Marketing mix : Place Management of distribution channels

Viraj Mahida QA Roll no:18 Smit Bhavsar QA Roll no:16

marketing channel is a system of relationships existing among businesses that participate in the process of buying and selling products and services.

Four Ps
Four Ps

Four Cs
Four Cs

P = Location
Convenience Distribution Availability Accessibility Usability Where and when necessary Size and portability

Place- Convenience
Placement is replaced by the convenience function. With the rise of internet and hybrid models of purchasing, place is no longer as relevant as before. Convenience takes into account the ease to buy a product, find a product, find information about a product, and several other considerations.

Product Classes - Place

Convenience Products - have to be in convenient places - small stores, vending machines Shopping Products - have to be where shoppers go, malls, superstores etc. Specialty Products - have to available where people want to buy them - ie. Movie theatres have to be located where many people go, and
where you can park easily

Place and PLC

PLACE must be considered in terms of the Product Life Cycle In the beginning Growth Stage - it might be good to have your product sold in a certain location, but in the maturity or decline stage, you may have to change locations to make it better for customers who are no longer so strongly interested in buying

Functions of distribution channel

Link between production and consumption Market information Communicate promotional offers Transporting & storing Financing and Risk taking

Types of Channels
Consumer Product Channels zero-level channel One-level channel Two-level channel Three-level channel strategic channel alliance

Marketing Channels for Consumer Products

Manufacturer Manufacturer Manufacturer Manufacturer Agents Wholesalers

Wholesalers Retailers

Retailers

Retailers

Consumers A

Consumers B

Consumers C

Consumers D

Direct channels
Door to door sales Mail order Telemarketing Tv selling Manufacturer owned stores: Example-Eureka Forbes, Tupperware, Bharat Petroleum

Industrial Product Channels

Manufacturer Manufacturer Manufacturer Manufacturer

Agent

Agent

Industrial Distributors

Industrial Distributors

Industrial Buyers P

Industrial Buyers Q

Industrial Buyers R

Industrial Buyers S

Intensity of Market Coverage

A company must determine the distribution coverage intensity a product should get, what number and kinds of channel in which the product will be sold. Three major coverage strategies include intensive, selective, and exclusive distribution. Intensive Distribution: A company uses all available distribution outlets for making its product available to consumers. Selective Distribution: Companies use selective distribution, which means using more than a few and less than all available outlets in a market area to distribute products. Exclusive Distribution: This type of distribution means using one or very limited few outlets.

Vertical Marketing System (VMS)

Vertical marketing system refers to an arrangement in which the whole channel focuses on the same target market at the end of the channel. There are three types of VMS corporate - Sherwin- Williams makes paint but also owns and operates 2,000 retail outlets. administered Kodak, Gillette, Procter & Gamble

contractual- value-adding partnerships

Horizontal Marketing Systems

Horizontal marketing system occurs when two or more related or unrelated companies working at the same level come together to exploit marketing opportunities.

Channel length : Direct/Indirect

Choice of intermediary Logistics options for channels Control over the channel
Who decides price, promotion, packaging

Why use intermediaries?

Geography Customers may live far away to be reached directly Segmentation Different segments can be reached only by different distribution channels Lack of retailing experience Better use of resources elsewhere

Factors to be considered in selection of channels

Type of product?:
Is it sold to other producers or customers?

How often the product is purchased? How expensive is the product? How perishable is the product? Location of customers? Competitors

Marketing Channel Management

Formulating channel strategy
Design channel structure Select channel members Motivate channel members Coordinate with marketing mix Evaluate member performance

Realize only the place P provides protection from imitation Distribution strategies can provide sustainable competitive advantage

Marketing Channel Management

Formulating channel strategy

Design channel structure

Select channel members Motivate channel members Coordinate with marketing mix Evaluate member performance

Set distribution objectives Specify tasks to be performed by the channel Consider alternative structures Choose optimal structure

Marketing Channel Management

Formulating channel strategy

Design channel structure

Select channel members Motivate channel members Coordinate with marketing mix Evaluate member performance

Optimal structure identified by considering:

Market variables Product variables Company variables Intermediary variables Behavioral variables External environment variables

Marketing Channel Management

Formulating channel strategy

Design channel structure

Select channel members

Motivate channel members Coordinate with marketing mix Evaluate member performance

Find prospective channel members Evaluate prospective channel members Convert prospective into actual channel members

