Description
This is a presentation about managing marketing channels.
Managing marketing channels
1
Definitions
“ A set of people and firms involved in the transfer of title to a product as it moves from producer to ultimate consumer or business user.” Stanton. ? “set of inter dependant organizations involved in the process of making a product or service available for consumption or use.” Stern, Ansary, et al
?
2
Value Network
?“a
system of partnerships and alliances that a firm creates to source, augment and deliver its offerings”
3
Importance of channels
?
“we are now re inventing our distribution system in order to strengthen our competitive advantage” M S Banga – H U L
DELL BATA WESTERN UNION CATERPILLAR STATE BANK OF INDIA Mc DONALDS IKEA
4
? ? ? ? ? ? ?
Channel management
Marketing focuses on the channel or Value Network which operates on the “customer side” ? Intermediaries that constitute a marketing channel are also called “trade channel” or Distribution channel”
?
5
ROLE OF MARKETING CHANNELS
?
?
? ? ? ?
Channel functions & flows Gather information about forces in the marketing environment Develop and disseminate persuasive communication Reach agreement on price and other terms Place orders with manufacturers. Finance inventories and various levels in the channel
6
Functions…..
?
?
? ?
Take on risks connected with channel work Storage and movement of physical goods Provide payment of buyers? bills. Oversee actual transfer of ownership
7
Flow
?
?
? ? ?
Physical flow Title flow Payment flow Information flow Promotion flow
8
Distribution channel activities
?
? ?
Distribution channel activities arise due to discrepancies between typical manufacturing activity and consumption activity. Discrepancies vary at different situations. The general discrepancies that exist are:
9
Distribution activities
?
Spatial discrepancy: Exists because of the physical distance between point of manufacture and point of consumption.
limited manufacturing locations and widespread consumption locations.
10
Distribution activities
?
Temporal discrepancies: The point of time in manufacturing is distinct from the point of time in consumption.
To bridge or reduce the temporal discrepancy products have to be stocked at appropriate places and in adequate quantities
11
Distribution activities
?
Breaking bulk: appropriate selling units. Provide an assortment: The OSS concept
?
12
Distribution activities
?
Bridging the information discrepancy.
Tourism and travel; Savings and Investment; New technology products
13
Corporate VMS
?
Reliance Fresh retails Reliance milk. Bata shoes are retailed thru Bata stores. Administered VMS: Manufacturers of dominant brands are able to demand and influence high levels of co operation from channels. (Kodak, P&G, Gillette.
?
14
VERTICAL MARKETING SYSTEMS
?
?
Vertical Marketing Systems : comprises the manufacturer, wholesaler, retailer acting as a unified system. The principal channel member has substantial control over the other members. Corporate VMS :combines stages of production and distribution under single ownership.
15
Contractual VMS
?
? ? ?
Independent firms at different levels of manufacturing and distribution integrate on a contractual basis.(Value adding Partnerships.) Whole seller sponsored Retailer cooperatives Franchise organizations
16
Horizontal marketing systems
?
Two or more unrelated companies put together resources to exploit an emerging market opportunity.( SBI and Indian Post, Maruti and Country wide finance.)
17
Channel levels
Zero level: manufacturer & consumer ? One level : mfgr.retailer,consumer ? Two level: mfgr.wholeseller,retailer,consumer ? Three level: ? mfgr.soledistributor,wholeseller, retailer,consumer
?
18
Wholesaling systems in India
?
?
Freelance established whole sellers who work with several non competitive companies or brands. Distributors, wholesalers stockists who are contracted by the company or brand.
19
Kinds of Retail Outlets
?
?
? ?
?
? ? ? ?
General Stores Limited stores Speciality stores Specialised Departmental stores Variety stores Supermarkets Vending machines Co-operative stores Company owned stores
20
Channel Design
Four key decisions needed: ? Specify the role of distribution ? Select the type of channel ? Determine intensity of distribution ? Choose specific channel members
21
Channel Design
Analyse customers’ desired output levels. Lot size Waiting time Spatial convenience Product variety Service back up The channel system evolves in response to local opportunities and conditions
?
22
Channel Design
?
?
Establish Objectives & constraints on the basis of cost target and service output levels. Consider product characteristics and channel strengths & weakness.
23
Channel Design
Identify major channel alternatives. Types of Intermediaries
?
Number of Intermediaries: Exclusive distribution Selective distribution Intensive distribution
24
Channel Design
The decision includes : ? Number of channels to employ. ? Number of levels to be included. ? Type of intermediaries to employ
25
An FMCG case
?
Channel design:
Company C & F agent STOCKIST
WHOLESALER
RETAILERS
CONSUMERS
26
A consumer durable case
COMPANY
SHOWROOM
DEALER
CONSUMER
DEALER
RETAILER
27
Developing channel design
?
