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Chapter 14. Designing and Managing Value Networks and Marketing Channels. PowerPoint by Karen E. James Louisiana State University - Shreveport. Objectives. Identify value networks and marketing-channel systems. Learn the type of work performed by marketing channels.

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Chapter 14

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Chapter 14

Chapter 14

Designing and Managing Value Networks and Marketing Channels

PowerPoint by Karen E. James

Louisiana State University - Shreveport

To accompany A Framework for Marketing Management, 2nd Edition


Objectives

Objectives

  • Identify value networks and marketing-channel systems.

  • Learn the type of work performed by marketing channels.

  • Understand the decisions companies face in designing, managing, evaluating, and modifying channels.

To accompany A Framework for Marketing Management, 2nd Edition


Objectives1

Objectives

  • Identify trends taking place in channel dynamics.

  • Learn how channel conflict can be managed.

To accompany A Framework for Marketing Management, 2nd Edition


Value networks and marketing channel systems

Value Networks and Marketing Channel Systems

  • A Value Network is a system of partnerships and alliances used by a firm to source, augment, and deliver its product or service offerings.

  • Intermediaries that help get the product from manufacturer to consumer or end users form the Marketing Channel(s).

To accompany A Framework for Marketing Management, 2nd Edition


Work performed by channels

Work Performed by Channels

  • Producers establish marketing channels for a variety of reasons:

    • Producers lack financial resources necessary for direct marketing

    • Direct marketing is not feasible for many offerings

    • Using channels frees money for investment in main business

    • Intermediaries are more efficient

To accompany A Framework for Marketing Management, 2nd Edition


Work performed by channels1

Work Performed by Channels

  • Channel members perform a number of key functions:

    • Forward flow functions:

      • Develop / disseminate communication

      • Store and move the physical products

      • Oversee transfer of ownership

    • Backward flow functions:

      • Place orders with manufacturers

      • Facilitate payment of bills

To accompany A Framework for Marketing Management, 2nd Edition


Work performed by channels2

Work Performed by Channels

  • Other key functions performed by channel members include those that flow both ways:

    • Forward and backward flow functions:

      • Gather information

      • Negotiate price and transfer of ownership

      • Finance inventories

      • Assume risk

To accompany A Framework for Marketing Management, 2nd Edition


Work performed by channels3

Work Performed by Channels

  • Channel levels vary according to the number of intermediaries:

    • Zero-level (direct marketing) channel

    • One, two, and three-level channels

    • Reverse flow channels

  • Service sector channels use agencies and locations to access population to be served.

To accompany A Framework for Marketing Management, 2nd Edition


Channel design decisions

Channel-Design Decisions

  • Push vs. pull strategy

  • Analyzing consumers’ desired service output levels

    • Lot size, waiting time, product variety, spatial convenience, service backup

  • Establishing objectives / constraints

  • Identifying and then evaluating major channel alternatives

To accompany A Framework for Marketing Management, 2nd Edition


Channel design decisions1

Channel Factors

Intermediary type

Number of intermediaries

Terms and responsibilities of intermediaries

Merchants

Buy, take title, and resell merchandise

Agents

Find customers, negotiate, do not take title to merchandise

Facilitators

Aid in distribution, do not negotiate or take title to merchandise

Channel-Design Decisions

To accompany A Framework for Marketing Management, 2nd Edition


Channel design decisions2

Channel Factors

Intermediary type

Number of intermediaries

Terms and responsibilities of intermediaries

Exclusive distribution

Severely limited distribution

Selective distribution

Some intermediaries willing to carry good are selected

Intensive distribution

Offering is placed in as many outlets as possible.

Channel-Design Decisions

To accompany A Framework for Marketing Management, 2nd Edition


Channel design decisions3

Channel Factors

Intermediary type

Number of intermediaries

Terms and responsibilities of intermediaries

Price policies

Price list and schedule of discounts

Conditions of sale

Payment terms and guarantees

Territorial rights

Define territory / terms

Services to be performed by party

Channel-Design Decisions

To accompany A Framework for Marketing Management, 2nd Edition


Channel design decisions4

Channel-Design Decisions

  • Channel Alternative Evaluation Criteria:

    • Economic criteria

      • Sales and costs vs. added value

    • Control criteria

    • Adaptive criteria

  • After choosing a particular channel alternative, firms take several actions

To accompany A Framework for Marketing Management, 2nd Edition


Channel management decisions

Motivate channel members

Evaluate channel members

Channel-Management Decisions

Channel Development Process

  • Select channel members

  • Train channel members

  • Modify channel arrangements

To accompany A Framework for Marketing Management, 2nd Edition


Channel dynamics

Channel Dynamics

  • Channel systems are constantly evolving and developing

  • Vertical Marketing Systems

    • Corporate VMS

    • Administered VMS

    • Contractual VMS

  • Horizontal Marketing Systems

  • Multichannel Marketing Systems

To accompany A Framework for Marketing Management, 2nd Edition


Channel dynamics1

Channel Dynamics

  • Conflict, Cooperation, & Competition

    • Types of conflict

      • Vertical, horizontal, and multichannel

    • Causes of conflict

      • Major causes: Goal incompatibility; unclear roles and rights

      • Other potential causes exist

    • Managing channel conflict

To accompany A Framework for Marketing Management, 2nd Edition


Channel management decisions1

Cooptation

Diplomacy

Mediation

Arbitration

Channel-Management Decisions

Managing Channel Conflict

  • Subordinate goal adoption

  • Exchange people between channel levels

To accompany A Framework for Marketing Management, 2nd Edition


Channel dynamics2

Channel Dynamics

  • Legal and Ethical Issues in Channel Relations

    • Two common distribution practices are legal as long as they don’t substantially lessen competition:

      • Exclusive dealing

      • Tying agreements

To accompany A Framework for Marketing Management, 2nd Edition


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