Marketing Channel Concept PDF

Marketing Channel Concept Marketing channel DEFINITION Defined as the internal or external organization that management operates to accomplish its distribution goals and objectives. Set of interdependent organizations involved in the process of developing a goods or services intended for us...

Marketing Channel Concept Marketing channel DEFINITION Defined as the internal or external organization that management operates to accomplish its distribution goals and objectives. Set of interdependent organizations involved in the process of developing a goods or services intended for use of consumption. Roles of producers and end user in marketing channel: 1. MANUFACTURER - Creator of the product and services and can also be the originator of the service. 2. Consumer – buys larger quantities at a times of various reasons : a. The manufacturer is offering bargain on the product which is normally is not available. b. The product commodity is available the best price as it is a seasonal products. 3. Manufacturer or end users cannot be considered as part of the marketing channel but it is called as intermediaries. Marketing intermediaries 1. Retailers – the gatekeepers to the market for all other members of the sales distribution process. The ultimate seller of the goods to its end users. 2. Wholesaler– buys products from the manufacturers and resell to retailers. Risk on products since they keep products until sold. Can gather products locally and internationally. 3. Agent and Brokers – works between supplier and retailers, but don’t take ownership of the products they sell. *commission based. *sell to wholesalers and retailers. Marketing intermediaries 4. Resident Sales Agent – Reside in the country to which they sell products but products came from foreign manufacturers. *Products samples *Pre order products and ship internationally. 5. Buying offices – Type of commission agent or broker, since they make their money pairing up retailers with product lines from various manufacturers. Marketing Channel Participants Channel participants are defined as participants that engage in negotiator functions linked together by the flows of negotiation or ownership 3 basic distinctions of marketing channels Marketing Producers and Manufacturers 01 Consist of firm or enterprise that are involved in conceptualizing, Channel developing or making of products. Products must be available to consumers where and how they Participants needed them. Channel participants Intermediaries are defined participants as that 02 Independent businesses that help producers and manufactures in the performance of negotiation and engage in negotiator other distribution tasks. functions linked together by the flows of negotiation or ownership Wholesalers 3 basic distinctions of 03 Consist of businesses that are involved in selling goods for resale or business use to retail, industrial, marketing channels commercial, institutional, professional, or agricultural firms even to other wholesalers. Conflict in the Conflict versus Competition Marketing Conflict in the marketing channel should not be Channel confused with competition. Competition is a behavior that is object centered, indirect and impersonal. Conflict Exist when a Conflict is direct, personal and member of the marketing opponent centered. channel perceived another Causes of Channel Conflict. members’ actions 1. Misunderstood communications impeded the attainment of 2. Divergent functional his or her goals. specializations and goals of channel members 3. Failings in joint decision making. 4. Differing economic objectives. 5. Ideological differences of channel members.  Role of Incongruities 01 Categories of channel Members of the channel marketing have a series of roles they are conflicts. expected to fulfill. If a member deviates from the given role. A conflict situation may result. 02 Resource Scarcities Disagreement of channel members over the allocation of valuable resources needed to achieve their goals. 03 Perceptual Differences Perception refers to the way an individual selects and interprets environmental stimuli. The way such stimuli are perceived are often quite different from objective reality.  Expectational differences Various channel members have 04 expectations about the behavior of other channel members. Expectation forecast concerning Categories of channel the future behavior of the channel members. Some of these forecast turn out inaccurate. conflicts. 05 Decision domain disagreement Channel members explicitly or implicitly carve out for themselves an area of decision making that they feel I exclusively theirs. Conflict arise over which member has the right to make what decision. Sample Goal – Pricing Decision incompatibilities 06 Each member of the marketing channel has his or her own goals. Situations in the organization will hardly overcome by having differences in setting goals. Communication difficulties 07 Communications is the creative vehicle for all interactions among channel members, whether such interactions are cooperative or conflicting. Marketing Channel and Environment The environment consist of all microenvironment or external uncontrollable factors. Natural Economic Competitive Sociocultural Technological Legal environment Economic Environment Economic factors are a critical determinants of channel member behavior and performance. The channel member must therefore be aware of the influence of economic variables on the participants in the Recession Channel members substantial reduction in sales volume and profitability Firms' heavy inventories Inflation = consumer price index Buy now before the price goes higher Hold on to your money Deflation Difficulties to pass cost induced price increases through the channel Other economic issues Huge national debt, the trade deficit and the government budget deficit  Competitive Environment Types of competition Horizontal competition - the same types of firms at the same channel Intertype competition – different types of firms at the same channel Vertical competition – channel member at the different levels Channel system competition – complete channel systems as units: corporate, contractual, administered. Competitive structure – Example. Scrambled merchandising Sociocultural Environment Age patterns of the population generation Y, N vs Silver Generation Change in ethnic mix minority markets Educational trends higher learning students Family or household structure smaller families, child free couples, single Changing role of women 80%: 30-40 years career oriented women. Technological Environment The internet and electronic marketing channels Scanners, computerized inventory management, and portable computers. Electronic data interchange. Teleshopping, computer shopping and home shopping. Other technological innovations. Legal Environment the legislation affecting marketing channels Legal issues in channel management Dual distribution: two different channels to his target market. Exclusive dealing: only its products Full line forcing: to carry a broad group of its full line products. Price determination Price maingtenance Etc. Strategy of Marketing Channel Factors to consider. The broad principles by which the firm expects to Market factors achieve its distribution Producers factor objectives for its target Product factor markets. Competitive factor  Delivery of Satisfaction Marketing concept emphasized on Strategies in earning profit through satisfaction of the customers. Marketing or Standard of living Distribution functions helps Distribution improve living standard of the consumers in the society. Proper distribution of necessary goods Channel and services to the consumers easily at the right time does not only satisfy them but also brings change in their living standard. Value addition 6the function distribution such as transportation, warehousing etc increase the importance of products by creating place utility, time utility and quantity utility,. Right quantity, right place at right time adding its value,  Communication Flow of information and message to consumers about their products, price, promotion etc. through channel members. Received information from Strategies in customer, competitors and environment change. Employment Marketing or The function of distribution creates employment opportunities in society. There are thousands of Distribution distributors, agent, wholesaler and retailers involves in supplying the product to consumer thus Channel employment is needed in this transportation and warehousing. Efficiency Distribution helps to satisfy the needs of consumers bu supplying assortment of different products of different producers. Thus efficiency achieve in both production and distribution. financing The timely payment by intermediaries and financial helps become more important for smooth operation of production.