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MAREKTING CHANNEL

A: Over the past three decades, the overwhelming emphasis in the Marketing Mix has been on: Product Strategy with Pricing Strategy and Promotional Strategy also being stressed. But.....:

A: Over the past three decades, the overwhelming emphasis in the Marketing Mix has been on: Product Strategy with Pricing Strategy and Promotional Strategy also being stressed. But.....

Marketing Channel Strategy (Place); the fourth “P” in the Marketing Mix has been largely neglected But this is changing....:

Marketing Channel Strategy (Place); the fourth “P” in the Marketing Mix has been largely neglected But this is changing....

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Marketing channel Definition Philip Kotler- Every produce seeks to link together the set of marketing intermediaries that best fulfill the firm’s objectives. This set of marketing intermediaries is called the marketing channel also trade channel or channel distribution

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Meaning - The entire function of getting the goods into the hands of consumer is often referred as distribution The term channel of distributions used to denote the middlemen engaged in moving goods from the place of production to the place of consumption Functions of channel of distribution 1. Help in production of function 2. Matching demand & supply 3. Financing the producer 4. Aid in communication 5. Stabilizing the prices 6. Promotional activities

Marketing Channel Strategy is Growing in Importance. Why? Five Reasons:

Marketing Channel Strategy is Growing in Importance. Why? Five Reasons (1) Search for Sustainable Competitive Advantage (2) Growing Power of Retailers in Marketing Channels (3) The Need to Reduce Distribution Costs (4) The Increased Role and Power of Technology (5) The New Stress on Growth

I. The Search for Sustainable Competitive Advantage:

I. The Search for Sustainable Competitive Advantage

Sustainable Competitive Advantage::

Sustainable Competitive Advantage: A competitive advantage that cannot be quickly and easily copied by competitors

A sustainable competitive advantage is becoming more difficult to attain through::

A sustainable competitive advantage is becoming more difficult to attain through: Product Strategy - rapid technology transfer enables competitors to quickly produce similar products Pricing Strategy - global economy allows competitors to find low cost production to match prices Promotion Strategy - high cost, clutter, and short life promotional campaigns limit competitive advantage

Competitive Advantage Based on Superior Marketing Channel Strategy is More Difficult for Competitors to Copy Because::

Competitive Advantage Based on Superior Marketing Channel Strategy is More Difficult for Competitors to Copy Because:

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Channel Strategy is Long Term Requires a Channel Structure Depends on Relationships and People Requires Effective Interorganizational Management

II. Growing Power of Retailers in Marketing Channels:

II. Growing Power of Retailers in Marketing Channels Retailers

Retailers....:

Retailers.... Are Growing Larger Enjoy Substantial Channel Power Act as Buying Agents for Customers Rather than Selling Agents for Suppliers Often Operate on Low Price / Low Margin Model Operate in Saturated Markets and Fight for Market Share

Retailers Are Growing Larger:

Retailers Are Growing Larger

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Concentration of Sales Among the Top 50 Retail Firms

Enjoy Substantial Channel Power:

Enjoy Substantial Channel Power Retailer

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Retailers Act as Buying Agents for Customers Rather than as Selling Agents for Suppliers

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Retailers Often Operate on Low Price / Low Margin Model

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Retailers Operate in Saturated Markets and Fight for Market Share

Power or Dominant Retailers are therefore the “Gatekeepers” into the Consumer Marketplace:

Power or Dominant Retailers are therefore the “Gatekeepers” into the Consumer Marketplace Thus, Effective Channel Strategy for Dealing with Power Retailers is Crucial

III. The Need to Reduce Distribution Costs:

III. The Need to Reduce Distribution Costs Distribution Costs

Distribution Costs Often Account for a Significant Percentage of the Final Price of Products:

Distribution Costs Often Account for a Significant Percentage of the Final Price of Products Sometimes Distribution Costs are Higher than the Manufacturing Cost or the Costs of Raw Materials and Component Parts

IV. Increasing Role and Usefulness of Technology:

IV. Increasing Role and Usefulness of Technology

Technology has the power to greatly enhance the effectiveness and efficiency of Marketing Channels and could potentially change the entire structure of distribution around the world.:

Technology has the power to greatly enhance the effectiveness and efficiency of Marketing Channels and could potentially change the entire structure of distribution around the world.

