Assignment

On

Designing and Managing

Integrated Marketing Channels

Submitted To

Prof. Dr. Abul Kalam Azad

Professor of University Of Dhaka

Master of Business Administration Department

East West University

Submitted By

Md Yeahyea Kabir

ID#2012-1-95-065

MKT 501

Sec-02

Q: 1 what is Marketing Channel? To maintain the Marketing Channels what are the strategies? Define.

Answer:

Marketing Channel:

A marketing channel system is the particular set of interdependent organizations involved in the process of making a product or service available for use or consumption. Most producers do not sell their goods directly to the final users; between them stands a set of intermediaries performing a variety of functions. These intermediaries constitute a marketing channel.

In other words, Marketing channels are sets of interdependent organizations participating in the process of making a product or service available for use or consumption. They are the set of pathways a product or service follows after production, culminating /finishing in purchase and consumption by the final end user.

To maintain the intermediaries organization uses 2 strategies.

Push Strategies Pull Strategies

Push Strategy: A push strategy uses the manufacturer’s sales force, trade promotion money, and other means to induce intermediaries to carry, promote, and sell the product to end users. A push strategy is particularly appropriate when there is low brand loyalty in a category, brand choice is made in the store, the product is an impulse item, and product benefits are well understood.

As an Example: Bangla Tissue company uses push strategies to sell their products. It categorizes in low brand loyalty.

Pull Strategy: A pull strategy uses advertising, promotion, and other forms of communication to persuade consumers to demand the product from intermediaries, thus inducing the intermediaries to order it. Pull strategy is particularly appropriate when there is high brand loyalty and high involvement in the category, when consumers are able to perceive differences between brands, and when they choose the brand before they go to the store.

As an Example: Basundhara Tissue company uses pull strategies to sell their products. It categorizes in high brand loyalty. Tissue means Basundhara.

Q: 2 Explain buyer expectations for channel integration.

Answer:

Buyer expects below issues for channel integration

Ability to order a product online and pick it up at a convenient retail location Ability to return an online-ordered product to a nearby store Right to receive discounts based on total online and offline purchases.

Example- Meena Bazar online shopping. It fulfills all three expectations.

Q: 3 Members of the marketing channel perform a number of key functions, what are the functions of marketing channels?

Answer:

A marketing channel performs the work of moving goods from producers to consumers. It overcomes the time, place, and possession gaps that separate goods and services from those who need or want them.

The functions of marketing channels are given below. Gather information Develop and disseminate persuasive communications Reach agreements on price and terms Acquire funds to finance inventories Assume risks Provide for storage Provide for buyers’ payment of their bills Oversee actual transfer of ownership

Some of these functions (storage and movement, title, and communications) constitute a forward flow of activity from the company to the customer; other functions (ordering and payment) constitute a backward flow from customers to the company. Still others (information, negotiation, finance, and risk taking) occur in both directions

Q: 4 Explain Marketing flows for a beverage industry.

Answer:

Beverage industry consists of several marketing flows. The flow starts with Physical and ends with Promotion. The marketing flows are given below.

Physical Flow:

The physical flow refers to the actual physical movement of the product from the manufacturer through all of the parties who take physical possession of the product, from its point of production to final consumers. In the case of beverage industry, the product comes from beverage and packaging plants several areas by way of company trucks or common carrier (transportation company) to beverage distributors (wholesalers), who in turn ship the product (usually in their own vehicle) to supermarkets, convenience stores, restaurants, and retailers where it is finally purchased by consumers.

Title Flow:

The title flow represents the interplay of the buying and selling functions associated with the transfer of title (right of ownership). Notice in the figure that the transportation firm is not included in this flow because it does not participate in the negotiator functions. Negotiations involve a mutual exchange between buyers and sellers at all levels of the channel.

Payment Flow:

Payment flow indicates backward flow. The payment comes from customers to manufacturers through several intermediaries such as Banks, Dealers, retailers, etc. Then manufacturer sends money to the suppliers.

Information Flow:

We see that the transportation firm has reappeared in this flow and that all of the arrows showing the flow of information from the manufacturer to consumers are two-directional. All parties participate in the exchange of information, and the flow can be either up or down. For example, Beverage Company may obtain information from the transportation company about its shipping schedule and rates, and the transportation company may in turn seek information from the company about when and in what quantities it plans to ship the product. The flow of information sometimes bypasses the transportation firm, as shown by the arrow leading from the manufacturer directly to the wholesalers, retailers, and consumers. This route of information flow occurs when the information sought does not concern the transportation company, such as details associated with the buying, selling, or promotion of beverage products.

