Unit Review for Marketing Channel Design and Intergration

What distribution tasks are best suited for retailers?

- Offering manpower and physical facilities. - Providing personal selling, advertising and display to aid in selling suppliers products. - Interpreting consumer demand and relaying this information back to the channel. - offering storage so that suppliers can have widely dispersed inventories of their products at a lower cost. - removing substantial risk from the producer and manfuacturer by ordering and accepting delivers in advance of the season.

What are some incentives to secure channel members?

- advertising and promotional support - management assistance - fair dealing and a friendly relationship - popular product lines - stressing the value of a good product line from the channel member's perspective - gaining immediate credibility by using a strong program of national advertising.

What distribution tasks are best suited for wholesalers?

- providing market coverage - making sales contacts - holding inventory - processing orders - gathering market information - offering customer support

What distribution tasks are best suited for facilitating agencies?

- transportation - storage - third party logisitcs providers - order processing

What are the four stages of the product life cycle?

1. Introduction 2. Growth 3. Maturity 4. Decline

List the major categories of variables that should be considered when evaluating alternative channel structures:

1. Market 2. Product 3. Company 4. Intermediary 5. Environmental 6. Behavioural

briefly describe the major categories of variables that should be considered when evaluating alternative channel structures:

1. Market: market geography, size, density and behaviour 2. Product: bulk and weight, perishability, unit value, technical vs. nontechnical 3. Company: size, financial capacity, managerial expertise, their objectives and strategies 4. Intermediary: availability, costs and the services offered 5. Environmental: economic, sociocultural, competitive, technological, legal 6. Behavioural: conflict, power, role, communication process

List and describe the 5 flows.

1. Product flow is the actual physical movement of the product from the manufacturer through all of the parties to the consumer. 2. Negotiation flow represents the interplay of the buying and selling functions associated with the transfer of title or rights of ownership. Negotiation is a two-way process involving mutual exchange between buyer and seller. 3. Ownership flow is the movement of the title of the product from one stage in the process to another. 4. Information flow involves two directions—from the manufacturer to the consumer and from the consumer to the manufacturer. This flow includes transportation as information deemed necessary for the actual delivery of the product is communicated to the transportation agents. 5. Promotion flow refers to the flow of persuasive communication in the form of advertising, personal selling, sales promotion and publicity. This flow adds the advertising agency as an element of promotion.

Six phases of channel design

1. Recognizing the need for a channel design decision 2. Setting and coordinating distribution objectives 3. Specifying the distribution tasks 4. Developing possible alternative channel structures 5. Evaluating the variable affecting channel structure 6. Choosing the "best" channel structure 7. Selecting the channel members

Six basic distribution decisions most firms need to consider to acheive their distribution objectives

1. The role of distribution in the firm's overall objectives and strategies. 2. The role distribution should play in the marketing mix. 3. The design of the marketing channels. 4. The selection of channel members. Cost, profit and relationships stand at the core of the selection of the best structure and members, though this phase can be considered more of an art than a formula. 5. The management of the marketing channel in order to implement the channel design effectively and efficiently on a continuing basis (e.g. consistent themes, logos etc). 6. The evaluation of channel member performance.

three dimensions to be considered when developing alternative channel structures

1. number of levels 2. intensity at various levels 3. types of intermediaries at each level

Is a franchise fee the same thing as a royalty fee? Discuss.

A franchise fee is typically a one-time flat fee paid by the franchisee to the franchisor usually when the franchisee signs the franchise contract. Royalty fees, on the other hand, represent regular and continuous fees to the franchisor for as long as they hold the franchise. Usually, royalty fees are set by the franchisor based on a percentage of the franchisee's gross sales.

What are the basic components of any logistic system?

Any logistics system consists of the following six basic components: Transportation - deciding on the modes of transport to be used. Materials handling - the range of activities and equipment involved in the placement and movement of products in storage areas. Order processing - the procedures and 'paperwork' needed to fill orders. Inventory control - the process of managing inventory levels so as to have the products desired by customers while minimising inventory levels. Warehousing - the holding of products until they are ready to be sold. Packaging - how products are protected for shipment and storage as it relates to other components of a logistics system.

What are the implication for channel management during the introductory stage?

Assure sufficient number of channel members for adequate market coverage and assure adequate supply on channel members shelves.

What key implications does the channel manager need to think about with regard to franchise channels when designing marketing channels?

Channel control is a key benefit of franchise channels. The channel manager pursuing a channel design strategy that seeks to build a high level of control into the channel but that still relies on independent highly motivated channel members will almost always have to consider the franchise channel option.

how can channel structure help to create sustainable competitive advantage?

Channel design should be used as an intgral part of the firms attempt to gain a differential advantage or sustainable competitive advantage in the market. A differential advantage based on teh design of a superior marekting channel can yield formidable and long-term advantages because it cannot be coppied easily.

Identify and discuss the four major areas of interface between channel management and logistics management.

