The Marketing Channels Sketch
A marketing channel is a set of practices or activities necessary to transfer the ownership of goods, and to move goods, from the point of production to the point of consumption and, as such, which consists of all the institutions and all the marketing activities in the marketing process. A marketing channel is a useful tool for management.
Channels[/b]
Direct mail
Telemarketing
Email Marketing
Door-to-Door Leaflet Marketing
Broadcast faxing
Voicemail Marketing
Couponing
Direct-response television marketing
Direct selling
Popularity of Direct Advertising
The first question to address is whether you should go direct or indirect. Often the answer is both--especially since the popularity of the Internet. The key, however is to avoid most of the channel conflict.
Channel conflict occurs when the vendor (you) and the reseller, or different reseller types (retail, VAR, mail order, Internet) compete for the same business. I say “most” of the channel conflict, since it is fine to have some conflict--resellers may compete, and there may be some of the business that you can take direct. For example, you might go direct with massive deals that are too big for a reseller to finance, or very small deals that don’t require any special training/installation/consulting--hence won’t provide margins for your resellers who make money on their ‘value added’ services.
To minimize conflict you could:
Segment the products
Setup exclusive or limited territories
Sell direct at a higher price than the average street price
Setup different promotions for different resellers--rotating so they all have advantages at different times
Provide MDF/Co-op and let the resellers choose to establish their own competitive advantage
Setup reseller levels--rewarding higher margins and support for higher authorization
Setup a process to determine if a customer has worked with a reseller prior to taking the business direct etc.
There are multiple ways that you can reduce conflict--the key is to be aware that it could exist and of your ramifications and that you do something about it to keep your reseller and revenue targets satisfied.
One vendor long gone, Ashton Tate, had a terrible problem with channel conflict--as a result, their resellers hated them. They still sold their products since they were so popular but were rooting for a competitor to take them out--which happened.
It is also a problem if you have no conflict, since it usually indicates that you don’t have enough sales coverage--there could be parts of the market you are not covering
Functions of the Channel[/b][/b]
Information Gathering and distributing market research and intelligence - important for marketing planning
Promotion Developing and spreading communications about offers
Contact Finding and communicating with prospective buyers
Matching Adjusting the offer to fit a buyer's needs, including grading, assembling and packaging
Negotiation Reaching agreement on price and other terms of the offer
Physical distribution Transporting and storing goods
Financing Acquiring and using funds to cover the costs of the distribution channel
Risk taking assuming some commercial risks by operating the channel
Transportation
The supplier delivers goods directly to channel members. For instance, Zambian Bottlers and Parmalat have their own fleet of vehicles that deliver products to customers.
Alternatively, it may be outsourced or sub-contracted from specialised transporting firms. For example the third party transporters in Zambia include Kasembo in Ndola, Freight and Passengers based in Lusaka, and Transcat that specialises in cold chain distribution.
WAREHOUSING
Warehousing (storage), inventory control and handling are very important factors to consider, especially in terms of storage costs and risks.
Price Policy
This entails producers establishing a list price for their product and also a schedule of discounts and trade rebates (allowances) for achieving set targets.
ConditionS of sale
This refers to payment terms and producer guarantees. For example, payment terms may include offering cash discounts to distributors to encourage early payments.
Territorial rights
A producer may specify geographical areas (regions or territories) where a distributor will sell products. For example, Solwezi district may be designated as an exclusive area for a particular distributor. Alternatively, the distributor may handle the entire North-Western Province.
Mutual services and responsibilities
Contractual obligations or agreements are often entered into by producers and distributors. This is particularly critical in franchised and exclusive-agency channels where both parties must fulfill obligations.
A new concept that has emerged is value-added partnerships. In this form of integration, small firms come together and form a system. Here, each participating channel member performs a single channel function at a particular channel level. A horizontal marketing system is another approach that has gained widespread support. It is an arrangement within a distribution channel in which two or more firms at the same channel level work towards a common goal. In this system, the participating organizations usually operate in different segments and are unrelated. The advantage of this type of arrangement is that the firms pool together resources and skills the others do not have, with the objective of exploiting the available market opportunity. Most companies operate through a strategic alliance or a joint venture.
