownsizingDownsizingFlat OrganizationsFlat Organizations

Lean and MeanLean and Mean

InInGrowthGrowthExpansionExpansion

New MarketsNew MarketsMarket ShareMarket Share

Top Line RevenueTop Line Revenue


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TranslationTranslation

y getting channel members to focus on youry getting channel members to focus on yourproducts to a greater extent than yourproducts to a greater extent than your

competitors, you gain market share andcompetitors, you gain market share and

growthgrowth


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(1)(1)Search For Competitive AdvantageSearch For Competitive Advantage

(2)(2)Growing Size and Power ofGrowing Size and Power of

RetailersRetailers

(3)(3)Need to Reduce Distribution CostsNeed to Reduce Distribution Costs

(4)(4)Power and Potential of TechnologyPower and Potential of Technology

(5)(5)Stress on Growth Instead ofStress on Growth Instead of

DownsizingDownsizing


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(1)(1)What role should distribution play in the firmsWhat role should distribution play in the firms

overall objectives and strategies?overall objectives and strategies?

(2)(2)What role should distribution play in the marketingWhat role should distribution play in the marketingmix?mix?

(3)(3)How should the firms marketing channels beHow should the firms marketing channels bedesigned to achieve its distribution objectives?designed to achieve its distribution objectives?

(4)(4)What kinds of channel members should be selected toWhat kinds of channel members should be selected to

meet the firms distribution objectives?meet the firms distribution objectives?

(5)(5)How can the marketing channel be managed toHow can the marketing channel be managed toimplement the firms channel design effectively andimplement the firms channel design effectively andefficiently on a continuing basis?efficiently on a continuing basis?


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CCss = f (P= f (P11, P, P22, P, P33, P, P44))where:where:CCss= degree of customer satisfaction= degree of customer satisfactionPP11= product strategy= product strategyPP22= pricing strategy= pricing strategy

PP33= promotional strategy= promotional strategyPP44= place (channel strategy)= place (channel strategy)


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When Do Customers Buy?When Do Customers Buy?

Where Do Customers Buy?Where Do Customers Buy?

How Do Customers Buy?How Do Customers Buy?

Who Buys?Who Buys?

Who makes the actual purchase?Who makes the actual purchase?

Who uses the product?Who uses the product?

Who takes part in the buying decision?Who takes part in the buying decision?


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Channel design decisions

1. Analyzing customer needs

2. Establishing channel objectives

3. Identifying major channel alternatives

4. Evaluating major channel alternatives

Factors affecting channels1. PRODCUT CHARACTERISTICS

-Purchase frequency

-perish ability

-weight & technicality of the product-selling price unit

-standardized products or ordered products


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2. Markets factors/Consumer factors

-Consumer or industrial market

-Number of purchasers

-Geographical distribution-Size of orders

-Polices of competitors

-Customer buying habits

3. Company characteristics-Financial resources

-Size of the company

-Product mix

-Attitude of company executives-Marketing polices

-Goodwill of the company


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4. Middlemen consideration

-Attitude of the middlemen

-Services provided by the middlemen-Availability of the middlemen

5. Environment

-Economic conditions

-Legal restrictions

-Social & ethical considerations


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Types of channel distribution

1. Consumer goods

2. Agricultural goods

3. Industrial goods

1. Consumer goods

Distribution through an agency that stands betweenthe manufacturer & the wholesalers

In this channel there brokers, manufacturesagents, commission merchant & the export

merchants. This channel is used when themanufacturer cant afford to invest the amountrequired to develop a sales force of his own


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Selling to wholesalers who sell it to retailers

-It is a traditional channel, the wholesaler

buys the large quantities from the producer& middlemen, and he tries to sell for morethan he pays

-The defect of the system is that themanufacturer losses contact with the retaildealers


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Selling direct to retailers or dealers

-Here the manufacturer assumes the function of thewholesalers & brokers. This requires an efficient sales force.

-The channel tries to eliminate wholesalers from thechannel of distribution

-This channel is currently receiving increased attentionafter the creation of super markets & departmental stores

Selling direct to customers

-This method is most common in industrial marketingwhere capital goods are marketed


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MANUFACTURER

CONSUMER

Agency

wholesaler

Retailer

wholesaler

Retailer Retailer


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2. Agricultural goods

---The chief characteristics feature of this

channel is the presence of large umber ofbrokers & agents, these brokers, thesebrokers who stand at par with the retailers inthe consumer goods channel perform a

number of functions of their own

--They sometime act as assemblers & there

after, instead of selling the products toultimate consumers sells it to wholesalers


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3. Industrial goods

Producer-industrial userProducer-agent user

Producer-agent industrialdistributor-user

Documents

Marketing Channel Vibha