Placement
Content
8/10/2011
What is a Marketing Channel?
Product Placement
Product Placement Product Placement
Marketing Channels & Supply Chain Management
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.
Product Placement
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.
Rural Distribution
Innovative Distribution Channels for Rural Markets • Hub and Spoke Model • Mobile shops and offices • Linkage with community based organizations (NGOs, and cooperatives Traditional Channels for Reaching Out to Rural Customers • Haats • Mandis • Melas
Important Terminology
Product Placement
• Marketing (distribution) channel: set of interdependent organizations involved in making a product available for use or consumption; from the producer down • Supply chain: includes upstream supplier partners, as well as downstream channel partners • Value-delivery network: all those who partner with each other to improve the performance of the supply chain system; including the company, suppliers, distributors, and even, customers
Product Placement
Channel Importance
• A company’s channel decisions directly affect all marketing decisions • Pricing gets affected by whether the product is available through national distribution chains, exclusive stores or direct to consumers
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8/10/2011
Channel Development
Using Marketing Intermediaries
Product Placement
Product Placement
• The organization tailors it’s sales force communication on the extent of the channels requirement of
– – – – Training Persuasion Motivation Support
• • •
• New product introduction would need to tie in with the channel’s capabilities • Channel decisions involve long term commitments – need for careful thought
Intermediaries reduce the number of contacts needed to cover a market Transform assortments made by producers into assortments desired by consumers Help to complete transactions: – Information – Promotion – Contact – Matching – Negotiation • Fulfill completed transactions: – Physical distribution – Financing – Risk taking
What is a Distribution Channel?
Product Placement
Product Placement
Adding Value
• Marketing Intermediaries transform assortment of products made by producers to assortments wanted by customers • Buy large quantities from many producers and break them down in smaller quantities & broader assortments required by customers – match supply & demand
• A set of interdependent organizations (intermediaries) involved in the process of making a product or service available for use or consumption by the consumer or business user. • Channel decisions are among the most important decisions that management faces and will directly affect every other marketing decision.
Distribution Channel Functions
Product Placement
Product Placement
Adding Value
• They bridge time, place & possession gaps • They help in completing transactions
• All
Use Up Scarce Resources
• All May Often Be Performed Better Through Specialization • All Can Often Be Shifted Among Channel Members
Risk Taking Financing
Information Promotion
Physical Distribution Negotiation
Contact
Matching
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8/10/2011
Product Placement
Product Placement
Adding Value
• Information: Collating & sharing market information and feedback • Promotion: Persuasive communication about an offer • Contact: Locating & communicating with prospects • Matching: Shaping & fitting the offer to buyer’s needs
Adding Value
• Negotiating: Agreement on terms of purchase • Physical Distribution: Transporting & storing goods • Financing: Covering cost of the channel • Risk Taking: Business risks
Product Placement
Product Placement
Channel Levels
Channel level is the layer of intermediaries that perform some of the work in bringing the product and its ownership closer to the final buyer
– Direct Marketing Channel: A channel that has no intermediaries – Indirect Marketing Channels: A channel containing one or more levels
Channel Behavior
Channel conflict: disagreements between marketing channel members on goals and roles-who should do what and for what rewards
– Horizontal conflict: between firms on the same channel level – Vertical conflict: between firms on different levels of the channel • Some conflict encourages healthy competition which produces innovation and better performance • Too much conflict becomes dysfunctional
Channel Behavior & Conflict
Types of Marketing Channels
Product Placement
Product Placement
• The channel will be most effective when: – each member is assigned tasks it can do best. – all members cooperate to attain overall channel goals and satisfy the target market. • When this doesn’t happen, conflict occurs: – Horizontal Conflict occurs among firms at the same level of the channel. – Vertical Conflict occurs between different levels of the same channel. • For the channel to perform well, conflict must be managed.
