Fundamentals of Marketing Channels PDF

UNIT II FUNDAMENTALS OF MARKETING CHANNELS  PRESENTERS Christine Joy Italia Japeth Permalan Christine Arogancia Febie Tiad Kristal Lachica CONTENTS OF PRESENTATION 01 Meaning & role of Marketing Channel 02 Mark...

UNIT II FUNDAMENTALS OF MARKETING CHANNELS  PRESENTERS Christine Joy Italia Japeth Permalan Christine Arogancia Febie Tiad Kristal Lachica CONTENTS OF PRESENTATION 01 Meaning & role of Marketing Channel 02 Marketing Structure for Consumer & Industrial Goods 03 Selection of Marketing Channel 04 Marketing Channel System 05 Power of Channel Members 06 Sources of Channel Conflict 07 Recent Trends in Marketing Channels MEANING AND ROLE OF MARKETING CHANNEL Next Slide  MARKETING CHANNEL/ DISTRIBUTION CHANNEL A marketing channel is the path or route a company's products and services take from the point of production to the end-user.  MARKETING CHANNEL/ DISTRIBUTION CHANNEL The ‘path’ along which goods move from manufacturer to customer. Are the set of interdependent organizations involved in the process of making product or service available for use or consumption.  MAIN OBJECTIVES OF MARKETING CHANNEL Make available goods at a Maintain sustainability of the prescribed time to the place of company consumer. Maintaining sustainability in Just-in-time delivery, or efficient marketing channels focuses on distribution, ensures goods reach efficient distribution, eco-friendly consumers at the right time and practices, strong partnerships, and place. It's essential in supply chain promoting sustainable products. management to boost customer This ensures long-term success satisfaction, reduce inventory while prioritizing environmental costs, and streamline operations. and social responsibility. VARIOUS ROLES PERFORMED BY MARKETING CHANNELS CAN BE DESCRIBED AS BELOW: A. INFORMATION PROVIDER An information provider offers data, insights, or knowledge to help others make informed decisions. Examples include news media, research institutions, consulting firms, and market research companies.  B. MOVEMENT OF GOODS/ TITLE TRANSFER Movement of goods refers to the physical transportation of products from one location to another. Title transfer occurs when ownership of the goods is legally transferred from the seller to the buyer. This typically happens when the goods are delivered, according to the terms outlined in the sales contract. C. PAYMENT COLLECTION AND PROCESSING/ FINANCE Payment collection and processing involves receiving and managing customer payments through various methods and ensuring accurate financial transactions. Finance oversees cash flow and account reconciliation to maintain financial accuracy and security.  D. UNDERSTAND CONSUMER BEHAVIOR Understanding consumer behavior involves analyzing how and why people make purchasing decisions, including their preferences, motivations, and buying patterns. This helps businesses tailor marketing strategies, improve products, and enhance customer satisfaction.  E. PRODUCTION (PROVIDE VALUABLE INPUTS FOR SALES FORECASTING AND SALES BUDGETING) Production supports sales forecasting and sales budgeting by supplying data on manufacturing capacity, inventory levels, and production schedules. This helps in accurately predicting future demand and setting budgets aligned with production capabilities.  MARKETING CHANNEL FOR CONSUMER GOODS Next Slide The marketing channel for consumer goods involves the manufacturer, wholesaler, retailer, and consumer. It ensures products move efficiently from production to end-users through various intermediaries. a) Zero-level Channel: (Producer......Consumers) b) One Level Channel: (Producer........Retailer......Consumers) c) Two-level Channel: (Producer.........Wholesaler.........Retailer............Consumers) d) Third Level Channel: (Producer....Agent.... Wholesalers....Retailers.... Consumers)  MARKETING CHANNEL FOR INDUSTRIAL GOODS Next Slide  The marketing channel for industrial goods involves the journey from the manufacturer to the end-user through intermediaries like distributors and business buyers, aiming to supply businesses with necessary products for their operations. a) Zero level (Producer ……………. Industrial user) b) One level (Producer……agent…. Industrial user) c) One level (Producer ………Industrial distributor……. Industrial user) d) Two level (Producer ………Agent…………Industrial distributor…. Industrial user)  SELECTION OF MARKETING CHANNEL Next Slide  SELECTION OF MARKETING CHANNELS Need for Producer Producer Buyer Willingness of Resources of Information Issues Factors Behavior intermediaries intermediaries and Service  Buyer behavior involves how people or organizations Buyer make purchasing decisions, including their decision Behavior process, influences, and economic factors. Need for The need for information and service involves Information consumers seeking details about products and and Service support before and after purchases. Providing this helps build trust and enhances customer satisfaction.  