The design should ensure that the product reaches the right segment and also reflects the product?s positioning. Arrow, Lee, Flying Machine
Newport
?
Ruf & Tuf
28
Channel for Arrow
?
Channel for Arrow ARVIND MILLS
CENTRAL WAREHOUSE FRANCHISE
29
Channel for Ruf & Tuf
ARVIND MILLS Central warehouse Distributors Sub distributors Wholesaler Retailer
30
Channel power
?
? ?
?
Channel members are not naturally inclined towards coordinated behaviour. This causes sub optimal channel performance. Channel power is a method of inducing coordinated behaviour. The channel members resources are their bases of power.
31
Reward power
?
?
? ?
Granting bigger margins. Allocate special allowances. (over riding commissions) Assign exclusive territories Best Distributor awards.
32
Coercive power
?
It is the “flip side” of Reward power. Recommended as a last recourse „Illegal coercion” Withholding incentive payment . Pressurising on payment terms.
? ? ?
33
Expert power
Expert knowledge of the trade which can be beneficial to other members of the channel.(imports,global trends,legal and technology issues etc.) (technical sales support)
?
34
Referent power
Mercedes dealership vs Hyundai ? Trust is a major prereqisite for building referent Power (HP is open, honest,trustworthy group to do business with) ? Legitimate power stems from the values, processes, systems, internalised by a channel member
?
35
Legitimate power
?
?
? ?
Emanates from contracts or agreements usually in writing Acceptance of standardised, time honoured and proven practices that influence policies. Retailers power over promotion,variety. Wholeseller?s power over credit facility.
36
Conflict
?
?
Channel conflict is a situation in which one channel member perceives another channel member(s) to be engaged in behaviour that prevents it from achieving its goals. The amount of conflict is, to a large extent, a function of goal incompatibility, domain dissension and differing perceptions of reality.
37
Channel conflicts
?
?
? ? ? ?
Vertical channel conflicts Horizontal channel conflicts Multi channel conflicts Channel expansion conflicts Goal differences Demarcation of Territories & Roles
38
Managing conflicts
?
?
?
Thru clauses of the contract Involvement in policy decisions Recognition and motivation
39
Sales management
?
Managing sales: selling situations; selling process; selling skills and techniques Managing the sales force: Recruitment and selection, Training, Supervising, Evaluation, Motivation
?
40
Objectives of sales management
3 general underlying objectives: 1. SALES VOLUME 2. PROFITS 3. GROWTH Sales – cost of sales = gross margin.
?
Gross margin – expenses =net profit
41
Managing the sales force
?
Recruiting and selecting sales people: * Attrition is a big problem. * Background and experience have very little relationship to sales performance. Assessment in a simulated environment is the best and most effective way of selection
42
Managing the sales force
?
?
?
Training : includes Product training, Personal effectiveness, Time management, negotiation skills, communication, team work etc. Motivation: Intrinsic / extrinsic. Dissatisfiers/Satisfiers. Quotas Evaluating :Reports, Plans, Outcomes. (calls/day, cost per call, revenue per call, lost customers, new customers
43
Personal selling
? ? ? ? ?
An ancient art. Now a Customer Management skill Questioning – listening- understanding needsproviding solutions. SPIN PRINCIPLE: SITUATION questions-explore the buyer?s situation PROBLEM questions-difficulties the buyer is facing IMPLICATION questions-consequences of the difficulties NEED payoff questions-usefulness of the proposed solution.
44
Sales force motivation
?
?
? ?
“the desire to make an effort to fulfill a need is motivation” Motivation includes three dimensions: Direction, Intensity and persistence. Motivation may also be Intrinsic or extrinsic Maslow?s hierarchy of needs:
45
MASLOW?S HIERARCHY OF NEEDS
Intense job challenge, full potential, full expression, creative expansion. Achievement, respect, recognition, responsibility, prestige, independence, attention, importance, appreciation.
Belonging, acceptance, love, affection, family and group acceptance, friendships.
Security, stability, dependency, protection, need for structure, order, law, tenure, pension, insurance. Hunger, thirst, reproduction, shelter, clothing, air, rest.
46
The sales process
1.
2.
3. 4. 5. 6. 7.
Prospecting & Qualifying Pre approach (pre call planning ) Approach Presentation & Demonstration Overcoming Objections Trial close / Closing the sale Follow –up and Service.
47
Prospecting
Process of identifying potential buyers. ? A prospect has a reasonable probability of buying ,has sufficient need to justify a profitable sale ,has financial resources to buy and can be classified as „eligible to buy? MONEY? AUTHORITY? DESIRE?
?
48
Selling process
?
Varies according to nature of selling task Three broad classification of tasks: Order takers
Inside,Outside,Delivery) Order creators: ( missionary) Order getters
front line,sales support)
49
?
