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Marketing Channel Structure
             and Functions
                    Overview
Outline
    •   Overview
    •   Primary Function of Channel Members
    •   How Channel Member add Value
    •   Consumer Channels Vs Business Channels
    •   Multi Channel Distribution
    •   Distribution System Selection
    •   Carefully Select Channel Members
    •   Building International Distribution
    •   Future Direction of Distribution
    •   Summary
Overview
   • Business channel management - is the
     process of designing a set of marketing
     and distribution arrangements that fulfill
     the requirements and preferences of
     targeted market segments and
     customers, creating value through direct
     sales force and logistics systems, and
     constructing offerings for channel
     members that build marketplace equity.
What is a Marketing Channel?

   A marketing channel is a a set of interdependent
   organisations involved in the process of making a
   product or service available for use or
   consumption.
Primary Functions of Channel Members
 •   to be a stockist of your product
 •   to represent your brand in the market place
 •   to gather marketing intelligence
 •   to assume risk
 •   to deliver product and offer post sales support
 •   to add value to the sale
How Channel Members Add Value
Primary Questions

   1. Which intermediary, or
      intermediary combination, is best
      suited for to take a new product
      or service to market?
   2. How should the intermediary
      network be managed once it is up
      and running?
Specialisation and Division of Labour Principle-
Fender Guitars

      Production                          Distribution
      Tasks                               Tasks
      Thickening the wood                 Buying
      Shaping body and neck               Selling
      Gluing and clamping parts           Transferring the title
      Sanding and assembly                Transportation
      Applying finish                     Storage
      Installing electric components      Processing orders
      Attaching machine heads & strings   Providing information
      Adjusting action and pickup         After sales customer service
Specialisation and Division of Labour
Principle- Fender Guitars

 Production                                    Distribution

Worker                              Manufacturer
                 Production                                        Distribution
                 tasks allocated                                   tasks allocated
Worker           to workers           Agents                       to intermediaries
                 specializing                                      specializing
                 in performing                                     in performing
                                    Wholesalers
Worker           those                                             those
                 tasks                                             tasks
                                     Retailers
Worker

                                    Consumers

    Result? Production Efficiency          Result? Distribution Efficiency
Consumer Marketing Channels
Business Marketing Channels
Multi Channel Distribution System
Distribution System Selection

    •   Marketing Managers select the most feasible
        marketing channels that effectively perform the
        business processes and functions needed to
        correct the targeted gaps in service outputs.
    •   Hybrid Channels, Multiple Channels and
        Shorter Channels or Direct Channels.
Figure 1 : Channel Selection: Traditional View




                          Manufacturer



        Wholesaler      Own sales force or reps   Wholesaler



          Dealer



                               Customer
Figure 2 : Hybrid Channel




                               Customer


             Demand         Physical        After -sales
             generation     distribution    service

             Own sales       Outside       Inside or Outside
               force        distributor    service specialists



                                Supplier
Figure 3 : The Free – Riding Problem




               Supplier A                                Supplier B




                                         Distributor
      Demand generation
                            Demand fulfillment         Full function
      functions
                            functions                  distributor


                              Customer
Figure 4 : Multiple Channels




                                           Seller



        No frills/Low cost channel                            Full service/Full cost channel




                                Customers who wear
        Price                                                                   Service
        sensitive               different hats on different                     sensitive
        customers               purchase occasions                              customers
Figure 5 : Multiple Channel Conflict




                               Seller

                       Α                      B

           Full product line            Limited product line
               X and Z                           X




          Mainly Z Customers             Mainly X Customers
Figure 6 : The role of master distributors




                                            Seller



                                                                Master distributor
         Retail distributors
        Bunnings Hardware
               House
                                                                      Dealer



                                     Building Trade and
                               Do-it yourself (DIY) customers
Carefully Select Channel Members

   •   Specify channel capabilities the supplier seeks
       in terms of:
         Technical competence
         Sales force deployment
         Warehouse and delivery capabilities
         Financial stability
         Leadership
Build International Marketing Channels



    •   Firms operating overseas should anticipate
        longer business processes and additional
        functions in the marketing channels.
    •   They must cover additional geography
    •   Adhere to export and import regulations of each
        country market as well as local culture and
        distribution practices
Future Direction of Distribution …..

