Conventional Marketing Systems

1. Conventional Marketing Systems Teacher – ShahedRahman

2. Introduction • Design Issues are critical in marketing channels • Selecting the right members • Assigning them the proper functions • Having everyone fulfill their responsibilities

3. Conventional Marketing Channels as Organizational Teams • Most marketers work in a team • Shoemakers, blacksmith and woodworkers work with their wives as their teammates • While Husband take care of production, wife take care of customers and apprentice • Conventional channel teams are loosely aligned teams of organization designed to bridge gaps between producers and consumers • For conventional channels to succeed – each members have to work hard

4. Conventional Marketing Channel: Issues and Answers • Producers, Wholesalers, Other intermediaries such as agents or support servicers and retailers all face the channel design decision

5. What is Channel Design • Indicate a pattern, arrangement or structure of parts • Arrangements that exist between organizations in marketing system • Design also reflect the rules and regulations that system members use to create and sustain the system • Channel Design refer to those decisions associated with the formation of new marketing channel or the alteration of existing channels • It is a strategic decision • A proper design can create a sustainable competitive advantage.

6. Why are Channel Design Decisions Critical? • A design effect all the marketing decisions • Producers’ prices vary substantially according to whether they use mass merchandisers or high quality boutiques • Channel Design decisions typically involve relatively long term commitments to other organizations and also the market that channel member serves • It is the key external resource of many manufacturers • It take years to build a successful channel • You wont see the results instant

7. Ensure Team work • Channel members need to convert their special skills into a successful team performance • Manufacturer >> Intermediary >>> end users linkage

8. Marketing Functions Factor into the Channel Design Decision? • Information • Promotion • Negotiation • Ordering • Financing • Risk Taking • Possession • Billing • Payment • Title

9. When is it time to design or Redesign a Channel • When the nature of market change • Organization's development of a new product or product line • Decision to target a new market segment • Do a PEST Analysis to see whether the External Environmental Changes

10. Making The Channel Design Decision • Organization should reach a workable compromise between what is ideal, what is adequate and what is obtainable. • New manufacturers often feature small operations within a limited market area • Larger firms tend to use different types of channels in different markets. • Wholesale distributor ----- for large market • Direct Retailers ---- for small market

11. Making The Channel Design Decision • Large or small an organization’s channel design should develop in response to a SWOT Analysis • SWOT Analysis should consider key success market success factors, Market attractiveness to a new entrants or a barrier to entry • Technology issue – Social or culural trends

12. Channel Design Option • Making channel design decisions, a number of conventional channel systems are available • Number of level present in the Channel • Number of intermediaries operating at the various levels • Types of intermediaries used at each level

13. Number of Levels in The Channel • Each intermediary that performs a function necessary to convey a good or service closer to final users represents a channel level • A channel’s length is described by the number of intermediary levels other than producers and users that it contains • Zero level channel or direct channel marketing exist when manufacturer sells directly to the final users • One level channel design feature one selling intermediary. Eg. Retailers buy directly from the manufacturer • Two level channel feature two selling intermediaries. Such as whole saler and retailer

14. Number of Intermediaries at Each Level • Intensive Distribution • Distribute through as many outlet as possible • Depends on product and consumer characteristics • Low involvement product or consumers want more convenience • Exclusive Distribution • Places limits on the number of intermediaries operating at any given channel level • Used when producers want to retain control over the quality of service levels

15. Number of Intermediaries at Each Level • Selective Distribution • This lies between the two extreme. • More than one but fewer than all available intermediaries are used

16. Types of Intermediaries at each level • Manufacturer’s sales force • Manufacturers Representatives • Industrial Distributor

17. Evaluating Channel Design Alternatives • Expected Sales and Costs Criteria • Control and Resources • All companies want to control over its product and resources as possible • Control often proves the deciding factor in this intermediary selection decision • Flexibility • Degree of commitment to the proposed relationship • Respond to a changing environmental opportunities and threats

18. Selecting the Best Channel Design • Analyzing Desired Channel Output Utilities • Convenience Utility • Lot size Utility • Selection Utility • Service utility • Analyzing Channel Objectives and Product Characteristics • Unit Value • Standardization • Bulkiness • Complexity • Stage of Product Life Cycle • Analyzing Market Behaviors and Segments

19. Modifying Existing Channels • Organization must do more than construct a good channel design, set it in motion, and then sit back and watch. • Channel adjustment – purposeful modification to intermediaries relationship- become necessary when consumers buying pattern change, market expand, new competition arise or newer innovative distribution channel options become available. • Add or drop individual intermediaries • Add or drop particular marketing channels • Develop a total new way of distributing and selling goods within a particular market

20. Modifying Existing Channels • Product Life Cycle Changes

21. Modifying Existing Channels • Customer – Driven Refinement of Existing Channels • Growth of Multichannel Marketing System • Multichannel marketing occurs when a single firm uses two or more marketing channels to reach one or more market segments • This is also know and dual distribution • By pursuing more segments firms usually achieve increased market coverage • Companies also establish different channels to sell different sized customers • Direct sales may be best for handling larger customers