A marketing channel is a set of practices or activities necessary to transfer the ownership of goods, and to move goods, from the point of production to the point of consumption and, as such, which consists of all the institutions and all the marketing activities in the marketing process. A marketing channel is a useful tool for management.
Channels[/b]
Direct mail
Telemarketing
Email Marketing
Door-to-Door Leaflet Marketing
Broadcast faxing
Voicemail Marketing
Couponing
Direct-response television marketing
Direct selling
Popularity of Direct Advertising
The first question to address is whether you should go direct or indirect. Often the answer is both--especially since the popularity of the Internet. The key, however is to avoid most of the channel conflict.
Channel conflict occurs when the vendor (you) and the reseller, or different reseller types (retail, VAR, mail order, Internet) compete for the same business. I say “most” of the channel conflict, since it is fine to have some conflict--resellers may compete, and there may be some of the business that you can take direct. For example, you might go direct with massive deals that are too big for a reseller to finance, or very small deals that don’t require any special training/installation/consulting--hence won’t provide margins for your resellers who make money on their ‘value added’ services.
To minimize conflict you could:
Segment the products
Setup exclusive or limited territories
Sell direct at a higher price than the average street price
Setup different promotions for different resellers--rotating so they all have advantages at different times
Provide MDF/Co-op and let the resellers choose to establish their own competitive advantage
Setup reseller levels--rewarding higher margins and support for higher authorization
Setup a process to determine if a customer has worked with a reseller prior to taking the business direct etc.
There are multiple ways that you can reduce conflict--the key is to be aware that it could exist and of your ramifications and that you do something about it to keep your reseller and revenue targets satisfied.
One vendor long gone, Ashton Tate, had a terrible problem with channel conflict--as a result, their resellers hated them. They still sold their products since they were so popular but were rooting for a competitor to take them out--which happened.
It is also a problem if you have no conflict, since it usually indicates that you don’t have enough sales coverage--there could be parts of the market you are not covering
Functions of the Channel[/b][/b]
Information Gathering and distributing market research and intelligence - important for marketing planning
Promotion Developing and spreading communications about offers
Contact Finding and communicating with prospective buyers
Matching Adjusting the offer to fit a buyer's needs, including grading, assembling and packaging
Negotiation Reaching agreement on price and other terms of the offer
Physical distribution Transporting and storing goods
Financing Acquiring and using funds to cover the costs of the distribution channel
Risk taking assuming some commercial risks by operating the channel
Transportation
The supplier delivers goods directly to channel members. For instance, Zambian Bottlers and Parmalat have their own fleet of vehicles that deliver products to customers.
Alternatively, it may be outsourced or sub-contracted from specialised transporting firms. For example the third party transporters in Zambia include Kasembo in Ndola, Freight and Passengers based in Lusaka, and Transcat that specialises in cold chain distribution.
WAREHOUSING
Warehousing (storage), inventory control and handling are very important factors to consider, especially in terms of storage costs and risks.
Price Policy
This entails producers establishing a list price for their product and also a schedule of discounts and trade rebates (allowances) for achieving set targets.
ConditionS of sale
This refers to payment terms and producer guarantees. For example, payment terms may include offering cash discounts to distributors to encourage early payments.
Territorial rights
A producer may specify geographical areas (regions or territories) where a distributor will sell products. For example, Solwezi district may be designated as an exclusive area for a particular distributor. Alternatively, the distributor may handle the entire North-Western Province.
Mutual services and responsibilities
Contractual obligations or agreements are often entered into by producers and distributors. This is particularly critical in franchised and exclusive-agency channels where both parties must fulfill obligations.
A new concept that has emerged is value-added partnerships. In this form of integration, small firms come together and form a system. Here, each participating channel member performs a single channel function at a particular channel level. A horizontal marketing system is another approach that has gained widespread support. It is an arrangement within a distribution channel in which two or more firms at the same channel level work towards a common goal. In this system, the participating organizations usually operate in different segments and are unrelated. The advantage of this type of arrangement is that the firms pool together resources and skills the others do not have, with the objective of exploiting the available market opportunity. Most companies operate through a strategic alliance or a joint venture.