3.0 Distribution model session 4 vodcast

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Slide 1:

The new distribution model - Marketing 3.0

DELL – the direct model of distribution:

DELL – the direct model of distribution

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HAPPY CUSTOMER UNHAPPY RESELLERS DELL kept all the margin Cut -out-the- middleman priniciple In 1999 DELL largest seller on Internet >Amazon.com, eBay and Yahoo… combined ! RESULT………

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Growth stalling Dell’s stock tumbled US market maturity Dell pushed to embrace reseller and indirect model Comupters became commodities – customisation less important Global markets – different cultures Customers matured – competition 2005 – the year the world changed

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Building reseller relationships on the quiet Building TRUST Relationship key 2007 – indirect sales 15% Partner Direct program 11,500 partners – 200 more per week KEY TAKEAWAYS Building the relationship 1 on 1 dialogue Giving value to partner 2007 Dell goes indirect

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Technology enabled success BUT technology created the forces of globalisation The POST GROWTH society – Long tail marketing Niche markets Demand for Products not in Traditional outlets Limited life ‘one product fits all’ Mass media OPPOSING FORCES MODEL

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Complex entities Hybrids of companies Have their own missions, visions and values Consumers with needs and wants Form the consumer interface Become collaborators , cultural change agents , creative partners What is the channel in 3.0?

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Values Purpose Identity Purpose Identity Values Company Channel Partner Mirroring Purpose - Identity -Values model

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Purpose = Overall key objective Identity = character of a potential partner Values = involve shared beliefs – ethics , socialibility Case study - Bodyshop Expansion required Channel creation – personal Interviews by A.Roddick Looking for siliar values to herself 90% or franchises were female owned Bodyshop grew 50% in Y1 Purpose - Identity -Values model

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Russian ‘roulette! Simple home made icecream Long term vision – make the world a better place – no interest in agressive growth Russia – reinforcement of US/ russian collaboration post COLD WAR Channel development ( Dave Morse) Difficult task – socially responsibility a hard sell ! Intercentive Cooperative Business values not aligned Bribery – point of conflict ! The ben and jerry’s example

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Importance of shared values 3 key assessments Win- win for both both Both businesses maintain high quality standard Compatibility of values Shared value improves channel economics Make the cow happy!

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Distributing the story Channel is customer interface Must market producer’s values Personal approach – consistency Signaling – generating interest stemmed from producer Channel sees the importance of the values. Channel as a Cultural Change Agent

Cultural change agents in New World marketing:

Channel can become consumers India – reaching population out of poverty Socially responsible distribution 1981 – 60% population in poverty 2005 – 42% of population in poverty Increase access to the poor Distribution via networks of humans Product distribution to rural areas ( in India 80% or TCS) In new growth markets - distribution requires network of many channel partners ( to enable peer to peer recommendation ) Communitization of customers Cultural change agents in New World marketing

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Marketing 3.0 sees power belonging to the consumer Channel provides consumer touch point Channel sometimes more important than manufacturer Channel delivers solutions Manufacturer must understand Product margin contribution Inventory turn around rate Product strategic importance to channel Channel 3.0 – as an ally

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Manufacturer must provide active management in ‘ selling out’ process Co-op marketing In-store promotion Brand presence in retail outlets Give rise to Category management position Company channel integration helps link in value chain VALUE = PROFIT CCI – mutual cooperation for competitiveness No more zero - sum rivalry Cooperation in retail promotion Channel 3.0 – as an ally

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Managing the relationship Retail promotion Regular information sharing Joint strategic planning Values combine – homogenous Channel 3.0 as an ally

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Dependancy – single channel Multi- channel , Company growth , without delineation Territory Based - Market territory and consumer segmentation Integrated muti - channel stage - Channel collaboration – within a same region or segment 4 stages of excellence in channel partnership

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Additional reading Sushil Vachanie and N.Craig Smith « Socially responsible Distribution : Strategies for reaching the bottom of the pyramid ( California management review 2008) Andrew Park «  Michael Dell: Thinking out of the box » Business Week , Nov 24 2004 Rackham , Friedman and Ruff « Getting partnering right: How marketing leaders are creating long term competitive advantage (New York:McGraw-Hill )

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Vodcast challenge

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Choose a company and identify its channel model Illustrate and discuss the Purpose - Identity -Values model in this collaboration

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