Date post: | 20-Jan-2015 |
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Business |
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(A TOOL 0F MARKETING MIX)
Place:-The fourth “P” in the Marketing Mix has been largely neglected
But this is changing....Marketing Channel Strategy Has Become Critically Important For Most Businesses
Marketing Channel Strategy
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
Marketing Channel Strategy is Growing in Importance. Why?
1.The Search for Sustainable Competitive Advantage
A competitive advantage that cannot be quickly and easily copied by competitors
Superior Marketing Channel Strategy is More Difficult for Competitors to Copy Because: Channel Strategy is Long Term
Requires a Channel StructureDepends on Relationships and PeopleRequires Effective Interorganizational Management
2.Growing Power of Retailers in Marketing Channels
Retailers
Retailers:- Are Growing Larger Enjoy Substantial Channel Power Act as Buying Agents for
Customers Often Operate on Low Price / Low
Margin Model Operate in Saturated Markets
and Fight for Market Share
Retailers
3.The Need to Reduce Distribution Costs
DistributionCosts
Distribution Costs Often Account for a Significant Percentage of the Final Price of Products
4.Increasing Role and Usefulness of Technology
Firms that make effective use of these technologies in their channel strategy can gain a substantial competitive advantage
5.The New Stress on Growth Strategy
Place Decisions Are an Important Part of Marketing Strategy
Channels of Distribution
Internet Makes Direct Distribution Easier
Internet Makes Direct Distribution Easier
Greater ControlGreater Control
Lower CostLower Cost
Direct Contact with Customer Needs
Direct Contact with Customer Needs
Quicker Response or Change in Marketing Mix
Quicker Response or Change in Marketing Mix
Suitable Middlemen Not Available
Suitable Middlemen Not Available
Channel System May Be Direct or Indirect
SomeReasonsFor ChoosingDirect Channels
Factors Related to the Use of Direct Distribution
• Direct (producer to customer) distribution is more common when:
– an aggressive personal selling effort is required and/or when customers need special technical service
– the product is primarily a service rather than a physical good– when working with middlemen would make it difficult to
maintain control of the marketing mix – the producer can perform marketing functions more efficiently
(economically) by itself
Manufacturer
End User
Indirect Distribution
Goods may move through a set of intermediaries Most FMCG companies follow this route
The intermediary has a far better reach than the company
The cost of operations of an intermediary like a wholesaler / retailer is shared with many businesses.
Indirect DistributionManufacturerManufacturer
Retailer
End User
Retailer
End User
Distributor/ wholesaler
Two levelOne level
Manufacturer
Retailer
Distributor/ wholesaler
End User
Agent
Third level
Marketing Channel Systems
Vertical:CorporateAdministeredContractual
HorizontalMulti-channel
Vertical Marketing System
Various parties like producers, wholesalers and retailers act as a unified system to avoid conflicts
Improves operating efficiency and marketing effectiveness3 types:
Corporate:- combine production and distribute under single ownershipAdministered:-Co-ordinates distribution activities and Gains market power
by dominating a channelContractual:-Independent producers, wholesalers and retailers operate on
a contract
Horizontal Marketing System
Two or more unrelated companies join together to pool resources and exploit an emerging market opportunityIn-store banking in hotels, big storesRetail outlets in petrol bunksCoffee Day outlets in airports
RetailerRetailer RetailerRetailer RetailerRetailer
Horizontal Arrangements
Limiting Market Exposure
ProducerProducer
VerticalArrangements
WholesalerWholesaler
Multi-channel Distribution
Company uses different channels to reach / same or different market segments Most FMCG companies have separate networks for
retail market and institutions Pharma companies may use different channels to
reach doctors, chemists and hospitals
By:- Mithilesh Trivedi
Akshay Tiwari Suresh Yadav
Dhruv Aggarwal Arun Patel
Shrinath
Questions
?