Download Marketing channel concepts

Marketing channel
concepts
2003 Fall semester
Week 1
Instructor: Jungwan Lee
Learning objectives
• Gain knowledge of the major reasons
for the importance of marketing
channels
• Have a understanding of the
definition of the marketing channels,
channel manager
• Discern the difference between
channel management and logistics
Case: coca-cola vs. pepsi
• Market size= 54 billion USD/year
• Coca cola 43% of market share
• Pepsi 31% of market share
• Pepsi –intensive distribution channel
strategy: Place
•
•
•
•
outlets
2 million stores
450,000 restaurants
1.4 million vending machines
Strategic marketing tools
•
•
•
•
Product
Price
Promotion (advertising)
Place (distribution channels)
Why has the marketing channel
emphasized recently?
• Greater difficulty of gaining a
sustainable competitive advantage
• Growing power of distributors
(retailers)
• The need to reduce distribution costs
• The new stress on growth
• The increasing role of technology
Reasons for increasing importance of
marketing channels
• Channel strategy is long term.
• Channel strategy usually requires a
structure.
• Channel strategy is based on
relationships and people.
Distribution costs table
autos
software
gasoline
fax machines packaged goods
distribution
15
25
28
30
41
manaufacturing
40
65
19
30
33
raw materials
45
10
53
40
26
source:Christine B. Bucklin, Steven D. Defalco, John R. DeVincentis,
and John P. Levis, "Are you tough enough to manage your channels?"
The McKinsey Quarterly 1996, 106.
Marketing channel definition
• The external contactual organization
that management operates to achieve
its distribution objectives.
• External-organizational structure,
interoganizational management
• Contactual-negotiatory functions
• Operates-management involvement
• Distribution objectives-distribution goals
Channel manager
• Large consumer goods manufacturersvice president of marketing
• Industrial products companies-vice
president of sales
• Franchise organizations-manager of
franchisee relations
• Small businesses-owner
• **decision maker of marketing channel
decisions**
Marketing channel and
Marketing management strategy
• Marketing channel
strategy
–
–
–
–
–
Product flow
Negotiation flow
Ownership flow
Information flow
Promotion flow
• Marketing
management
strategy
–
–
–
–
Product
Price
Promotion
Place (Distribution)
Channel structure
•
•
•
•
M-C
M-R-C
M-W-R-C
M-A-W-R-C
– A=agent, C=consumer, M=manufacturer,
R=retailer, W=wholesaler
Distribution through
intermediaries
• Specialization and division of labor
– Manufacturer->agents->wholesalers
– >retailers->consumers: efficiency?
• Contactual efficiency
– Negotiation efforts (input)-Estimated dollar
costs of inputs=Distribution objective (output)
• Direct: 4 x 4= 16 contacts
• Indirect: 4 + 4= 8 contacts