Marketing Channel unit 2
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The document discusses marketing channels and distribution management. It defines marketing channels as relationships between businesses involved in buying and selling products and services. It describes various channel functions like physical distribution, financing, and risk taking. The roles of channels include bridging producers and consumers and adding value. Factors influencing channel selection include product characteristics, competition, and desired control. Examples are given of Dabur's distribution channels and trends like multi-channel systems and reducing intermediaries.
Marketing Channel unit 2
- 1. MARKETING CHANNEL Distribution Management 7th Semester BBA By Mr. Navin Raj Saroj M.B.A. (Marketing)
- 2. MARKETING CHANNELS “A marketing channel is a system of relationships existing among businesses that participate in the process of buying and selling products and services.”
- 3. MEANING OF CHANNEL OF DISTRIBUTION Sets of interdependent organizations involved in the process of making a product or service available for use or consumption. Whether selling products or services, marketing channel decisions play a role of strategic importance in the overall presence and success a company enjoys in the marketplace. Distribution refers to the steps taken to move and store a product from the supplier stage to a customer stage i.e. raw materials and components are moved from suppliers to manufacturers, whereas finished products are moved from the manufacturer to the end consumer.
- 4. ROLE OF CHANNEL OF DISTRIBUTION Marketing channels are key because they are the means of making goods and services available to ultimate users. The ultimate role of distribution channel is to bridge the gap between producers and consumers by adding value to product or services. • Four functions of marketing channels: • Channels facilitate the exchange process by reducing the number of marketplace contacts necessary to make a sale. • Distributors adjust for discrepancies in the market’s assortment of goods and services via sorting, channeling products to meet the buyer’s and producer’s needs. • Channel members tend to standardize payment terms, delivery schedules, prices, purchase lots, and other conditions. • Channels facilitate searches by both buyers and sellers and bring them together to complete the exchange process.
- 5. DISTRIBUTION CHANNEL FUNCTIONS Channel functions are categories of activities and services that add value to physical goods as they move from manufacturers to customers Ordering Payments CommunicationTransfer Negotiation FinancingRisk Taking Physical Distribution Information
- 6. Other Books refers Distribution Channel Functions as stated: • Information • Promotion • Contact • Matching • Negotiation • Physical distribution • Financing • Risk taking
- 7. Marketing Managers select the most feasible marketing channels that effectively perform the business processes and functions needed to correct the targeted gaps in service outputs. • Hybrid Channels, Multiple Channels and Shorter Channels or Direct Channels. FACTORS INFLUENCING THE SELECTION OF DISTRIBUTION CHANNEL
- 8. Channel Selection: Traditional View Manufacturer Customer Retailer Own Sales Force or Reps.Wholesaler Wholesaler
- 9. THE DESIGN OF MARKETING CHANNELS Use intermediaries to reach target market type location density number of channel levels Contact ultimate buyers directly using its own sales force or distribution outlets using the Internet through a marketing Web site or electronic storefront vs.INDIRECT DIST. DIRECT DIST.
- 10. FACTORS INFLUENCING THE SELECTION OF DISTRIBUTION CHANNEL This includes product, company, customer, competition factors, PLC stages, objectives, and desired market coverage intensity and control etc.
- 11. MARKET FACTORS Customer Profiles Consumer or Industrial Customer Size of Market Geographic Location Market Factors That Affect Channel Choices
- 12. PRODUCT FACTORS Product Complexity Product Price Product Life Cycle Product Delicacy Product Factors That Affect Channel Choices
- 13. ORGANISATIONAL (PRODUCER) FACTORS Producer Resources Number of Product Lines Desire for Channel Control Producer Factors That Affect Channel Choices
- 14. COMPETITIVE FACTORS No. of Players Market share Industry Size Market Opportunity COMPETITIVE Factors That Affect Channel Choices
- 15. ROLE OF MIDDLEMEN Searching out buyers and sellers (contacting & Mechandising), matching goods to the requirements of market. Offering goods in the form of assortments or packages. Persuading and influencing the prospective buyers to favour a certain product and its maker (personal selling/sales promotion). Implementing pricing policies in such a manner that would be acceptable to buyers and ensure effective distribution. Providing feed back information, marketing intelligence and sales forecasting services for the regions to their suppliers. Looking after the process of distribution where necessary. Participating actively in the creation and establishment of a market for a new product. Offering pre and after sale services to consumers. Communicating the use of technique of the product to the users. Offering credit to retailers and consumers. Risk bearing with reference to stock hoarding/transport.