Marketing Channel Management

Formulating channel strategy Develop selection criteria
Credit and Financial Condition Sales Strength

Design channel structure

Attitude

Size

Select channel members

Motivate channel members Coordinate with marketing mix Evaluate member performance
Management Ability

Prospective channel member

Product Lines

Management succession Sales Performance Market Coverage

Reputation

Marketing Channel Management

Formulating channel strategy

Learn about the needs and problems of channel members

Advisory committees

Design channel structure Select channel members

Offer support

Informal support Strategic alliances, partnerships

Provide ongoing leadership

Continuing focus

Motivate channel members

Coordinate with marketing mix Evaluate member performance

Marketing Channel Management

Formulating channel strategy

Design channel structure Select channel members Motivate channel members

Product and Channel Retailers (a channel member) play an important role in product positioning Personal selling

Pricing and Channel Relevant to channel members: Profit margins available to channel members Pricing policies Incentives

Coordinate with marketing mix

Evaluate member performance

Promotion and Channel Promotions interface with channel members Point-of-purchase displays Inventory levels Sales person training

Marketing Channel Management

Formulating channel strategy

Design channel structure Select channel members Motivate channel members

Coordinate with marketing mix

Assessment of success of channel members in implementing strategies

Requires good information flows between members Point-of-sale systems

Evaluate member performance

Channel Conflicts and Cooperation

Channel conflict occurs when manufacturers disintermediate their channel
partners, such as distributors, retailers, dealers, and sales representatives Situation in which one channel member perceives another channel member(s) to be engaged in behavior that prevents it from achieving its goals. The amount of conflict is, to a large extent, a function of goal incompatibility,

domain descensus, and

differing perceptions of reality

Types of conflict
Latent conflict The channel members may be unaware about the opposition. They do not fully sense the conflict. This is due to the separate or un-conflicting goals. Perceived conflict The channel members sense that some sort of opposition of perceptions, of interest, or of intensions exists. It is more psychological, i.e. two organizations can perceive that they are in disagreement but their individual members do not consider it as a very serious issue. Felt conflicts When channel members not only perceive the opposition or disagreement but also feel it actually they are felt or affective conflicts. This needs to be sorted out at a early stage to avoid further consequences.

Types of conflict
Manifest Conflict If felt conflicts are not managed in time and properly, they can become manifest or overt conflicts and these conflicts stop the cooperation and understanding between two organizations and block the other from achieving its goals. Functional Conflict When channel members accept that there is opposition and disagreement but actually, this opposition will improve their relationship, it becomes functional conflict. It is common, obvious and sometimes desirable too due to the interdependence of channel members on each other.

Types of Conflict
In any distribution channel arrangement there can
possibly develop three kinds of conflicts: Vertical channel conflict Horizontal channel conflict Multichannel conflict

Vertical Channel Conflict

Reasons for vertical conflict

Dual distribution i.e. manufacturers may bypass intermediaries and sell directly to consumers and thus they compete with the intermediaries. Over saturation, i.e. manufacturers permit too many intermediaries in a designated area that can restrict, reduce sales opportunities for individual dealer and ultimately shrink their profits. Partial treatment, i.e. manufacturers offer different services and margins to the different channels members even at same level or favor some members. New channels, i.e. manufacturers develop and use innovative channels that create threat to establish channel participants.

Horizontal Channel Conflict:-

Reasons for horizontal conflict

Price-off by one dealer / retailer can attract more customers of other retailers. Aggressive advertising and pricing by one dealer can affect business of other dealers. Extra service offered by one dealer / retailer can attract customers of others. Crossing the assigned territory and selling in other dealers / retailers / franchises area. Unethical practices or malpractices of one dealer or retailer can affect other and spoil the brand image.

Multi channel conflict

Some techniques are as follows

Channel leadership He possesses the channel power. ability of one channel member to influence another members marketing decisions and goal achievement Adoption of Super ordinate goals An agreement on the fundamental goal they are jointly seeking, whether it is survival, market share, high quality or customer satisfaction. Exchange of persons between two or more channel levels Joint membership in and between trade associations Diplomacy Diplomacy takes pace when each side sends a person or a group to meet with their counterpart from the other side to resolve the conflict

References
Designing and managing integrated marketing channels, Phillip Kotler, 13th edition Wikipedia http://www.consumerpsychologist.com/dist_Distribution_Objectives. html Marketing channels and physical distribution, Dr D I Gupta