Channel management and logistics management are linked closely. The four major areas of interface are: Defining the kinds of logistics service standards that channel members want: It is essential to clearly define the kinds and levels of service desired by the channel members. Making sure that the proposed logistics program designed by the manufacturer meets the channel member service standards: The channel members' viewpoint, not the manufacturer's, is the determining perspective. Selling the channel members on the logistics program: To secure their cooperation, the channel manager must convince the channel members of the logistics program's value. Monitoring the results of the logistics program once it is instituted: Changing needs, changing competition and changing technology are guaranteed to create shortcomings in any logistics system across time. Channel members' satisfaction levels must be monitored so shortcomings can be corrected before they become crises.

What is the difference between channel strategy and logistics management?

Channel management is a much broader and more basic component of the distribution strategy variable of the marketing mix than is logistics management. Channel management involves the entire process of setting up and operating the contactual organization that is responsible for meeting the firm's distribution objectives. Logistics management, on the other hand, is more narrowly focused on providing product availability at the appropriate times and places in the marketing channel.

What is the difference between channel structure and ancillary structure?

Channel structure, as viewed from a managerial perspective, are: The group of channel members to which a set of distribution tasks have been allocated. Ancillary structure, on the other hand, is defined as the group of institutions (facilitating agencies) that assist channel members in performing distribution tasks. Ancillary structures are usually easier to manage than channel strucutres because facilitating firms don't play a part in teh channel decisions that ultimatlet control the distribution of goods.

Basic push promotional strategies include:

Cooperative advertising. Promotional allowances. Slotting fees. Displays and selling aids. In-store promotions. Contests and incentives. Special promotional deals and merchandising campaigns.

Explain the concepts of disintermediation and reintermediation.

Disintermediation refers to the elimination of intermediaries from the channel structure while reintermediation means the addition of intermediaries to the channel structure. In both cases, the structural dimension referred to is that of channel length.

Define the meaning and key points in the definition of electronic marketing channels.

Electronic marketing channels are defined in the text as the use of the internet to make products and services available so that target markets with access to computers (or web TVs) can shop and complete transactions for purchase via interactive electronic means. Several key points should be noted in this definition: Available does not mean physical availability of tangible products that cannot be digitised and moved electronically. Personal computers are not the only means for gaining access to the internet. Web TVs and possibly some other even cheaper technologies may come along in the future. The buyer and seller must be able to consummate the transaction via interactive electronic means.

What is the difference between push and pull strategies?

In pull strategies, a manufacturer builds strong consumer demand for a product to force members to automatically promote the manufacturer's product because it is in their obvious self-interest to do so. In push strategies, a manufacturer develops mutual effort and cooperation in the development and implementation of promotional strategies by working directly with members to develop strong and viable promotional support.

What is contactual efficiency?

It is the level of negotiation effort between sellers and buyers relative to achieving a distribution objective. Thus, it is a relationship between an input (negotiation effort) and an output (the distribution objective).

what is the specialisation and division of labour in the context of marketing channels design?

Just as a manufacturers production manager should allocate production tasks o the basis of specialisation and division of labour, so should the channel manager. Ideally he should allocate the distribution tasks to those firms who can perfomr them most efficiently. His contactual organisation whould then reflect an optimal allocation of the distribution tasks.

JIT: What is it? What are its pros and cons?

Just-in-Time (JIT) or kanban systems transfer products from supplier to user in a rapid and highly efficient fashion. JIT is a 'demand-pull' system: inventory is 'pulled-forward' from the supplier when needed by the user. Traditional production and inventory systems are 'batch-push' and deliver inventory when it is ready rather than when it is needed. The objective of JIT systems is to reduce inventory and, in fact, sometimes are referred to as "stockless" or 'zero inventory' systems. Productive capital is freed and the risk of aging stock is reduced or even eliminated. To be successful with JIT, a company needs well-coordinated systems, high employee skills and excellent supplier relations. The impact of JIT on marketing channels could be profound. Holding inventory is one of the distribution tasks commonly allocated to all levels of the channel. A manufacturer whose channel members want JIT inventory would have to establish JIT within its own production and purchasing processes, or perform the entire inventory holding task itself. One downside to JIT is its difficulty handling surprise hits. This is particularly problematic in categories like toys and fashions.

What are the key advantages of electronic marketing channels?

Key advantages of electronic marketing channels: global scope and reach convenience/rapid transaction processing information processing efficiency flexibility data-based management and relationship building capabilities lower sales and distribution costs.

Why is the success of a manufacturer's overall promotional strategy dependent to a significant extent on channel member cooperation?

Many promotional strategies require a good deal of support from channel members to work successfully. If the channel members do not offer this support, the entire promotional program may be jeopardised. For example, any manufacturer's promotion to consumers, be it coupons, buy one get one free, or a bonus pack, requires sufficient inventory to meet increased demand. Because the intermediaries are independent businesses, the manufacturer cannot force them to carry sufficient inventory, honour coupons or use in-store displays. Absent the ability to control the intermediaries, the manufacturer must seek voluntary cooperation.