- 16. FACTORS IN FAVOR OF THE ELIMINATION OF CHANNEL MEMBERS END CUSTOMERS/ CONSUMERS PRODUCT CHARACTERISTICS COMPANY FACTORS COMPETITION PRODUCT LIFE CYCLE STAGES
- 17. FACTORS IN FAVOR OF THE ELIMINATION OF CHANNEL MEMBERS Excessive number : Often there are too many middlemen between the manufacturers and consumers. As every middleman charges some commission or profit, the ultimate consumer has to pay a very high price for goods. They are social parasites thriving at the cost of the consumer and their ultimate elimination will reduce prices and burden on consumers. Superfluous : Most middlemen do not render any useful service in lieu of profit or commission. They act as only transfer agents and unnecessarily cause delay in the flow of goods. Their elimination will result in quick and smooth flow of goods. Limited risk taking : Middlemen do not bear the producers' risk such as loss due to strikes, lockouts, depression and change in fashions and habits, etc. Anti-social activities : They take undue advantage of adverse conditions in business. Some businessmen (middlemen) indulge in anti-social activities like hoarding and adulteration to earn huge amount to profits. Limiting consumers' choice : The middlemen often promote products which are inferior in quality and get high margin of profit. Thus they exploit consumers and limit their choice.
- 18. SELECTION OF CHANNELS FOR CONSUMER GOODS
- 19. SELECTION OF CHANNELS FOR INDUSTRIAL GOODS Cont..
- 20. SELECTION OF CHANNELS FOR CONSUMER GOODS AND INDUSTRIAL GOODS Cont… • A company must determine the distribution coverage intensity a product should get, what number and kinds of channel in which the product will be sold. Three major coverage strategies include intensive, selective, and exclusive distribution. • Intensive Distribution: A company uses all available distribution outlets for making its product available to consumers. • Selective Distribution: Companies use selective distribution, which means using more than a few and less than all available outlets in a market area to distribute products. • Exclusive Distribution: This type of distribution means using one or very limited few outlets. CHANNEL TERMS AND CONDITIONS • The producer stipulates terms and condition and responsibilities of channel partners to develop better mutual understanding and usually include price policy and trade margins, payment terms, and territorial demarcation, guarantee and returns policy, and mutual responsibilities etc.
- 21. REASON FOR CHANGING CHANNEL OF DISTRIBUTION Product characteristics. Buyer behaviour and location. Severity of competition. Cost effectiveness and channel efficiency. Degree of desired control on intermediaries. Adaptability to dynamic market conditions. OTHER REASONS Explosion of Information Technology and E –commerce, Greater difficulty of gaining a sustainable competitive advantage, Growing power of distributors, especially retailers in marketing channels,
- 22. EXAMPLE: DABUR DISTRIBUTION CHANNEL
- 23. EXAMPLE: DABUR DISTRIBUTION CHANNEL
- 24. EXAMPLE: DABUR DISTRIBUTION CHANNEL
- 25. DISTRIBUTION PROCESS Manufacturing plant company ware house Regional ware house Regional stockist Super stockist Stockist Distributor Retailer
- 26. UNDERSTAND - CHANNEL FLOW
- 28. CHANNEL GAPS • Geography • Time - Just-in-time systems, Lead Time • Knowledge • Technology Targeted levels of customer service What segments to serve Best channels to use Minimizing the cost of meeting customer service requirements
- 29. TOOLS OF MAINTAINING MARKETING CHANNEL MEMBERS • Channel Position • Channel Offering • Capacity Building Program
- 30. • Specify channel capabilities the supplier seeks • in terms of: • Technical competence • Sales force deployment • Warehouse and delivery capabilities • Financial stability • Leadership SELECTION CRIETERIA FOR MARKETING CHANNEL MEMBERS
- 31. SELECTION CRIETERIA FOR MARKETING CHANNEL MEMBERS
- 33. CHANNEL OFFERING - VMS Vertical Marketing System (VMS) is a distribution channel in which producers, wholesalers, retailers and other functional middleman operate as an integrated entity to deliver a specific product or service to the customer.
- 35. Horizontal marketing systems (HMS) is most similar to the concept of symbiotic marketing. Generic business formations which comprise HMSs include partnerships, strategic alliances, and joint ventures between firms operating in different markets. A HMS is defined as two or more, independent firms combining their resources to take advantage of a market opportunity. CHANNEL OFFERING - HMS
- 36. HORIZONTAL MARKETING SYSTEMS • Another channel development is the horizontal marketing system, in which two or more companies at one level join together to follow a new marketing opportunity. • By working together, companies can combine their financial, production, or marketing resources to accomplish more than any one company could alone.
