Marketing Channels

What are Marketing Channels?

Sets of interdependent organizations involved in the process of making a product or service available for use or consumption.

Why are They Used?

• Because producers lack resources to carry out direct marketing.
• Because direct marketing is not feasible.
• Because rate of return on manufacturing > rate of return on retailing.
• Because they reduce the amount of work that must be done.

Channel Functions & Flows

Info-Promotion-Negotiation-Ordering-Financing-Risk taking-Physical possession-Payment-Title

All of the functions have 3 things in common:

1.   They use up scarce resources.

2.   Can be performed better through specialization.

3.   They are shiftable among channel members.

Channel Levels

Each intermediary that performs work in bringing the product & its title closer is a channel level.

• Zero-channel level (direct-marketing channel) consists of a manufacturer selling directly to the final customer (i.e. door-to-door sales, mail order. Telemarketing, TV selling)
• One level channel contains one selling intermediary (i.e. retailer)
• Two level…(wholesalers, retailers)
• Three level…(wholesalers, jobbers, retailers)

The longer the channel, the more difficult it is to exercise control.

Channel-Design Decisions

Designing a channel system calls for analyzing customer needs, establishing channel objectives, & identifying & evaluating the major channel alternatives.

Analyzing Customers’ Desired Service Output Levels

Channels produce 5 service output levels:

1.   Lot size: # of units that the marketing channel permits a typical customer to purchase on a purchase occasion

2.   Waiting time: Average time that customers of that channel wait for receipt of the goods.

3.   Spatial convenience: Degree to which the marketing channel makes it easy for customers to purchase the product.

4.   Product variety: assortment breadth.

5.   Service backup: add-on services provided by the channel (installation, repairs, credit).

Establishing the Channel Objectives & Constraints

• Channels objectives vary with product characteristics.
• Channel design must take into account the strengths & weaknesses of different types of intermediaries.
• Channel design is also influenced by the competitors’ channels.
• Channel design must also adapt to the larger environment.
• Legal regulations & restrictions also affect channel design.

Identifying the Major Channel Alternatives

A channel alternative is described by three elements:

1.   Types of intermediaries.

Depends on the service outputs desired by the target market & the channel’s transactions costs. The company must search for the channel alternative that promises the most long-run profitability.

2.   Number of intermediaries.

Exclusive distribution
Selective distribution
Intensive distribution

3.   Terms & responsibilities of channel members
The producer must determine the rights & responsibilities of the participating channel members, making sure that each channel member is treated respectfully & given the opportunity to be profitable.

Evaluating the Major Channel Alternatives

Each alternative needs to be evaluated against three criteria.

1.   Economic Criteria

o    The first step is to determine whether a company sales force or a sales agency will produce more sales.

o    The next step is to estimate the costs of selling different volumes through each channel.

o    The final step is comparing sales & costs.

Each channel will produce a different level of sales & costs.

2.   Control Criteria
The agents may concentrate on other customers’ products or they may lack the skills to handle our products.

3.   Adaptive Criteria
The channel members must make some degree of commitment to each other for a specified period of time.

Channel-Management Decisions

After a company has chosen a channel alternative, individual intermediaries must be selected, motivated & evaluated.

Selecting Channel Members

For some producers this is easy; for others it’s a pain in the ass.
Anyway, in order to select them, producers should determine what characteristics distinguish the better intermediaries (years in business, other lines carried, solvency, reputation, etc.)

Motivating Channel Members

Constant training, supervision & encouragement. Producers can draw on the following types of power to elicit cooperation:

• Coercive power. Manufacturer threatens to withdraw a resource or terminate a relationship if intermediaries fail to cooperate. Produces resentment.
• Reward power. Manufacturer offers intermediaries extra benefits for performing specific acts.
• Legitimate power. Manufacturer requests a behavior that is warranted by the contract.
• Expert power. Manufacturer has special knowledge that the intermediaries value.
• Referent power. Intermediaries are proud to be identified with the manufacturer.

Evaluating Channel Members

Under performers need to be counseled, retrained or re-motivated. If they do no shape up, it might be best to terminate their services.

