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Unit 11- Marketing Channels
Introduction to Marketing (MKTG 400 )
Kansas State University
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Marketing Channels Caterpillar Case Study o Dominates world’s markets for heavy construction and mining equipment o Revenue decreased more than $8 billion each year for past two years o Independent dealers are key to success, providing training, service, parts, repairs o Caterpillar stresses dealer profitability, extraordinary dealer support, personal relationships, dealer performance and full/honest/frequent communications o Caterpillar’s distribution is major distribution is major source of competitive advantage Value Delivery Network—firm’s suppliers, distributors, and ultimately customers who partner w each other to improve the performance of the entire system Intermediaries—offer procedures create greater efficiency in making goods available to target markets. Through their contracts, experience, specialization, and scale of operations, intermediaries usually offer the firm more than it can… Marketing Channel—consists of firms that have partnered for their common good w each member playing a specialized role How channel members add value o Information: refers to gathering and distributing research and intelligence info about actors and forces in the marketing environment needed for planning and aiding exchange o Promotion: developing and spreading persuasive communications about an offer o Contacts: finding and communicating w prospective buyers o Physical distribution: transporting and storing physical goods o Finance Channel Conflict—refers to disagreement over goals, roles, and rewards by channel members o Horizontal conflict: conflict among members are the same channel level o Vertical conflict: conflict between different levels of same channel Conventional Distribution Systems—consist of one or more independent produces, wholesalers, AND RETAILERS. Each SEEKS TO MAXIMIZE IS OWN PROFITS, AND THERE IS LITTLE CONTROL OVER the other members and no formal means for assigning roles and resolving conflict Vertical Marketing Systems—provide channel leadership and consist of producers, wholesalers, and retailers acting as a unified system o Corporate marketing systems—integrates successive stages of production and distribution under single ownership o Contractual marketing systems—independent firms at different levels of production and distribution who join together through contracts to obtain more economies or sales impact than each could achieve alone. Most common form is franchise organization Multi-channel distribution o Hybrid or multi-channel distribution—when a single firm sets up one of more marketing channels to reach one or more customer segments Advantages Increased sales and market coverage Marketing Channels New opportunities to tailor products and services o specific needs of customer segments Challenges Hard to control May create channel conflict Disintermediation—product or service producers cut out intermediaries and go directly to final buyers, or when radically new types of channel intermediaries displace traditional ones 4 Channel design decisions o Analyzing the consumer needs Find out what target customers want from the channel o Setting channel objectives Setting channel objectives includes: Targeted levels of customer service What segments to serve Best channels to use Minimizing the cost of meeting customer service requirements Channels objectives are influenced by: Nature of the company Marketing intermediaries Competitors environment o Identifying major alternatives Types of intermediaries Industrial distributor Manufacturer’s agents Company sales force Number of intermediaries Exclusive distribution: manufacturer gives only a limited number of dealers the exclusive right to distribute its products in their territories Selective distribution: producer uses more than one but fewer than all of the intermediaries willing to carry the producer’s products Intensive distribution: manufacturing firm places its products in as many retail outlets as possible Responsibilities of each channel member Services provided Territory agreements Evaluating major alternatives Economic criteria: compares the likely sales costs and profitability of different channel members Control: channel member’s control over the marketing of the product Adaptive criteria: refers to the ability to remain flexible to adapt to environmental changes Selecting channel members o Determining key operating characteristics
Unit 11- Marketing Channels
Course: Introduction to Marketing (MKTG 400 )
University: Kansas State University