• Conventional distribution channel:
– One or more independent producers, wholesalers, and retailers – Each seeking to maximize its own profits • Vertical marketing system (VMS):
– Producers, wholesalers, and retailers – Act as a unified system – One channel member owns, has contracts with, or has so much power that they all cooperate
• Franchise organization • Horizontal marketing system
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8/10/2011
Types of Vertical Marketing Systems
Product Placement
Common Ownership at Different Levels of the Channel
Product Placement
Greater
Corporate
Corporate VMS
A vertical marketing system that combines successive stages of production and distribution under one single ownership – channel leadership is established through common ownership.
Degree of Direct Control
Contractual
Contractual Agreement Among Channel Members
Administered Lesser
Leadership is Assumed by One or a Few Dominant Members
Hybrid Marketing Channel
Product Placement
• Multichannel distribution system: a single firm sets
up two or more marketing channels to reach one or more customer segments
Product Placement
Contractual VMS
A vertical marketing system in which independent firms at different levels of production & distribution join together through contracts to obtain more economies or sales impact than they could achieve alone
• Disintermediation:
– Displacment of traditional resellers by new types of intermediaries or by selling direct
Product Placement
Product Placement
Manufacturer sponsored retailer franchise system
Administered VMS
A vertical marketing system that coordinates successive stages of production and distribution , not through common ownership or contractual ties, but through the size or power of one of the parties
Manufacturer sponsored wholesale franchise system
Service firm sponsored retailer franchise system
4
8/10/2011
Product Placement
Product Placement
Innovations in Marketing Systems
Horizontal Marketing System Two or More Companies at One Channel Level Join Together to Follow a New Marketing Opportunity. Example: Banks in Grocery Stores
Innovations in Marketing Systems
Hybrid / Multi-channel MultiMarketing System A Single Firm Sets Up Two or More Marketing Channels to Reach One or More Customer Segments. Example: Retailers, Catalogs, and Sales Force
Product Placement
Disintermediation: The displacement of traditional resellers from a marketing channel by radical new types of intermediaries
Product Placement
Changing Channel Organization
Channel Design Decisions
Analyzing Consumer Service Needs Setting Channel Objectives & Constraints Identifying Major Alternatives
Intensive Distribution
Selective Distribution
Exclusive Distribution
Evaluating the Major Alternatives
Product Placement
Product Placement
Analyzing Consumer Needs
What do target consumers want from the channel?
Nearby locations? Centralized location? Willing to travel? Mail order? Buy in person? Home delivery? Installation? Buy over the phone? Credit?
Channel Objectives
• • • • Targeted level of customer service Segments to serve Best channels to use in each case Influenced by:
– Nature of company – Products – Marketing intermediaries – Competitors – Environment
Internet?
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8/10/2011
Identifying Major Alternatives
Number of Intermediaries
Product Placement
Product Placement
Company Sales Force
• Also known as intensity of distribution
Type, number & responsibilities of intermediaries
Intensive distribution
As many outlets as possible
Convenience goods
Manufacturer’s Agency
Selective distribution
More than one, but not all outlets
Shopping goods
Industrial Distributors
Exclusive distribution
One outlet per market area
Specialty goods
Product Placement
Stocking the product in as many outlets as possible
Product Placement
Intensive Distribution
Exclusive Distribution
Giving limited number of dealers the exclusive right to distribute the products in their territories
Product Placement
The use of more than one but fewer than all of the intermediaries that are willing to carry the company’s products
Product Placement
Selective Distribution
Responsibilities of Channel Members
Both should agree on: • Price policies • Conditions of sale • Territorial rights • Purchasing & shelving • Slotting fees • Specific services by each party Producer should establish: • A list price • A fair set of discounts • Conditions of sale • Channel member’s territory
6
8/10/2011
Product Placement
Product Placement
Evaluating Major Alternatives
• Economic Criteria: likely sales, cost, profitability, investments • Control Issues: Allowing control to the channel about the marketing of the product • Adaptive Criteria: Channel should be flexible to adapting to changing environment. Long term commitments should be superior to economic & control issues
Channel Management Decisions
Selecting
FEEDBACK
Motivating
Evaluating
Channel Management Decisions
Product Placement
Selecting channel members: companies will vary in their ability
to attract qualified intermediaries – Channel member history, reputation, financial position, location – Other product lines carried, facility – Cooperativeness, future growth potential
Product Placement
Dominating Counters
Key parameters:
• Share of floor (floor space management) • Quality of Display • Merchandising • Product placement • Product Mix • 'In product' Display
Managing & motivating:
– Partner relationship management – Programs, contests, sales incentives – Cooperative advertising – Product/sales training
Evaluating channel members:
• Performance standards for sales, market share, customer service levels, inventory carried, and participation in company programs
(Key Driver: Attitude)
Counter Share
Product Placement
Key Parameters:
• • • • • • • Share by Segment/mix Share by floor Quality of selling Targets In Shop Demo Prod. Literature Comparative charts
Product Placement
Storage Space
Key Parameter:
• Stock Norm • Investment Level • Competitive Tracking
(Key driver: Planning & Forecasting)
(Key driver: ROI & Retention)
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8/10/2011
Product Placement
Product Placement
Dominant Trade Franchise = Brand Franchise.