Modifying Channel Arrangements

Periodic modification to meet new conditions in the marketplace. Modification is necessary when:

• Distribution channel is not working as planned.
• Consumer buying patterns change.
• Market expands.
• New competition arises.
• Innovative channels emerge.
• Product moves into later stages in the product life cycle.

3 levels of channel adaptation can be distinguished:

1.   Adding or dropping individual channel members.

2.   Adding or dropping particular market channels.

3.   Developing a totally new way to sell goods in all markets.

Channel Dynamics

Conventional marketing channel

• Comprises an independent producer, wholesaler(s) & retailer(s).
• Each is a separate entity.
• No channel member has complete or substantial control over the other members.

Vertical Marketing Systems

1.   Producer, wholesaler(s) & retailer(s) act as a unified system.

2.   They all cooperate.

3.   Can be dominated by any of the three members of the system.

4.   It arose as a result of strong channel members’ attempts to control channel behavior & eliminate the conflict that results when independent channel members pursue their own objectives.

5.   Has become the dominant mode of distribution in the U.S. consumer marketplace.

3 types of VMS:

1.   Corporate VMS
Combines successive stages of production & distribution under single ownership. (Sears).

2.   Administered VMS
Coordinates successive stages of production & distribution through the size & power of one of members (Kodak, Gillete, P&G)

3.   Contractual VMS
Independent firms at different levels of production & distribution integrating their programs on a contractual basis to obtain more economies &/or sales impact than they could achieve alone. 3 types:

o    Wholesaler-sponsored voluntary chains

o    Retailer cooperatives

o    Franchise organizations

Horizontal Marketing Systems

Two or more unrelated companies put together resources or programs to exploit an emerging marketing opportunity.

Multichannel Marketing Systems

A single firm uses two or more marketing channels to reach one or more customer segments. By adding more channels, companies can gain 3 important benefits: increased market coverage, lower channel cost, more customized selling.

Roles of Individual Firms in the Channel

• Insiders. Members of the dominant channel.
• Strivers. Firms seeking to become insiders.
• Complementary. Not part of the dominant channel
• Transients. Outside the dominant channel & do not seek membership. Short-run expectations.
• Outside innovators. Real challengers & disrupters of the dominant channels.

Channel Cooperation, Conflict & Competition

Types of conflict & competition

• Vertical channel conflict exists when there is conflict between different levels within the same channel.
• Horizontal channel conflict exists when there is conflict between members at the same level within the channel.
• Multichannel conflict exists when the manufacturer has established two or more channels that compete with each other in selling to the same market.

Causes of Channel Conflict

• Goal incompatibility
• Unclear roles & rights
• Differences in perception
• Intermediaries’ great dependence on the manufacturer

Managing Channel Conflict

• Some channel conflict can be constructive. It can lead to more dynamic adaptation to a changing environment. But too much is dysfunctional.
• Perhaps the most important mechanism is the adoption of superordinate goals. Working closely together might help them eliminate or neutralize the threat.
• Exchange of persons between two or more channel levels is useful.
• Cooperation is an effort by one organization to win support of the leaders of another organization by including them in advisory councils, boards of directors, etc.
• Encouraging joint membership in & between trade associations.
• When conflict is chronic, the parties may have to resort to diplomacy, mediation or arbitration.

Legal & Ethical Issues in Channel Relations

• Exclusive dealing
• Exclusive territories
• Tying agreements
• Dealers’ rights

Product Hierarchy:

Each product is related to certain other products. The product hierarchy stretches from basic needs to particular items that satisfy those needs. There are 7 levels of the product hierarchy:

1. Need family:

The core need that underlines the existence of a product family. Let us consider computation as one of needs.

2. Product family:

All the product classes that can satisfy a core need with reasonable effectiveness. For example, all of the products like computer, calculator or abacus can do computation.

3. Product class:

A group of products within the product family recognized as having a certain functional coherence. For instance, personal computer (PC) is one product class.

4. Product line:

A group of products within a product class that are closely related because they perform a similar function, are sold to the same customer groups, are marketed through the same channels or fall within given price range. For instance, portable wire-less PC is one product line.

