marketing management questions and answers part2

MARKETING MANAGEMENT PHILIP KOLTER QUESTIONS + ANSWERS AND EXAMPLES FOR FINAL TESTPART 2CHAPTER 10 CHAPTER 15 CHAPTER 17ContentsChapter 13So why is Marketing crucial for business success?3What is the scope of marketing?4What are some fundamental marketing concepts?6How has marketing management changed in recent years?8What are the task necessary for successful marketing management?94 P Explanation12Holistic marketing15Internal marketing174P Examples18Chapter 220How does marketing affect customer value?20How is strategic planning carried out at different levels of the organization?21Value chain23What does a marketing plan include?26Characteristics of Strategic Business Unit27Value chain example33Core business process:37Strategic business units38Mission Statement39Components of a Corporate Strategic Plan40Chapter 345What are the components of a modern marketing information system?45What are useful internal records for such a system?46What are some influential macroeconomic developments?47What makes up a marketing intelligence system?48Chapter 1049How can a firm develop and establish an effective positioning in the market?49How do marketers identify and analyze competition?51How are brands successfully differentiated?52Apple example52Differnent big and small53Emotional branding55Nike Brand Strategy57Different strategy57Chapter 1559What is a marketing channel system and value network?59What work do marketing channels perform?59How should channels be designed?60What decisions do companies face in managing their channels?60How should companies integrate channels and manage channel conflict?62Roles of marketing channels63Types of Marketing Channels65Horizontal marketing system66Vertical Marketing System68Horizontal VS Vertical Marketing70Chapter 1770What is the role of marketing communications?70What are the major steps in developing effective communications?71Marketing communications mix73Advertising Nike Products76Marketing communication effects77Developing effective communications78What is an integrated marketing communications program?80Toyota81Chapter 10 How can a firm develop and establish an effective positioning in the market?What are the methods to determine positioning?Determining a frame of reference by identifying the target markets and relevant competitionIdentifying and Analyzing Competitors Citigroup knows that Bank of America is a major banking competitor.Identifying the optimal points of parity and points of differenceA brand mantra is a 3 to 5 word shorthand encapsulation of your brand position. It is not an advertising slogan and it won’t be something you use publicly.A brand mantra is at its most powerful when it becomes a deeply resonant piece of the DNA of the company and is used as a touchstone to return when making difficult decisions.Nike’s brand mantra • “Authentic Athletic Performance” – Huh? Isn’t their brand mantra Just do it?’. Well, the answer is no. A brand mantra is not a slogan. Just do it is a tagline and not a brand mantra. It’s an external manifestation of ‘Authentic Athletic Performance’.The brand mantra can be your guide to decide in which business you should operate, how to handle a crisis or how to make a painful choice (darkmatters.com).”Creating a brand mantra to summarize the positioning and essence of the brandDisney adopted an internal brand mantra of “fun family entertainment” to serve as a screen for proposed ventures.Establishing Brand Positioning Once they have determined the brand positioning strategy, marketers should communicate it to everyone in the organization so it guides their words and actionsConstructing a Brand Positioning bull’s eye Alternative Approaches to Positioning 1.Brand Narratives and Storytelling 2.Brand Journalism 3.Cultural BrandingHow do marketers identify and analyze competition?Identifying CompetitorsIn the process of developing a successful marketing strategy, the first step is to identify the key competitors in your market. Competitor identification is important to increase managerial awareness of competitive threats and opportunities. Identification of key competitors is necessary to gain competitive advantage by offering your customers a greater value than the competitors. Not only current competitors are required to be identified, but future competitors are also to be anticipated.Analyzing CompetitorsCompetitor analysis helps an organization to identify opportunities for and threats to the organization from the competitive industrial environment. Competitor analysis is an assessment of the strengths and weaknesses of current and potential competitors. It is an essential component of corporate strategy; while formulating organizations strategy, managers must consider the competitor organisations strategies.How are brands successfully differentiated?1. Employee Differentiation Companies can have better trained employees who provide superior customer service. Well regarded in large part because of its flight attendants2. Channel DifferentiationCompanies can more effectively and efficiently design their distribution channels’ coverage, expertise, and performance to make buying easier and more enjoyable.Achieved differentiated positioning and competitive advantage through its directtohome channel3. Image Differentiation

MARKETING MANAGEMENT PHILIP KOLTER QUESTIONS +

ANSWERS AND EXAMPLES FOR FINAL TEST

PART 2 CHAPTER 10 / CHAPTER 15 / CHAPTER 17Contents

Chapter 10

1. How can a firm develop and establish an effective positioning in the

market?

