Lecture Marketing channel strategy: Chapter 3 - TS. Đinh Tiến Minh

Lecture Marketing channel strategy - Chapter 3: Channel analysis - Auditing marketing channels" has contents: Auditing marketing channels, physical possession, inventory holding costs, information sharing,... And other contents.
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Lecture Marketing channel strategy: Chapter 3 - TS. Đinh Tiến Minh1/21/2018Chapter 3: Channel Analysis:Auditing MarketingChannelsDINH Tien MinhAuditing MarketingChannels• Auditing what channel functions get performedby each channel member in the existing channelsystem, by whom, at what levels, and at whatcost, provides several important benefits:1. Diagnose and remedy shortcomings in the provisionor price of service outputs to targeted segments.2. An audit may identity gaps in service outputs desiredby targeted end-user segments.3. Knowing which channel members have incurred thecosts of performing which channel functions helpsmembers allocate channel profits equitably.CHANNEL AUDIT CRITERIA: CHANNELFUNCTIONSPhysicalPossession/OwnershipProducersPhysicalPossession/OwnershipPhysicalPossession/OwnershipPromotionPromotionPromotionNegotiationNegotiationNegotiationFinancingWholesalersFinancingRetailersFinancingRiskingRiskingRiskingOrderingOrderingOrderingPaymentPaymentInformation sharingInformation sharingConsumersIndustrialandHouseholdPaymentInformation sharingCommercial Channel Subsystem11/21/2018Physical possession• Physical possession refers to channel activitiespertaining to the storage of goods, includingtransportation between channel members.• The costs of running warehouses andtransporting products from one location toanother are physical possession costs.• For product returns ,physical possession and itsmanagement drive the channel functions veryshape, including who its members are and wherethe product ultimately will wind upOwnership• When a channel member takes title to goods,it bears the cost of carrying the inventory; itscapital is tied up in product (whoseopportunity cost is the next highest value useof that money).• In many distribution systems, physicalpossession and owmership move togetherthrough the channel, but this pairing is neithernecessary nor universal.Inventory holding costs• Inventories refer to stocks of goods or thecomponents used to make them, and theyexist for several reasons:– Demand surges outstrip production capacity– Economies of scale exist in production andtransportation.– Transportation takes time,– Supply and demand are uncertain.21/21/2018Promotion• Promotion functions take many forms: personal selling byan employee or outside sales force (e.g., brokers andregistered investment advisors for mutual funds), mediaadvertising, sales promotions (trade or retail), publicity, andother public relations activities.• Promotional activities seek to increase awareness of theproduct being sold, educate potential buyers aboutproducts’ features and benefits, and persuade potentialbuyers to purchase.• A third-party reverse logistics specialist helpsmanufacturers achieve this promotional goal when itrefurbishes returned products and sells them through newchannels (e.g., eBay);Negotiation• The negotiation function is present in thechannel if the terms of sale or the persistenceof certain relationships are open to discussion.• The costs of negotiation are measured mainlyas personnel’s time to conduct thenegotiations, and, if necessary, the cost oflegal counsel.Financing• Financing costs are inherent to any sale thatmoves from one level of the channel toanother or from the channel to the end-user.• Typical financing terms for a business-tobusiness purchase require payment within 30days and may offer a discount for earlypayment.31/21/2018Risk• There are many sources of risk:• Price guarantees• Warranties, insurance• After-sales service activitiesOrdering• Ordering and payment costs are thoseincurred during the actual purchase of ailpayment for the product.• They may seem unglamorous, but innovationsare radically altering the performance of thesefunctions today.– Automatic replenishmentInformation sharing• Information sharing takes place among andbetween every channel members both routineand specialized ways.• Retailers share information with theirmanufacturers about sales trends andpatterns through electronic data interchanges• If used properly, this information can reducethe costs of many other channel functions.41/21/2018AUDITING CHANNELS USING THEEFFICIENCY TEMPLATE• The efficiency template describes1. The types and amounts of work done by eachchannel member to perform the marketingfunctions.2. The importance of each channel function to theprovision of end-user service outputs, and3. The share of total channel profits that eachchannel member should reap.Importance Weights forfunctions:CostsBenefit Potential(High, Medium,Low)FinalWeightProportion functionPerformance of channelmember123Total4(End-user)Physicalpossession100Ownership100Promotion100Negotiation100Financing100Ordering100Payment100Informationsharing100Total100N/A100Normativeprofit shareN/AN/AN/AN/AN/AN/AN/AN/A100The efficiency template• It is a useful tool for codifying the costs borne and thevalue added to the channel by each channel member,including end-users.• It can reveal how the costs of particular functions getshared among channel members• It can be a powerful explanatory tool and justificationfor current channel performance or changes to existingoperating channels.• For products sold through multiple channels, theirefficiency templates can be compared to find anydifferences in the costs of running the differentchannels.5