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Marketing Channels by Louis W. Stern Adell El-Ansary Marketing Channels by Louis W. Stern Adell El-Ansary

Manufacturers selling directly Manufacturers selling directly

Functions Performed by the Intermediaries A Flow is Identical to a “Function” Typical “Forward” Functions Performed by the Intermediaries A Flow is Identical to a “Function” Typical “Forward” Flow Physical Possession Ownership Promotion Typical “Backward” Flow Payment Ordering

Channel Flows P C P C Channel Flows P C P C

Channel flows Cont. Channel flows Cont.

Complexity of Channel Flows W Complexity of Channel Flows W

You can eliminate channel members but you cannot eliminate channel functions. You can eliminate channel members but you cannot eliminate channel functions.

Level means intermediary in the channel. Length of a channel refers to the number Level means intermediary in the channel. Length of a channel refers to the number of intermediary levels

C P P P R W R C C C C P P P R W R C C C

Note: Impact of service characteristics on channels of distribution. In Banking: Branch Decisions Automatic Note: Impact of service characteristics on channels of distribution. In Banking: Branch Decisions Automatic Teller Hospitals: Macro-Location Decisions Micro-Outpatient Clinics

Need for Formal Channel Planning Process Majority of channels are not purposively designed but Need for Formal Channel Planning Process Majority of channels are not purposively designed but simply evolved over time (Lambert study of 18 consumer and industrial goods)

2 service output: Lot size, waiting time etc. 1 2 service output: Lot size, waiting time etc. 1

Organization of the mkg functions or flows 4 3 Organization of the mkg functions or flows 4 3

Control Control

( source: Louis Bucklin) ( source: Louis Bucklin)

Channel Objectives Firms design channels to accomplish one or more of the following objectives: Channel Objectives Firms design channels to accomplish one or more of the following objectives:

Types of Intermediaries Number of Intermediaries The terms and responsibilities of each alternative Types of Intermediaries Number of Intermediaries The terms and responsibilities of each alternative

Types of Intermediaries example of cellular car phones Types of Intermediaries example of cellular car phones

Evaluating the Major Channel Alternatives 1. Economic Criteria (Sales vs. Costs) 2. Control Criteria Evaluating the Major Channel Alternatives 1. Economic Criteria (Sales vs. Costs) 2. Control Criteria

manufacturer’s sales agency manufacturer’s sales agency

FEEDBACK FEEDBACK

The concept of power and when to use it to influence channel members’ behavior: The concept of power and when to use it to influence channel members’ behavior:

Incentives For Motivating Channel Members Established Products--buy back allowances Incentives For Motivating Channel Members Established Products--buy back allowances

4. Incentives to improve customer service: Company-Sponsored Training Programs 4. Incentives to improve customer service: Company-Sponsored Training Programs

A Conceptual Approach to the Problem of Channel Modification A Conceptual Approach to the Problem of Channel Modification

Channel Dynamics VMS Systems Channel Dynamics VMS Systems

Vertical Marketing Systems (VMS) Vertical Marketing Systems (VMS)

Conventional Distribution Channel vs. Vertical Marketing Systems Conventional Distribution Channel vs. Vertical Marketing Systems

Conventional Marketing Channels (CMC) Conventional Marketing Channels (CMC)

Types of vertical marketing systems Types of vertical marketing systems

Contractual VMS Wholesalersponsored voluntary chains Franchise Systems Retailersponsored cooperatives (e. g. Assoc. Grocers) Contractual VMS Wholesalersponsored voluntary chains Franchise Systems Retailersponsored cooperatives (e. g. Assoc. Grocers)

Franchise Systems Man. retailer franchise system (e. g. Chrysler) Man. wholesaler franchise system (e. Franchise Systems Man. retailer franchise system (e. g. Chrysler) Man. wholesaler franchise system (e. g. Coca-Cola) Service sponsretailer franch. system e. g. Holiday Inns)

1. Administered Systems Examples: Kraft Co. Sears, J. C. Penny 1. Administered Systems Examples: Kraft Co. Sears, J. C. Penny

Contractual Systems Involving Backward Integration Contractual Systems Involving Backward Integration

Contractual systems involving voluntary forward integration Wholesaler-sponsored vole. groups Independent Grocers Alliance Pro, Liberty, Contractual systems involving voluntary forward integration Wholesaler-sponsored vole. groups Independent Grocers Alliance Pro, Liberty, Sentry (hardware), Western Auto

Franchise Systems Four Basic Types of Franchise Systems Franchise Systems Four Basic Types of Franchise Systems

Legal Contracts Carvel Ice Cream Chicken Delight and Paper Products Legal Contracts Carvel Ice Cream Chicken Delight and Paper Products

Types of Conflict Types of Conflict

Sources of Conflict The amount of conflict is, to a large extent, a function Sources of Conflict The amount of conflict is, to a large extent, a function of: Goal Incompatibility Domain Dissensus (from dissension) and differences in perception of reality. “Great dependence on mfg. ”

Conflict Level Conflict Level

How to Manage Channel Conflict? Exchange of Persons Cooperation Diplomacy Mediation Arbitration How to Manage Channel Conflict? Exchange of Persons Cooperation Diplomacy Mediation Arbitration

Legal & Ethical Issues in Channel Relations Legal & Ethical Issues in Channel Relations

Review Review