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Designing and Managing Value Networks and channels

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Designing and Managing Value Networks and channels
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Thumbs up Designing and Managing Value Networks and channels - January 4th, 2008

Designing and Managing Value Networks and channels

::: Marketing Channels and Value Networks

Marketing channels are sets of interdependent organizations involved in the process of making a product or service available for use or consumption.

The importance of channels:
A marketing channels system is the particular set of marketing channels employed by a firm. One of the chief roles of marketing channels is to convert potential buyers into profitable orders. Marketing channels must not just serve market, they must also make markets. A push strategy is appropriate where there is low brand loyalty in a category, brand choice is made in the store, the product is an impulse item, and product benefits are well understood. A pull strategy is appropriate when there is high brand loyalty and high involvement in the category.

Channel development
A new firm typically starts as a local operation selling in a limited market, using existing intermediaries. If the firm is successful, it might branch into new markets and use different channels in different markets.
Different consumers have different needs during the purchase process. Buyers fall into one of the four categories.
1. Habitual shoppers
2. High value deal seekers
3. Variety-loving shoppers
4. High-involvement shoppers

Value Networks
A system of partnerships and alliances that a firm creates to source, augment, and deliver its offerings.

::: The Role of Marketing Channels

Channel Functions and Flows
A marketing channel performs the work of moving goods from producers to consumers.
Some functions constitute a forward flow of activity from the company to the customer; other functions constitute a backward flow from customer to the company. A manufacturer selling a physical product and services might require three channels: a sales channel, and a service channel.

Channel levels
A zero level channel consist of a manufacturer selling directly to the final customer. Major examples are door to door sale, mail order.
A one-level channel contains one selling intermediary, a two-level channel contains two selling intermediaries. These intermediates could be retailers, distributors.
As the no. of levels increase the level of difficulty of information sharing and coordination also increase. Channels normally describe a forward movement of products from source to user.

Service Sector Channels
Marketing channels are not limited to the distribution of physical goods. Producer of service and ideas also face problem of making their output available and accessible to target population.

::: Channel-Design Decisions

Analyzing customers desired service output levels
1. Lot size
2. Waiting and Delivery time
3. Special convenience
4. Product variety
5. Service backup

Establishing objectives and constraints
Channel objectives should be stated in terms of targeted service output level. Channel objectives vary with product characteristics. Bulky product such as building materials require channels that minimize the shipping distance and the amount of handling.

Identifying major channel alternatives
Companies can choose from a wide variety of channels for reaching customers from sales forces to agents, distributors, dealers and direct mail. Channel alternative described by 3 elements: the types of available business intermediaries, the no. of intermediaries needed and the terms and responsibilities of each channel member.

Types of intermediaries: A firm needs to identify the types of intermediaries available to carry on in channel work.
No. of intermediaries: 3 stages are available: exclusive distribution, selective distribution and intensive distribution. Exclusive distribution means severally limiting a no. of intermediaries. Selective distribution involves the use of more than a few but less than all of the intermediaries who are willing to carry a particular of product. Intensive distribution consists of the manufacturer placing the goods or services in as many outlets as possible.

Terms and responsibilities of channel members:
Price policy calls for the producer to establish a price list and schedule of discounts and allowance that intermediaries see as a equitable and sufficient.
Condition of sale refers to payment terms and producer guarantee.
Mutual service and responsibilities must be carefully spelled out, especially in franchise and exclusive agency channels.

::: Channel management decisions

1. Selecting channel members
Companies need to select their channel members carefully as they represent the company to the customer. To facilitate channel members selection, produces should determine what characteristics distinguish the better intermediaries, for e.g. the no. of years in business, the growth and profit record and financial strength.

2. Training channel members
Companies need to plan and implement careful training programs for their intermediaries.

3. Motivating channel members
Coercive power
Reward power
Legitimate power
Expert power
Referent power

4. Evaluating channel members
5. Modifying channel arrangements

::: Channel Integration and Systems

Vertical marketing system
A VMS by contrast, comprises the producer, wholesaler and retailer. Acting as a unified system.

Corporate vms
Administered vms: It coordinates successive stages of production and distribution through the size and power of one of the member.
Contractual vms: 1. Wholesaler-sponsored voluntary chains
2. Retailer cooperatives
3. Franchise organizations

Horizontal marketing systems
In which two or more unrelated companies put together resources on program to exploit an emerging marketing opportunity.
Multichannel marketing systems
It occurs when single firm uses two or more marketing channels to reach one or more customer segments.
Planning channel architecture

::: Conflict, cooperation, and competition

Types of conflict and competition
Vertical channel conflict means a conflict between different levels within the same channel.
Horizontal channel conflict involves a conflict between members at the same level within the channel.
Multi-channel conflict exists when the manufacturer has established two or more channel that sell to the same market.

Causes of channel conflict
Goal incompatibility
Difference in perception

Managing channel conflict
Co-optation is an effort by one organization to win the support of leaders of another organization by including them in advisory council.
Arbitration occurs when the two parties agree to present their arguments to one or more arbitrators and accept the arbitration decision.

Legal and ethical issues in channel relations
Many producers likes to develop exclusive channels for their products. Exclusive dealing often include exclusive territory agreement. The producer may agree not to sell to other dealers in a given area. Producers are free to select their dealers, but their right to terminate dealers is somewhat restricted.

::: E-commerce marketing practices

E-commerce means that a company or site offers to transact or facilitate the selling of product and service online.
E-purchasing means companies decide to purchase goods services and information from various online suppliers.
E-marketing described company efforts to inform buyers communicate, promote and sell its product and services over the internet.

Pure-click companies
There are several kinds of pure-click companies for e.g. search engines, ISP, commerce sites.

Business to Business E-commerce
The purpose of B2B sites is to make markets more efficient. In B2B buyers get information from supplier website, informidiaries, market makers and customer communities.

Brick and Click companies
Many brick and mortar companies have agonized over whether to add online e-commerce channel. Many companies moved quickly to open web site describing their business but resisted adding e-commerce to their sites. They felt that selling their products or services online would produce channel conflict.

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Re: Designing and Managing Value Networks and channels
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Re: Designing and Managing Value Networks and channels - March 26th, 2009

hi give me the projects on distribution os channels of sale for 2-3 companies
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Re: Designing and Managing Value Networks and channels - July 6th, 2015

Advantages of Designing and Managing Value Networks and channels

1) Productive channels

2) Minimize in flaws

3) Process at ease
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