Marketing Logistics
Supply Chain Management
Product Placement
The tasks involved in planning, implementing, and controlling the physical flow of materials, final goods, and related information from points of origin to points of consumption to meet customer requirements at a profit
Product Placement Product Placement
Marketing Logistics
Supply Chain Management
Managing upstream and downstream value added flows of materials, final goods, and related information among the supplier, company, resellers and final consumers.
Product Placement
Nature and Importance of Marketing Logistics
• Involves getting the right product to the right customers in the right place at the right time. • Companies today place greater emphasis on logistics because: – effective logistics is becoming a key to winning and keeping customers – provides competitive advantage – logistics is a major cost element for most companies. – the explosion in product variety has created a need for improved logistics management. – information technology has created opportunities for major gains in distribution efficiency.
Goals of the Logistics System
• Provide a Targeted Level of Customer Service at the Least Cost. • Maximize Profits, Not Sales. Higher Distribution Costs/ Higher Customer Service Levels
TARGET LEVEL OF SERVICE
Lower Distribution Costs/ Lower Customer Service Levels
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8/10/2011
Supply Chain Management
Product Placement
Major logistics functions:
– Warehousing: storage and distribution centers – Inventory management: balance customer needs with cost – Transportation: speed costs money, how fast do you need it? • Rail, trucks, water, pipeline, air, and the Internet
Product Placement
Warehousing
• How many and what type of warehouses • Storage warehouses vs. Distribution centers Distribution Center A large, very highly automated warehouse designed to receive goods from various plants and suppliers, take orders, fill them efficiently, & deliver goods to customers as quickly as possible
Product Placement
Product Placement
Inventory Management
• Too little stocks and the company risks not having the product when the customers need it • Too high inventory leads to higher costs & obsolescence • Companies benefit by using just-in-time (JIT) inventories • Use of technologies like RFID helps in managing the supply chain
Transportation Modes
Rail
Nation’s largest carrier, cost-effective for shipping bulk products, piggyback
Truck
Flexible in routing & time schedules, efficient for short-hauls of high value goods
Water
Low cost for shipping bulky, low-value goods, slowest form
Pipeline
Ship petroleum, natural gas, and chemicals from sources to markets
Air
High cost, ideal when speed is needed or to ship high-value, low-bulk items
Choosing Transportation Modes
Integrated Logistics Management
Product Placement
Product Placement
Checklist for Choosing Transportation Modes
1. Speed. 2. Dependability. 3. Capability. 4. Availability. 5. Cost.
Concept Recognizes that Providing Better Customer Service and Trimming Distribution Costs Requires Teamwork, Both Inside the Teamwork Company and Among All the Marketing Channel Organizations.
Cross-Functional Teamwork inside the Company Building Channel Partnerships Third-Party Logistics
9
8/10/2011
Product Placement
• Goal is to harmonize company wide logistical decisions • Logistical committees comprising of managers responsible for each distribution function • Logistical activities based on functional areas • Use of technology
Product Placement
Cross-Functional Teamwork inside the Company
Building Channel Partnerships
Coordinating and working closely with all channel partners in the supply chain to implement and manage logistics strategies
Product Placement
Third-Party Logistics
Independent logistics provider that performs any or all the functions required to get its clients product to market
10
What is a Marketing Channel?
