Channel Review: Chapters 12, 13 and 17

1
Channel ReviewChapters 12, 13 and 17

• Margaret Cornish

2
Distribution DecisionsChapt 12 Objectives

• Why do companies need distribution channels?
• What value do they add?
• What are the alternative channels are there?
• How do you evaluate channel members?

3
Channel Conflict

• Conflict amongst one or more of wholesaler,
  retailer and producer about who should do what in
  the value chain and for what rewards. Frequently
  reduces value to consumer.

4
Vertical Marketing System

• Channel structure in which producers wholesalers,
  and retailers act as a unified system under
  contractual dominance of one member in the chain
• Dominance frequently a result of ownership ties

5
Vertical Marketing System

• In conventional distribution channel each member
  tries to maximize its own profits and co-operates
  only opportunistically

6
Vertical Marketing System (VMS)

• Can be producer, wholesaler or retailer
• Rationale is to manage and control channel
  conflict. Maximize value to the consumer by
  achieving smooth flow through the channel and by
  wringing costs from the system (purchasing
  economies, reduced handling or other elimination
  of duplication etc)

7
VMS Three types

• Corporate or 100 owned channel
• Contractual
• Wholesaleer-sponsored (independent firms)
• Retail co-operatives (backward integration)
• Franchise organization
• Administered VMS co-operation comes from size
  and power of one member (eg PG, Toys R Us,
  Campbell Soup)

8
Horizontal Marketing System

• Two or more companies at same level
  collaborate to pursue new marketing opportunity
• Global airline alliances are example of HMS
  (eg Star Alliance of Air Canada, Varig, Thai
  Lufthansa and SAS) more seamless global travel
  better connections fewer lost bags
• Coke and Nestle marketing ready to drink coffee
  and tea

9
Hybrid Marketing Systems

• Multi-channel or hybrid distribution different
  channels used to reach different customer
  segments
• IBM
• own sales force
• Business customers requiring major support
• IBM Direct
• Mail order
• Mass Retailers

10
Hybrid Marketing Systems

• Advantages enables large company to maximize
  sales by meeting needs of vary different
  customer segments
• Disadvantage May create friction amongst
  channels mass marketers resented IBM Direct
  initiative

11
Channel Design

• Analyzing consumer service needs
• Setting channel objectives
• Identifying channel alternatives
• Evaluating

12
Consumer Service Needs Customer value
delivery systems

• Desired location, delivery timing and add- on
  services (training, credit, repairs,
  installation)
• Must balance consumer service needs, against
  feasibility and cost as well as consumer price
  preferences

13
Channel Objectives Constraints

• Efforts to minimize total costs
• Product characteristics require special factors
  perishable, bulky etc reduced distances
• Firm characteristics size and financial strength
  
• Firm intermediaries expertise promotion,
  customer contact, storage and credit
• Competitor channels strength and location
• Environmental economic conditions and legal
  considerations

14
Identifying Major Alternatives Types, number

• Types
• Company sales force
• Manufacturers agency
• Industrial distributors
• Number to use at each level
• Intensive
• Exclusive
• Selective

15
Evaluating Major Alternatives

• Economic criteria sales vol vs margin
• Control issues producers prefer to retain more
• Adaptive criteria least long-term commitment
  possible, hence more adaptive to evolving market

16
Barrow Booster (BB)Which would you choose?

• What criteria for selecting a channel were used
  for initial and final choices?
• At Chicago trade show he met with distributors,
  manufacturers, manufacturers reps. Evaluate each
  one.
• How should he motivate reps?
• Logistical issues at 100,000 units/yr

17
Channel Mgmt Decisions

• Selecting
• What are hallmarks of successful ones?
• Motivating by carrot and stick
• Higher margins, special deals, premiums, shared
  advertising and promotion display allowances etc
• Evaluating channel members

18
Integrated Logistics Management

• Teamwork throughout the entire customer value
  chain to optimize performance of the entire
  distribution system
• Objective is to shift from anticipatory based
  distribution to response based distribution
  systems. This can lead to outsourcing logistics
  to third parties to save costs and increase
  efficiency

19
Store Retailing

• Amount of service
• Product line department specialty
• Relative prices
• Control of outlets
• Independent, corporate and voluntary chains,
  retail co-ops, franchise and merchandizing
  conglomerate (diversified retailing)

20
Non-Store Retailing

• Direct Marketing
• Direct Selling
• Automatic Vending

21
Direct Marketing Benefits to consumers

• Larger selection
• Saves time
• Saves expense of actual window shopping

22
Direct Marketing

• Face-to face
• On-line marketing
• Direct Mail
• Catalogue Marketing
• Telemarketing (inbound and outbound)
• Direct Response (e.g. home shopping)
• Kiosk-marketing (trade show)

23
Direct Marketing Benefits to Sellers

• Database may identify your target market very
  precisely
• Allows you to customize offer to special needs
  and wants (simplifies making multiple offers)
• Enhances ability to build closer relationships
• Offer and strategy less visible to competitors
• (May) eliminate cost of physical store

24
Customer databases

• Identify prospects
• Deciding which customers should receive an offer
• Deepening customer loyalty
• Reactivating customer purchases ie, follow-up
  pitches (replacements, upgrades etc)

25
Direct Marketing

• Online
• Direct mail
• Direct response TV
• Telemarketing (outbound, inbound)
• Catalogue
• Face-to-face
• Kiosk

26
Online Marketing

• Benefits to Buyers
• Convenient, 24 hours, immediate, inter-active,
  easy, private
• Unrivalled comparative information
• Benefits to Sellers
• Customer relationship building, global
• Can reduce cost, and increase efficiency
• Flexibility in updating the offer

27
Online Marketing Channels

• Creating an electronic storefront
• Advertising online
• Participating in forums, newsgroups and web
  communities
• Using e-mail and webcasting

28
Integrated Direct Marketing

• Direct marketing approach that uses multiple
  vehicle, multiple stage campaigns
• For example ad with response channel then direct
  mail then outbound telemarketing, then
  face-to-face sales call followed by continuing
  communication
• What was marketing approach in your project?

29
Final EXAM

• Wednesday August 2nd from 9-12 am
• Multiple choice and scenarios
• Know the text
• I will be a procter