5. Product type:

A group of items within a product line that share one of several possible forms of the product. For instance, palm top is one product type.

6. Brand:

The name associated with one or more items in the product line that is used to identity the source or character of the items. For example, Palm Pilot is one brand of palmtop.

7. Item/stock-keeping unit/product variant:

A distinct unit within a brand or product line distinguishable by size, price, appearance or some other attributes. For instance, LCD, CD- ROM drive and joystick are various items under palm top product type.

SERVICES MARKETING CASE STUDIES

CASE I

With the entry of private insurance players like Tata-AIG, ICICI-Prudential and Max-New York Life, LIC felt a need to revamp its business. Based on recommendations of the leading consulting company Booz, Allen & Hamilton, LIC restructured various aspects of its business. The caselet discusses LIC's measures to train and develop competent personnel. It focuses on the customer service initiatives of LIC by using technology and improving service delivery. Finally, the caselet talks about the change in LIC's branding and advertising strategy.

Issues:

a. Need for training in Insurance.

b. Branding of an insurance company.

c. Use of technology in insurance services marketing.

Introduction:

Till the year 2000, Life Insurance Corporation (LIC) held a monopoly in the life insurance market by virtue of being India’s only life insurance company in India. With the opening of the insurance sector to private players, LIC’s hold on the market was threatened. Institutional equity (Kotak Mahindra Capital Company) and mutual funds (Kotak Mahindra Asset Management Company), has been converted (it obtained the banking license in February 2003) into Kotak Mahindra Bank (KMB). It launched its first branch at Nariman Point in Mumbai in March 2003. KMB has tried to differentiate its services in all aspects, starting from the design of the bank logo to the design of its products and services... Questions for Discussion:

a). The changing perception about a company among customers is a challenging task for any service provider. To what extent has LIC succeeded on that front?

b). What kind of branding strategy should LIC adopt, given its increasing product mix and the aggressive brand building measures of private insurers?

  

CASE II

Keeping pace with economic growth of this country, the housing loan has been becoming a most lucrative and large marketable product of banking and non-banking financial institutions.

ICICI, HDFC, SBI, Andhra Bank are the leaders of house loans in Andhra region. It is observed that of late there is a mismatch between demand for and supply of house loans in this region with increasing demand for and less of supply of this financial service.

You are required to:

(a) List out common causes of this mismatch between demand and supply in India.

(b) Explain the strategies to match them.

  

CASE III

The boardroom was filled with the voice of Marketing manager, Ashutosh Kant. He was addressing the meeting of senior manager of Escape, “The last three months were spent by our market research team in finding out the reasons and patterns of sales at stores. Let me emphasize that retail sale is showing growth all over the country and in the process, competition is intensifying. We can no longer afford to sit and relax; instead we need to put ourselves fully to retain our market leadership”. Three facts revealed by the survey were particularly disturbing.

1) People found Escape service staff bordering an aggressiveness and not really helpful as they were never left to browse.

2) Children got bored and hence parents often left the store within minutes after finishing essential shopping. They never browsed or spent leisure time at Escape stores which could otherwise help promote sales.

3) With many choices available in the market consumers stopped treating Escape stores as unique and exclusive anymore.

Mr. Rehman, an entrepreneur, had set up a garment shop in one of Delhi’s busy market areas about 10 years ago. He realized that to attract customers, he must do something new. With this in mind, he chalked out a massive plan to open a chain of stores called Escape. Some major features of his store were:

1) Complete dress range for kids, parents and teenagers.

2) Full accessories for women and men in footwear, purses, jewellery and cosmetics.

3) A play centre where kids could spend time when the parents shopped.

CASE IV

MAC India a 100% subsidiary of USA based parent company, wants to launch health drink for sports people and iced tea. Preliminary research indicated that Indian public is becoming increasingly health conscious and cola market has become saturated.
India’s beverage market size is 720 million liters, which includes soft drinks, tea, coffee, and mineral water but does not include health drinks. In tetra pack the only success is Parle Agro’s FROOTI, MAC INDIA intends processing 250 tons fruits in the first year to make health drink, which will be expanded up to 2000 tones by 5th year.
After the initial success of health drink is ensured, it wants to launch iced tea.

