MARKETING MANAGEMENT – MBA 504

PIM MBA – 2019

1. Defining Marketing for the New Realities – Chapter 1
2. Developing Marketing Strategies & Plans – Chapter 2
3. Analyzing Consumer Markets – Chapter 6
4. Conducting Market Research & Forecasting Demand – Chapter 4 & 5
5. Identifying Market Segments & Targets & Crafting the Brand Positioning – Chapters 9 & 10
6. Marketing Myopia – HBR Article
7. Creating Brand Equity – Chapter 11
8. Designing & Managing Services – Chapter 14
9. Channels & Distribution Strategies – Chapter 21 & 22
10. Revision & Discussion
Asanga Ranasinghe
Marketing Channels
• Most producers do not sell their goods directly to the final users.
• Between producer & end user stands a set of intermediaries performing a variety of functions - a
marketing channel (also called a trade channel or a distribution channel).
• Marketing channels are sets of interdependent organizations participating in the process of making a
product or service available for use or consumption.
• A set of pathways a product or service follows after production, culminating in purchase & consumption
by the final end user

Asanga Ranasinghe
Marketing Channels
• The Importance of Channels
o One of the chief roles of marketing channels is to convert potential buyers into profitable customers.
o The channels chosen affect all other marketing decisions.
✓ The company’s pricing depends on whether it uses online discounters or high-quality boutiques.
✓ Its sales force & advertising decisions depend on how much training & motivation dealers need.
✓ Channel choices depend on the company’s marketing strategy with respect to segmentation, targeting, & positioning.
o In managing its intermediaries, the firm must decide how much effort to devote to push and to pull marketing.
o A push strategy uses the manufacturer’s sales force, trade promotion money, or other means to induce
intermediaries to carry, promote, & sell the product to end users.
o In a pull strategy the manufacturer uses advertising, promotion, & other forms of communication to persuade
consumers to demand the product from intermediaries, thus inducing the intermediaries to order it.

Top marketing companies such as Apple, Coca-Cola, & Nike skillfully employ both push and
pull strategies. A push strategy is more effective when accompanied by a well-designed and
well-executed pull strategy that activates consumer demand. On the other hand, without at least
some consumer interest, it can be very difficult to gain much channel acceptance and support,
and vice versa for that matter.

Asanga Ranasinghe
Marketing Channels
• Multichannel Marketing
o Today’s successful companies typically employ multichannel marketing – use two or more marketing channels
to reach shopper segments in one market area.
o Each channel can target a different segment of shoppers to deliver the right products in the right places in the
right way at the least cost.

HP uses its sales force to sell to large accounts, outbound telemarketing to sell to medium-sized accounts, direct
mail with an inbound phone number to sell to small accounts, retailers to sell to still smaller accounts, and the
Internet to sell specialty items.

o Companies are increasingly employing digital distribution strategies, selling directly online to customers or
through e-merchants who have their own Web sites.
o An integrated marketing channel system is one where multiple channels work seamlessly together & match
shopper types/ needs, delivering the right product information & customer service regardless of whether
shoppers are online, in the store, or on the phone.
o Adding more channels gives companies 3 important benefits.
1. Increased market coverage.
2. Lower channel cost
3. Ability to do more customized selling
Asanga Ranasinghe
The Role of Marketing Channels
• Many producers lack the financial resources & expertise to sell directly on their own.
• A marketing channel performs the work of moving goods from producers to consumers.

The William Wrigley Jr. Company would not find it practical to establish small retail gum
shops throughout the world or to sell gum online or by mail order. It is easier to work
through the extensive network of privately owned distribution organizations.

• Channel member functions

o Gather information about potential & current customers, competitors, & other actors & forces in the
marketing environment.
o Develop & disseminate persuasive communications to stimulate purchasing.
o Negotiate & reach agreements on price & other terms so that transfer of ownership or possession can be
affected.
o Place orders with manufacturers.
o Acquire the funds to finance inventories at different levels in the marketing channel.
o Assume risks connected with carrying out channel work.
o Provide for the successive storage & movement of physical products.
o Provide for buyers’ payment of their bills through banks & other financial institutions.
Asanga Ranasinghe
The Role of Marketing Channels
• A manufacturer selling a physical product & services might require 3 channels.
1. a sales channel
2. a delivery channel
3. a service channel

• All channel functions have 3 characteristics in common.

