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Chapter 15
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The Topics
What is marketing channels system andvalue network?
What work do marketing channels perform
How should channels be designed? What decisions do companies face in
managing their channels?
How should companies integrate channels
and manage channel conflict? What are the key issues with e-commerce
and m-commerce?
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Advertising and promotionManufacturers’ sales force and
trade promotion money
Marketing Channels
1. Marketing Channel & Value Network : Definitions
Sets of interdependent organizations participating in the process of making a product or
services available for use or consumption
Marketing Channel
Push Marketing
Hybrid /
Multichannel
Pull Marketing
Mix – Push Pull Marketing Strategy
Merchant : Wholesalers and retailers
Agent : Brokers, manufacturers’ representative, sales agents
Facilitator : transportation companies, independent
warehouse, bank, advertising agencies
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Some Examples of Marketing Channel
1. Marketing Channel & Value Network : Definitions
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Value Network
1. Marketing Channel & Value Network : Definitions
Value Network
A system of partnership and alliances that a firm creates
to source, augment and deliver its offering
Including :• A firm suppliers and its suppliers’ suppliers
• Intermediate customers and end customers
• Others such university researchers and government
approval agencies
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Some Examples of Value Network
1. Marketing Channel & Value Network : Definitions
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Key Function of Marketing Channel Members
2. The Role of Marketing Channel
• Gather information about potential and current
customers, competitors and other actor and forces in
marketing environment
• Develop and disseminate communication to stimulate
purchasing
• Negotiate and reach agreements on price and other
terms so that transfer of ownership or possession can
be affected
• Place orders with manufacturers
• Acquire the funds to finance inventories at different
levels in the marketing channel
• Assume risks connected with carrying out channel work• Provide for the successive storage and movement of
physical products
• Provide for buyers’ payment of their bills through bank
and other sinancial institution
• Oversee actual transfer of ownership from one
organization or person to another
Storage & Movement
Title
Communication
Ordering
Payment
Information
Negotiation
Finance
Risk Taking
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Channel Level
2. The Role of Marketing Channel
Manufacturer Manufacturer Manufacturer Manufacturer Manufacturer Manufacturer Manufacturer Manufacturer
Consumer Marketing Channels Industrial Marketing Channels
Wholesaler Wholesaler
Jobber
Retailer
Customer
0-level 1-level 2-level 3-level 0-level 1-level 2-level 3-level
RetailerRetailer
CustomerCustomerCustomerIndustrial
Customer
Industrial
Customer
Industrial
Customer
Industrial
Customer
Industrial
Distributor
Manufacturerrepresentative
Manufacturersales branch
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Some Examples
2. The Role of Marketing Channel
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How to Design Market Channel
3. Channel Design
1. Analyzing Customer Needs and Wants• Different customer have different needs during the purchase process
• Same customer may choose different channels for different functions in
a purchase
• Channels produce 5 services output : lot size, waiting & delivery time,
spatial convenience, product variety and service backup
2. Establishing Objectives and Constraints• Objective : vary with product characteristics (bulky
product, non-standard product, product requiring
installation and high-unit-value product)
• Constraints : Legal regulation and restrictions
3. Identify and Evaluate Major Channel Alternatives• Each channel has unique strength and weakness
• Identifying major channel alternatives is based on three factors :
• Type of intermediaries
• Number of intermediaries
• Terms and responsibilities of channel member
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Customer Preference : Customer Value
3. Channel Design
50France
Germany
UK
32 18
16 39 45
15 19 66
Service/ quality
customers
Price/value
customers
Affinity
customers
% of respondents
Clothing
40France
Germany
UK
27 25
13 42 45
13 32 55
Service/ qualitycustomers Price/valuecustomers Affinitycustomers
% of respondents
Grocery
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Value-Adds vs Costs of Different Channels
3. Channel Design
Internet
Value-added
partners
Retail Stores
Distributors
Telemarketing
Sales force
Low High
High
V a l u e - a d d
o f S a l e
Cost per transaction
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Some Examples of Channel Design
3. Channel Design
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Some Decisions in Managing Channels
4. Channel-Management Decisions
1. Selecting Channel Members
2. Training and Motivating Channel Members
3. Evaluating Channel members
4. Modifying Channels Design and Arrangements
5. Global Channel Considerations
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Some Examples of Channel-Management
Decisions
4. Channel-Management Decisions
h l h l fl
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Channel Integration
5. Channel Integration & Channel Conflict Management
• Producer, wholesaler and retailer act as a
unified system
• Strong channel member attempt to
control channel behaviour and eliminateconflict between members of system
• Consists of three type : Corporate VMS,
Administered VMS and Contractual VMS
Channel
Integration
1. Vertical Marketing System 2. Horizontal Marketing System
• Two or more unrelated companies put
together resources or programs to exploit
an emerging market opportunity
• Strategic fit between member of system :capital, know-how, marketing resources,
risk, etc
3. Integrating Multichannel Marketing System
• Multichannel marketing
• Create more benefit : market coverage, lower channel cost,
more customized selling
• Trade off : more conflict and problem may occur in control
and co-operation
Ch l I i & Ch l C fli
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Some Examples of Channel Integration
5. Channel Integration & Channel Conflict Management
5 Ch l I i & Ch l C fli M
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Channel Conflict Management
5. Channel Integration & Channel Conflict Management
1. Strategic Justification
2. Dual Compensation
3. Superordinate goals
4. Employee exchange
5. Joint memberships
6. Co-optation
7. Diplomacy, mediation or arbitration
8. Legal recourse
5 Ch l I t ti & Ch l C fli t M t
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Some Examples of Channel Conflict
Management
5. Channel Integration & Channel Conflict Management
6 K I i d
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Issue in E-Commerce and M-Commerce
6. Key Issue in e-commerce and m-commerce
E-Commerce
• Quality of web site (simplicity,
fast and easy to use)
• Security & privacy• Payment options
• Attractive interface
• Existence and quality of customer
services
• Social interaction
• Penetration of smartphone
• Penetration and adoption of 3G
• Payment options
• Mobile application
• Internet tariff
M-Commerce
6 K I i d