13/02/2017

Marketing Channels:
Delivering Customer Value

Marketing Channels

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Topic Outline

! Supply Chains and the Value Delivery

Network
! The Nature and Importance of Marketing
Channels
! Channel Behavior and Organization
! Channel Design Decisions
! Channel Management Decisions

Supply Chain Partners

Upstream partners include raw material

suppliers, components, parts,
information, finances, and expertise to
create a product or service
Downstream partners include the marketing
channels or distribution channels that
look toward the customer, including
retailers and wholesalers

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Supply Chain Views

Supply chain make and sell view includes

the firms raw materials, productive
inputs, and factory capacity

better term
Demand chain sense and respond view
suggests that planning starts with the
needs of the target customer

Value Delivery Network

Value delivery network is

composed of the
company, suppliers,
distributors, and,
ultimately, customers
who partner with each
other to improve the
performance of the
entire system

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Marketing channel (distribution channel) is a set

of interdependent organizations that help
make a product or service available for use or
consumption by the consumer or business
user

How Channel Members Add Value

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How Channel Members Add Value

Information Promotion Contact

Physical
Matching Negotiation
distribution

Financing Risk taking

Number of Channel Levels

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Number of Channel Levels

Connected by types of flows:

! Physical flow of products
! Flow of ownership
! Payment flow
! Information flow
! Promotion flow

Channel Behavior

Marketing channel consists of firms that have

partnered for their common good with
each member playing a specialized role

Channel conflict refers to disagreement over

goals, roles, and rewards by channel
members
! Horizontal conflict (different stores in the
same areas, e.g. Mediaworld vs. Comett)
! Vertical conflict (owned stores vs.
independent stores in the case of e.g.
Geox; direct online sales vs. retailers)

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Conventional distribution systems consist of

one or more independent producers,
wholesalers, and retailers. Each seeks to
maximize its own profits, and there is
little control over the other members and
no formal means for assigning roles and
resolving conflict.

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Vertical marketing systems (VMSs) provide

channel leadership and consist of
producers, wholesalers, and retailers
acting as a unified system
! Corporate marketing systems
! Contractual marketing systems
! Administered marketing systems

Vertical Marketing Systems

Corporate vertical
marketing system
combines successive
stages of production
and distribution
under single
ownership
(Zara, Ikea)

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Vertical Marketing Systems

Contractual vertical marketing system consists

of independent firms at different levels of
production and distribution who join
together through contracts. The most
common form is the franchise organization

Vertical Marketing Systems

Franchise organization links several stages in

the production distribution process
Manufacturer-sponsored retailer franchise system
(Geox, Swatch, Pets Planet)
Manufacturer-sponsored wholesaler franchise
system (Coca Cola)
Service firm-sponsored retailer franchise system
(McDonald, Tecnocasa, Rosso Pomodoro)

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Vertical Marketing Systems

Administered vertical marketing system has a few

dominant channel members without common
ownership. Leadership comes from size and
power (e.g. Auchan, Esselunga, )

Horizontal Marketing System

Horizontal marketing
system is a channel
arrangement in which two
or more companies at one
level join together to
follow a new marketing
opportunity

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Multichannel Distribution Systems

Hybrid Marketing Channels

Multichannel Distribution systems (Hybrid

marketing channels) are when a single firm
sets up two or more marketing channels to
reach one or more customer segments

Multichannel Distribution System

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Changing Channel Organization

Disintermediation is
the cutting out of
marketing channel
intermediaries by
producers or the
displacement of
traditional resellers
by new
intermediaries

Analyzing Setting
consumer channel
needs objectives

Identifying
major
Evaluation
channel
alternatives

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Analyzing Consumer Needs

! Find out what target consumers want from

the channel
! Identify market segments
! Determine the best channels to use
! Minimize the cost of meeting customer
service requirements

Setting Channel Objectives

! Determine targeted levels of customer

service
! Balance consumer needs not only against
costs and customer price preferences

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Identifying Major Alternatives

! Types of intermediaries

! Number of marketing intermediaries

! Responsibilities of channel members

Identifying Major Alternatives

Types of intermediaries refers to

channel members available to carry
out channel work. Most companies
face many channel member choices

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Number of marketing intermediaries

Intensive distribution
Candy and toothpaste

Exclusive distribution
Luxury automobiles and prestige clothing

Selective distribution
Television and home appliance

Evaluating the Major Alternatives

Each alternative
should be evaluated
against:
Economic criteria
Control
Adaptability criteria

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Evaluating the Major Alternatives

HIGH DRECT
CHANNEL

INVESTMENTS
AND FRANCHISING
FINANCIAL
RISK SHORT
CHANNEL

LOW LONG
CHANNEL

HIGH LEVEL OF CONTROL LOW

Designing International Distribution Channels

! Channel systems
can vary from
country to
country
! Marketers must
be able to adapt
channel strategies
to structures
within each
country

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Selecting Managing Motivating Evaluating

channel channel channel channel
members members members members

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