CH - 14 - Designing and Managing Value networks and Channels.ppt
- 1. Designing and Managing Value networks and Channels Chapter 14
- 2. What are marketing channels “ They are sets of interdependent organisations involved in the process of making a product or service available for use or consumption Examples: a. Intermediaries like wholesalers and retailers who buy, take title and sell are known as – Merchants b. Some others who act on behalf of the producer but do not take title are known as - agents
- 3. Members • Stockist and traders • Distributors • Wholesalers • Retailers • Clearing and Forwarding Agents (C and F) • Agents • Dealers
- 4. Importance of channels • It must convert potential buyers to profitable order • It must not only serve markets but also ‘make markets’ • Push v/s Pull strategy needs to be worked out • Push is for low brand loyalty, impulse item • Pull is for high brand loyalty, high involvement item
- 5. Channel development • Usual intermediaries – agents, wholesalers, retailers, trucking companies (transporters) and warehouses • Hybrid channels : use of sales force, internet, home shopping, telephone along with usual intermediaries • Omni channels: product/service is available through all the different channels possible in the market ---- Online/e-comm (company owned website, amazon, myntra, nykaa), physical outlets
- 6. Value Networks • It includes a firm’s suppliers
- 7. Role of Marketing Channels • Intermediaries bring in pooled financial resources • They help in breaking bulk and create assortment for customer • They are most cost effective due to specialization • They are most helpful in small value items which cannot be sold through direct marketing
- 8. Channel function • Gather information from the marketing environment • Develop and send persuasive communication to customers • Reach price agreement and transfer ownership • Acquire funds to finance inventories at different levels • Provide storage and movement to products • Provide customer with retail financing • Carry the risk associated with the channel work
- 9. Channel flow • Physical flow: Supplier->Manu -> Customer • Title flow • Payment flow • Information flow • Promotion flow
- 10. Channel levels • 0-level – Manuf Consumer • 1-level – Manuf Retailer Consumer • 2-level – Manuf Wholesaler Retailer Consumer • 3-level – Manuf Wholesaler Jobber Retailer Customer • Manufacturer-----Distributor-----C&F agent---- Retailer -----Consumers • Manufacturer----C&F agent----dealer/retailer----- Consumer
- 11. Channel design decisions 1. customer’s desired service output levels channels produce five service outputs a. Lot size – Number of units the channel permits a typical customer to purchase on one occasion b. Waiting and delivery time – Average time customers of that channel wait for receipt of goods c. Spatial convenience – Degree to which channel makes it easy for customers to purchase the product d. Product variety – Assortment of products that the channel can supply to the customer – more variety , better the chance of getting what the customer wants e. Service back up- Add o services like credit, delivery, installation and repairs are provided by the channel
- 12. Channel design decisions 2. Establishing objectives and constraints a. Channel objectives vary with product characteristics – perishable products need direct marketing, bulky products need less shipping distance and less handling, customised products and high value products need company’s sales force b. Strength and weakness of the different channels also needs to be studied
- 13. Channel design decisions 3. Identifying major channel alternatives – channel alternatives are identified by three elements – a. The types of intermediaries needed b. The number of intermediaries needed 1. Exclusive distribution: Intermediary carried just one firm’s products/services 2. Selective distribution – more than few but less than all 3. Intensive distribution – placing goods at all possible outlets c. Terms and responsibilities of each channel member – which include – price policy, conditions of sale, territorial rights, mutual services and responsibilities
- 14. Channel design decisions 4. Evaluating the major alternatives a. Economic criteria – cost and sales. Example: company’s sales force are trained to sell the company’s product. b. Control criteria – Control issue Example: agent might not know the technical details or handle sales brochure properly c. Adaptive criteria – some duration of commitment and loss of flexibility.
- 15. Channel Management decisions a. Selecting channel members – channel member’s length of business, growth and profit record, etc. b. Training channel members c. Motivating channel members - positive and negative motivators d. Evaluating channel members e. Modifying channel arrangements ( through periodic review)
- 16. Channel integration and systems • There are three types of channel systems – Vertical, Horizontal and Multi channel • Vertical marketing system – It comprises of producer, wholesaler and retailer acting as a unified system. One channel member – the channel captain owns the others or franchises them.
