CHAPTER 15 Designing and Managing Integrated Marketing Channels Presented by : Bhumika(13) Nitin(19) Ateet(31) Saurin(33)

WHAT IS MARKETING CHANNELS Set of interdependent organisations involved in the process of making a product or service available for use or consumption. Set of pathways a product or servic e follows after production and use by the final end users.

IMPORTANCE OF CHANNELS Marketing channel system A set of marketing channels a firm employs and decision s about it are among the most critical management faces. It represent a substant ial opportunity cost. It allows channel members to earn margins. Its main role i s to convert potential buyers into profitable customers. Affects all other marke ting decisions.

MANAGING INTERMEDIARIES A Push strategies involves the manufacturer using sales force and trade promotion money to induce intermediaries to carry, promote and sell the product to end us ers. A Pull strategy involves the manufacturer using advertising and promotion to persuade consumers to ask intermediaries for the product, thus inducing the int ermediaries to order it. Examples are : coca-cola, intel, nike.

CHANNEL DEVELOPMENT New firm - starts as a local operation selling in circumscribed market. - Uses e xisting intermediaries. Successful firm - Might branch into new market. - Uses d ifferent channels in different markets. Example: DELL

HYBRID CHANNELS Using number of channels. All should work together and match each target custome r s preferred ways of doing business.

EXAMPLES HP COMPUTERS: Sales force inance institutions Internet sites Retailers

Telemarketing

ICICI BANK: Branches

Franchisees

Micro-f

UNDERSTANDING CUSTOMER NEEDS Habitual shoppers High-value deal seekers Variety-loving shoppers High-involveme nt shoppers

CLOTHING France Germany United Kingdom Service/quality customers 50% 16% 15% 19% 39% Price/value customers 32% Affinity customers 18% 45% 66% GROCERY France Germany United Kingdom Service/quality customers 40% 42% 32% Price/value customers 27% 45% 55% Affinity customers 25% 13% 13%

DEMAND CHAIN PLANNING View of a firm to think first of the target market and then designing the supply chain. Yields several insights The company can estimate whether more money is m ade upstream or downstream. Company is more aware of disturbances. Companies can go online with their business partners.

CHANNEL MEMBER FUNCTIONS Gather information Develop and disseminate persuasive communications Place order s with manufacturers Acquire the funds Provide for the successive storage and mo vement of physical products Oversee actual transfer of ownership Reach agreement s on price and other terms

1.Physical flow 2. Title flow 3. Payment flow Suppliers Transporters, warehouses Manufacturer Transporters, warehouses Dealers Suppliers Suppliers Banks Manufacturer Manufacturer Banks Dealers Dealers Transporters Banks Customers Customers Customers

4. Information flow 5. Promotion flow Suppliers Transporters, warehouses Manufacturer Transporters, warehouses Dealers Suppliers Advertising agency Manufacturer Advertising agency Dealers Transporters, banks Customers Customers

CUSTOMER MARKETING CHANNELS 0-Level 1-Level 2-Level 3-Level MANUFACTURER MANUFACTURER MANUFACTURER WHOLESALER MANUFACTURER WHOLESALER JOBBER RETAILER CONSUMER CONSUMER RETAILER CONSUMER RETAILER CONSUMER

INDUSTRIAL MARKETING CHANNELS 0-Level 1-Level 2-Level 3-Level MANUFACTURER MANUFACTURER MANUFACTURER MANUFACTURER S REPRESENTATIVE MANUFACTURER MANUFACTURER S SALES BRANCH INDUSTRIAL DISTRIBUTORS INDUSTRIAL DISTRIBUTORS INDUSTRIAL DISTRIBUTORS INDUSTRIAL CUSTOMERS INDUSTRIAL CUSTOMERS INDUSTRIAL CUSTOMERS INDUSTRIAL CUSTOMERS

CHANNEL-DESIGN DECISIONS Analyzing customer needs Establishing channel objectives Identifying and evaluat ing major channel alternatives Evaluating the major alternatives

Analyzing customer s desired service output levels Lot size Waiting and delivery time Spatial convenience Product variety Service b ackup

Channel objectives Channel objectives shall be based on targeted service output levels. Channel obj ectives are based on product characteristics. When a company enter new markets i ts objective are affected by other firms in the same market.

Channel constraints Certain factors or constraints in channel selection are :Market conditions Legal issues Product characteristics Competition

Identifying and evaluating major channel alternatives Companies have got variety of channel options to reach customers. For e.g. agent s, distributors, dealers, internet. But each of them has its own complexities wh ich makes it difficult for company to decide which channel alternative to choose .

Channel elements Types of Intermediaries No. of Intermediaries Responsibilities of channel members

Types of Intermediaries A firm need to identify types of intermediaries it needs available to it. Compan ies shall try to search for innovative marketing channels. Sometimes companies a dopt new or unconventional channel to deal with difficulty or ineffectiveness of dominant channel.

Number of Intermediaries Three strategies are basically followed for this Exclusive distribution Selective distribution Intensive distribution

Exclusive distribution It means keeping limited of number of intermediaries. Its best suited when produ cer wants to have control over service level. It requires a close partnership be tween seller and reseller. It basically used in distribution of automobiles, maj or appliances etc.