2. How do marketers identify and analyze competition?

3. How are brands successfully differentiated?

4. What are the differences in positioning and branding with a small

business?

How can a firm develop and establish an effective positioning in the market?

What are the methods to determine positioning?

Determining a frame of reference by identifying the target markets andrelevant competition

Identifying and Analyzing Competitors Citigroup knows that Bank ofAmerica is a major banking competitor

Identifying the optimal points of parity and points of difference

A brand mantra is a 3 to 5 word shorthand encapsulation of your brandposition It is not an advertising slogan and it won’t be something youuse publicly

A brand mantra is at its most powerful when it becomes a deeplyresonant piece of the DNA of the company and is used as a touchstone

Nike’s brand mantra • “Authentic Athletic Performance” – Huh?! Isn’ttheir brand mantra Just do it?’ Well, the answer is no A brand mantra

is not a slogan Just do it is a tagline and not a brand mantra It’s anexternal manifestation of ‘Authentic Athletic Performance’

The brand mantra can be your guide to decide in which business youshould operate, how to handle a crisis or how to make a painful choice(darkmatters.com).”

Creating a brand mantra to summarize the positioning and essence ofthe brand

Disney adopted an internal brand mantra of “fun family entertainment”

to serve as a screen for proposed ventures

Establishing Brand Positioning Once they have determined the brandpositioning strategy, marketers should communicate it to everyone inthe organization so it guides their words and actions

Constructing a Brand Positioning bull’s eye

Alternative Approaches to Positioning 1.Brand Narratives andStorytelling 2.Brand Journalism 3.Cultural Branding

How do marketers identify and analyze competition?

Identifying Competitors

In the process of developing a successful marketing strategy, the firststep is to identify the key competitors in your market Competitoridentification is important to increase managerial awareness ofcompetitive threats and opportunities Identification of key competitors

is necessary to gain competitive advantage by offering your customers

required to be identified, but future competitors are also to beanticipated.

Analyzing Competitors

Competitor analysis helps an organization to identify opportunities forand threats to the organization from the competitive industrialenvironment Competitor analysis is an assessment of the strengthsand weaknesses of current and potential competitors It is an essentialcomponent of corporate strategy; while formulating organization'sstrategy, managers must consider the competitor organisations'strategies

How are brands successfully differentiated?

Achieved differentiated positioning and competitive advantage throughits direct-to-home channel

The company limits the innovation of new product generations andfocus on few sparkling innovations while re-using the already existingproduct design This has helped the company to focus on few highlydifferentiated innovations that result in brilliant marketing wonderswhile controlling the resources, costs and maintaining stability Apple’sMacintosh computers differ completely from the competing windowscomputers Windows computers are made by different manufacturersmaking it hard for Microsoft to control the minimum baseline of thehardware On the other hand, Apple controls the variety of both thehardware and software, this minimizes the end user technical issuesbecause there is guarantee there is a common Macintosh hardwareplatform that create user experience Apple enjoys the brandingstrategy whereby it is the only one responsible for the manufacture ofMacintosh products This monopoly ensures them to make qualityproducts that compete differently with the competitor windowshardware and which are manufactured by many manufactures Uniquebranding allows them to charge premium prices (Alex, 2002).

Product Design

A major aspect of a product differentiation strategy comes fromproduct design Products that display a different visual style, includedifferent features or handle different tasks stand out from those offered

by the competition Apple has made product design a hallmark of itsproduct differentiation strategy since the company's origins WhenApple introduced the iPod, iPhone, and iPad, there were no similarconsumer electronics products that included so many features in onedistinctive, iconic package

Differnent big and small

Business Size Basics

A business's size can be measured by the number of employees thatwork for it or by total sales within a defined period, but no specific lineexists that separates a big business from a small business However,the U.S Small Business Administration, for its purposes, does notconsider a business with more than 500 employees or $7 million intotal annual receipts to be a small business

Business Legal Structure

A business's legal structure determines how the business is managed,taxed and whether owners are liable for business debts Many smallcompanies start as sole proprietorships or partnerships, which give asole owner or a group of owners complete control over a company.Owners of sole proprietorships and partnerships pay income taxes forbusiness profit on their personal income tax returns and are legallyliable for business debts Large companies are often organized ascorporations that pay taxes separately from the owners Owners ofcorporations are shareholders who vote to appoint executive boardmembers but do not directly manage the business

Financing

Financing describes how a business raises money to fund operationsand new projects New small businesses typically receive financing

from the personal savings of owners, small business loans from banks,and gifts or loans from friends and family members Well-establishedsmall businesses and medium-sized companies might be able toattract financing outside investors and money from venture capitalfirms Large corporations can raise money by selling shares of stock tothe public and by selling corporate bonds.

