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Marketing Channel Structure And Function

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Marketing Channel Structure And Function

  1. 1. Marketing Channel Introduction
  2. 2. Marketing Channel Introduction <ul><li>Definition: a marketing channel is viewed as an interorganizational system involved with making goods, services, and concepts available for consumption by enhancing their time, place, and possession utilities. The essence of this course is how institutions can transmit items of value from points of conception, extraction, and/or production to points of consumption. </li></ul>
  3. 3. Marketing Channel Introduction <ul><li>Part of every product and service purchased </li></ul><ul><li>Complexity continuum – from highly complicated to simple </li></ul><ul><li>Different groups work together, sometimes unknowingly, to deliver products and services </li></ul><ul><li>Channel Examples? </li></ul>
  4. 4. Marketing Channel Introduction <ul><li>Channel management – ongoing process </li></ul><ul><li>Evaluation – why is evaluation important? How is a channel evaluated? </li></ul><ul><ul><li>Is there a formula? </li></ul></ul><ul><ul><li>Can all channels be evaluated the same way? </li></ul></ul><ul><ul><li>Is goodwill important? </li></ul></ul>
  5. 5. Marketing Channel Introduction <ul><li>Analyzing the previous channel: </li></ul><ul><ul><li>A wholesaler could “clean up” on economies of scale that the manufacturers are ignoring </li></ul></ul><ul><ul><li>OR…the manufacturers could strive to reduce their costs of distribution by working together in the channel </li></ul></ul>
  6. 6. Marketing Channel Introduction <ul><li>Why channels/why change? </li></ul><ul><li>Demand side </li></ul><ul><ul><li>Facilitation of Search </li></ul></ul><ul><ul><li>Assortment </li></ul></ul><ul><li>Supply side </li></ul><ul><ul><li>Routinizing transactions </li></ul></ul><ul><ul><li>Reducing contact points </li></ul></ul>
  7. 7. Marketing Channel Introduction <ul><li>Demand Side: </li></ul><ul><li>Facilitation of Search: uncertainty on the part of buyers and sellers </li></ul><ul><li>Assortment Discrepancy: difference between the assortment of goods and services desired by the end user and the assortment of goods and services provided </li></ul>
  8. 8. Marketing Channel Introduction <ul><li>Assortment Discrepancy </li></ul><ul><li>Sorting Out </li></ul><ul><li>Accumulation </li></ul><ul><li>Allocation </li></ul><ul><li>Assorting </li></ul>
  9. 9. Marketing Channel Introduction <ul><li>Supply Side </li></ul><ul><li>Routinization of Transactions : each transaction involves ordering, valuating, and payment. Must be agreement on amount, mode, and timing of payment </li></ul><ul><ul><li>i.e. EDI, CRP </li></ul></ul><ul><ul><li>Inventory Turnover = COGS/Inventory (average) </li></ul></ul><ul><li>Reduction in number of Contacts: Without channel intermediaries, every buyer would have to interact directly with every seller, or at lease every seller with whom interaction was required </li></ul>
  10. 10. Selling Directly Manufacturers Retailers 40 Contact Lines Selling Through One Wholesaler Manufacturers Wholesaler Retailers 14 Contact Lines Selling Through Two Wholesalers Manufacturers Wholesalers Retailers 28 Contact Lines Contact Complexity with/without Intermediaries  
  11. 11. Marketing Channel Introduction <ul><li>The work of the channel </li></ul><ul><li>Flows, not activities </li></ul><ul><li>Reason? The whole point of the channel is to move product and services. </li></ul>
  12. 12. Marketing Channel Introduction <ul><li>Consider: SCA Tissue – participation in more than one channel </li></ul><ul><li>Svenska Cellulosa Aktiebolaget, SCA   (formerly Wisconsin Tissue Mills) </li></ul><ul><li>Hygiene Products; tissue products, incontinence care products, baby diapers and feminine hygiene products. Packaging; corrugated board, containerboard, customized protective and specialty packaging. Forest Products; publication papers, pulp, timber and solid-wood products. </li></ul>
  13. 13. Performance of Marketing Flows     Physical Physical Physical Possession Possession Possession Ownership Ownership Ownership   Promotion Promotion Promotion   Negotiation Negotiation Negotiation Consumers Producers Wholesalers Retailers Industrial Financing Financing Financing and Household Risking Risking Risking   Ordering Ordering Ordering   Payment Payment Payment      
  14. 14. Marketing Channel Introduction <ul><li>Performance of flows is correlated to other flows </li></ul><ul><li>Concept: members of the channel can be shifted/changed/eliminated, however the flows that they represent cannot. </li></ul>
  15. 15. Marketing Channel Introduction <ul><li>Manufacturers: </li></ul><ul><ul><li>Branded production </li></ul></ul><ul><ul><ul><li>Ford example in textbook (12) – is a “Ford” still only/exclusively a Ford? </li></ul></ul></ul><ul><ul><li>Production contracted out </li></ul></ul><ul><ul><ul><li>i.e. Packard Company, 1940 </li></ul></ul></ul><ul><ul><li>Selling under a variety of names </li></ul></ul><ul><ul><ul><li>Jeans </li></ul></ul></ul><ul><ul><li>Product “package” </li></ul></ul><ul><ul><ul><li>i.e. Mutual Funds </li></ul></ul></ul>
  16. 16. Marketing Channel Introduction <ul><li>Intermediaries – between the manufacturer and the end user </li></ul><ul><ul><li>Wholesale </li></ul></ul><ul><ul><ul><li>Walkers Auto Body Supply </li></ul></ul></ul><ul><ul><li>Retail </li></ul></ul><ul><ul><ul><li>Staples </li></ul></ul></ul><ul><ul><li>Specialized </li></ul></ul><ul><ul><ul><li>CIT Financial – large client financial services </li></ul></ul></ul>
  17. 17. Marketing Channel Introduction <ul><li>End Users </li></ul><ul><li>In consuming products & services, we often perform channel flows </li></ul><ul><li>Possession, ownership, risking, etc </li></ul>
  18. 18. Marketing Channel Introduction <ul><li>Analyzing the channel </li></ul><ul><li>There is no one “right” way to design a marketing channel </li></ul><ul><ul><li>Without a reference or framework, we overlook important aspects of the channel and design it poorly or in a cost-ineffective manner </li></ul></ul>
  19. 19. Marketing Channel Introduction <ul><li>Questions for Group Discussion </li></ul><ul><li>TB pg. 17 #1,2,3,4,5 – 10 minutes. In groups of 4, select 1 question, discuss, take point notes, and be prepared to present your answers. Be sure to include all group members’ names </li></ul><ul><li>Volunteer needed to: </li></ul><ul><ul><li>1 – take attendance </li></ul></ul><ul><ul><li>2 – collect all point notes to enter & email to me so that I can make them available on the website. </li></ul></ul>