1. they use up scarce resources
2. they can often be performed better through specialization
3. they can be shifted among channel members

• Shifting some functions to intermediaries lowers the producer’s costs & prices. If the intermediaries are
more efficient than the manufacturer, prices to consumers should be lower.
• To sell its Bowflex fitness equipment, the Nautilus Group historically has emphasized
direct marketing via television infomercials & ads, inbound/outbound call centers,
response mailings, & the Internet as sales channels; UPS ground service as the delivery
channel; & local repair people as the service channel.
• Reflecting shifting consumer buying habits, they now also sells through regional &
national retailers such as Sears and Dick’s Sporting Goods as well as through online
merchants such as Amazon.com.
Asanga Ranasinghe
Channel- Design Decisions
• In designing a marketing channel system, marketers need to perform 7 fundamental tasks.
1. Analyzing shopper needs & wants
o Shoppers may choose the channels they prefer based on price, product assortment, & convenience as well as
their own shopping goals (economic, social, or experiential).
o Channel segmentation exists, & marketers must be aware that different shoppers have different needs during
the purchase process.
o Even the same shopper, though, may choose different channels for different reasons.
o Shoppers are willing to

✓ “trade up” to retailers offering higher-end goods such as Rolex

watches or Callaway golf clubs

✓ “trade down” to discount retailers for private-label paper

towels, detergent, or vitamins.

✓ Others may browse a catalog before visiting a store or test-drive

a car at a dealership before ordering online.
Asanga Ranasinghe
Channel- Design Decisions
2. Establishing objectives & constraints
o Marketers should state their channel objectives in terms of the service output levels they want to provide & the
associated cost a& support levels.
o Channel objectives vary with product characteristics.
✓ Bulky products, such as building materials, require channels that minimize the shipping distance & the amount of
handling.
✓ Nonstandard products such as custom built machinery are sold directly by sales representatives.
✓ Products requiring installation or maintenance services, such as heating & cooling systems, are usually sold &
maintained by the company or by franchised dealers.
✓ High-unit-value products such as generators & turbines are often sold through a company sales force rather than
intermediaries.

• Apple’s channel objective of creating a dynamic retail experience for consumers was
not being met by existing channels, so it chose to open it own stores.
• Apple Stores have been an unqualified success in fueling excitement for the brand.
• They let people see & touch the products— experience what Apple can do for them
• They target tech-savvy customers with in-store product presentations & workshops.
• Although the stores initially upset existing Apple retailers, the company worked hard
to smoothen relationships, in part justifying its decision as a natural evolution of its
online sales channel.

Asanga Ranasinghe
Channel- Design Decisions
3. Identifying major channel alternatives
o Each distribution channel has unique strengths & weaknesses.
o Sales forces can handle complex products & transactions, but they are expensive.
o Internet is inexpensive but may not be as effective for complex products.
o Distributors can create sales, but the company loses direct contact with customers.
o Distributor sales representatives can share the cost of manufacturers’ reps, but the selling effort is less intense than
company reps provide.
o Channel alternatives differ in 3 ways.
1. the types of intermediaries
2. the number needed
3. the terms & responsibilities of each intermediary

STIHL manufactures hand held outdoor power equipment. All its products are branded under one name,
& it does not make private labels for other companies. Best known for its chain saws, the company has
expanded into string trimmers, blowers, hedge trimmers, & cut-off machines. It sells exclusively to six
independent U.S. distributors & six company-owned marketing & distribution centers, which sell to a
nationwide network of more than 8,000 independent retail dealers offering service. STIHL also exports to
80 countries & is one of the few outdoor-power-equipment companies not selling through mass
merchants, catalogs, or the Internet.

Asanga Ranasinghe
Channel- Management Decisions
4. Selecting channel members
o To customers, the channels are the company, hence careful selection of
channel members is critical.
o To facilitate channel member selection, producers should determine what
characteristics distinguish the better intermediaries.
✓ number of years in business
✓ other lines carried
✓ growth & profit record Consider the negative impression
✓ financial strength customers would get of McDonald’s,
✓ cooperativeness Shell Oil, or Mercedes-Benz if one
✓ service reputation. or more of their outlets or dealers
consistently appeared dirty,
o If the intermediaries are sales agents, producers should evaluate inefficient, or unpleasant.
✓ the number & character of other lines carried
✓ the size and quality of the sales force.

o If the intermediaries are department stores

✓ whether they want exclusive distribution
✓ their locations
✓ their future growth potential
✓ type of clientele they target & attract.
Asanga Ranasinghe
Channel- Management Decisions
5. Training & motivating channel members
o A company needs to view its channel members the same way it views its end users
✓ should determine their needs & wants & tailor its channel offering to provide them with superior value.
o Carefully implemented training, market research, & other capability-building programs can motivate & improve
channel members’ performance.