Some Examples...:

Some Examples... The Internet Wireless Communications B2C and B2B E-Commerce Cell Phones Global Telecommunications Robotics & Automated Warehousing Computerized “Salespeople”

Firms that make effective use of these technologies in their channel strategy can gain a substantial competitive advantage:

Firms that make effective use of these technologies in their channel strategy can gain a substantial competitive advantage Competition

V. The New Stress on Growth Strategy:

V. The New Stress on Growth Strategy

In American Business Circles “Growth” has Overtaken “Restructuring” as the #1 Buzzword :

In American Business Circles “Growth” has Overtaken “Restructuring” as the #1 Buzzword Out Reengineering Restructuring Downsizing Flat Organizations Lean and Mean In Growth Expansion New Markets Market Share Top Line Revenue

QUESTION In a relatively slow growth economy, how can an individual company selling mature products in mature markets grow?:

QUESTION In a relatively slow growth economy, how can an individual company selling mature products in mature markets grow?

ANSWER Share of Mind = Share of Market :

ANSWER Share of Mind = Share of Market Translation By getting channel members to focus on your products to a greater extent than your competitors, you gain market share and growth

Summary:

Summary (1) Search For Competitive Advantage (2) Growing Size and Power of Retailers (3) Need to Reduce Distribution Costs (4) Power and Potential of Technology (5) Stress on Growth Instead of Downsizing

Basic Strategic Questions:

Basic Strategic Questions (1) What role should distribution play in the firm’s overall objectives and strategies? (2) What role should distribution play in the marketing mix? (3) How should the firm’s marketing channels be designed to achieve its distribution objectives? (4) What kinds of channel members should be selected to meet the firm’s distribution objectives? (5) How can the marketing channel be managed to implement the firm’s channel design effectively and efficiently on a continuing basis?

The Relationship between customer satisfaction and the company’s marketing mix can be represented as::

The Relationship between customer satisfaction and the company’s marketing mix can be represented as: C s = f (P 1 , P 2 , P 3 , P 4 ) where: C s = degree of customer satisfaction P 1 = product strategy P 2 = pricing strategy P 3 = promotional strategy P 4 = place (channel strategy)

The Most Basic Questions in the Design of Marketing Channels:

The Most Basic Questions in the Design of Marketing Channels When Do Customers Buy? Where Do Customers Buy? How Do Customers Buy? Who Buys? Who makes the actual purchase? Who uses the product? Who takes part in the buying decision?

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Channel design decisions 1. Analyzing customer needs 2. Establishing channel objectives 3. Identifying major channel alternatives 4. Evaluating major channel alternatives Factors affecting channels 1. PRODCUT CHARACTERISTICS -Purchase frequency -perish ability -weight & technicality of the product -selling price unit -standardized products or ordered products

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2. Markets factors/Consumer factors -Consumer or industrial market -Number of purchasers -Geographical distribution -Size of orders -Polices of competitors -Customer buying habits 3. Company characteristics -Financial resources -Size of the company -Product mix -Attitude of company executives -Marketing polices -Goodwill of the company

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4. Middlemen consideration -Attitude of the middlemen -Services provided by the middlemen -Availability of the middlemen 5. Environment -Economic conditions -Legal restrictions -Social & ethical considerations

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Types of channel distribution 1. Consumer goods 2. Agricultural goods 3. Industrial goods 1. Consumer goods Distribution through an agency that stands between the manufacturer & the wholesalers In this channel there brokers, manufactures agents, commission merchant & the export merchants. This channel is used when the manufacturer can’t afford to invest the amount required to develop a sales force of his own

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Selling to wholesalers who sell it to retailers -It is a traditional channel, the wholesaler buys the large quantities from the producer & middlemen, and he tries to sell for more than he pays -The defect of the system is that the manufacturer losses contact with the retail dealers

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Selling direct to retailers or dealers -Here the manufacturer assumes the function of the wholesalers & brokers. This requires an efficient sales force. -The channel tries to eliminate wholesalers from the channel of distribution -This channel is currently receiving increased attention after the creation of super markets & departmental stores Selling direct to customers -This method is most common in industrial marketing where capital goods are marketed

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MANUFACTURER CONSUMER Agency wholesaler Retailer wholesaler Retailer Retailer

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2. Agricultural goods -- -The chief characteristics feature of this channel is the presence of large umber of brokers & agents, these brokers, these brokers who stand at par with the retailers in the consumer goods channel perform a number of functions of their own --They sometime act as assemblers & there after, instead of selling the products to ultimate consumers sells it to wholesalers

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3. Industrial goods Producer-industrial user Producer-agent user Producer-agent industrial distributor-user

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