Strategic Marketing Fall 2005 Tinker AFB Campus

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Strategic Marketing Fall 2005Tinker AFB Campus

• Chapter Fourteen
• Channels Strategies

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Value Network

• The emergence of the value network view of the
  individual businesses. Deals with all the
  upstream (suppliers) and downstream (customers)
  variables.

3
What Is a Value Network and Marketing-Channel
System

• Value Network - A system of partnerships and
  alliances that a firm creates to source, augment
  and deliver its offerings.
• Firm decision regarding emphasis upstream versus
  downstream
• Makes firm more aware of where problems can occur
• Encourages more online development with business
  partners.

4
Marketing Channels

• Interdependent organizations
• Making product or service available for use or
  consumption.
• More use today of "hybrid" channels (direct,
  online, and indirect)
• Customers expect more channel integration (buy
  from any of the hybrid channels and obtain from
  any of the others).

5
What Work Is Performed by Marketing Channels?

• Smooth the flows of goods and services.
• Save manufacturer money, time, and specialized
  effort.

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Channel Functions and Flows

• Information
• Promotion
• Negotiation
• Ordering
• Financing
• Risk taking
• Physical possession
• Payment
• Title

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What Work Is Performed by Marketing Channels?
(cont.)

• Channel Levels - zero to three levels, can be
  longer
• Service Sector Channels - Focus on location and
  minimizing levels.

8
Information Highway Channels (information
industry)

• Expansion of bandwidth, internet, extranets, and
  intranets
• Companies to Provide This content (Disney),
  consumer devices (Palm, etc.), components
  (Lucent), and conduit (ATT).

9
Channel-Design Decisions

• Analyze Customers' Desired Service Output Levels
  (lot size, waiting time, spatial convenience,
  product variety, and service backup)
• Establish Objectives and Constraints - based on
• Product characteristics
• Strengths and weaknesses of intermediaries
• Competition's channels
• Environmental changes

10
Identify Major Channel Alternatives

• Types of intermediaries
• Number of intermediaries
• Exclusive Distribution - one or a select few
• Selective Distribution - more than a few, less
  than all
• Intensive Distribution - as many outlets as
  possible
• Terms and responsibilities of channel members
• Evaluate the Major Alternatives
• Economic criteria - sales versus costs
• Control and Adaptive Criteria - degree of
  intermediary commitment

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Channel-Management Decisions

• Selecting Channel Members - evaluate experience,
  number of lines carried, growth and profit
  record, solvency, cooperativeness, and
  reputation.
• Training Channel Members - Prepare the channel
  member employees to perform more effectively and
  efficiently.
• Motivating Channel Members - coercive, reward,
  legitimate, expert, or referent power.
• More sophisticated companies try to form
  partnerships.
• Can evolve into long-term distribution
  programming.

12
Evaluating Channel Members

• Sales quota attainment, average inventory levels,
  customer delivery time, treatment of damaged and
  lost goods, and cooperation in promotional and
  training programs.

13
Modifying Channel Arrangements

• System will require periodic modification to meet
  new conditions in the marketplace.

14
Channel Dynamics

• Vertical Marketing Systems
• Corporate and Administered VMS - corporate (under
  single ownership), administered (one member
  emerges as dominant in channel)
• Contractual VMS - program integration
• Wholesaler-sponsored voluntary chains
• Retailer cooperatives
• Franchise organizations
• Manufacturer-sponsored retailer franchise (Ford
  dealers) or manufacturer-sponsored wholesaler
  franchise (Coca Cola bottlers)

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The New Competition in Retailing

• Between systems, not individuals

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Horizontal Marketing Systems

• Two or more unrelated firms put together
  resources or programs.
• Each firm lacks the capital, technology,
  marketing resources or other variables to take on
  the venture alone.
• Can be permanent or temporary.

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Multichannel Marketing Systems

• Multichannel marketing - Single firm uses two or
  more marketing channels to reach one or more
  customer segments. Advantages increased
  coverage, lower cost, customized selling.
• Planning Channel Architecture - Companies
  thinking through their channel architecture,
  which are efficient and not, and developing new
  means.
• Roles of Individual Firms in a Multi-Channel
  System insiders, strivers, complementers,
  transients, and outside innovators

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Conflict, Cooperation, and Competition

• Types of Conflict and Competition
• Vertical channel conflict
• Horizontal channel conflict
• Multichannel conflict

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Causes of Channel Conflict

• Goal incompatibility
• Unclear roles and rights
• Differences in perception
• "Over" dependence

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Managing Channel Conflict (responses)

• Adoption of superordinate goals
• Exchange of people between channel levels
• Co-optation - winning support at different levels
• Joint membership in and between trade
  associations
• Diplomacy, mediation, and arbitration

21
Legal and Ethical Issues in Channel Relations

• Exclusive Dealing
• Exclusive Territories
• Tying Agreements
• Dealers' Rights