Product Placement
Product Placement Product Placement
Marketing Channels & Supply Chain Management
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.
Product Placement
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.
Rural Distribution
Innovative Distribution Channels for Rural Markets • Hub and Spoke Model • Mobile shops and offices • Linkage with community based organizations (NGOs, and cooperatives Traditional Channels for Reaching Out to Rural Customers • Haats • Mandis • Melas
Important Terminology
Product Placement
• Marketing (distribution) channel: set of interdependent organizations involved in making a product available for use or consumption; from the producer down • Supply chain: includes upstream supplier partners, as well as downstream channel partners • Value-delivery network: all those who partner with each other to improve the performance of the supply chain system; including the company, suppliers, distributors, and even, customers
Product Placement
Channel Importance
• A company’s channel decisions directly affect all marketing decisions • Pricing gets affected by whether the product is available through national distribution chains, exclusive stores or direct to consumers
1
8/10/2011
Channel Development
Using Marketing Intermediaries
Product Placement
Product Placement
• The organization tailors it’s sales force communication on the extent of the channels requirement of
– – – – Training Persuasion Motivation Support
• • •
• New product introduction would need to tie in with the channel’s capabilities • Channel decisions involve long term commitments – need for careful thought
Intermediaries reduce the number of contacts needed to cover a market Transform assortments made by producers into assortments desired by consumers Help to complete transactions: – Information – Promotion – Contact – Matching – Negotiation • Fulfill completed transactions: – Physical distribution – Financing – Risk taking
What is a Distribution Channel?
Product Placement
Product Placement
Adding Value
• Marketing Intermediaries transform assortment of products made by producers to assortments wanted by customers • Buy large quantities from many producers and break them down in smaller quantities & broader assortments required by customers – match supply & demand
• A set of interdependent organizations (intermediaries) involved in the process of making a product or service available for use or consumption by the consumer or business user. • Channel decisions are among the most important decisions that management faces and will directly affect every other marketing decision.
Distribution Channel Functions
Product Placement
Product Placement
Adding Value
• They bridge time, place & possession gaps • They help in completing transactions
• All
Use Up Scarce Resources
• All May Often Be Performed Better Through Specialization • All Can Often Be Shifted Among Channel Members
Risk Taking Financing
Information Promotion
Physical Distribution Negotiation
Contact
Matching
2
8/10/2011
Product Placement
Product Placement
Adding Value
• Information: Collating & sharing market information and feedback • Promotion: Persuasive communication about an offer • Contact: Locating & communicating with prospects • Matching: Shaping & fitting the offer to buyer’s needs
Adding Value
• Negotiating: Agreement on terms of purchase • Physical Distribution: Transporting & storing goods • Financing: Covering cost of the channel • Risk Taking: Business risks
Product Placement
Product Placement
Channel Levels
Channel level is the layer of intermediaries that perform some of the work in bringing the product and its ownership closer to the final buyer
– Direct Marketing Channel: A channel that has no intermediaries – Indirect Marketing Channels: A channel containing one or more levels
Channel Behavior
Channel conflict: disagreements between marketing channel members on goals and roles-who should do what and for what rewards
– Horizontal conflict: between firms on the same channel level – Vertical conflict: between firms on different levels of the channel • Some conflict encourages healthy competition which produces innovation and better performance • Too much conflict becomes dysfunctional
Channel Behavior & Conflict
Types of Marketing Channels
Product Placement
Product Placement
• The channel will be most effective when: – each member is assigned tasks it can do best. – all members cooperate to attain overall channel goals and satisfy the target market. • When this doesn’t happen, conflict occurs: – Horizontal Conflict occurs among firms at the same level of the channel. – Vertical Conflict occurs between different levels of the same channel. • For the channel to perform well, conflict must be managed.
• Conventional distribution channel:
– One or more independent producers, wholesalers, and retailers – Each seeking to maximize its own profits • Vertical marketing system (VMS):
– Producers, wholesalers, and retailers – Act as a unified system – One channel member owns, has contracts with, or has so much power that they all cooperate
• Franchise organization • Horizontal marketing system
3
8/10/2011
Types of Vertical Marketing Systems
Product Placement
Common Ownership at Different Levels of the Channel
Product Placement
Greater
Corporate
Corporate VMS
A vertical marketing system that combines successive stages of production and distribution under one single ownership – channel leadership is established through common ownership.