Microsoft requires its third-party service engineers to complete a set of courses and take certification
exams. Those who pass are formally recognized as Microsoft Certified Professionals and can use this
designation to promote their own business.

o Most producers see gaining intermediaries’ cooperation as a huge challenge & use positive motivators, such as
higher margins, special deals, premiums, cooperative advertising allowances, display allowances & sales
contests.
o Modern companies try to forge a long-term partnership with distributors (Joint Business Plans – JBPs) with a
comprehensive compensation plan with clear deliverables.
✓ market coverage
✓ inventory levels
✓ market development
✓ technical advice & services
✓ marketing information
Asanga Ranasinghe
Channel- Management Decisions
6. Evaluating channel members’ performance
o Producers must periodically evaluate intermediaries’ performance against such standards as
✓ sales-quota attainment
✓ average inventory levels
✓ customer delivery time
✓ treatment of damaged & lost goods
✓ cooperation in promotional & training programs.
7. Modifying channel design & arrangements
o No channel strategy remains effective over the whole product life cycle & will inevitably need change over
time.
o The change could mean adding or dropping some channels or channel members or developing a totally new
way to sell goods.
o In short, the channel system evolves as a function of local opportunities & conditions, emerging threats &
opportunities, & company resources & capabilities.
Small office copiers were first sold by
When new competition from Best manufacturers’ direct sales forces,
Buy & Costco forced 1/3 of Leica’s later through office equipment
U.S. dealers to close, the high-end dealers, still later through mass
camera maker decided to open its merchandisers, & now by mail-order
own stylish stores to appeal to firms & Internet marketers.
serious photographers. Asanga Ranasinghe
Channel- Management Decisions Extended Reading
• No matter how well channels are designed & managed, there will be some conflict - because the
channel interests do not always coincide.
• Channel conflict is generated when one channel member’s actions prevent another channel member
from achieving its goal.
• Channel coordination occurs when channel members are brought together to advance the goals of the
company instead of their own potentially incompatible goals.
• Causes of channel conflict
o Goal incompatibility - The manufacturer may want to achieve rapid market penetration through a low-price
policy whereas dealers may prefer to work with high margins & pursue short-run profitability.
o Unclear roles & rights – The manufacturer may sell product to large accounts through its own sales force, but
its licensed dealers may also be trying to sell to same accounts
o Differences in perception. The manufacturer may be optimistic about the short-term economic outlook & want
dealers to carry higher inventory, while the dealers may be pessimistic.
o Intermediaries’ dependence on the manufacturer. The dealers are affected by the manufacturer’s product &
pricing decisions.
• Some channel conflict can be constructive & lead to better adaptation to a changing environment, but
too much is dysfunctional.
• The challenge is not to eliminate all conflict, which is impossible, but to manage it better.
Asanga Ranasinghe
Retailing
• Retailing includes all the activities in selling goods or services directly to final consumers for personal,
nonbusiness use.
• A retailer or retail store is any business enterprise whose sales volume comes primarily from retailing.
• There are 2 types of retailers
o Store retailers - Different formats of store retailers will have different competitive & price dynamics.
✓ Specialty store: Narrow product line.

✓ Department store: Several product lines.

✓ Supermarket: Large, low-cost, low-margin, high-volume, self-service store

designed to meet total needs for food & household products.

✓ Convenience store: Small store in residential area, often open 24/7,

limited line of high-turnover convenience products plus takeout.

✓ Drug store: Prescription & pharmacies, health & beauty aids, other personal care, small durable,
miscellaneous items.

✓ Discount store: Standard or specialty merchandise; low-price, low-margin, high-volume stores.

Asanga Ranasinghe
Retailing
• Retailing includes all the activities in selling goods or services directly to final consumers for personal,
nonbusiness use.
• A retailer or retail store is any business enterprise whose sales volume comes primarily from retailing.
• There are 2 types of retailers
o Store retailers - Different formats of store retailers will have different competitive and price dynamics.
o Non-store retailing – Although bulk of goods & services is sold through stores, non-store retailing has been
growing much faster than store retailing, especially because of e-commerce.

✓ Direct marketing has roots in direct-mail & catalog marketing. People are ordering a
greater variety of goods & services from a wider range of Web sites. In the United
States, online sales were estimated to be 6 % of total retail sales.

✓ Direct selling, also called multilevel selling & network marketing, is a multibillion-
dollar industry, with companies selling door to door or through at-home sales
parties.

