Chapter # 17

Designing and managing value

networks and marketing
channels

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 Marketing channels

Marketing channels are sets of interdependent orgs

involved in the process of making a product or service
available for use or consumption.
Channels affect other mkt decision:
-Pricing (use mass merchandisers or
high quality boutiques)
-Sales force and advertising (training
and motivation needs)
-Long term commitment

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 An intermediary reduces the number of channel transactions

Number of contacts without a distributor Number of contacts with a distributor

MxC=3x3=9 M x C = 3+ 3 =6
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 Channel Level

A layer of intermediaries that performs some work in

bringing the product and its ownership closer to the
final buyer
-Producer and Final Consumer in every channel
• Direct Marketing Channel - Company sells directly
to consumers and has NO intermediaries- Zero-level
• Indirect Marketing Channels
Company sells through one or more intermediaries-
• One-level channel
• Two level
• Three level
More levels increase customer contacts Fewer
levels - more control and less complex 4
 Consumer marketing channel

Channel 1
Manu- Consumer
facturer

Channel 2
Manu- Retailer Consumer
facturer

Channel 3
Manu- Whole- Retailer Consumer
facturer saler
Channel 4
Manu- Whole- Jobber Retailer Consumer
facturer saler

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 Channel-design decisions

Analyzing consumer needs

Establishing channel objectives
Identifying major channel Alternatives
Evaluating the major channel Alternatives

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 Push Vs Pull Strategy

A push strategy involves the manufactured using its

sales force and trade promotion money to induce
intermediaries to carry, promote, and sell the product
to end users.
-low brand loyalty
-brand choice is made in the store
-impulse item
-product benefit well understood

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 Push Vs Pull Strategy

A pull strategy involves the manufactured using

advertising and sales promotion to induce consumers
to ask intermediaries for the product, thus inducing
intermediaries to order it.
-High brand loyalty
-High involvement
-people perceive differences between brands
-people choose the brand before they go to the store

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 Analyzing Customers’ desired
service output levels

• lot size: The number of units the channels permits a

typical customer to purchase on one occasion.
• Waiting time: Customer normally prefer fast delivery
channels.
• Spatial convenience: The degree to which the
marketing channels makes it easy for customers to
purchase the product.
• Product variety: Normally, customer prefer a grater
assortment because more choices increase the chance
of finding what they need.
• Service backup: Credit, delivery, installation, repairs.
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 Identifying Major Alternatives

• Types of Intermediaries
The company’s direct sales force
Higher manufactures’ agents in different regions
Find distributor in the different regions
• Number of Marketing Intermediaries
• Intensive Distribution -Stock in maximum possible
outlets -Maximum brand exposure and convenience.
• Exclusive Distribution
-Limited number of dealers - exclusive rights
Selective Distribution
-Choose from willing intermediaries -above average
selling-Good market coverage-More control and less
cost versus intensive distribution 10
 Identifying Major Alternatives

Terms and Responsibilities of channel members

(Trade relations mix)
Price policies (price list, discounts and allowances)
Conditions of sale (payment terms and producer
guarantee)
Territorial rights
-Services to be performed

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Evaluating Major Alternatives

• Economic criteria
-Profitability
-Potential sales
-Costs of selling
• Control issues
• Adaptive criteria

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