Promotion Flow:

Finally, the promotion flow refers to the flow of persuasive communication in the form of advertising, personal selling, sales promotion, and publicity. Here, a new component, the advertising agency, is included in the flow because the advertising agency is actively involved in providing and maintaining the promotion flow, especially the advertising element of promotion. The two-directional arrow connected by a line between the manufacturer and the advertising agency is meant to show that the manufacturer and advertising agency work together closely to develop promotional strategies. All other arrows show one-directional flow from the advertising agency or directly from the manufacturer to the other parties in the marketing channel.

From the perspective of channel management, the concept of flows in marketing channels helps to convey the dynamic nature of marketing channels. The word flow suggests movement or a fluid state, and indeed this is the nature of channels of distribution. Changes, both obvious and subtle, always seem to be occurring. New forms of distribution emerge, different types of intermediaries appear in the channel while others drop out, unusual competitive structures close off some avenues of distribution and open up others.28 Changing patterns of buyer behavior and new forms of technology add yet another dimension of change. Channel flows must be adapted to meet these changes. Innovative channel strategies and effective channel management are needed to make this happen.

Q: 5 Explain consumer Marketing Channels & Industrial Marketing Channels.

Consumer Marketing Channels:

The producer and the final customer are part of every channel. The number of intermediary levels designates the length of a channel. Figure consumer Marketing Channel illustrates several consumer goods marketing channels of different lengths. A one-level channel contains one selling intermediary, such as a retailer. A two-level channel contains two intermediaries. In consumer markets, these are typically a wholesaler and a retailer. A three-level channel contains three intermediaries. In the meatpacking industry, wholesalers sell to jobbers, essentially small-scale wholesalers, who sell to small retailers. In Japan, food distribution may include as many as six levels. Obtaining information about end users and exercising control becomes more difficult for the producer as the number of channel levels increases.

Industrial Marketing Channels:

An industrial-goods manufacturer can use its sales force to sell directly to industrial customers; or it can sell to industrial distributors who sell to industrial customers; or it can sell through manufacturer’s representatives or its own sales branches directly to industrial customers, or indirectly to industrial customers through industrial distributors. Zero-, one-, and two-level marketing channels are quite common. Figure “Industrial Marketing Channels shows” channels commonly used in B2B marketing.

Q: 6 what are the strategies based on intermediaries? Explain.

Answer:

Marketing intermediaries refers to resellers, physical distribution firms, marketing services agencies, and financial intermediaries. These are the people who help the company promote, sell, and distribute its products to final buyers. Resellers are those who hold and sell the company's product. They match the distribution to the customers and include places, such as Wal-Mart, Target, and Best Buy. Physical distribution firms are places, such as warehouses, that store and transport the company's product from its origin to its destination. Marketing services agencies are companies that offer services, such as conducting marketing research, advertising, and consulting. Financial intermediaries are institutions, such as banks, credit companies, and insurance companies.

Three strategies based on the number of intermediaries are given below

Exclusive distribution, Selective distribution, and

Intensive distribution.

Exclusive distribution: Exclusive distribution severely limiting the number of intermediaries. It’s appropriate when the producer wants to maintain control over the service level and outputs offered by the resellers, and it often includes exclusive dealing arrangements. By granting exclusive distribution, the producer hopes to obtain more dedicated and knowledgeable selling.

The use of a single or very few outlets. Creates high dealer loyalty and considerable sales support. Provides greater control. Limits potential sales volume. Success of the product is dependent upon the ability of a single intermediary.

Example: BMW

Selective distribution: Selective distribution relies on only some of the intermediaries willing to carry a particular product. It’s an intermediary strategy, with the exact number of outlets in any given market dependent upon market potential, density of population, dispersion of sales, and competitors' distribution policies.

Contains some of the strengths and weaknesses of the other two strategies. It is difficult to determine the optimal number of intermediaries in each market. It is up to the channel manager to evaluate these alternatives with respect to some use of

criteria.

Example: KFC Bangladesh

Intensive distribution: Intensive distribution places the goods or services in as many outlets as possible. The manufacturer attempts to get as many intermediaries of a particular type as possible to carry the product. Provides for increased sales volume, wider consumer recognition, and considerable impulse purchasing.

