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• What is a marketing channel system and value network?
• What work do marketing channels perform?
• How should channels be designed?
• What decisions do companies face in managing their
• How should companies integrate channels and manage
channel conflict?
• What are the key issues with e-commerce?

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What is a Marketing Channel?

A marketing channel system is the particular set of

interdependent organizations involved in the
process of making a product or service available for
use or consumption.

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Channels and
Marketing Decisions

• A push strategy uses the manufacturer’s sales force,

trade promotion money, and other means to induce
intermediaries to carry, promote, and sell the product to
end users

• A pull strategy uses advertising, promotion, and other

forms of communication to persuade consumers to
demand the product from intermediaries

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Hybrid Channels- Buyer Expectations &
Channel Integration

• Ability to order a product online and pick it up at a

convenient retail location
• Ability to return an online-ordered product to a nearby store
• Right to receive discounts based on total online and offline

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Categories of Buyers

• Habitual shoppers
• High value deal seekers
• Variety-loving shoppers
• High-involvement shoppers

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Types of Shoppers
• Service/quality customers
• Price/value customers
• Affinity customers

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Channel Member Functions

• Gather information
• Develop and disseminate persuasive communications to
stimulate purchase
• Reach agreements on price and terms
• Acquire funds to finance inventories
• Assume risks
• Provide for storage
• Provide for buyers’ payment of their bills

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• Oversee actual transfer of ownership
Channel Levels

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Designing a Marketing
Channel System
• Analyze customer needs
• Establish channel objectives & constraints
• Identify major channel alternatives
• Evaluate major channel alternatives

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Needs-Channel Service Outputs

• Lot size
• Waiting/delivery time
• Spatial convenience
• Product variety
• Service backup •Analyze customer needs
•Establish channel objectives
•Identify major channel alternatives
•Evaluate major channel alternatives

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Channel Objectives &
• Nature of product
• Size of product
• Legal constraints
•Analyze customer needs
• Desired level of service •Establish channel objectives & constraints
•Identify major channel alternatives
•Evaluate major channel alternatives

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Identifying Channel Alternatives

• Types of intermediaries
•Analyze customer needs
• Number of intermediaries •Establish channel objectives & constraints
– Exclusive •Identify major channel alternatives
•Evaluate major channel alternatives
– Selective
– Intensive
• Terms and responsibilities
– Price policy
– Condition of sale
– Distributors’ territorial rights

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– Mutual services and responsibilities
Evaluate Channel Alternatives

• Costs associated with various alternatives

• Sales achievable through various channels

•Analyze customer needs

•Establish channel objectives & constraints
•Identify major channel alternatives

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•Evaluate major channel alternatives
Channel-Management Decisions

• Selecting channel members

• Training channel members
• Motivating channel members
• Evaluating channel members
• Modifying channel members

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Channel Power

• Coercive
• Reward
• Legitimate
• Expert
• Referent

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Channel Integration and Systems

 Vertical marketing systems

 Corporate VMS
 Administered VMS
 Contractual VMS
 Horizontal marketing systems
 Multichannel systems

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What is Channel Conflict?

• Channel conflict occurs when one member’s

actions prevent another channel from achieving its
• Types of channel conflict
– Vertical
– Horizontal
– Multichannel

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Causes of Channel Conflict

• Goal incompatibility
• Unclear roles and rights
• Differences in perception
• Intermediaries’ dependence on manufacturer

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Strategies for Managing
Channel Conflict

• Adoption of superordinate goals • Diplomacy

• Exchange of employees • Mediation
• Joint membership in trade • Arbitration
• Legal recourse
• Cooptation

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Few Concepts

• Dilution
• Cannibalization
• E-commerce
• M-commerce
• Pure click companies
• Brick and click companies

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What is Retailing?

Retailing includes all the activities involved in

selling goods or services directly to final consumers
for personal, nonbusiness use.

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Major Retailer Types

Store Retailers Non-store Retailing

• Specialty store • Direct selling
• Department store • Direct marketing
• Supermarket • Automatic vending
• Convenience store • Buying service
• Discount store
• Off-price retailer

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• Superstore

• Contractual association between a franchisor &


• A franchising system is a system of individual

franchisees, a tightly knit group of enterprises
whose systematic operations are planned, directed,
and controlled by the operation’s franchisor.

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Characteristics of Franchises

• The franchisor owns a trade or service mark and licenses it

to franchisees in return for royalty payments
• The franchisee pays for the right to be part of the system
• The franchisor provides its franchisees with a system for
doing business

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Retailers’ Marketing Decisions

• Target market
• Product assortment
• Procurement
• Prices
• Services
• Store atmosphere
• Store activities

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• Communications
• Locations
Indicators of Sales Effectiveness

• Number of people passing by

• Percent who enter store
• Percent who buy
• Average amount spent per sale

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Private Label Brands

• Private labels are ubiquitous

• Consumer accepts private labels
• Private-label buyers come from all socioeconomic strata
• Consumer loyalty shifts from manufacturers to retailers

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Wholesaling Functions

• Selling and promoting • Transportation

• Buying and assortment • Financing
building • Risk bearing
• Bulk breaking • Market information
• Warehousing • Management services
and counseling

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Major Wholesaler Types

• Merchant
• Full-service
• Limited-service
• Brokers and agents
• Manufacturers
• Specialized

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What are
Integrated Logistics Systems?

An integrated logistics system (ILS) includes

materials management, material flow systems,
and physical distribution, aided by information

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