Selective distribution It relies on more than a few intermediaries. It is basically useful for establis hed companies & for new companies seeking distributors. Best advantage of select ive distribution is that the company here gain adequate market coverage, more co ntrol & less cost.

Intensive distribution Here the manufacture places its products and services in as many outlets as poss ible. Its best suited for products that consumer buys frequently. E.g. soft-drin ks, newspapers, snack foods. Titan watches follows intensive distribution techni que.

Terms and responsibilities of channel members Price policy:- Producer shall prepare appropriate pricing policy & shall offer r easonable allowances to intermediaries. Conditions of sale:- Payment terms and p roducer guarantees shall be disclosed properly. Distributors territorial rights: - it defines distributor s territories & terms for franchisee.

Continue .. Mutual services and responsibilities:- This has to be clearly specified. Franchi sees are also expected to satisfy company standards for physical facility, suppo rt new promotions, buy supplies from specified vendors.

Evaluating Major Alternatives Economic criteria Control & Adaptive criteria

Economic criteria Each alternative will produce different level of sales and costs. So firms will try to analyze & would prefer channel that can maximize demand and that too at l ower cost. Sales agents are tend to be used by smaller firms where the sales vol ume is low.

Control & adaptive criteria When sales agency is used it creates control problem as it focuses on maximizing profits. To make channels successful members must develop sense of commitment w ith each other. Channel structures & policies should provide high adaptability t o producers.

Selecting channel members Modify channel design Channel management decision Motivating channel members Evaluating channel members

Selecting channel members For these the producers shall consider characteristics of better intermediaries. They shall evaluate the no. of years in business, other lines carried, growth & profit etc. Further more evaluation has to be done as per intermediaries as for e.g.:-sales agents, department stores etc.

Motivating Channel Members The company shall plan and implement training programs & research programs. The company shall make intermediaries believe them to be equal partner in their proc ess. Producers can even use channel power so that members takes action which the y wouldn t have taken otherwise.

Evaluating channel members Producers must periodically evaluate intermediaries performance against set stan dards like sales-quota attainment, inventory levels etc. Producer shall provide discounts to members as per performance. Underperformers on other hand shall be provided guidance

Modifying channel design & arrangements A producer must review channel design & modify if its not successful enough. No marketing channel will remain effective for life time so change has to be made w ith time. The change could mean adding or dropping particular channel member or bringing new way to sell.

vertical marketing Horizontal marketing Integrated multichannel marketing

Vertical marketing systems VMS are of three types: Corporate Vertical Marketing Systems-successive stages fr om production to distribution are under single ownership. Administered VMS-seeks to control successive stages from production to distribution not through owners hip but through the size and power of one of the channel members. Contractual VM S-independent firms at different levels of production and distribution integrati ng their programs on a contractual basis to obtain larger economies of scale and , or sales impact than they could achieve alone

Three types of contractual VMS Wholesaler based voluntary chains are under which whole-sellers organize volunta ry chains of independent retailers. Retailer co-operatives are under which retai lers take initiative to carry on wholesaling and possibly some production. Franc hise organizations are under which franchisor might link several stages in produ ction-distribution process.

Horizontal marketing system This reflects the readiness or willingness of two or more non-related companies to put together resources to exploit an emerging market opportunity E.g. post of fices selling insurance, HUL in strategic tie-up with PepsiCo.

Integrated multichannel systems In multi channel marketing the firm uses two or more channels to reach one or mo re market segments. An integrated marketing channel system is one in which tacti cs & strategies of selling through one channel reflects tactics and selling thro ugh other channels.

Increased market coverage Lower channel cost More customized selling

TYPES OF CHANNEL CONFLICT There are mainly 3 types of channel conflict: 1) Vertical channel conflict 2) Ho rizontal channel conflict 3) Multichannel conflict

CAUSES OF CHANNEL CONFLICT Goal incompatibility Differences in perception

Dependence

MANAGING CHANNEL CONFLICT Adoption of subordinate goals Exchange of persons between channels Co-optation M editation Arbitration File a law suit

E-Marketing E-Marketing describes company efforts to inform buyers, communicate, promote and sell its products and services over the Internet.

Cont There are mainly two types companies in EMarketing: Pure-click companies Brick-c lick companies

Pure click companies Companies those that have launched a website without any previous existence as a firm.

Burst of Dot-com bubble There are mainly three reasons: Rushed into the market without proper research or planning s Poorly designed websites Lacking in adequate infrastructure

Brick-click companies Companies that have added an outline site for information and/or e-commerce They resist adding e-commerce to their sites They felt that selling their products o r services online would produce channel conflict

Three strategies to improve sales Different brands or products on the Internet Offer the offline partners higher c ommissions to cushion the negative impact on sales Take orders on the website bu t have retailers deliver and collect payment.

SUMMARY Producers do not sell their goods directly to final users but through a host of marketing intermediaries. Company uses intermediaries when direct marketing is n ot feasible. The important functions performed by intermediaries are information , promotion, negotiation, ordering etc.

Continue Manufactures have many alternatives for market channels and they need to analyze properly and select intermediaries. Marketing channels at times have to face co nflict which have to be sorted out properly. E-commerce plays and important aspe ct in channel system and its importance is growing today.