MARKETING FINAL EXAM STUDY GUIDE 12 08 2014 Marketing Channels Nature and Importance of Marketing Channels o Must secure the placement of products in appropriate outlets in sufficient quantities when the customers want them o Marketing Channels Add Value Each participation in the chain adds value Each transaction costs money and is passed on to the customer When retailer is used product is more convenient and less expensive o Marketing Channel Management Affects Other Aspects of Marketing Every marketing decision is affected by and has an affect on marketing channels How and when the critical components reach the factory must be Distribution center coordinated with production of goods to company stores of customers may be operated by retailers manufacturers or distribution specialists facility for the receipt storage and redistribution Structure of Marketing Channels o Independent Marketing Channel independent members maximizing their own o Administered Vertical Marketing System independent with dominant o Contractual Vertical Marketing System independent with contracts to reduce o Corporate Vertical Marketing System o Choosing Retail Partners Distribution Intensity channel owned by one company profits member conflict Intensive Exclusive Selective o Channel Members Manufacturers wholesales and retailers can have different perspectives on pricing strategies Must protect against gray market transactions Channel Power o Exists when one firm has the means ability to dictate the actions of another o Reward power o Coercive power member at a different level of distribution not undertaking certain tasks a contractual agreement b w the 2 firms o Referent power o Expertise power o Information power o Legitimate power o Channel Conflict monetary incentive to do what the other wants it to do threatens to punish punishes the other channel member for if the supplier desperately wants to be associate w the brand relies on the expertise of their marketing providing withholding such important market information getting a channel member to behave in a certain way b c of Channel conflict exists when one channel member believes another channel member is engaging in behavior that inhibits it from achieving its goals Primary causes of conflict Incompatibility of goals aims or values Lack of agreement over relevant domains Types of Channels o Direct Marketing Channel No intermediaries between the buyer and the seller Typically the seller is a manufacturer Can also be an individual o Indirect Marketing Channel One or more intermediaries work with manufacturers to provide goods services to customers Wholesalers prevalent when company does not buy in sufficient quantities for it to be cost effective for the manufacturer to deal directly with them Also common in less developed economies Retailing and Multichannel Marketing the set of business activities that add value to products and services involves selling in more than one channel e g store o Retailing sold to consumers for their personal or family use catalog internet o Multichannel Strategy o Factors for Establishing a Relationship with Retailers Choosing Retail Partners Channel Structure Degree of vertical integration Manufacturers brand Power of manufacturer and retailer Identify types of retailers Food General merchandise Service Developing a retail strategy Benefits of Stores for Consumers Browsing Touching and Feeling Personal Service Cash and Credit Entertainment and Social Interaction Risk Reduction Instant Gratification Benefits of the Internal and Multichannel Retailing Personalization Deeper and Broader Selection Gain insights into Consumer Shopping Behavior Expand Market Presence Increase Customer Satisfaction and Loyalty Managing a Multichannel Strategy Strategic Relationships Open Communications Mutual Trust Common Goals Interdependence Credible Commitments Pricing and Margins and Markups Steps in Setting Price o Balancing the Marketing Mix with Price Value Capture Revenue Value Creation Expenses Price Product Promotion Place Price is a signal 5 C s of Pricing Competition Costs Company objectives Customers Channel Members Can be both too high and too low Price set too low can signal low quality Price set too high can signal high demand forecast Justification for Pricing Strategy o Costs o Competition Break Even Analysis and Decision Making Less Price Competition and Fewer Firms Monopoly one firm controls the market More Price Competition and Fewer Firms Oligopoly a handful of firms control the market Less Price Competition and Many Firms Monopolistic Comp many firms selling differentiated products at different prices More price Competition and Many Firms Pure Competition many firms selling commodities for the same prices o Cost based Methods start with cost All costs calculated on a per unit basis Assumes costs don t vary for different levels of production Set prices to signal information of how a product compares with competitors o Value based Consumers may be willing to spend more initially if over the lifetime the product will eventually cost less to own o Competitor based o Everyday low pricing EDLP Saves search costs of finding lowest overall prices Provides the thrill of the chase for the lowest price o High Low Pricing o New Product Pricing Price skimming Appeals to consumers willing to pay the premium price to have the innovation first Pay higher price to obtain new product Lower the price to capture skim the next price sensitive market segment Continue until demand satisfied Penetration Pricing Experience curve effect Set the price low build market share sales and profits quickly Incentive to purchase immediately accumulated volume sold increases unit cost drop significantly as the Sales grow costs drop Discourages competitors from entering the market the reductions retailers take on the initial selling price of the Get rid of slow moving obsolete merchandise sell season items after the appropriate season match competitors prices the larger the quantity the less the cost per ounce quantity o Markdowns product or service o Size discount discount Encourage consumers to purchase larger quantities each time they buy price reductions offered on products and services to Less likely to switch brands o Seasonal discount stimulate demand during off peak seasons o Coupons purchased offer a discount on the price of specific items when they re Induce customers to try products for the first time May annoy alienate confuse customers Some