Marketing Channels Overview

Marketing Channels

• Value Delivery Network encompasses all parties involved in the production, distribution, and service delivery of a product, including all direct participants.
• Supply Chain is a network of companies and individuals involved in creating and delivering a product to the customer.
• Marketing Chain outlines the stages a product goes through from production to consumption (production, wholesale/distribution, retailing, promotion, and consumption)
• Direct marketing involves selling directly to consumers, e.g., Fenty Beauty sells directly on their website.
• Indirect marketing employs intermediaries like wholesalers and retailers.
• Multichannel marketing uses online and offline platforms to reach customers, maintaining a consistent presence.
• Intermediaries in indirect marketing facilitate sales by acting as a third-party link between producers and consumers. For example, Sephora acts as an intermediary for Fenty Beauty and Rare Beauty. Their functions include transactional (buying and selling), logistical (gathering, storing, sorting); and facilitating (financing, grading, marketing information/research)
• Distributors, wholesalers, dealers, and retailers facilitate distribution: Dealers are intermediaries connecting manufacturers, wholesalers, distributors to consumers. Wholesalers/distributors manage bulk distribution to retailers. Retailers sell directly to consumers.

Channel Mark-up & Price Escalation

• Channel Mark-up is the added price at each stage of a product’s distribution chain, covering business-related costs.

Retailing & Wholesaling

• Retailers include department stores, supermarkets, discount stores, convenience stores, specialty stores, and e-commerce websites.
• Retail landscapes are changing because of increased online sales that have led many brick-and-mortar stores to close or adopt multichannel approaches.
• Covid accelerated these changes.

Pricing Concepts & Strategies

• List Price is the base price without discounts.
• Dynamic Pricing adjusts prices based on demand, competition, or factors.
• Penetration Pricing involves initially offering products at a low price to capture significant market share.
• Skimming Pricing sets the highest initial price for a new product before lowering it over time, targeting customers who initially want the product.
• Total Costs are the sum of fixed and variable costs.
• Fixed Costs remain constant regardless of production levels.
• Variable Costs depend on production.
• Unit Contribution is the difference between the price of a product and its variable cost per unit.
• Break-Even Analysis calculates the number of units needed to sell to cover all costs.
• Standard Markup Pricing adds a fixed percentage to the cost of a product to determine the price.
• Cost-plus pricing adds a fixed amount to the cost of a product.
• Cost-plus percentage-of-cost pricing adds a percentage of the cost to the total unit cost.
• Customer value-based pricing determines price based on customers' perceived value of the product.
• Cost-based pricing sets the price based on the cost of production.
• Competition-based pricing determines price based on competitor prices.

Pricing Strategies (Continued)

• Psychological pricing strategies can influence consumers (e.g., odd-even pricing like $9.99).
• Premium pricing sets high prices to suggest high quality.
• Bundle pricing groups multiple products together at a lower price.

Marketing Metrics

• Stock/Inventory turnover measures how efficiently a company uses its inventory.
• Inventory Turnover = Cost of Goods Sold/Average Inventory