Degree of Direct Control
Contractual
Contractual Agreement Among Channel Members
Administered Lesser
Leadership is Assumed by One or a Few Dominant Members
Hybrid Marketing Channel
Product Placement
• Multichannel distribution system: a single firm sets
up two or more marketing channels to reach one or more customer segments
Product Placement
Contractual VMS
A vertical marketing system in which independent firms at different levels of production & distribution join together through contracts to obtain more economies or sales impact than they could achieve alone
• Disintermediation:
– Displacment of traditional resellers by new types of intermediaries or by selling direct
Product Placement
Product Placement
Manufacturer sponsored retailer franchise system
Administered VMS
A vertical marketing system that coordinates successive stages of production and distribution , not through common ownership or contractual ties, but through the size or power of one of the parties
Manufacturer sponsored wholesale franchise system
Service firm sponsored retailer franchise system
4
8/10/2011
Product Placement
Product Placement
Innovations in Marketing Systems
Horizontal Marketing System Two or More Companies at One Channel Level Join Together to Follow a New Marketing Opportunity. Example: Banks in Grocery Stores
Innovations in Marketing Systems
Hybrid / Multi-channel MultiMarketing System A Single Firm Sets Up Two or More Marketing Channels to Reach One or More Customer Segments. Example: Retailers, Catalogs, and Sales Force
Product Placement
Disintermediation: The displacement of traditional resellers from a marketing channel by radical new types of intermediaries
Product Placement
Changing Channel Organization
Channel Design Decisions
Analyzing Consumer Service Needs Setting Channel Objectives & Constraints Identifying Major Alternatives
Intensive Distribution
Selective Distribution
Exclusive Distribution
Evaluating the Major Alternatives
Product Placement
Product Placement
Analyzing Consumer Needs
What do target consumers want from the channel?
Nearby locations? Centralized location? Willing to travel? Mail order? Buy in person? Home delivery? Installation? Buy over the phone? Credit?
Channel Objectives
• • • • Targeted level of customer service Segments to serve Best channels to use in each case Influenced by:
– Nature of company – Products – Marketing intermediaries – Competitors – Environment
Internet?
5
8/10/2011
Identifying Major Alternatives
Number of Intermediaries
Product Placement
Product Placement
Company Sales Force
• Also known as intensity of distribution
Type, number & responsibilities of intermediaries
Intensive distribution
As many outlets as possible
Convenience goods
Manufacturer’s Agency
Selective distribution
More than one, but not all outlets
Shopping goods
Industrial Distributors
Exclusive distribution
One outlet per market area
Specialty goods
Product Placement
Stocking the product in as many outlets as possible
Product Placement
Intensive Distribution
Exclusive Distribution
Giving limited number of dealers the exclusive right to distribute the products in their territories
Product Placement
The use of more than one but fewer than all of the intermediaries that are willing to carry the company’s products
Product Placement
Selective Distribution
Responsibilities of Channel Members
Both should agree on: • Price policies • Conditions of sale • Territorial rights • Purchasing & shelving • Slotting fees • Specific services by each party Producer should establish: • A list price • A fair set of discounts • Conditions of sale • Channel member’s territory
6
8/10/2011
Product Placement
Product Placement
Evaluating Major Alternatives
• Economic Criteria: likely sales, cost, profitability, investments • Control Issues: Allowing control to the channel about the marketing of the product • Adaptive Criteria: Channel should be flexible to adapting to changing environment. Long term commitments should be superior to economic & control issues
Channel Management Decisions
Selecting
FEEDBACK
Motivating
Evaluating
Channel Management Decisions
Product Placement
Selecting channel members: companies will vary in their ability
to attract qualified intermediaries – Channel member history, reputation, financial position, location – Other product lines carried, facility – Cooperativeness, future growth potential
Product Placement
Dominating Counters
Key parameters:
• Share of floor (floor space management) • Quality of Display • Merchandising • Product placement • Product Mix • 'In product' Display
Managing & motivating:
– Partner relationship management – Programs, contests, sales incentives – Cooperative advertising – Product/sales training
Evaluating channel members:
• Performance standards for sales, market share, customer service levels, inventory carried, and participation in company programs
(Key Driver: Attitude)
Counter Share
Product Placement
Key Parameters:
• • • • • • • Share by Segment/mix Share by floor Quality of selling Targets In Shop Demo Prod. Literature Comparative charts
Product Placement
Storage Space
Key Parameter:
• Stock Norm • Investment Level • Competitive Tracking
(Key driver: Planning & Forecasting)
(Key driver: ROI & Retention)
7
8/10/2011
Product Placement
Product Placement
Dominant Trade Franchise = Brand Franchise.