Questions:

(1) State and explain the problem area of the case?
(2) Advice on the marketing mix and market segmentation strategy?

CASE V

Fast Express courier ltd. (FECL) is an innovative overnight delivery company that helped change the way companies do business. It was the first company to offer an overnight delivery system, but the company markets more than just a delivery service. What FECL really sells is on-time reliability. The company markets risk reduction and provide the confidence that people shipping packages will be “absolutely, positively, certain their packages will be there by 10.30 in the morning”. In fact, FECL sells even more than reliable delivery. It designs tracking and inventory management systems for many large companies. In other words, the customers buy more than just delivery service they buy a solution to their distribution problems. For example, a warehouse designed and operated by FECL is part of the distribution centre for a very large computer firm. In other organizations, customers can place an order for inventory as late as midnight, and the marketer, because of FECL’s help, can guarantee delivery by the next morning. FECL has positioned itself as a company with a service that solves its customer’s problems.

Questions:

i)                    What are the elements of service quality for a delivery service like FECL?

ii)                  In what way does technology influence FECL’s service quality?

Services Marketing MCQs

1. The design process of developing a corporate image consists creating a:-

 (a) Mission statement

 (b) Vision statement

 (c) Visual statement

 (d) Value system

2. The technology is used as a useful tool to circumvent trade barriers.

 (a) True

 (b) False

3. Annual plan control is also called as:-

 (a) Strategic control

 (b) Profitability control

 (c) Marketing audit

 (d) Performance control

4. The service organizations which needs high contact personnel are:-

 (a) Retailing

 (b) Post office

 (c) Banking

 (d) Hospitals

5. Corporate as well as ___________ image of the service firm influence the expectations

of the customer.

 (a) International

 (b) Local

 (c) National

 (d) Domestic

6. Service sector has shown tremendous growth:-

 (a) In India

 (b) In China

 (c) In U.S.A

 (d) All over the world

7. A service delivery system is concerned with creation and delivery of the service offer

with the help of people, process and facilities.

 (a) True

 (b) False

8. Pricing decisions are influenced by several departments of a company e.g.:-

 (a) a) Production department

 (b) b) Marketing department

 (c) c) Finance department

 (d) Both (a) and (b)

9. The customer's in put affect the service firm's productivity in terms of:-

 (a) a) Quality

 (b) b) Quantity

 (c) c) Satisfaction

 (d) Both (a) and (b)

10. The perspectives to the physical environment in any services are:-

[1] Process of operations perspective

[2] Marketing perspective

[3] Production perspective

[4] Networking perception

Select the correct options.

 (a) 3 and 4

 (b) 1, 2 and 3

 (c) 1, 2, 3 and 4

 (d) 1 and 2

Marketing Management syllabus for BBM

Unit-I: Concept of marketing -  Market, Marketing, Marketer - Selling concept, marketing concept, Social marketing concept - Need of marketing in Business Sector - Non-profit sector and Government sector - Marketing environment - Identifying market segments -Basis for market segmentation for consumer and industrial market and requirement of effective segments.  

Unit-II: Product and Product lines - Product hierarchy, Product classification, Product mix decisions - Product line decisions - product attribute decisions, Branding and Brand decisions, packing and labeling decision - Product life cycle, Marketing strategies for different stages of the product life cycle.  

Unit-III: Pricing: Setting the price, pricing process, pricing methods. Adapting price: Geographical pricing, price discounts and allowances, promotional pricing, discriminatory pricing, product mix pricing.

Unit-IV: Marketing channels: The Importance of marketing channels - Channel design decisions - Channel management decisions - Channel Conflict: Types, Causes and managing the conflict.

Unit-V: Promotion mix Advertisement:- Meaning, Objectives - Types of Media - Sales Promotion - Objectives and Tools - Public relation - Meaning and Tools - Personal selling -Process.

References:

1) Philip Kotler and Armstrong, Principles of Marketing, PHI

2) Philip Kotler, Marketing Management, PHI

3) V.S Ramaswamy and S. Namakuari, Marketing Management.