- 17. Types of VMS Three types – a. Corporate VMS – combines successive stages of production and distribution under one ownership – AMUL, Apple, Future Group Chain b. Administered VMS – Successive stages of production and distribution is coordinated through the size and power of one of the members – Dominant brands secure distribution in this manner – Wal-Mart c. Contractual VMS – Independent firms at different levels of production and distribution integrate their programs on a contractual basis to obtain more economies or sales impact that they could achieve alone. Its types are – 1. Wholesaler sponsored 2. Retailer sponsored 3. Franchise organization
- 18. Channel integration and systems • Horizontal marketing systems – Two or more unrelated companies put together resources or programs to exploit an emerging marketing opportunity. IOC – ICICI petro card, McDonald- Walt Disney • Multichannel marketing systems – it occurs when a single firm uses two or more marketing channels to reach one or more customer segments
- 19. Conflict, Cooperation and Competition • Conflict happens when one channel member’s actions prevent the channel from achieving its goal • Types of conflict – vertical (manufacturer to retailer), horizontal (between two franchisee) and multichannel (more than one channel) • Causes – goal incompatibility, unclear roles and rights, differences in perception and dependence • Managing conflict – strategic justification, dual compensation, superordinate goals, employee exchange, joint membership, co-optation, diplomacy, mediation and arbitration and legal resources.
- 20. Managing Retailing, wholesaling and Logistics Chapter 15
- 21. Retailing • It is defined as all the activities involved in selling goods and/or services directly to final consumer for personal, nonbusiness use
- 22. Types of retail outlet • Specialty stores - specializing on specific merchandise, such as toys, shoes, etc. • Department stores- Department stores are general merchandisers. They offer to the customers mid- to high-quality products like "Westside" and "Lifestyle"--popular department stores. • Super market - A supermarket is a grocery store that sells food and household goods. They are large, most often self-service and offer a huge variety of products. • Hyper market(1,00,000 sqmt to 1,50,000 sqmt) - Big Bazaar and Reliance Fresh are hypermarkets that draw enormous crowds. • Convenience store • Discount store – 365*24*7 – some kind discount • Life style store
- 23. Retailing on the basis of service • Wheel of retailing hypothesis • Retailing on the basis of services – self service, self selection, limited service and full service • Retailing can also be divided into two categories – store retailing and non store retailing • Non store retailing – Direct selling ( Amway, Eureka), Direct marketing ( telemarketing, internet selling – flipkart, amazon.com), Automatic vending machine • Organized retail and unorganized retail
- 24. Marketing decisions in retailing • Target market • Product assortment and procurement • Services a. Prepurchase service – telephone and mail orders, advertising, shopping hours b. Post purchase service – delivery, alterations and tailoring etc c. Ancillary services – parking , restaurants, general information • Store atmosphere – visual merchandising • Store activities and experiences • Price decisions -Every day low pricing ( EDLP) • Communication – coupons, In store sampling, frequent shopper reward program • Location decision
- 25. Private labels • It is developed by retailers or wholesalers • Bare Denim, Bare Leisure, Rig, Annabelle, Honey, RangManch, Trishaa and Akkriti, JM Sport,Urbana, Scullers, John Miller, and Indigo Nation are private labels of pantaloons.
- 26. Wholesaling • It includes all the activities involved in selling goods or services to those who buy for resale or business use • How do wholesalers differ from retailers a. Pay less attention to promotion, atmosphere and location b. Their transactions are usually larger than retail transactions c. Govt regulations are different for wholesalers and retailers
- 27. Types of Wholesalers • Merchant Wholesalers ( own business that takes title of products they handle) • Full service wholesalers ( Carry stock, have sales force, offer credit, make deliveries etc) • Limited service wholesalers • Brokers( works on commission of selling price) and agents ( represents seller on a more permanent basis) • Manufacturer’s and retailers branches and offices
- 28. Functions of Wholesalers • Selling and promoting • Buying and assortment building • Bulk breaking • Warehousing • Transportation • Financing • Risk bearing • Market information • Management Service and counseling
- 29. Market logistics • Physical distribution is now explained by a broader term known as Supply chain management • SCM is defined as – Activities that involves procuring the right inputs ( raw material, components and capital equipment), converting them efficiently into finished products and dispatching them to the final destinations • Market logistics involves planning the infrastructure to meet demand, then implementing and controlling the physical flows of materials and final goods from point of origin to points of use to meet customer requirement at a profit
- 30. Market logistics planning • Deciding the company’s value preposition to its customer • Deciding the best channel design and network strategy for reaching the customers • Developing operational excellence in sales forecasting, warehouse management, transportation management and materials management • Implementing the solution with the best information systems, equipment, policies and procedures
- 31. Market logistics decisions • How should orders be handled ? – Order processing • Where should stocks be located ? - Ware housing • How much stock should be held ? – Inventory • How should good should be shipped ? - Transportation