Promotion through the marketing channel involves the following key elements:

Reseller (channel member) support is very important. The distinction between pull and push strategies. The major findings from research on push promotions. The seven basic types of push promotion that require channel support. The four types of 'kinder and gentler' push promotional strategies.

Discuss the importance of gaining channel member support in building market acceptance for a new product.

Since most producers and manufacturers do not sell their products directly to their ultimate target markets, they must utilise the services of independent channel members. Strong acceptance of the new product by the channel members is therefore a critical factor in determining whether the product will be successful in it's ultimate markets. According to a 1992 study by Group EFO of Weston, Connecticut, 63% of managers surveyed think that five years from now their firms will get 30% of sales from new products. That is up from 38% in 1989. (See Stem 1992) Given these high expectations for sales from new products, enormous new product development and launch costs, and high new product failure rates, manufacturers are well-advised to do all possible to ensure cooperation from channel members in new product launches.

Once you've identified the types of intermediaries needed for a selected channel structure, how do you go about identifying some specific organisations to approach?

Sources of key information and ideas can include: field sales staff industry directories

Discuss the five flows in marketing channels and how these relate to the use of the internet as an electronic marketing channel.

The five flows in channels are: 1) product flow, 2) negotiation flow, 3) ownership flow, 4) information flow, and 5) promotion flow. The internet is very efficient at handling the last four of the flows because all can be moved from producer to final customer electronically. However, for the most basic flow of product, only in the case of such products as printed material and music that can be transmitted electronically can the internet handle the product flow. So, the Internet is still severely constricted as a marketing channel because of this limitation.

Discuss some implications of electronic marketing channels for the major areas of channel decision making.

The key implications of electronic marketing channels for the major areas of channel decision making are as follows: Electronic marketing channels have broadened the range of channel options available to the firm. The internet with its vast capacity to convey information may reduce the potency of the other Ps (product, price, and promotion) for gaining a competitive advantage. Channel design decisions must now include consideration of the internet as a potential marketing channel. Management of marketing channels is likely to be more complex rather than less as a result of the Internet because the channel manager must deal not only with the more formalised conventional channels but with electronic marketing channels as well. The criteria for channel member performance evaluation may change such as the use of hits on websites and information gathering and performance may be carried out over the Internet.

List the four dimensional framework used for analysing markets.

The market variables are a four-dimensional construct for analysing markets. The four basic dimensions are: Market geography: defines the market in terms of its geographic boundaries, its location and its distance. Market size: defines the market in terms of the number of buyers or potential buyers. Market density: defines the market in terms of the number of buyers or potential buyers per unit of geography. Market behaviour: consists of four sub-dimensions: 1. Where the market buys 2; Who buys 3. When the market buys 4. How the market buys

What are some of the downsides of franchise channels, from the perspectives of franchisors and franchisees?

Three downsides of franchise channels for franchisors are: limited flexibility, overly high franchisee expectations, and increased regulatory scrutiny. Three downsides for franchisees include: limited independence, royalty fees, and the negative halo effect

In the process of new product planning, what needs to be considered is:

What input, if any, can channel members provide into new product planning? What has been done to assure that new products will be acceptable to the channel members? Do the new products fit into the present channel members' assortments? Will any special education or training be necessary to prepare the channel members to sell the new products effectively? Will the product cause the channel members any special problems?

Describe the impact on channel design decisions relevant to market behaviour variables.

When the market buys: seasonal, weekly and daily variations in the time of purchase. In some cases, particularly prepared food retailing, variations are tracked hourly. Where the market buys: the types of outlets from which the buyers choose to make their purchases and the location of those outlets. How the market buys: the buyer's purchase behavior including quantity purchased per transaction, purchase assistance, stops per shopping trip, purchase decision process, credit utilization, in-home versus out-of-home purchasing, effort expended and service demanded. Who buys: includes both the actual buyer and those partaking in the purchase decision. For consumer purchases, family unit members may be the buyer, user, influencer and/or decider. One person may assume any number of those roles or each may be played by a different member of the household. In the industrial market, two additional roles are found in the buying center: approvers are people who authorise the actions of the deciders and buyers, and gatekeepers are people who can block sellers and their information from reaching members of the buying centre.

Define vertical competition:

channel members at differnet levels in the channel compete with eachother

Define intertype competition:

competitiion between different types of firms at the same channel level

Define horizontal competition:

competition between firms of the same type

Define channel system competition:

complete channel systems compete with each other as units.

What are the implication for channel management during the maturity stage?

extra emphasis on motivating channel members to mitigate competitive impact. Investigate possibility of changes in channel structure to extend maturity stage and possibly foster new growth stage.

What are the four type of competition?

horizontal, intertype, vertical, channel system

Channel partners will accept new products provided they understand:

how the product will sell (i.e the turnover) whether the product is easy to stock and display whether the product will be profitable (i.e. the margins).

What are the implication for channel management during the decline stage?

phase out marginal channel members. Investigate impact of product deletion on channel members.

What are the implication for channel management during the growth stage?

similiar to phase 1 but emphasis on adequacy of channel member inventories. Monitor the effects of competitive products on channel member support.