3. Marketing channels are the routes to market used to sell every
product and service that consumers and business buyers
purchase everywhere in the world.
Marketing Channel
4. Important of Studying Marketing Channels
Gatekeeper
Important Asset of Marketing Strategy
# Differentiator #Difficult to replicate
End-User Satisfaction
# Overall brand image
Awareness of channel important is low
# Opportunity for competitive advantage
Difficult to create and maintain channel
#Difficult and costly to change #Right the first time
Marketing Channel
5. What is a Marketing Channels?
Set of Interdependent Organizations. A marketing channel is a
set of interdependent
organizations involved
A Process (usually over time) in the process of making
a product or service
available for use or
Process with purpose consumption.
- “ to satisfy end-users”
The marketing channel is often viewed as a key strategic asset of a manufacturer
Marketing Channel
6. Why Do Marketing Channels Exist and Change?
Two forces for channel development and and change
Demand-Side Factors
Facilitation of Search
Intermediary channels arise because buyers and sellers cannot find each
other
Adjustment of Assortment Discrepancy
Manufacturer = large quantity of limited variety
Consumers = large variety in small quantities (customization & choice)
1. Sorting out (packer : orange size and grade)
2. Accumulation (wholesaler : gather together supply)
3. Allocation (wholesale distributor : breaking bulk)
4. Assorting (complementary
Bottom Line : Meeting customer demands, driven by the consumer.
Marketing Channel
7. Channel Development & Change
Supply-Side Factors
Routinization of transactions
Electronic Data Interchange ; Continuous replenishment program (CRP)
Reduction in number of contacts
Employing more and more intermediaries is subject to diminishing returns simply from the
point of view of number and cost of contacts in the market
Manufacturers
Manufacturers
Wholesaler
Retailer
Retailer
Bottom Line : mitigating risk, minimizing management costs, maximizing utility
Marketing Channel
9. What is The Work of The Marketing Channel?
Marketing Flows in Channels
Physical Physical Physical
Ownership Ownership Ownership
Promotion Promotion Promotion
Consumers:
Negotiation Negotiation Negotiation Industrial
Producers Wholesalers Retailers and
Financing Financing Financing
Household
Risking Risking Risking
Ordering Ordering Ordering
Payment Payment Payment
Intermediaries participate in the work of marketing channel because they both add value and help reduce cost in the channel.
Marketing Channel
10. Marketing Flows
Processes flow through the channel
Done at different points in time by different channel
members
Flow of information
The eight universal marketing channel flows :
1. Physical possession
2. Ownership
3. Promotion
4. Negotiation
5. Financing
6. Risking
7. Ordering
8. Payment
Marketing Channel
11. Who Belongs To A Marketing Channel?
Manufacturers
Channel Members Intermediaries (retailers, wholesalers, specialized)
End-users
“Channel Captain” : “Channel format as Combination of
An organization that taks the keenest interest in
Channel Members
the workings of this product or service and that
The various channel participants can combine in
act as a prime mover in establishing and
many ways to create effective marketing
maintaining channel links.
channels.
The range and number of channel members are
affected by the nature of demand by end-users,
and the captaincy of the channel can vary from
situation to situation.
Marketing Channel
12. Channel Analysis Framework
CHANNEL DESIGN PROCESS : CHANNEL IMPLEMENTATION
# Segmentation PROCESS :
Recognize and Respond to target customers’
service output demands Channel Power: Channel Conflict:
Identify sources for Identify actual and
all channel members potential source
Decisions about Efficient Channel Response :
#Channel Structure :
What kind of intermediaries are in my channel? ; Manage/ Defuse Conflict :
Who are they? ; How many of them? Use power source strategically, subject to
# Splitting the workload legal constraints
With what responsibilities?
# Degree of commitment:
Distribution alliance? Goal :
Vertical integration / ownership? Channel Coordination
# Gap analysis
What do i have to change?
