Customer Centricity Session 07 2024 PDF

PLACING Marketing & Customer Centricity Armando Cirrincione Mumbai | India AGENDA Functions of the channel How to design a channel Channel competition and co-opetition Different channels for different targets: X...

PLACING Marketing & Customer Centricity Armando Cirrincione Mumbai | India AGENDA Functions of the channel How to design a channel Channel competition and co-opetition Different channels for different targets: Xiameter AGENDA Functions of the channel How to design a channel Channel competition and co-opetition different channels for different targetsThe Xiameter case THE NEED TO REDUCE THE COMPLEXITY Industrial producer ? Customer bigger amount, smaller amount, limited heterogeneity, high heterogeneity economies of scale DEMAND-SUPPLY MATCHING Producer It matchs producers’ and customers’ needs Channel It transforms heterogeneity of demand into wider assortment Customer THE CHANNEL IS THE SET OF INTERDEPENDENT INSTITUTIONS THAT PERFORM FUNCTIONS NEEDED TO MAKE A PRODUCT OR SERVICE AVAILABLE TO CUSTOMERS (CONSUMER OR BUSINESS) FROM COMPLEXITY… Without intermediaries (direct channel) P C Customers Producers P C P C P X C = 3 X 3 = 9 relationships …TO AN EASIER WORLD With intermediaries (indirect channel) P C Customers Producers P C D P C P + C = 3 + 3 = 6 relationships DIFFERENT INTERMEDIARIES, DIFFERENT CHANNEL STRUCTURES Direct channel Producer Customer Marketplace Producer Customer Indirect channel Producer Retailer Customer (short) Indirect Producer Wholesaler Retailer Customer channel (long) DISTRIBUTION FUNCTIONS The channel creates value for both customer and producers in different ways: Logistic Visibility Selection and Information Positioning Negotiation Funding and Risk management LOGISTIC FUNCTION Physical distribution fulfills the logistic task of bringing the product into the physical availability of the client VISIBILITY An important part of the promotion is carried out at the nearest to the customer point, that is: the store. Promotion is made through the windows, the exhibitions and other communication made by the retailer or allowed by the retailer into its store. SELECTION AND INFORMATION Customer information is a very important function, carried out through: sales staff the way the assortment is organized (category management) the breadth and depth of the assortment (comparison between competing brands)  POSITIONING Retail districts monobrand “only in pharmacy” The store communicates to the customer the quality of products that can be found inside; therefore the pdv plays a very important role in the perception that the customer has of a certain brand (positioning). The store also allows to be immerse into the «brand experience» (monobrand stores) FUNDING AND RISK MANAGEMENT producer intermediary customer P order D C product ownesrhip product ownesrhip payment payment Funding takes place when the downstream intermediaries in the channel pay in advance for the product. Risk management is carried out by translating downstream the ownership of the goods (in indirect channels), whereby the downstream intermediaries assume the risk of the unsold. AGENDA Functions of the channel How to design a channel Channel competition and co-opetition different channels for different targetsThe Xiameter case THE ORGANIZATION PERSPECTIVE: MAIN DECISIONS IN CHANNEL’S DESIGN 1. Market coverage: reach of the distribution (proximity to the customer) 2. Control over the product and the customer (brand positioning and ability to influence the customer’s decision) 3. Set of services provided to the customer (commercial formats where the customer shops) THE ORGANIZATION PERSPECTIVE: MARKET COVERAGE Intensive Selective Exclusive (extensive) Several distributors Few distributors Only one distributor in the area in the area in the area SELECTIVE VS EXTENSIVE DISTRIBUTION Extensive (intensive) distribution = the product is distributed by all the possible pdv that deal with the type of goods, without any kind of particular constraint emphasis on the purely logistic function of the pos convenience product, frequently purchased product, impulse purchase product Selective distribution = few points of sale (POS) are selected based on specific criteria ▪ more control over the pdv’s policy ▪ use of the pdv to transfer complex, informative and emotional value ▪ use of the pdv also for positioning [special kind of selective: exclusive distribution] Exclusive distribution = the product can only be sold by a pdv in a certain area (usually it is an agreement that binds to one another) high control on the pdv The pos for the promotion of the product on the territory (in exchange for an exclusive monopoly) type of product that requires strong investments by the distributor (mitigation of the risk due to exclusivity) 2. DIRECT CONTROL VS INTERMEDIATION Control and Investments and risks For the producer: Market more investments control Direct higher fixed costs channel greater market risk greater control on the market and on Indirect positioning For the producer: short lower investments