Marketing Logistics
Supply Chain Management
Product Placement
The tasks involved in planning, implementing, and controlling the physical flow of materials, final goods, and related information from points of origin to points of consumption to meet customer requirements at a profit
Product Placement Product Placement
Marketing Logistics
Supply Chain Management
Managing upstream and downstream value added flows of materials, final goods, and related information among the supplier, company, resellers and final consumers.
Product Placement
Nature and Importance of Marketing Logistics
• Involves getting the right product to the right customers in the right place at the right time. • Companies today place greater emphasis on logistics because: – effective logistics is becoming a key to winning and keeping customers – provides competitive advantage – logistics is a major cost element for most companies. – the explosion in product variety has created a need for improved logistics management. – information technology has created opportunities for major gains in distribution efficiency.
Goals of the Logistics System
• Provide a Targeted Level of Customer Service at the Least Cost. • Maximize Profits, Not Sales. Higher Distribution Costs/ Higher Customer Service Levels
TARGET LEVEL OF SERVICE
Lower Distribution Costs/ Lower Customer Service Levels
8
8/10/2011
Supply Chain Management
Product Placement
Major logistics functions:
– Warehousing: storage and distribution centers – Inventory management: balance customer needs with cost – Transportation: speed costs money, how fast do you need it? • Rail, trucks, water, pipeline, air, and the Internet
Product Placement
Warehousing
• How many and what type of warehouses • Storage warehouses vs. Distribution centers Distribution Center A large, very highly automated warehouse designed to receive goods from various plants and suppliers, take orders, fill them efficiently, & deliver goods to customers as quickly as possible
Product Placement
Product Placement
Inventory Management
• Too little stocks and the company risks not having the product when the customers need it • Too high inventory leads to higher costs & obsolescence • Companies benefit by using just-in-time (JIT) inventories • Use of technologies like RFID helps in managing the supply chain
Transportation Modes
Rail
Nation’s largest carrier, cost-effective for shipping bulk products, piggyback
Truck
Flexible in routing & time schedules, efficient for short-hauls of high value goods
Water
Low cost for shipping bulky, low-value goods, slowest form
Pipeline
Ship petroleum, natural gas, and chemicals from sources to markets
Air
High cost, ideal when speed is needed or to ship high-value, low-bulk items
Choosing Transportation Modes
Integrated Logistics Management
Product Placement
Product Placement
Checklist for Choosing Transportation Modes
1. Speed. 2. Dependability. 3. Capability. 4. Availability. 5. Cost.
Concept Recognizes that Providing Better Customer Service and Trimming Distribution Costs Requires Teamwork, Both Inside the Teamwork Company and Among All the Marketing Channel Organizations.
Cross-Functional Teamwork inside the Company Building Channel Partnerships Third-Party Logistics
9
8/10/2011
Product Placement
• Goal is to harmonize company wide logistical decisions • Logistical committees comprising of managers responsible for each distribution function • Logistical activities based on functional areas • Use of technology
Product Placement
Cross-Functional Teamwork inside the Company
Building Channel Partnerships
Coordinating and working closely with all channel partners in the supply chain to implement and manage logistics strategies
Product Placement
Third-Party Logistics
Independent logistics provider that performs any or all the functions required to get its clients product to market
10