1. 2. 3.
doc_683239506.ppt
This is a presentation about managing marketing channels.
Managing marketing channels
1
Definitions
“ A set of people and firms involved in the transfer of title to a product as it moves from producer to ultimate consumer or business user.” Stanton. ? “set of inter dependant organizations involved in the process of making a product or service available for consumption or use.” Stern, Ansary, et al
?
2
Value Network
?“a
system of partnerships and alliances that a firm creates to source, augment and deliver its offerings”
3
Importance of channels
?
“we are now re inventing our distribution system in order to strengthen our competitive advantage” M S Banga – H U L
DELL BATA WESTERN UNION CATERPILLAR STATE BANK OF INDIA Mc DONALDS IKEA
4
? ? ? ? ? ? ?
Channel management
Marketing focuses on the channel or Value Network which operates on the “customer side” ? Intermediaries that constitute a marketing channel are also called “trade channel” or Distribution channel”
?
5
ROLE OF MARKETING CHANNELS
?
?
? ? ? ?
Channel functions & flows Gather information about forces in the marketing environment Develop and disseminate persuasive communication Reach agreement on price and other terms Place orders with manufacturers. Finance inventories and various levels in the channel
6
Functions…..
?
?
? ?
Take on risks connected with channel work Storage and movement of physical goods Provide payment of buyers? bills. Oversee actual transfer of ownership
7
Flow
?
?
? ? ?
Physical flow Title flow Payment flow Information flow Promotion flow
8
Distribution channel activities
?
? ?
Distribution channel activities arise due to discrepancies between typical manufacturing activity and consumption activity. Discrepancies vary at different situations. The general discrepancies that exist are:
9
Distribution activities
?
Spatial discrepancy: Exists because of the physical distance between point of manufacture and point of consumption.
limited manufacturing locations and widespread consumption locations.
10
Distribution activities
?
Temporal discrepancies: The point of time in manufacturing is distinct from the point of time in consumption.
To bridge or reduce the temporal discrepancy products have to be stocked at appropriate places and in adequate quantities
11
Distribution activities
?
Breaking bulk: appropriate selling units. Provide an assortment: The OSS concept
?
12
Distribution activities
?
Bridging the information discrepancy.
Tourism and travel; Savings and Investment; New technology products
13
Corporate VMS
?
Reliance Fresh retails Reliance milk. Bata shoes are retailed thru Bata stores. Administered VMS: Manufacturers of dominant brands are able to demand and influence high levels of co operation from channels. (Kodak, P&G, Gillette.
?
14
VERTICAL MARKETING SYSTEMS
?
?
Vertical Marketing Systems : comprises the manufacturer, wholesaler, retailer acting as a unified system. The principal channel member has substantial control over the other members. Corporate VMS :combines stages of production and distribution under single ownership.
15
Contractual VMS
?
? ? ?
Independent firms at different levels of manufacturing and distribution integrate on a contractual basis.(Value adding Partnerships.) Whole seller sponsored Retailer cooperatives Franchise organizations
16
Horizontal marketing systems
?
Two or more unrelated companies put together resources to exploit an emerging market opportunity.( SBI and Indian Post, Maruti and Country wide finance.)
17
Channel levels
Zero level: manufacturer & consumer ? One level : mfgr.retailer,consumer ? Two level: mfgr.wholeseller,retailer,consumer ? Three level: ? mfgr.soledistributor,wholeseller, retailer,consumer
?
18
Wholesaling systems in India
?
?
Freelance established whole sellers who work with several non competitive companies or brands. Distributors, wholesalers stockists who are contracted by the company or brand.
19
Kinds of Retail Outlets
?
?
? ?
?
? ? ? ?
General Stores Limited stores Speciality stores Specialised Departmental stores Variety stores Supermarkets Vending machines Co-operative stores Company owned stores
20
Channel Design
Four key decisions needed: ? Specify the role of distribution ? Select the type of channel ? Determine intensity of distribution ? Choose specific channel members
21
Channel Design
Analyse customers’ desired output levels. Lot size Waiting time Spatial convenience Product variety Service back up The channel system evolves in response to local opportunities and conditions
?
22
Channel Design
?
?
Establish Objectives & constraints on the basis of cost target and service output levels. Consider product characteristics and channel strengths & weakness.
23
Channel Design
Identify major channel alternatives. Types of Intermediaries
?
Number of Intermediaries: Exclusive distribution Selective distribution Intensive distribution
24
Channel Design
The decision includes : ? Number of channels to employ. ? Number of levels to be included. ? Type of intermediaries to employ
25
An FMCG case
?
Channel design:
Company C & F agent STOCKIST
WHOLESALER
RETAILERS
CONSUMERS
26
A consumer durable case
COMPANY
SHOWROOM
DEALER
CONSUMER
DEALER
RETAILER
27
Developing channel design
?