✓ Automatic vending offers a variety of merchandise, are found in factories, offices,

large retail stores, gasoline stations, hotels, restaurants, & many other places. They
offer 24-hour selling, self-service, & merchandise that is stocked to be fresh.
Asanga Ranasinghe
Retailing
• Marketing decisions retailers have to make
o Target market - Until it defines & profiles the target market, the retailer cannot make consistent decisions
about product assortment, store decor, advertising messages & media, price, & service levels.

Whole Foods has succeeded by offering a unique shopping experience to a

customer base interested in organic & natural foods.

o Channels - Based on a target market analysis, retailers must decide which channels to employ to reach their
customers. Increasingly, the answer is multiple channels.

Victoria’s Secret’s integrated multichannel approach of retail stores, catalog, & Internet has
played a key role in its brand development.

o Product assortment - The retailer’s product assortment must match the target market’s shopping expectations
in breadth and depth.
✓ Destination categories may play a particularly important role because they have the greatest impact on where
households choose to shop & how they view a particular retailer.

Both Coles & Woolworth, work closely with their farmers & growers across Australia to look at the
way their fresh products are grown, harvested & prepared & have rejuvenated their offer &
developed fantastic new product assortment as a differentiation strategy.
Asanga Ranasinghe
Retailing
• Marketing decisions retailers have to make
o Procurement - After deciding on the product-assortment strategy, the retailer must establish merchandise
sources, policies, & practices - demand forecasting, merchandise selection, stock control, space allocation, &
display.
While other food retailers carry thousands of products, ALDI’s product range is very narrow. ALDI is very
focused on products with high turnover, which it can source in high quantities at low prices. Logistics,
weekly promotions, & store displays of products in transport boxes are designed to keep costs as low as
possible in order to provide value. High quality at low prices is the brand promise.

o Prices - Prices are a key positioning factor & must be set in relationship to the target market, product-&-service
assortment mix, & competition.
Walmart has abandoned “sale pricing” in favor of everyday low pricing (EDLP). EDLP positioning has
lead to lower advertising costs, greater pricing stability, a stronger image of fairness & reliability, &
higher retail profits. TELDP is Walmart’s key positioning factor.

o Service – Providing reliable customer service to shoppers, whether face to face, across phone lines, or via
online
o Store atmosphere – Focusing on all the senses in shaping a memorable customer’s experience.
o Communications – Using the right & effective mix of communication tools to generate traffic & purchases.
o Store locations - The three keys to retail success are often said to be “location, location, and location.”
Asanga Ranasinghe
The Modern Retail Marketing Environment
• The retail marketing environment is dramatically different today from what it was just a decade or so
ago – 3 areas that have seen enormous change
1. Competitive retail market structure - The retail market is very dynamic, & a number of new types of
competitors & competition have emerged in recent years - 5 important developments
1. New retail forms & combinations - Bookstores feature coffee shops. Gas stations include
food stores. Supermarkets have fitness clubs.
2. Growth of giant retailers - Through their superior IT, logistical systems, & buying power, giant
retailers are able to deliver good service & immense volumes of product to masses of
consumers at appealing prices.
3. Growth of intertype competition - Department stores are expanding into product areas -
clothing, health, beauty, & electrical appliances
4. Emergence of fast retailing – Retailers develop completely different supply chain &
distribution systems to allow them to offer consumers constantly changing product choices.
5. Decline of middle market retailers - Growth is centered at the top (with luxury offerings) &
at the bottom (with discount pricing). Opportunities are scarcer in the middle, where once-
successful general trade is struggling or even gone out of business.

2. Role of technology - Technology is profoundly affecting the way retailers conduct virtually every facet of their
business – forecasting, inventory cost control, & supplier orderings, reducing the need to discount & to
improve consumer shopping experience inside the store.
Asanga Ranasinghe
The Modern Retail Marketing Environment
• The retail marketing environment is dramatically different today from what it was just a decade or so
ago – 3 areas that have seen enormous change
3. Shopper marketing is the art & science of communicating to a shopper & get him/ her to purchase by mining
shopper/ retailer insights.
o It is behavior based – moving shoppers
through consideration to purchase to
advocacy
o It’s the science of driving conversion &
enhancing the brand equity.
o It’s the way to influence & educate
shoppers by using the retail space as a
communication channel.
o It’s an approach to help retailers build &
grow categories.
o In todays’ world focusing on traditional
advertising alone will not build strong
brands
o Modern marketing need to understand
the entire consumer – consuming &
shopping
Asanga Ranasinghe
Wholesaling Extended Reading

• Wholesaling includes all the activities in selling goods or services to those who buy for resale or
business use.
• Wholesalers (also called distributors) differ from retailers in a number of ways.
1. wholesalers pay less attention to promotion, atmosphere, & location because
they are dealing with business customers rather than final consumers.
2. wholesale transactions are usually larger than retail transactions,
& wholesalers usually cover a larger trade area than retailers.
3. wholesalers & retailers are subject to different legal regulations and taxes.

