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Marketing Mix

Place

7th April 2007 Marketing Fundamental Mgt 1203

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).

7th April 2007 Marketing Fundamental Mgt 1203

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

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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

7th April 2007 Marketing Fundamental Mgt 1203

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.

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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

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Channel-Design Decisions

• Channel Factors– Intermediary type

• 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

– Number 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.

– 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

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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

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Channel-Management Decisions

• Channel Development Process– Select channel members– Motivate channel members– Evaluate channel members– Modify channel arrangements

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Channel Dynamics

• Channel systems are constantly evolving and developing

• Vertical Marketing Systems– Corporate VMS– Administered VMS– Contractual VMS

• Horizontal Marketing Systems

• Multichannel Marketing Systems

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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• Subordinate goal adoption• Exchange people between channel levels• Cooptation• Diplomacy• Mediation• Arbitration