Marketing bán hàng - Chapter 9: Marketing channels

Chapter 9Marketing Channels1Learning ObjectivesUnderstand channel structure and how channels manage discrepanciesUnderstand concept of channel flowsRelationship of channel flows to service levelsUnderstand channel formats and levelsUnderstand what channel systems are expected to deliverProminent marketing and channel systemsSDM- Ch 92Tata McGraw Hill PublishingChannel FunctionsInformation gatheringConsumer motivationBargaining with suppliersPlacing ordersFinancing Inventory managementRisk bearingAfter sales supportSDM- Ch 93Tata McGraw Hill PublishingRole of IntermediariesCompany 1Company 2Company 3IntermediaryLarge number of CONSUMERSDirect and Indirect.SDM- Ch 94Tata McGraw Hill PublishingDirect DistributionCompany to consumers or retailers without use of intermediaries. Also includes reaching Institutional buyers.Selling on the InternetIf products are technically complex, this system is preferredCost is a major consideration to adopt this modeSDM- Ch 95Tata McGraw Hill PublishingDirect Distribution - ExamplesBanking servicesCredit cardsPetrol / diesel – company own outletsLand line phone connectionsHealth servicesUtilities – electricity, waterSubsidized rationEducation SDM- Ch 96Tata McGraw Hill PublishingIndirect DistributionGoods may move through a set of intermediariesMost FMCG companies follow this routeThe intermediary has a far better reach than the companyThe cost of operations of an intermediary like a wholesaler / retailer is shared with many businesses.SDM- Ch 97Tata McGraw Hill PublishingIndirect Distribution - ExamplesAll FMCG, consumer durables and pharmaceuticalPetrol / diesel / cooking gas - franchiseesInsurance Mobile phonesAll kinds of passenger transportSDM- Ch 98Tata McGraw Hill PublishingMarketing Channel SystemsVertical:CorporateAdministeredContractualHorizontalMulti-channelVertical.SDM- Ch 99Tata McGraw Hill PublishingVertical Marketing SystemVarious parties like producers, wholesalers and retailers act as a unified system to avoid conflictsImproves operating efficiency and marketing effectiveness3 types:CorporateAdministered Contractual CorporateSDM- Ch 910Tata McGraw Hill PublishingCorporate VMSCombines successive stages of production and distribution under single ownershipExamples: Bata, Bombay Dyeing, RaymondSears, GoodyearSuppliers of food items could be also their own supplying firms - like NilgirisAdministeredSDM- Ch 911Tata McGraw Hill PublishingAdministered VMSCo-ordinates distribution activitiesGains market power by dominating a channelUsually true of dominant brands like GE, Kodak, Pepsi, Gillette, Coke and HLL in certain locationsCommand high level of co-operation in shelf space, displays, pricing policies and promotion strategiesContractualSDM- Ch 912Tata McGraw Hill PublishingContractual VMSIndependent producers, wholesalers and retailers operate on a contractCould take the forms of:Wholesaler sponsored voluntary chainsRetailer co-operativesManufacturer sponsored retail or wholesale franchiseFranchise organizations Service firm sponsored retail franchiseSDM- Ch 913Tata McGraw Hill PublishingHorizontal MSTwo 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 airportsMulti-channelSDM- Ch 914Tata McGraw Hill PublishingMulti-channel DistributionCompany uses different channels to reach / same or different market segmentsMost FMCG companies have separate networks for retail market and institutionsPharma companies may use different channels to reach doctors, chemists and hospitalsSDM- Ch 915Tata McGraw Hill PublishingMulti-channel DistributionUsed in situations where:Same product but different market segmentsUnrelated products in same market – detergents and ice creams (HLL)Size of buyers varies Geographic concentration of potential consumers variesReach is difficultSDM- Ch 916Tata McGraw Hill PublishingDistribution ChannelsTake care of the following ‘discrepancies’SpatialTemporal Breaking bulkAssortment andFinancial supportSDM- Ch 917Tata McGraw Hill PublishingSpatial DiscrepancyThe channel system helps reduce the ‘distance’ between the producer and the consumer of his products.Consumers are scatteredHave to be reached cost effectivelyExample: companies produce products in one location even for global needsSDM- Ch 918Tata McGraw Hill PublishingTemporal DiscrepancyThe channel system helps in speeding up in meeting the requirement of the consumersTime when the product is made and when it is consumed is differentLimited number of production points but hundreds of consumersMaruti plant in Gurgaon – cars and spares are available when the consumer wantsSDM- Ch 919Tata McGraw Hill PublishingBreaking BulkThe channel system reduces large quantities into consumer acceptable lot sizesProduction has to be in large quantities to benefit from economies of scaleConsumption is necessarily in small lot sizesIndia is the ultimate example in breaking bulk – you can buy one cigarette, one Anacin, one toffee etcSDM- Ch 920Tata McGraw Hill PublishingNeed for AssortmentThe channel system helps aggregate a range of products for the benefit of the consumer – it could be made by one company or several of them.For the same product, it could be a variety of brands and pack sizesMICO makes fuel injection equipment, spark plugs etc in different plants but its dealer will sell the entire range.SDM- Ch 921Tata McGraw Hill PublishingFinancial SupportThe channel system provides critical working capital to its customers by extending credit.Some channel members like stockists and wholesalers finance the business of their customers.Medical diagnostic equipment to hospitals SDM- Ch 922Tata McGraw Hill PublishingChannel Flows Forward flow – company to its customers – goods and servicesBackward flow – customers to the company – payment for the goods. Returned goods.Flows both ways - informationSDM- Ch 923Tata McGraw Hill PublishingThree Flows RecognizedFORWARDBOTH WAYSBACKWARDGoods and ServicesInformationPayment for goods / returnsCompanyCustomersSDM- Ch 924Tata McGraw Hill PublishingThe Five Channel Flows Physical flow of goodsTitle flow of goods (negotiation, ownership and risk sharing also)Payment flows (financing and payment)Information flow (about goods, orders placed and orders executed)Promotion flowsWho is responsible?SDM- Ch 925Tata McGraw Hill PublishingChannel FlowsSome channel member/s have to perform themThere is a cost associated with each flowIf a channel member is discontinued, the flow has to be performed by anotherAll flows and transactions can be effective only with timely, accurate and correct informationThe channel flow is ideally to be handled by the most competent channel member who can deliver best service at the lowest cost.SDM- Ch 926Tata McGraw Hill PublishingDegree of InvolvementManufacturerC&FA or Distribution CenterDistributor,dealersWholesaler or retailerPhysicalTitle / ownershipInformationRisk sharingPromotions PhysicalTitle InformationPayment Order processingPhysicalTitle / ownershipInformationPayment Order placementNegotiation Risk sharingPromotions PhysicalTitle / ownershipInformationPayment Order placementNegotiation Risk sharingPromotions Channel formatsSDM- Ch 927Tata McGraw Hill PublishingChannel FormatsIs decided by who ‘drives’ the channel system:Producer drivenSeller drivenService drivenOthers SDM- Ch 928Tata McGraw Hill PublishingProducer DrivenThis is the effort of the manufacturer to reach the product to his consumers. Examples:Company owned retail outlets – petrol, Bata, Reliance mobilesLicensed outlets – KMFConsignment selling agentsFranchiseesBrokersVending machinesCompany contracted distributors SDM- Ch 929Tata McGraw Hill PublishingSeller DrivenUse of existing channels to reach the largest number of end usersExisting wholesalers and retailers Modern retail formatsSpecialty stores – Shoppers’ StopDiscount stores – SubhikshaPheriwalas SDM- Ch 930Tata McGraw Hill PublishingService DrivenThese are the people who facilitate the distributionTransporters and freight forwardersProviders of warehouse spaceC&F agents3P Logistics service providersCouriersSDM- Ch 931Tata McGraw Hill PublishingOther formatsMulti-level marketing systems – Amway, Modicare, Tupperware, HerbalifeCo-operative societiesTelephone kiosksTV home shoppingCatalogue marketingThe internetExhibitions, fairs and trade showsData base marketingChannel levelsSDM- Ch 932Tata McGraw Hill PublishingChannel LevelsZero level – if the product or service is provided to the end user directly by the company.Used mostly by companies delivering service like health, education, banking (also known as service channels)One level – consists of one intermediaryTwo level – consists of two intermediaries and is the most common for FMCG productsSDM- Ch 933Tata McGraw Hill PublishingService Channel Companies establish their own unique channels to deliver services like health, education, banking, insurance etcHundreds of bank branches to be close to prospectsBanks may also recruit independent agents to get customers to walk inConsulting or IT firm uses one team for Biz Development and another for executionMusician or magician may use mass media, events or web sites to reach customersSDM- Ch 934Tata McGraw Hill PublishingChannel LevelsManufacturerManufacturerManufacturerEnd UserRetailerEnd UserRetailerEnd UserDistributor/ wholesalerZero levelTwo levelOne levelSummarize ExpectationsSDM- Ch 935Tata McGraw Hill PublishingKey LearningsMarketing channels are responsible for flows – physical possession, title, payments, information and promotion covered by forward, backward and flows both waysEach channel partner has a different role in supporting customer service through suitable channel flowsNumber of categories operating in a channel system define the channel levels as one, two etcSDM- Ch 936Tata McGraw Hill PublishingKey LearningsChannel system deliverables are: bulk breaking, place utility, reduced waiting time, providing assortment, financial help, installation and after sales support.Customer service has to be done at optimum costMarketing channel systems are categorised as vertical, horizontal and multi-channel depending on the structure and the functionality SDM- Ch 937Tata McGraw Hill Publishing