Transcript Document

Chapter 14
Designing and Managing
Value Networks and
Marketing Channels
PowerPoint by Karen E. James
Louisiana State University - Shreveport
©2003 Prentice Hall, Inc.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 0 in Chapter 14
Objectives
 Identify value networks and marketingchannel systems.
 Learn the type of work performed by
marketing channels.
 Understand the decisions companies
face in designing, managing,
evaluating, and modifying channels.
©2003 Prentice Hall, Inc.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 1 in Chapter 14
Objectives
 Identify trends taking place in channel
dynamics.
 Learn how channel conflict can be
managed.
©2003 Prentice Hall, Inc.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 2 in Chapter 14
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).
©2003 Prentice Hall, Inc.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 3 in Chapter 14
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
©2003 Prentice Hall, Inc.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 4 in Chapter 14
Work Performed by Channels
 Channel members perform a number
of key functions:
– Forward flow functions:
 Develop
/ disseminate communication
 Store and move the physical products
 Oversee transfer of ownership
– Backward flow functions:
 Place
orders with manufacturers
 Facilitate payment of bills
©2003 Prentice Hall, Inc.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 5 in Chapter 14
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
©2003 Prentice Hall, Inc.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 6 in Chapter 14
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.
©2003 Prentice Hall, Inc.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 7 in Chapter 14
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
©2003 Prentice Hall, Inc.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 8 in Chapter 14
Channel-Design Decisions
Channel Factors
 Intermediary type
 Number of
intermediaries
 Terms and
responsibilities of
intermediaries
©2003 Prentice Hall, Inc.
 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
To accompany A Framework for Marketing Management, 2nd Edition
Slide 9 in Chapter 14
Channel-Design Decisions
Channel Factors
 Intermediary type
 Number of
intermediaries
 Terms and
responsibilities of
intermediaries
©2003 Prentice Hall, Inc.
 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.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 10 in Chapter 14
Channel-Design Decisions
Channel Factors
 Intermediary type
 Number of
intermediaries
 Terms and
responsibilities of
intermediaries
©2003 Prentice Hall, Inc.
 Price policies
– Price list and schedule
of discounts
 Conditions of sale
– Payment terms and
guarantees
 Territorial rights
– Define territory / terms
 Services to be
performed by party
To accompany A Framework for Marketing Management, 2nd Edition
Slide 11 in Chapter 14
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
©2003 Prentice Hall, Inc.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 12 in Chapter 14
Channel-Management Decisions
Channel Development Process
 Select channel
members
 Motivate channel
members
 Train channel
members
 Evaluate channel
members
 Modify channel arrangements
©2003 Prentice Hall, Inc.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 13 in Chapter 14
Channel Dynamics
 Channel systems are constantly
evolving and developing
 Vertical Marketing Systems
– Corporate VMS
– Administered VMS
– Contractual VMS
 Horizontal Marketing Systems
 Multichannel Marketing Systems
©2003 Prentice Hall, Inc.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 14 in Chapter 14
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
©2003 Prentice Hall, Inc.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 15 in Chapter 14
Channel-Management Decisions
Managing Channel Conflict
 Subordinate goal
adoption
 Cooptation
 Exchange people
between channel
levels
 Mediation
©2003 Prentice Hall, Inc.
 Diplomacy
 Arbitration
To accompany A Framework for Marketing Management, 2nd Edition
Slide 16 in Chapter 14
Channel Dynamics
 Legal and Ethical Issues in Channel
Relations
– Two common distribution practices are
legal as long as they don’t substantially
lessen competition:
 Exclusive
dealing
 Tying agreements
©2003 Prentice Hall, Inc.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 17 in Chapter 14