Managing Marketing Channels - Literature review Example

Question 1 There are a variety of factors that might play a role in influencing the selection of a distribution channel for a product or service. According to Tutor2u (2008, pg. 1), “Most businesses use third parties or intermediaries to bring their products to market. They try to forge a ‘distribution channel’ which can be defined as ‘all the organisations through which a product must pass between its point of production and consumption.’” Businesses experience a significant trade off when they decide to utilize the services of third parties along a distribution channel. In turn for giving up some of the control over how their products are sold, they gain the expertise and efficiency of distribution costs. “Intermediaries are specialists in selling. They have the contacts, experience and scale of operation which means that greater sales can be achieved than if the producing business tried run a sales operation itself” (Tutor2u, 2008, pg. 1). “The main function of a distribution channel is to provide a link between production and consumption. Organisations that form any particular distribution channel perform many key functions” (Tutor2u, 2008, pg. 1). These can include factors such as information, promotion, contact, matching, negotiation, physical distribution, financing, and risk taking (Tutor2u, 2008). The amount of information an intermediary knows is crucial for market planning. The ability of an intermediary to promote a product tells how efficient it is at communicating product and offer information. Contacts held by a particular intermediary lets a business know how well it can find and communicate with prospective buyers. The ability of an intermediary to match means whether or not it is able to meet the needs of prospective buyers. Negotiation refers to the ability of an intermediary to reach agreements on prices and other terms. The physical distribution for an intermediary refers to its ability to transport and/or store products. The ability to acquire and use funds to cover costs refers to the financing ability of an intermediary. Finally, an activity such as holding stock in other organizations shows an intermediary’s willingness to take risks (Tutor2u, 2008). According to the material presented at Tutor2u (2008, pg. 1), “All of the above functions need to be undertaken in any market. The question is - who performs them and how many levels there need to be in the distribution channel in order to make it cost effective.” Three examples of channel levels include those channel levels which consist of no intermediary, one intermediary, and two intermediaries. When there is no intermediary in a channel, it is known as direct marketing. An example of this is a factory outlet store. A channel with one intermediary is usually a retailer. A channel with two intermediaries could be illustrated through the UK drug market (Tutor2u, 2008). Oversaturation occurs when the marketplace is crowded of a particular product or service. One relevant example of this in the U.K. is superhero movies. During the summer of 2008, a large number of superhero films were released—such as the Incredible Hulk—leaving the market oversaturated with them (Guardian, 2008). An example of a conflict occurring over stock levels is the recent release of Mac’s iPhone all throughout the world, including the UK. When it was released into the marketplace, consumer demand exceeded the supply available. Therefore, it was hard for distribution channel members to keep them on store shelves (MacRumors, 2008). An example of conflict involving direct versus indirect channels comes into play with Computer Associates. According to Yirrell (2002, pg. 1), “The world's third largest software vendor has pledged to eliminate the long-standing conflict between direct and indirect and has launched a strategy which it claims will encourage the two sides to work together.” One company that refuses to be locked into a single supplier is WISE I.T. Solutions. They claim this decision was made because, as a company, they, “realise that no single hardware or software company provides the best solution for every scenario. As a result, our consultants have a broader product knowledge and our clients receive the best possible solutions for their individual situations” (WISE IT, 2008, pg. 1). An example of technological requirements in the area of marketing is the standard call centre location. Three of the main areas in this category are location, layout, and furnishing. These come, of course, in addition to the technological requirements of the actual equipment in a call centre. Typically, this equipment consists of high-end telephones and other communications equipment (Sarkisian and Le, 2000). Question 2 According to Logistics World (2008, pg. 1), “Logistics is defined as a business planning framework for the management of material, service, information and capital flows. It includes the increasingly complex information, communication and control systems required in today's business environment.” According to the work of RAI Foundation Colleges (2008, pg. 1), “In terms of logistical system design and administration, each firm must simultaneously achieve at least six different operational objectives. These operational objectives, which are the primary determinants of logistical performance, include rapid response, minimum variance, minimum inventory, movement consolidation, quality, and life-cycle support.” Rapid response in logistics management deals with a firm’s ability to satisfy their customers’ needs in a timely fashion. Minimum variance is associated with avoiding variance, which is any unexpected event that disrupts the performance of a business system. Keeping minimum inventory helps to keep it as low as possible to reduce costs while still meeting customer needs. Movement consolidation involves combining things to keep transportation costs as low as possible. Quality improvement defines itself in that it simply refers to seeking continual improvement in overall quality. Finally, life-cycle support refers to the fact that products need to be sold with some sort of guarantee that they will perform as promised (RAI Foundation Colleges, 2008). There are trade-off