marketing channels (upstream vs downstream)
- Supply chain (from manufactures perspectives)
o Upstream – suppliers that supply raw materials
o Downstream – marketing intermediaries
Retailer
Wholesaler
direct vs indirect distribution benefits
Benefits of direct channels (to producer)
o More control
o Closer customer contact
o Eliminates double margins
Benefits of indirect channels (to producer)
o Rapid penetration and broader coverage
o Benefits of specialization
o Variable rather then fixed cost structure
Reasons for indirect channel
- Lower transaction costs
- Customer desire product assortments
- Manufacturer simply have inadequate resources
- Better rate of return on core business
- Value is added by intermediaries
a. Carry inventory
b. Physical distribution
c. Demand generation/selling -customization (add-ons)
d. After sales service -repairs, installation
e. Extending credit -financing
types of distribution channels
Intensive distribution (as many outlets as possible)
Usually simple, inexpensive, easily transported products
Ex: drugstore, supermarket
Pull strategy
* Promote directly to end consumers to generate demand
Selective distribution (not all outlets but more than just one or two)
Limited distribution
Complex and or expensive products
Ex: cars, customers
Push strategy:
* Promote to distribution partners to push good thorough channel to customer
Exclusive distribution
Extremely selective distribution
Ex: Rolex or Ferrrari
Manufactures have the most control
Can become monopolistic
level of ownership, level of service, and product assortment
Management level of ownership
Independent
Branded store chains
Franchises
Level of service provided
Usually related to price points
Product assortment carried
Specialty carry depth not much breadth
* Ex: toy store
General merchandise: carry breadth
* Ex: grocery store
types of franchising
Product franchising
o Supplier authorized a distributor is a territory to carry its product
o Ex: Coke, Ford
Business format franchising
o Company offers proven system to conduct business
o McDonalds, Holiday in
channel conflict
- Vertical
o Conflict between different levels of the same channel
o More common
o Free riding - Horizontal
o Occurs among firms at the same level of channel
vertical channel conflict solutions
- Exclusive territories
- Branded variant
- Co-op advertising
- Dual distribution
- Resale price maintenance
horizontal channel conflict solutions
- Quotas and quantity forcing
- Exclusive dealings contract
- Manufactures run outlets (sell direct)
- Differentiate from other manufactures
competitive advantage of PL
- Better margins (not necessary always)
- Build store loyalty
- Negotiate better terms
need for both PL and national brand
- PL have lower prices
- NB build store traffic (PULL)
- Need balanced approach
3 ways to build harmonious relationships between PL and national brand
Dedicated private label strategy
o Concentrate exclusively on making PL
o Challenges
Risks associated with product introductions
NBs protect with patents
Overdependence on key customers
o Key success factors
Low costs
Unsurpassed flexibility
Co-branding strategy
o Retailer offer cobranded products in which NB are an element in PL product
Dual strategy
o Model where manufactures make both its own brand and private label brand
when should national brands engage in dual strategy
- Total cost is lower then variable costs of competitors
- Variable cost lower then variable cost of competitors
- Is their spare capacity
- Is there spare enduring
successful dual strategy
DO NOT
o Dilute focus on NB
o Borrow the latest innovations developed for NB
TC engaging in PL production
- ^ exceptions are
o PL is only on sessional basis
o PL for less important categories
o No evidence that brand matters