• Wholesalers (WHs) can more efficiently perform one or more of the following functions than companies
going direct to retailers or consumers:
o WH’s sales forces help manufacturers reach many small business customers at a lower cost.
o WHs are able to select items & build assortments their customers need, saving them considerable work.
o WHs hold inventories, thereby reducing inventory costs & risks to suppliers & customers.
o WHs can provide quicker delivery to buyers because they are closer to the buyers.
o WHs finance customers by granting credit & finance suppliers by ordering early & paying bills on time.
o WHs absorb some risk by taking title & bearing the cost of theft, damage, spoilage, & obsolescence.
o WHs supply information to suppliers & customers regarding competitors’ activities, NPD etc
Asanga Ranasinghe
E-Commerce Marketing Practices
• E-Commerce uses a Web site to transact or facilitate the sale of products & services online.
• Online retailers can predictably provide convenient, informative, & personalized experiences for vastly
different types of shoppers & businesses.
• By saving the cost of retail floor space, staff, & inventory, they can also profitably sell low-volume
products to niche markets.
• Online retailers compete in 3 key aspects of a transaction:
1. customer interaction with the Web site,
2. delivery,
3. ability to address problems when they occur

To drive traffic to their sites, eBay and Amazon are offering same-day delivery in major markets employing
affiliate marketing supported with a good return policy which is unmatched to brick & mortar stores.

• Consumer surveys suggest that the most significant inhibitors of online shopping are the absence of
pleasurable experiences, social interaction, & personal consultation with a company representative.
• Firms have responded by offering live online chats, blogs & videos to give potential customers
immediate advice about products & suggest additional items.
Asanga Ranasinghe
Marketing Excellence (page 680/681) – Amazon.com

Founded by Jeff Bezos in 1995, Bezos promised to revolutionize retailing, Amazon initially set out to create
Amazon.com started as the “world’s however, and over the years he has blazed a personalized storefronts for each
largest bookstore” and, ironically, trail of e-commerce innovations that many customer by providing more useful
owned no books. executives have studied and companies have information and more choices than
followed found in a neighbourhood bookstore.

Amazon has successfully

Amazon started to diversify its
reinvented itself time and again
product line in the late 1990s, first
and created a critical channel for
with DVDs and videos and then with
merchants around the world who
consumer electronics, games, toys,
are able to reach more than 244
software, video games, and gifts
million customers worldwide

Maintained competitive and low prices One consistent key to Amazon’s success is
The company continued to
throughout its product expansion. its willingness to invest in the latest
expand its product offerings :
The company understands how important technology to make shopping online
Amazon Video On Demand,
it is to keep its prices low in order to drive faster, easier, and more personally
Amazon MP3, Kindle. Today, you
the volume it needs to remain a market rewarding for its customers and third-
can find virtually anything you
leader and expand geographically party merchants.
want on Amazon.com
Asanga Ranasinghe
Summary
• Between producers & final users stands one or more marketing channels – intermediaries performing variety of
functions.
• The most important functions performed by intermediaries are information, promotion, negotiation, ordering,
financing, risk taking, physical possession, payment, & title.
• Deciding which type(s) of channel to use calls for analyzing customer needs, establishing channel objectives, &
identifying & evaluating the major alternatives, including the types & numbers of intermediaries involved.
• Effective channel management calls for selecting intermediaries & training & motivating them - to build a long-
term partnership that will be profitable for all channel members.
• Retailing includes all the activities in selling goods or services directly to final consumers for personal or to non-
business use.
• The major types of retail stores are specialty stores, department stores, supermarkets, convenience stores,
discount stores, extreme value or hard-discount store, off-price retailers, superstores, & catalog showrooms.
• Non-store retailing includes direct selling, direct, automatic vending, & buying services.
• Wholesaling includes all the activities in selling goods or services to those who buy for resale or business use.
• Wholesalers can perform some functions better & more cost-effectively than the manufacturer can – selling &
promoting, buying & assortment building, bulk breaking, warehousing, transportation, financing, risk bearing,
dissemination of market information, & provision of management services & consulting.
• E-Commerce is growing & provide convenient, informative, & personalized experiences for vastly different types of
consumers & businesses.
Asanga Ranasinghe