Insight for specific channel institutions :
Retailing, Wholesaling and Logistics, Franchising
13. Segmentation
• Splitting market into groups of end-users
Similar within groups
Different between groups
Based on demands for the outputs of the marketing channel
Added value
Service outputs
Example : Segments of book end-users
Marketing Channel
14. Channel Structure
1. Types of channel members
2. Identities of specific channel members
3. Channel intensity : number of each type
Splitting the Workload
• Assign channel flows to channel members
Meet target segment’s service output demands
Reliable
Minimize total cost, while meeting service level
Marketing Channel
15. Degree of Commitment
Transactional relationships Vertical integration
- Pursue individual goals - Own channel members
- No guarantee of continued business - Reasons
Alliances - Channel members do not exist
- Enduring connections throughout - Company can handle flows as efficiently
companies - Channel member is not sufficiently
- Pursue common goals committed
Gap Analysis
The difference between optimal and actual channels
Demand side gaps
- Service output demands are not being met
- Undersupplied
- Oversupplied
Supply side gaps
- At least one flow is costing too much
- Lack of expertise
- Waste
Closing gaps is difficult and costly
Marketing Channel
16. Channel Power
Ability to control other channel members
Necessary to implement channel design
May be used to optimize channel to benefit of all channel members
Channel Conflict
Actions of channel members prevent channel from
achieving its goals
Goal conflict
Domain conflict
Perceptual conflict
Marketing Channel
17. Manage/ Difuse Conflict
Identify sources of conflict
- Poor channel design
- Poor performance
Take action
- Exercise channel power
Channel Coordination
Result of
- Channel designed to meet service output
demands of target end-user segments
- Application of channel power to ensure smooth
implementation of the channel design
Ongoing process
Marketing Channel
19. End-User Channel Preferences
Product or service can be bought
in multiple way, ex; corporate
personal PC and online bill payment
Diff. end user have diff. demands
Identify how the end-user wants to
buy as well as what the end-user
wants to buy
Marketing Channel
21. Service Outputs
Spatial
Bulk breaking Waiting time
convenience
• Enabling • Reducing • Time period
customers to customers‟ between
buy in their transportation ordering and
desired requirements receiving
quantities and search products and
costs services
• Longer waiting
times mean
customers must
be able to
predict needs
and plan further
in advance
Marketing Channel
22. Service Outputs
Information
Product variety Customer service
provision
• Variety; diff. • Easing the • Education of
classes of good shopping and customers about
making up the purchase product
product offering process attributes,
(the breadth of • Must be product usage
product lines) sensitive to the capabilities,
• Assortment; target end-user solutions
depth of product retailing, pre-
brand/models purchase
offered within services, and
each generic post-purchase
product services
Marketing Channel
23. TABLE 1-1: SERVICE OUTPUT DEMAND DIFFERENCES
(an example of segmentation in the book-buying market)
Browser buying best-sellers to take on vacation Student buying textbooks for fall semester at college
Service Output Service Output
Descriptor Demand Level Descriptor Demand Level
Bulk- “I‟m looking for some „good “I only need one copy of my
Medium High
breaking read‟ paperbacks to enjoy.” Marketing textbook!”
Spatial “I have lots of errands to run
“I don‟t have a car, so I can‟t
convenienc before leaving town, so I‟ll be Medium High
travel far to buy.”
e going past several bookstores.”
Waiting “I‟m not worried about getting “I just got to campus, but
and the books now… I can even classes are starting tomorrow
Low High
delivery pick up a few when I‟m out of and I‟ll need my books by
time town if need be.” then.”
“I want the best choice
Assortment “I‟m just buying what‟s on my
available, so that I can pick High Low
and variety course reading list.”
what looks good.”
Customer “I like to stop for a coffee when “I can find books myself, and
High Low
service book browsing.” don‟t need any special help.”
“I value the opinions of a well-
“My professors have already
Information read bookstore employee; I
High decided what I‟ll read this Low
provision can‟t always tell a good book
semester.”
from a bad one before I buy.”