The design should ensure that the product reaches the right segment and also reflects the product?s positioning. Arrow, Lee, Flying Machine
Newport
?
Ruf & Tuf
28
Channel for Arrow
?
Channel for Arrow ARVIND MILLS
CENTRAL WAREHOUSE FRANCHISE
29
Channel for Ruf & Tuf
ARVIND MILLS Central warehouse Distributors Sub distributors Wholesaler Retailer
30
Channel power
?
? ?
?
Channel members are not naturally inclined towards coordinated behaviour. This causes sub optimal channel performance. Channel power is a method of inducing coordinated behaviour. The channel members resources are their bases of power.
31
Reward power
?
?
? ?
Granting bigger margins. Allocate special allowances. (over riding commissions) Assign exclusive territories Best Distributor awards.
32
Coercive power
?
It is the “flip side” of Reward power. Recommended as a last recourse „Illegal coercion” Withholding incentive payment . Pressurising on payment terms.
? ? ?
33
Expert power
Expert knowledge of the trade which can be beneficial to other members of the channel.(imports,global trends,legal and technology issues etc.) (technical sales support)
?
34
Referent power
Mercedes dealership vs Hyundai ? Trust is a major prereqisite for building referent Power (HP is open, honest,trustworthy group to do business with) ? Legitimate power stems from the values, processes, systems, internalised by a channel member
?
35
Legitimate power
?
?
? ?
Emanates from contracts or agreements usually in writing Acceptance of standardised, time honoured and proven practices that influence policies. Retailers power over promotion,variety. Wholeseller?s power over credit facility.
36
Conflict
?
?
Channel conflict is a situation in which one channel member perceives another channel member(s) to be engaged in behaviour that prevents it from achieving its goals. The amount of conflict is, to a large extent, a function of goal incompatibility, domain dissension and differing perceptions of reality.
37
Channel conflicts
?
?
? ? ? ?
Vertical channel conflicts Horizontal channel conflicts Multi channel conflicts Channel expansion conflicts Goal differences Demarcation of Territories & Roles
38
Managing conflicts
?
?
?
Thru clauses of the contract Involvement in policy decisions Recognition and motivation
39
Sales management
?
Managing sales: selling situations; selling process; selling skills and techniques Managing the sales force: Recruitment and selection, Training, Supervising, Evaluation, Motivation
?
40
Objectives of sales management
3 general underlying objectives: 1. SALES VOLUME 2. PROFITS 3. GROWTH Sales – cost of sales = gross margin.
?
Gross margin – expenses =net profit
41
Managing the sales force
?
Recruiting and selecting sales people: * Attrition is a big problem. * Background and experience have very little relationship to sales performance. Assessment in a simulated environment is the best and most effective way of selection
42
Managing the sales force
?
?
?
Training : includes Product training, Personal effectiveness, Time management, negotiation skills, communication, team work etc. Motivation: Intrinsic / extrinsic. Dissatisfiers/Satisfiers. Quotas Evaluating :Reports, Plans, Outcomes. (calls/day, cost per call, revenue per call, lost customers, new customers
43
Personal selling
? ? ? ? ?
An ancient art. Now a Customer Management skill Questioning – listening- understanding needsproviding solutions. SPIN PRINCIPLE: SITUATION questions-explore the buyer?s situation PROBLEM questions-difficulties the buyer is facing IMPLICATION questions-consequences of the difficulties NEED payoff questions-usefulness of the proposed solution.
44
Sales force motivation
?
?
? ?
“the desire to make an effort to fulfill a need is motivation” Motivation includes three dimensions: Direction, Intensity and persistence. Motivation may also be Intrinsic or extrinsic Maslow?s hierarchy of needs:
45
MASLOW?S HIERARCHY OF NEEDS
Intense job challenge, full potential, full expression, creative expansion. Achievement, respect, recognition, responsibility, prestige, independence, attention, importance, appreciation.
Belonging, acceptance, love, affection, family and group acceptance, friendships.
Security, stability, dependency, protection, need for structure, order, law, tenure, pension, insurance. Hunger, thirst, reproduction, shelter, clothing, air, rest.
46
The sales process
1.
2.
3. 4. 5. 6. 7.
Prospecting & Qualifying Pre approach (pre call planning ) Approach Presentation & Demonstration Overcoming Objections Trial close / Closing the sale Follow –up and Service.
47
Prospecting
Process of identifying potential buyers. ? A prospect has a reasonable probability of buying ,has sufficient need to justify a profitable sale ,has financial resources to buy and can be classified as „eligible to buy? MONEY? AUTHORITY? DESIRE?
?
48
Selling process
?
Varies according to nature of selling task Three broad classification of tasks: Order takers


49
?
1. 2. 3.
doc_683239506.ppt