Low price, low margin, and small order sizes often result. Extremely difficult to stimulate and control the large number of intermediaries.

Example: This strategy serves well for snack foods, soft drinks, newspapers, candies, and gum—products consumers buy frequently or in a variety of locations.

Q: 7 what is channel conflict? What type of conflict arises?

Channel Conflict: Channel conflict is generated when one channel member’s actions prevent another channel from achieving its goal. In channel distribution, conflict is not negative, rather, some conflict actually strengthen and improves a channel.

Three types of channel conflict arises

Horizontal Conflict Vertical Conflict Multichannel Conflict

Horizontal Conflicts

A horizontal conflict refers to a disagreement among two or more channel members at the same level. For example, suppose a toy manufacturer has deals with two wholesalers, each contracted to sell products to retailers in different regions. If one wholesaler decides to branch its operations into the other wholesaler’s region, a conflict will result. If the toy manufacturer doesn't help solve the problem, its business dealings with both the wholesalers -- and the downstream retailers, as well -- might be in jeopardy.

Vertical Conflicts

Vertical conflicts involve a disagreement between two channel members on consecutive levels. For example, if the toy manufacturer discovers its products are arriving at retail stores later than scheduled, a conflict might develop between the manufacturer and the wholesaler responsible for shipping to retailers. At the same time, the retail stores might be in conflict with the wholesaler due to its inability to ship products on time.

Multichannel Conflicts

Multichannel conflicts refer to disagreements among members in separate marketing channels. While neither strictly horizontal nor vertical, these conflicts can affect all members of every channel. For instance, suppose the toy manufacturer participates in two marketing channels. In the first channel, the manufacturer sells its products directly to consumers via its official website. In the second channel, the manufacturer sells its products to wholesalers for resale to retailers. If the toy manufacturer’s website sells the products for much lower prices than retail stores, sales in the second channel will plummet. The resulting conflict will require some solution that works for both channels.

Q: 8 what are the causes of Channel Conflict? Explain how to manage channel conflicts.

Answer:

Goal incompatibility

Though channel members share the common goal of maximizing their joint effectiveness, each is a separate legal entity. Each has its own employees, owners and interest groups who help shape goals and strategies, some of which may not be totally compatible with those of other channel members. This incompatibility may be the underlying cause of stress, ultimately creating conflict.

Unclear roles & rights

Changes in specification of position or poorly defined roles may cause conflict. Incompatibility develops within channel arrangements as roles and methods of operation change. Conflict also arises when there is lack of agreement concerning appropriate domain of members.

Differences in Perception:

Conflict occurs when different channel members differ in methods of achieving mutual goals or have different solutions to a mutual problem even when they have a strong desire to cooperate, conflict can result from different perceptions of the facts.

Achieving rapid market penetration through a low-price policy Vs High margins and pursues short-run profitability:

Dealers, in contrast, may prefer to work with high margins and pursue short-run profitability. HP may sell personal computers to large accounts through its own sales force, but its licensed dealers may also be trying to sell to large accounts.

Territory boundaries and credit for sales:

The manufacturer may be optimistic about the short-term economic outlook and want dealers to carry higher inventory. Dealers may be pessimistic. In the beverage category, it is not uncommon for disputes to arise between manufacturers and their distributors about the optimal advertising strategy. The fortunes of exclusive dealers, such as auto dealers, are profoundly affected by the manufacturer’s product and pricing decisions. This situation creates a high potential for conflict.

Managing Channel Conflict:

Some channel conflict can be constructive and can lead to more dynamic adaptation in a changing environment. Too much conflict can be dysfunctional, however, so the challenge is not to eliminate conflict but to manage it better. There are several mechanisms for effective conflict management:

Adoption: Adoption of super ordinate goals. Channel members come to an agreement on the fundamental goal they are jointly seeking, whether it is survival, market share, high quality, or

customer satisfaction. They usually do this when the channel faces an outside threat, such as a more efficient competing channel, an adverse piece of legislation, or a shift in consumer desires.

Exchange: Exchange persons between channel levels. General Motors executives might work for a short time in some dealerships, and some dealers might work in GM’s dealer policy department, as a way of helping participants appreciate each other’s viewpoint.