channel lower market risk lower control on the market, on Indirect positioning and on Long price channel intermediation risk (self-interest seeking Investments and risks behavior) DIRECT CHANNEL: PRO AND CONS Types of direct channel: Producer Producer Supplier Own stores (eg. flagship) Direct online sale TV sales door-to-door Direct channel advantages: Better monitoring on product positioning Control on interactions with the customer Information on customers’ behavior Control over the final price Direct channel disadvantages: Higher investments required Greater organizational complexity Customer Customer Too focus on production process rather than channel Customer Need for commercial skills INDIRECT CHANNEL: PRO AND CONS Producer Producer supplier Advantages: Lower investments Greater distribution coverage Focus on core activities (production for the producer, distribution for retailers) Intermediary Intermediary Intermediaries Disadvantages : Lack of contact over the customer’s decision process Lack of control over the marketing efforts (potential positioning problems) Lack of control over the final price Customer Customer customer THE FRANCHISING: BETWEEN DIRECT AND INDIRECT Franchising definition Contractual agreement between a franchisor (franchisor, can be either the producer or a large distributor) and a retail distributor (franchisee, or franchisee) that offer: use of the brand exclusivity of the inventory sales support services transfer of sales information staff training, etc. The franchise combines the control possibilities typical of a direct channel with the limitation of the investment Market and the typical risk of the indirect channel control Franchising Direct channel Indirect short channel Indirect long channel Investments and risks 3. RETAIL FORMATS: ASSORTMENT AND SERVICES Specialist store – Low category range assortment, focused on a few categories, depth of line – High level of service (information, advice, post-sale) assortment Department store – Wide range assortment, low depth of line – Mainly logistic function Concept store – Complementarity based on lifestyle – Mainly information and experience AGENDA Functions of the channel How to design a channel Channel competition and co-opetition different channels for different targetsThe Xiameter case INTERMEDIARIES: A STRATEGIC POSITION C C D C C C C Without distributor: direct relatioships With distributor: direct relationship producer-customer distributor-customer The producer lacks the interaction with the customer, the "last mile»: the most difficult step, and the richest in information and potential to influence. PRODUCER-DISTRIBUTOR RELATIONSHIPS M1 C D M2 The producer loses control over the consumer The distributor uses control over the consumer to direct his choices – promotes the most convenient offer per se, by putting producers in competition with each other Channel collision  THE COLLISION BETWEEN PRODUCER AND DISTRIBUTOR Producer’s Distributor’s desires desires - their products at the - several different eyes’ level industrial brands (wider range) - larger linear space (»facing») - higher margins - high turnover - promotion at the point (turnaround) of the shelf of sale («in store (bucause the space has promotion» like a high opportunity cost) display, flyer, etc) In the middle: Trade Marketing THE PRODUCER'S PERSPECTIVE: "PUSH" AND "PULL" STRATEGIES Strategies aimed at solving the problem of competition between producer and distributor Branding P C D Trade marketing Push: the producer offers distributors a higher profit margin and high value services (trade mktg) in order to encourage them to promote and sell their product to customers Pull: the producer invests heavily in communication to the consumer in order to generate their strong demand that induces the distributors to want to have in assortment the specific product PUSH STRATEGIES VS. PULL STRATEGIES Trade marketing Push = “pushing”: push the distributor to promote our offer to the consumer (ex: convince the staff of the pdv to promote our product, develop visual merchandising policies to promote our product among those in the assortment) Pull = to convince consumers to pull, by "pulling", our offer through the channel, that is to ask for our product at the POs, (eg to look for our product in the assortment) Twin Branding = mix between pull and push (the most widespread strategies) CHANNEL COMPETITION Multi-channel: use of different channels for the same type of offer (with different commercial services) direct and indirect channel offline and e-commerce potential conflict among channels Mono- channel vs. Multi- channel Offline stores vs. e-commerce Serve different customer segments through different channels eg: website and traditional shops offer different types of commercial services using different channels eg: pc for business and pc for family serve different geographical areas through different channels AGENDA Functions of the channel How to design a channel Channel competition and co-opetition different channels for different targetsThe Xiameter case THE XIAMETER CASE