      •   Proliferation of information
          technology.
      •   Polarisaton of customers
          (consolidation on one hand and
          fragmentation on the other).
      •   Manufacturing operations that can
          mass customise.
      •   Quick shipment distribution logistics.
Summary

    •   Regardless of structural form, distribution
        channels in the future will be more
        interactive with the customer.
    •   The internet will continue to challenge
        traditional channels.
    •   International channels of distribution are
        important
    •   Channel Management is about being
        adaptive to where the customer prefers to
        buy.
You are welcome to contact Nigel Bairstow at B2B
Whiteboard your source of B2B Asia / Pacific
marketing advice

http://www.linkedin.com/pub/nigel-bairstow/6/41b/726

http://twitter.com/#!/b2bwhiteboard

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Marketing Channel Structure and Functions

  • 1. Marketing Channel Structure and Functions Overview
  • 2. Outline • Overview • Primary Function of Channel Members • How Channel Member add Value • Consumer Channels Vs Business Channels • Multi Channel Distribution • Distribution System Selection • Carefully Select Channel Members • Building International Distribution • Future Direction of Distribution • Summary
  • 3. Overview • Business channel management - is the process of designing a set of marketing and distribution arrangements that fulfill the requirements and preferences of targeted market segments and customers, creating value through direct sales force and logistics systems, and constructing offerings for channel members that build marketplace equity.
  • 4. What is a Marketing Channel? A marketing channel is a a set of interdependent organisations involved in the process of making a product or service available for use or consumption.
  • 5. Primary Functions of Channel Members • to be a stockist of your product • to represent your brand in the market place • to gather marketing intelligence • to assume risk • to deliver product and offer post sales support • to add value to the sale
  • 7. Primary Questions 1. Which intermediary, or intermediary combination, is best suited for to take a new product or service to market? 2. How should the intermediary network be managed once it is up and running?
  • 8. Specialisation and Division of Labour Principle- Fender Guitars Production Distribution Tasks Tasks Thickening the wood Buying Shaping body and neck Selling Gluing and clamping parts Transferring the title Sanding and assembly Transportation Applying finish Storage Installing electric components Processing orders Attaching machine heads & strings Providing information Adjusting action and pickup After sales customer service
  • 9. Specialisation and Division of Labour Principle- Fender Guitars Production Distribution Worker Manufacturer Production Distribution tasks allocated tasks allocated Worker to workers Agents to intermediaries specializing specializing in performing in performing Wholesalers Worker those those tasks tasks Retailers Worker Consumers Result? Production Efficiency Result? Distribution Efficiency
  • 13. Distribution System Selection • Marketing Managers select the most feasible marketing channels that effectively perform the business processes and functions needed to correct the targeted gaps in service outputs. • Hybrid Channels, Multiple Channels and Shorter Channels or Direct Channels.
  • 14. Figure 1 : Channel Selection: Traditional View Manufacturer Wholesaler Own sales force or reps Wholesaler Dealer Customer
  • 15. Figure 2 : Hybrid Channel Customer Demand Physical After -sales generation distribution service Own sales Outside Inside or Outside force distributor service specialists Supplier
  • 16. Figure 3 : The Free – Riding Problem Supplier A Supplier B Distributor Demand generation Demand fulfillment Full function functions functions distributor Customer
  • 17. Figure 4 : Multiple Channels Seller No frills/Low cost channel Full service/Full cost channel Customers who wear Price Service sensitive different hats on different sensitive customers purchase occasions customers
  • 18. Figure 5 : Multiple Channel Conflict Seller Α B Full product line Limited product line X and Z X Mainly Z Customers Mainly X Customers
  • 19. Figure 6 : The role of master distributors Seller Master distributor Retail distributors Bunnings Hardware House Dealer Building Trade and Do-it yourself (DIY) customers
  • 20. Carefully Select Channel Members • Specify channel capabilities the supplier seeks in terms of: Technical competence Sales force deployment Warehouse and delivery capabilities Financial stability Leadership
  • 21. Build International Marketing Channels • Firms operating overseas should anticipate longer business processes and additional functions in the marketing channels. • They must cover additional geography • Adhere to export and import regulations of each country market as well as local culture and distribution practices
  • 22. Future Direction of Distribution ….. • Proliferation of information technology. • Polarisaton of customers (consolidation on one hand and fragmentation on the other). • Manufacturing operations that can mass customise. • Quick shipment distribution logistics.
  • 23. Summary • Regardless of structural form, distribution channels in the future will be more interactive with the customer. • The internet will continue to challenge traditional channels. • International channels of distribution are important • Channel Management is about being adaptive to where the customer prefers to buy.
  • 24. You are welcome to contact Nigel Bairstow at B2B Whiteboard your source of B2B Asia / Pacific marketing advice http://www.linkedin.com/pub/nigel-bairstow/6/41b/726 http://twitter.com/#!/b2bwhiteboard