Marketing Channel
24. Service Outputs
Service output demanded by meaningful
segment of end-user
Costly activities of channel members
Marketing Channel
25. Segmenting the Market
Identify all relevant service outputs
A priori segmentation
Service output segmentation
- Maximally similar within groups
- Maximally different between groups
- On dimensions that matter
Marketing Channel
26. FIGURE 2-1: IDEAL CHANNEL SYSTEM FOR BUSINESS-TO-BUSINESS SEGMENTS BUYING A NEW
HIGH-TECHNOLOGY PRODUCT
Manufacturer
(New High Technology Product)
Associations,
Pre-Sales Events,
Awareness
Efforts
Third-
Dealers Party
VARs TeleSales/ Supply
Sales TeleMktg Out-
source
Internal Support
- Install, Training & Service
Post-Sales Group
Lowest
Responsive References/
Full-Service Total
Segment Support Credentials
Cost
Source: Reprinted with permission of Rick Wilson, Chicago Strategy
Associates, 2000.
Marketing Channel
27. Meeting Service Output Demands
Cost—prohibitively expensive
- Decide whether or not to provide the service
- Decide whether to cover the cost or explicitly charge the customer
Competitive—what do the competitors offer?
- Providing extra service may not affect market share
Ease of entry
- New competitors
Other elements of excellence in offering
- Very low price
- Truly superior product
Marketing Channel
28. The Role of Service Output Demand Analysis
in Marketing Channel Design
Assess segment attractiveness
Select segments to target and not to target
Customize the marketing channel for each
targeted segment
- Create new marketing channels
- Modify existing marketing channels
Marketing Channel
30. Market Testing
The objective
1. to get insight about opportunity in obtaining solid forecast of dollar
and unit sales.
2. As diagnostic information to revise and refine anything about the
launch.
Marketing Channel
32. Factor to be considered in market test decision
Any special twists on the launch
What Information is needed
Cost
Nature of the marketplace
Marketing Channel
33. Methods of market Testing
Pseudo Sale : refers to the presentation of the product directly to its
potential consumers in order to record their thoughts about it and
then use it to figure out if the product will have a market or not.
Controlled Sale : the newly developed product is actually displayed
for sale, but the only difference is that it is controlled.
Full Sale : all variables are go, including competition and the trade.
Marketing Channel
35. Pseudo Sale Method
Speculative Sale
the marketing team presents the product to the potential
consumers. Once the presentation is over, the potential
consumers are free to ask any questions about the product to the
marketing team. And of course, here the marketing team must
make sure to reply to them in a convincing manner. The next job
then is figuring out how much the potential customers are willing
to pay for the product. In the end, the marketing team asks them
whether they would be interested in buying it. In the process, all
the reactions and answers of these potential customers are
recorded.
Marketing Channel
36. Pseudo Sale Method
Simulated Test market
Simulated test market refers to a marketing research technique
where consumers are subjected to engineered advertising and
purchase decisions to examine their response to a new product or
service.
Marketing Channel
37. Control Sale Method
Informal Selling
In informal selling category, a specific location is picked where a
salesperson trained by the marketing team is stationed with the
new product. This location can be anything ranging from trade
show to hallway of a mall. As people come to see this product the
salesperson is supposed to give them a presentation of the
product. After hearing his explanation if the people buy the
product and then again come back to buy another portion of it
after a week or two then the marketing team sees it as a good
sign.
Marketing Channel
38. Control Sale Method
Direct Marketing
direct marketing is an "interactive system of marketing which
uses one or more advertising media to effect a measurable
response and/or transaction at any location, using mail,
telephone, TV, Fax, or computer network.
Marketing Channel
39. Control Sale Method
Minimarket
the marketing team selects a few different stores (limited outlet)
for displaying their newly developed product. These stores
happen to be very specific. They must be close to the potential
customers who are in need of the product and also their sales
people. In majority of the cases, a marketing team picks those
stores which already have old connection with the company of
the newly developed product. However, the goal remains the
same. The marketing team wishes to see if the potential customers
buy the product and makes repeated purchases in later time.
Marketing Channel
40. Full Sale Method
Test Marketing
Product development stage where the product and the marketing
program are introduced on a small scale into one or more selected
cities or market areas. Test marketing provides the marketer the
opportunity to observe consumer behavior toward the product in
a real market situation, gain experience with the marketing
program, and assess potential problem areas before launching a
full-scale product introduction.
Marketing Channel
42. Full Sale Method
Rollout
Sometime called tired marketing or limited marketing is a term
for the introduction of a new product or service to the market and
often accompanied by a strong marketing campaign to generate a
large amount of consumer’s interest.
Marketing Channel