Willingness of intermediaries involves their readiness to Willingness of distribute and promote products, influenced by potential intermediaries profits, product demand, and support from manufacturers. High willingness ensures effective distribution and market reach. Resources of intermediaries include financial, physical, Resources of human, and technological assets that help them efficiently intermediaries manage, distribute, and promote products.  Producer issues include managing production costs, ensuring Producer Issues quality, handling supply chain disruptions, balancing capacity with demand, and integrating new technologies. Addressing these challenges is key for efficient operations and meeting market needs. Producer factors include production capacity, resource Producer availability, technological capabilities, cost management, Factors and regulatory compliance. These elements influence a producer's efficiency, product quality, and market competitiveness. SELECTION OF MARKETING CHANNEL AN ALSO BE CONSIDERED AS FOLLOWS:  1. PRODUCT CONSIDERATION A Unit Value B Nature of product C Types of products  2. MARKET CONSIDERATION A Types of Market B Number of potential consumers C Geographic Concentration D Order Size  3. MIDDLEMAN CONSIDERATION A Availability of Middleman B Capacity of Middleman C Attitudes of middleman towards producers and policies D Service Provides by Middleman  4. COMPANY CONSIDERATION A Financial resources B Ability of management C Desire for channel control D Company’s Goodwill  5. ENVIRONMETAL CONSIDERATION A Legal consideration B Social consideration C Economic consideration MARKETING CHANNEL SYSTEM Next Slide  Developing a distribution chain refers to decisions involving the development of new marketing channels where none had existed before, or the modification of existing channels.  1. VERTICAL CHANNEL SYSTEM a. A vertical marketing b. Conventional Marketing system (VMS) channel is a traditional distribution is a distribution approach system where where one organization or manufacturers, partnership manages the wholesalers, and retailers entire supply chain—from operate independently, production to retail—to often leading to less enhance coordination coordination and potential and efficiency. conflicts among them. 1. VERTICAL CHANNEL SYSTEM 2. HORIZONTAL MARKETING CHANNEL SYSTEM Horizontal marketing system is one in which two or more companies join together to follow a new marketing opportunity. 2. HORIZONTAL MARKETING CHANNEL SYSTEM involves companies at the same distribution level working together to expand market reach and improve efficiency through joint efforts and resource sharing  3. MULTI- CHANNEL SYSTEM When companies interact with their customers from a combination of channels, such as kiosks, ATMS, call centers, direct marketing, home shopping networks, catalogues, online interactions, as well as supermarkets and stores, they operate through multiple channels. POWER OF CHANNEL MEMBERS Next Slide  Power is defined as an ability of one channel member (A) to get another channel member(B) to do something it otherwise would not have done. Simply put, power is the potential for influence. Power seems to exist when firm (Target of the influence) follows the path that another firm (the influencer) desires. Different channel members inherit different power within them, some of the power of different channel members is discussed below:  1. BACKEND OR PRODUCT POWER This refers to the power that a manufacturer or service provider wields if the brand is very popular or powerful. Manufacturers of a powerful brand, for instance, may force dealers to buy less powerful or profitable lines along with their popular brands. The dealers and retailers have little choice but to carry the brand or risk losing their customers. This power, exercised by manufacturers, is also known as backend power.  2. MIDDLE OR WHOLESALER POWER This refers to the power held by an intermediary by virtue of control over the distribution in a particular area. For instance, a wholesaler who sells a variety of products to a large number of smaller retailers is often able to bargain with manufacturers because of his/her reach and the fact that the small retailers depend on him/ her for quick and cost-effective supplies. Such power may also arise if the wholesaler has his/her own fleet of small vehicles or an army of salesmen servicing markets that cannot be matched by the company.  