Cooptation: Cooptation is an effort by one organization to win the support of the leaders of another organization by including them in advisory councils, boards of directors, trade associations, and the like. As long as the initiating organization treats the leaders seriously and listens to their opinions, cooptation can reduce conflict.

Diplomacy: Diplomacy takes place when each side sends a person or group to meet with its counterpart to resolve the conflict.

Mediation: Meditation means having a skilled, neutral third party reconcile the two parties’ interests.

Arbitration: Arbitration occurs when the two parties agree to present their arguments to an arbitrator and accept the arbitration decision.

Companies can manage conflict by striving for super ordinate goals, exchanging people among two or more channel levels, coopting the support of leaders in different parts of the channel, and through diplomacy, mediation, or arbitration to resolve chronic or acute conflict.

Q: 9 What are the major retailer types? Explain levels of retail service.

There are 9 main types of retailers which can be defined by the size of their business and the way they in which they sell their products.

The 9 main types of retailers are;

Specialty Store – Specializing in specific industries or products, this type of retailer is able to offer the customer expert knowledge and a high level of service. They also add value by offering accessories and additional related products at the same outlet.

Department Store – This type of retailer is often the most complex offering a wide range of products and can appear as a collection of smaller retail stores managed by one company. The department store retailers offer products at various pricing levels. This type of retailer adds high levels of customer service by adding convenience enabling a large variety of products to be purchased from one retailer.

Supermarkets – Generally this type of retailer concentrates in supplying a range of food and beverage products. However many have now diversified and supply products from the home, fashion and electrical products markets too. Supermarkets have significant buying power and therefore often retail goods at low prices.

Convenience Store – Usually located in residential areas this type of retailer offers a limited range of products at premium prices due to the added value of convenience. Convenience stores are small stores in residential area, often open 24/7, limited line of high-turnover convenience products plus takeout. Drug stores carry prescription and pharmacies, health and beauty aids, other personal care, small durable, miscellaneous items.

Discount Retailer – This type of retailer offers a variety of discounted products. They offer low prices on less fashionable branded products from a range of suppliers by reselling end of line and returned goods at discounted prices. Discount stores are standard or specialty merchandise; low-price, low-margin, high-volume stores. Extreme value or hard-discount store carry a more restricted merchandise mix than discount stores but at even lower prices.

Off-price retailers- This type of retailers carry leftover goods, overruns, irregular merchandise sold at less than retail.

Superstores: Superstores are huge selling spaces, routinely purchased food and household items, plus services. Category killers carry a deep assortment in one category.

Hypermarkets – Hypermarkets are huge stores that combine supermarket, discount, and warehouse retailing.

Catalog showrooms- This type of retailers include a broad selection of high-markup, fast-moving, brand-name goods sold by catalog at a discount.

Levels of Retail Service:

Retailers meet widely different consumer preferences for service levels and specific services. They position themselves as offering one of four levels of service.

Self Service: Self-service is the cornerstone of all discount operations. Many customers are willing to carry out their own “locate-compare-select” process to save money.

Self-Selection: Self-selection means that customers find their own goods, although they can ask for assistance.

Limited Service: Limited service means these retailers carry more shopping goods and services such as credit and merchandise-return privileges.

Full Service: With full service, salespeople are ready to assist in every phase of the “locate-compare-select” process. Customers who like to be waited on prefer this type of store.

Q: 10 what is wholesaling? What are the functions of Wholesale?

Wholesaling:

In general, wholesalers are more efficient in performing one or more of these functions. Wholesalers’ sales forces help manufacturers reach many small business customers at a relatively low cost. Wholesalers are able to select items and build the assortments their customers need, saving them considerable work. Wholesalers achieve savings for their customers by buying large carload lots and breaking the bulk into smaller units. Wholesalers hold inventories, thereby reducing inventory costs and risks to suppliers and customers. Wholesalers can often provide quicker delivery to buyers because they are closer to the buyers.

Functions of Wholesale:

Wholesalers finance customers by granting credit, and finance suppliers by ordering early and paying bills on time.

Wholesalers absorb some risk by taking title and bearing the cost of theft, damage, spoilage, and obsolescence.

Wholesalers supply information to suppliers and customers regarding competitors’ activities, new products, price developments, and so on.

Wholesalers often help retailers improve their operations by training sales clerks, helping with store layouts and displays, and setting up accounting and inventory-control systems.