Post on 06-Apr-2018
transcript
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Presentation On Channel
Dynamics
Prepared By:-
Nitish Oberoi Rachit Manocha
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The Nature of Distribution
Channels Distribution channels are intermediaries used by the
producers to bring their products to the market.
Why? Because the use of intermediaries bring greater
efficiency in making goods available to target markets.In other words, they match the supply with the
demand.
Most important benefit of using intermediaries is that
they provide economies. They reduce the amount of
work that must be done by both producers and
consumers.
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Vertical Marketing Systems
Vertical Marketing Systems (VMS) consists of
producers, wholesalers, and retailers acting as a unified
system - that seek to maximize profits for the whole
channel. Here, one channel members owns the others, has
contracts with them or use so much power that they all
cooperate.
Such systems occur to control channel behavior and
manage channel conflict.
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There are three major types of VMSs which has
different means for setting up leadership and power
in the channel; Corporate VMS
Contractual VMS
Wholesaler-sponsored voluntary chains
Retailer cooperatives
Franchise organizations
Administered VMS
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Types of Vertical Marketing Systems
Corporate
VMS
Wholesaler-sponsored
voluntary
chains
Retailercooperatives
Franchiseorganizations
Contractual
VMS
Administered
VMS
Vertical
marketing
systems (VMS)
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Corporate VMS
In a corporate VMS, production and distribution
stages are combined under single ownership, in
order to manage cooperation and conflict
management e.g. AT&T markets its products
through its own chain of distributors.
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Contractual VMS
A contractual VMS consists of independent firms at
different levels of production and distribution who join
together through contracts to obtain more economies
or sales impact than each could achieve alone. There are three types of contractual VMSs;
wholesaler-sponsored voluntary chains ; are contractual marketing
systems in which wholesalers organize voluntary chains of
independent retailers to help them compete with largecorporate chain organizations.
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retailer cooperatives ; are contractual marketing systems in
which retailers organize a new, jointly owned business to
carry on wholesaling and possibly production.
franchise organizations ; are contractual marketing systems in
which a channel member, called a franchiser, links several
stages in the production-distribution process. There are
three forms of franchisees;
manufacturer-sponsored retailer franchise system e.g. Ford
licenses dealers to sell its cars. The dealers are independent
businesspeople who agree to meet various conditions of sales
and service.
manufacturer-sponsored wholesaler franchisee system e.g. Coca-
Cola licenses bottlers (wholesalers) in varius markets who buy
Coca-Cola syrup concentrate and then carbonate, bottle and sell
the finished product to retailers in local markets.
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Administered VMS
A vertical marketing system that coordinates
production and distribution stages, not through
common ownership or contractual ties, but through the
size and power of one of the parties e.g. Procter &Gamble, Kraft, Campbell Soup (or retailers like Wal-
Mart, Toys `R` Us) are very strong that they can
command special displays, shelf space, promotions and
prices form the other parties.
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Horizontal Marketing Systems
Horizontal marketing systems is a channel
arrangement in which two or more companies at
one level join together to follow a new marketing
opportunity.
The major benefit is that companies combine their
capital, production capabilities, marketing resources
and therefore accomplish more. Companies might join forces with competitors or
noncompetitors. They might work with each other
on a temporary or permanent basis or they may
create a separate company.
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E.g. Coca-Cola and Nestle formed a joint venture to
market ready-to-drink coffee and tea worldwide.
Coke provided worldwide experince in marketing and distribution beverages and Nestle contributed
two established brand names - Nescafe and Nestea.
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Hybrid Marketing Systems
Hybrid marketing systems is also called
multichannel distribution systems where the
company uses several marketing channels (e.g. direct
mail - telemarketing, retailers, distributors, dealers,own sales force) to sell its products to different
customer segments.
E.g. IBM uses its own sales force + IBM direct
which is the catalog and telemarketing operation of
IBM + independent IBM dealers + IBM dealers for
business segments + large retailers like Wal-Mart.
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The major benefit is that when the company has
large and complex markets (consumers) the
company can expand its sales and market coverageby providing services to the specific needs of diverse
customer segments.
The disadvantage is that they are harder to control
and generate more conflict.