decisions that exist with regard to determining logistics objectives. Sometimes managers must use a little give and take, because they absolutely must carry a delicate balance of each of the aforementioned areas. According to Mentzer and Firman (1994, pg. 1), “Measurement and control of logistics performance entails four broad aspects: information systems to gather and report performance measures, what constitutes good performance measures, variance analysis, and corrective action.” Question 3 According to CEI Logistics (2008, pg. 1), “The first step in any process improvement initiative should be to benchmark the current process. The “do nothing” alternative will form the baseline against which all alternative concepts are judged. It is not enough just to do better. You must do better in a manner that is both economically and qualitatively justified. There are likely multiple ways to improve upon the current process. An analysis of all practical concepts will identify the optimal solution.” They list the following concepts to define: Investment Required Impact to layout / material flow Impact on information systems Space required Annual labor costs Estimated savings Other benefits Qualitative factors (CEI Logistics, 2008, pg. 1) There are a number of factors that can affect the scope and frequency of channel evaluations. These include, but are not limited to, the following: loans, point-of-sale debits, credit card usage, investments, electronic bill payment, customer satisfaction, cost of customer services, number of branches, amount of staff, account retention, cost of call centres, brand awareness, market positioning, and market share (Bruene, 1997). According to Schierholz, et.al (2005, pg. 1): The burst of the e-bubble largely affected the expectations towards and the willingness to invest in mobile initiatives. Recently, the interest for mobile business and mobile commerce both in academia and in the practice field have risen again. This time, business managers request detailed and reliable reporting about the benefits of such initiatives for the justification of the investment though. A prominent example for such mobile initiatives is mobile marketing, where the pervasiveness and personalization features of mobile technologies such as cellular are taken advantage of. Typically these mobile marketing initiatives are embedded in a multi-channel management. Current management accounting instruments do not provide sufficient information about the performance of the different channels. Particularly new and innovative channels such as mobile marketing are required to prove their efficiency and thus need such instruments. One of the most challenging aspects of any marketing plan can be measuring its performance. This, in turn, makes it difficult for companies to improve or change those channels. “The best-in-class channel manager is the organisation that implements the best channel strategy in its industry and is the best manager of its relationships with channel providers. Benchmarking an organisation’s channel management performance (both internally and against the best-in-class) can help managers focus on the measurement criteria and tasks required to improve channel performance” (Bellin, 2007, pg. 1). The use of a Channel Management Framework, or CMF, can assist with channel strategy formulation as well as in making decisions on a daily basis. According to Bellin (2007, pg. 1), a qualified CMF will be: • Market-driven and based on customer needs • Framework-based • Efficient – balances cost, control and coverage • Cost effective • Adaptable and capable of continuous improvement • Takes a long term perspective • Incorporates a robust core offer (quality products for which there is substantial market demand) which includes competitive pricing; appropriate financial and commercial terms given the skill and effort required; capital investment and risks associated with selling the product or service; excellent logistical support. • Maintains an ease of doing business for all parties There are a variety of typical performance evaluation questions. These include determining the needs of the customer, determining the preferred channels, determining their before and after purchase expectations, who purchases the product or brand, what are the customers’ preferred channels, how well do existing channels support customers, are the channels effective in meeting organizational and customer needs, what are the roles and responsibilities of the channels, and are the channels efficient (Bellin, 2007). Bibliography Bellin, H., ‘Managing marketing channels made easy’, 2007, Inside Retailing. [online]. http://www.insideretailing.com.au/articles-page.aspx?articleType=ArticleView&articleId=1145 Bruene, J., ‘Four-pronged approach to delivery channel evaluation’, 1997, NetBanker. [online]. http://www.netbanker.com/1997/08/four-pronged_approach_delivery_channel_evaluation.html ‘Concepts, objectives, and elements of logistics’, 2008, RAI Foundation Colleges. [online]. http://www.rocw.raifoundation.org/management/mba/Int_Logisticsmanagement/lecture-notes/lecture-01.pdf ‘Distribution’, 2008. Tutor2u. [online]. http://tutor2u.net/business/marketing/distribution_introduction.asp ‘Distribution process improvement’, 2008, CEI Logistics. [online]. http://www.ceilogistics.com/distribution_operations_design/distribution_facility_process.htm ‘Hulk director: Too many superhero movies’, 2008. Guardian. [online]. http://www.guardian.co.uk/film/2008/jun/13/sciencefictionandfantasy ‘Logistics’, 2008, Logistics World. [online]. http://www.logisticsworld.com/logistics.htm Mentzer, J.T. and J. Firman, ‘Logistics control systems in the 21st century’, 1994. [online]. http://findarticles.com/p/articles/mi_qa3705/is_199401/ai_n8712868 Sarkisian, E.J. and P. Le, ‘The outbound call center: New technology requirements for a new role’, 2000, Call Centre CRM Solutions. ‘UK Apple store stock levels’, 2008. MacRumors. [online]. http://forums.macrumors.com/showthread.php?t=521881 ‘WISE I.T’, 2008, WISE I.T. [online]. http://www.wiseit.net.au/ Yirrell, S., ‘CA calls for end to direct/indirect conflict’, 2002, CRN. [online]. http://www.channelweb.co.uk/crn/analysis/2011431/ca-calls-direct-indirect-conflict Read More