3. FRONT OR RETAILER POWER Large retailers can command major concessions from companies because they can place large orders. Large retail chains can exercise their power and boycott products if they do not like the margins offered. SOURCES OF CHANNEL CONFLICT Next Slide  REWARD POWER Reward power involves incentivizing channel members with bonuses or rewards for achieving specific targets, which can drive performance and challenge larger brands, especially when there's latent demand. An example of reward power is when a beverage manufacturer offers a holiday package to retailers who sell over 10,000 cases of their drink in a month. This incentive motivates retailers to promote and increase sales of the product, potentially outperforming larger brands that don't offer similar rewards.  COERCIVE POWER Involves forcing channel partners to take specific actions, such as requiring distributors to buy slow-moving products along with popular ones, or demanding extra discounts for large orders. An example of coercive power is when a toothpaste company forces distributors to buy a certain number of toothbrushes along with their toothpaste orders. Similarly, a large retailer might insist on additional discounts before placing a substantial order with a manufacturer.  EXPERT POWER Expert power comes from having superior knowledge or expertise, influencing others to follow recommendations. Examples include companies advising franchisees on equipment and consultants guiding client decisions. An example of expert power is when a technology consultant advises a company on the best software to use based on their specialized knowledge, and the company follows the consultant's recommendation.  LEGITIMATE POWER Legitimate power is based on formal authority or legal rights, such as a boss over employees or contractual agreements between distributors and companies that establish rights and responsibilities. An example of legitimate power is when a franchisee follows the rules set by the franchisor in their contract, as the franchisor has formal authority and legal rights established by the agreement.  REFERENT POWER Referent power arises when one party seeks association with a well-known brand to enhance its reputation. For example, a distributor may carry a big brand to attract more business. Using this power responsibly is important to avoid conflict and maintain market strength. Another example of referent power is when a retailer wants to partner with a luxury brand to enhance its store's prestige, attracting more customers and boosting sales. Similarly, a small marketing agency might seek to work with a well-known company to build credibility and gain more clients.  RECENT TRENDS IN MARKETING CHANNELS Next Slide  1. SYMBIOTIC MARKETING Symbiotic marketing is “an alliance of resources or programs between two or more independent organization design to increase the market potential of each”.  2. THIRD PARTY DELIVERY Third-party delivery is an independent logistics provider that performs any or all of the functions required to get a client’s product to market.  3. MULTI-CHANNEL MARKETING Multichannel marketing refers to the practice of interacting with customers using a combination of indirect and direct communication channels – websites, retail stores, mail order catalogs, direct mail, email, mobile, etc. – and enabling customers to take action in response – preferably to buy your product or service – using the channel of their choice.  4. MULTI-LEVEL MARKETING · Multi-level marketing is a strategy that some direct sales companies use to encourage their existing distributors to recruit new distributors by paying the existing distributors a percentage of their recruits' sales; the recruits are known as a distributor's "downline."  5. E-MARKETING · Very simply put, eMarketing or. electronic marketing refers to the application of marketing principles and techniques via electronic media and more specifically the Internet. The terms eMarketing, Internet marketing and online marketing, are frequently interchanged, and can often be considered synonymous.  6. DIRECT MARKETING · Direct marketing is a form of advertising where organizations communicate directly to customers through a variety of media including cell phone text messaging, email, websites, online adverts, database marketing, fliers, catalog distribution, promotional letters, and targeted television, newspaper, and magazine. One of the great advantages of this type of marketing is that you can reach your specific audience segments with personalized messages. THANK YOU FOR LISTENING