Unit - V

Designing and Managing

Value Networks and
Channels
Chapter Questions
 What is a marketing channel system and
value network?
 What work do marketing channels perform?
 How should channels be designed?
 What decisions do companies face in
managing their channels?
 How should companies integrate channels
and manage channel conflict?
 What is the future for e-commerce?

Marketing Channels


 Sets of interdependent organizations

 involved in the process of making a
 product or service available for use
 or consumption.

Importance of Channels
 A very critical decision for the management
as it involves a substantial cost
 A long term commitment
 Converting potential buyers into profitable
orders
 Not only SERVE markets but MAKE markets

 PUSH VS PULL Strategy

Channel Development
 Hybrid channels


 Categories of buyers
◦ Habitual buyers
◦ High value deal seekers
◦ Variety loving shoppers
◦ High involvement shoppers
◦
Buyer Expectations for Channel
Integration

 Ability to order a product online and pick it
up at a convenient retail location

 Ability to return an online-ordered product to
a nearby store

 Right to receive discounts based on total
online and offline purchases

Value networks
 A system of partnerships and alliances that
a firm creates to source, augment and
deliver its offerings

 It includes suppliers, its suppliers supplier,
immediate customers and also the end
customers

 Supply chain planning
 Demand chain planning
Role of marketing channels
 Channel functions and flows

 Channel levels

 Service sector channels
Channel members
functions
◦ Gather information
◦ Develop and disseminate persuasive
communications
◦ Reach agreements on price and
terms
◦ Place orders with manufacturers
◦ Acquire funds to finance inventories
◦ Assume risks
◦ Provide for storage
◦ Provide for buyers’ payment of their
bills
◦ Oversee actual transfer of ownership
Channel Flows in marketing
Forward Flow
 Physical
 Title
 Promotion
Backward Flow

 Payment
 Information

Channel Levels
 Zero Level channel
 One level channel
 Two level channel
 Three level channel

 SERVICE SECTOR CHANNELS
 Education dissemination systems
 Health delivery system
Designing a Marketing Channel
System
 Analyze customer needs
 Establish channel objectives
 Identify major channel alternatives
 Evaluate major channel alternatives

Analyzing customer’s desired
service output level
 Channel service output
 Lot size
 Waiting/delivery time
 Spatial convenience
 Product variety
 Service backup

Establishing objectives and
constraints
 Should be stated in terms of targets output levels
 May vary with product characteristics
 Strengths and weaknesses of intermediaries
should be taken into consideration
 Competitors channels
 Legal regulations


Identifying Channel
Alternatives
 Types of intermediaries


◦



Identifying Channel
Alternatives


 Number of intermediaries
◦ Exclusive
◦ Selective
◦ Intensive
 Terms and responsibilities
◦ Price policy
◦ Conditions of sale
◦ Distributers territorial rights
◦ Mutual services & responsibilities
Evaluating the major
alternatives


 Economic criteria – Channel advantage

◦ Will they sell
◦ Cost of selling
 Low cost alternatives – internet, telemarketing, retail
stores
 High or med cost -distributors, value added partners,
direct sales
 Control and adaptive criteria –
◦ Ex. sales agency –less control
◦
Channel-Management
Decisions
 Selecting channel members
 Training channel members
 Motivating channel members
◦ Channel power –coercive, reward, legitimate ,
expert & referent
 Evaluating channel members
 Modifying channel members

Channel Integration and
Systems
vVertical marketing systems
 Corporate VMS
 Administered VMS
 Contractual VMS

vHorizontal marketing systems

vMultichannel systems

Channel Conflict
 Types of conflict and competition
◦ Vertical –diff level within the channel
◦ Horizontal – between members of same level
within the channel
◦ Multi channel - between two channels
 Causes of conflict
◦ Goal incompatibility
◦ Unclear roles rights
◦ Differences in perception
◦ Dependence on manufacturer

Managing Channel Conflict
 Adoption of super ordinate goals
 Cooptation
 Diplomacy
 Mediation
 Arbitration


 Legal and ethical issues in channel relations