4) J.P.Gupta and Joyti Rana, Principles of Marketing Management, R. Chand & Co. New Delhi. 

E Business syllabus

OBJECTIVE :
Objective of this course is to provide basic concepts of e-business and equip the student with the
skill of integrating business process with electronic technology.
UNIT –I
Introduction – Traditional Business Vs E-Business - E-Business, E-Commerce, E- Marketing
and M-Commerce –Internet, WWW and Evolution of E-Business – Growth of E-Business in
India
UNIT - II
Infrastructure for E-Business – Internet Protocals, Web-Based Clint/Server, Internet Security,
Media Convergence, Multimedia –Architectural Framework for E- Business – WWW as the
Architecture
UNIT - III
E-Business Models based on Relationship of Transaction Parties and based on Relationship of
Transaction Types – E-Business for Service Industry – Travel and Tourism, Employment
Placement, Real Estate, Stocks Trading, Publishing - Mobile Commerce through different Apps
UNIT –IV
E-Payment Systems – Classification of Payment Systems – Risk and E-Payment Systems – ESecurity
– Privacy, Integrity, Authentication, Non Repudiation, Technical Attacks and Non
Technical Attacks
UNIT –V
E- Advertisement - E-Business Strategies and Implementation – E-Supply Chain Management –
Legal Ethical Issues of E-Business
SUGGESTED READINGS :
Ravi Kalakota & Marcia Robinson, E-Business Road map for success, Pearson Education, Asia.
Ravi Kalkota & Andrew B. Whinston, Frontiers of Electronic Commerce, Addison Wesley.
P.T.Joseph, S.J. E-Commerce: An Indian Perspective, Prentice Hall of India
Kenneth C. Laudon, Carol Guercio Traver, E-Commerce: Business, Technology, Society,
Pearson Education
Efraim Turban, Jae Lee, David King and H. Michael Chung, Electronic Commerce, Pearson
Education
C.S.V. Murthy, e-commerce : concepts, models and strategies, Himalaya Publishing/
C.S. Rayudu, E-Commerce and E-Business, Himalaya Publishing House.
Kamalesh Bajaj and Debjani Nag, E-Commerce, Tata McGraw Hill.
N.Bandopadhyaya, E-Commerce Context, Concepts and Consequences, Tata McGraw Hill.
. Abhjit Choudhary, E-Business and E-Commerce Infrastructure Technologies supporting

SERVICES MARKETING syllabus

                                                     
Objective: to enlighten the students with the Concepts and Practical applications of Services
Marketing.
Unit – I: Introduction to Services Marketing: Importance and characteristics of Services: Growth
of Services Sector; Services in the Indian Economy; Services Strategy.
Unit – II: Consumer Behaviour in Services; Market Segmentation and Services Positioning;
Service Demand Management Designing and Managing Service Product.
Unit – III: Service quality Management: Service Quality Audit – GAP Model of Service Quality
– Total quality Services Marketing – Service Excellence, Pricing of Services – Pricing Strategies
Linked to Value Perceptions.
Unit – IV: Service Distribution – Managing Physical Evidence – Internal Marketing.
Unit – V: External Marketing: Word of Mouth Communication. Interactive Marketing:
Management of Moments of Truth - Service Deficiencies - consumer Grievance Recovery
Strategies.
(Case Studies are Compulsory)
Suggested Books:
1. K.Rama Mohana Rao: Services Marketing, Pearson Education, New Delhi.
2. Valeri Zeithmal and Mary Jo Bunter: Services Marketing, Tata McGraw Hill, New Delhi.
3. Apte – Services Marketing, Oxford University Press.
4. Bhattacharya: Servies Marketing, Excel Publishers.
5. Christopher Lovelock: Services Marketing, Pearson Education, Delhi.
6. Ravi Shanker: Services Marketing: Indian Perspectives, Excel Publishers.
7. Christian Gronrose: Services Management and Marketing, Maxwell Macmillan.
8. Kenneth E.Clow & David L.Kurtz, Servies Marketing, Wiley India, New Delhi.
9. S.L.Gupta, Marketing of Services, Wisdom Publication.