- 38. • Multichannel distribution system is a distribution system in which a single firm sets up two or more marketing channels to reach one or more customer segments. • Multichannel distribution systems offer many advantages to companies facing large and complex markets. CHANNEL OFFERING - MDS
- 39. Producer driven: This is the effort of the manufacturer to reach the product to his consumers. Examples: Company owned retail outlets – Shikhar Shoes, Adidas, Nike Bakery Product of Bhatbhateni RECENT TRENDS IN MARKETING CHANNELS
- 40. Service Driven – Transporters and freight forwarders – Providers of warehouse space – 3P Logistics service providers – Couriers RECENT TRENDS IN MARKETING CHANNELS
- 41. Seller Driven – Existing wholesalers and retailers – Modern retail formats – Specialty stores – Shoppers’ Stop – Discount stores – RECENT TRENDS IN MARKETING CHANNELS
- 42. • Multi-level marketing systems – Amway, Modicare, Tupperware, Herbalife • Co-operative societies • Telephone kiosks • TV home shopping • Catalogue marketing • Exhibitions, fairs and trade shows • Data base marketing RECENT TRENDS IN MARKETING CHANNELS
- 43. MARKETING CHANNELS - PRACTICES • SYMBIOTIC MARKETING • THIRD PARTY (3P) DELIVERY • MULTI- CHANEL MARKETING SYSTEMS (MMS) • MULTI- LEVEL MARKETING (MLM) • CHANNEL REDUCTION AND ELIMINATION • E-MARKETING AND CHANNEL OF DISTRIBUTION
- 44. SYMBIOTIC MARKETING Symbiotic marketing is “an alliance of resources or programs between two or more independent organization design to increase the market potential of each”. In other words Symbiotic Marketing can be defined as “ Strategic blending resources by two or more actors, who may be either direct competitors or operate in completely distinct markets to achieve superior market returns not achievable by either party independently”.
- 45. THIRD PARTY DELIVERY • Third-party delivery is an independent logistics provider that performs any or all of the functions required to get a client’s product to market. • Companies use third-party logistics providers for several reasons. First, since getting the product to market is their main focus, using these providers makes the most sense, as they can often do it more efficiently and at lower cost. Second, outsourcing logistics frees a company to focus more intensely on its core business. Finally, integrated logistics companies understand increasingly complex logistics environments.
- 46. Third-party logistics is the outsourcing of logistics functions to third-party logistics providers (3PLs) • Provide logistics functions more efficiently • Provide logistics functions at lower cost • Allow the company to focus on its core business • Are more knowledgeable of complex logistics
- 47. MULTI CHANNEL MARKETING SYSTEMS • Used in situations where: – Same product but different market segments – Unrelated products in same market – detergents and ice creams (HUL) – Size of buyers varies – Geographic concentration of potential consumers varies – Reach is difficult Multi-channel marketing involves the blending of an electronic marketing channel and a traditional channel in ways that are mutually reinforcing in attracting, retaining, and building relationships with customers.
- 48. • MULTI-CHANNEL DIGITAL MARKETING is a strategy that combines various kinds of direct and indirect marketing channels to generate favorable actions or responses from targeted audiences • It may look like a complex web of distinct channels all working towards a similar end, and that is connecting with potential customers • More Potential Customers means Better results for business
- 49. Excessive number : Often there are too many middlemen between the manufacturers and consumers. As every middleman charges some commission or profit, the ultimate consumer has to pay a very high price for goods. They are social practices thriving at the cost of the consumer and their ultimate elimination will reduce prices and burden on consumers. Superfluous : Most middlemen do not render any useful service in lieu of profit or commission. They act as only transfer agents and unnecessarily cause delay in the flow of goods. Their elimination will result in quick and smooth flow of goods. Limited risk taking : Middlemen do not bear the producers' risk such as loss due to strikes, lockouts, depression and change in fashions and habits, etc. Anti-social activities : They take undue advantage of adverse conditions in business. Some businessmen (middlemen) indulge in anti-social activities like hoarding and adulteration to earn huge amount to profits. Limiting consumers' choice : The middlemen often promote products which are inferior in quality and get high margin of profit. Thus they exploit consumers and limit their choice. CHANNEL REDUCTION AND ELIMINATION
- 51. MULTI – LEVEL MARKETING People sell at different levels in company hierarchy. Distributors recruit new people to join the program. The practice is sometimes called “sharing” business.
- 52. • E-business describes the use of electronic means and platforms to conduct a company’s • business. E-commerce means that the company or site transacts or facilitates • the online selling of products and services. E-commerce has given rise to • e-purchasing and e-marketing. E-purchasing means companies decide to buy goods, • services, and information from various online suppliers. E-marketing describes company • efforts to inform buyers, communicate, promote, and sell its offerings online. E-MARKETING AND CHANNEL OF DISTRIBUTION
- 54. M – Commerce: Consumers and businesspeople no longer need to be near a computer to go online. All they need is a cellular phone or personal digital assistant to wirelessly connect to the Internet so they can check the weather, sports scores, and more; send and receive e-mail messages; and place online orders. Many see a big future in what is now called m- commerce (m for mobile).
- 55. FUTURE OF DIGITAL MARKETING • Mobile still has plenty of room for penetration, and we believe that the new “small screen” will continue to grow • Wearable's and IoT will enter mainstream: According to Cisco’s Visual Networking Index report, there will be more than half a billion wearable devices in use every day by the 2019. We expect to see ultra-personal, on- time marketing as a result • Social media will continue to serve both as a way to push / pull marketing messages, and as a way to deliver proactive CRM, but consumers will turn to instant messaging platforms.