Market Niche

Another difference between small businesses and large companies isthat small companies often focus on a niche market, while largercompanies tend to offer more products and services to a wider variety

of consumers A small company with only a few employees might beable to make enough money to survive by selling a single product orservice in a very specific market As companies grow, they tend tobranch out into new markets and offer new products and services toincrease sales and hire more employees

STAFFING DIFFERENCES FOR SMALL BUSINESS MARKETERS

Look at the organization chart of any major corporation Nearly always,you find a marketing vice president Under that position you see abunch of other professionals, including advertising directors, salesmanagers, online and social-media marketing managers, researchdirectors, customer service specialists, and so on

In contrast, strong small businesses blend marketing with theleadership function The small business organization chart often putsresponsibility for marketing in the very top box, the one with theowner’s name, which likely puts you in the essential role of overseeingmarketing as a hands-on task

CREATIVE DIFFERENCES BETWEEN SMALL AND BIG BUSINESSMARKETING

The top-name marketers routinely spend six figures to create ads withthe sole purpose of building name recognition and market preference

for their brands, often without a single word about a specific product orprice.

Small businesses take a dramatically different approach They want todevelop name recognition just like the biggest advertisers, but theirads have to do double duty You know firsthand that each and everysmall business marketing investment has to deliver immediate andmeasurable market action

Each effort has to stir enough purchasing activity to offset themarketing cost involved The balancing act is to create marketingcommunications that build a clear brand identity while also inspiringthe necessary consumer action to deliver inquiries, generate leads,and prompt sales — now

Problem with small business: Limited Budget

3 Here are some specific branding guidelines for small businesses:

4 1 Creatively conduct low cost marketing research

5 There are a variety of low-cost marketing research methods thathelp small businesses connect with customers and study competitors

6 2 Focus on building one or two strong brands

7 Small business often must rely on only one or two brands and keyassociations as points-of-difference for those brands

8 3 Employ a well integrated set of brand elements

9 It is important for small businesses to maximize the contribution ofeach of main sets of brand equity drivers

10 4 Create a buzz and a loyal brand community

11 Small businesses often must rely on word of mouth to establishtheir positioning, public relations, social networking, and low costpromotions and sponsorship can be inexpensive alternatives

12 5 leverage as many secondary associations as possible

13 Secondary associations- any persons, places or things withpotentially relevant associations- are often a shortcut means to buildbrand equity.

14 Unlike big brand small businesses don’t have the luxury to makemistakes hence must design and implement marketing programs muchmore carefully

Emotional branding

Emotional branding is a term used within marketing communicationthat refers to the practice of building brands that appeal directly to aconsumer's emotional state, needs and aspirations Emotionalbranding is successful when it triggers an emotional response in theconsumer, that is, a desire for the advertised brand (or product) thatcannot fully be rationalized Emotional brands have a significantimpact when the consumer experiences a strong and lastingattachment to the brand comparable to a feeling of bonding,companionship or love

Why emotional branding?

With growing consumer choices through new market entrants andincreased globalisation, the retail industry can no longer simply rely ontraditional marketing and sales techniques to ensure longevity Itseffect on the bottom line means the importance of strong emotionalbranding cannot be overstated

To create any kind of branding, it is essential to consider howcustomers perceive the brand’s personality and values

These will evoke certain reactions and emotions in customers; the trick

is understanding why this happens and how to make it happen in apositive way Doing so will clearly differentiate the brand from thecompetition

Remember that brands are built on three levels of understanding:features and attributes, beliefs and values, and benefits—

Consider a brand such as Adidas The features and attributes of itsrunning shoes would be the shapes, styles, colours, and so on Thepractical benefits might include the grip and power of the shoes, whilethe emotional benefits are the feelings of energy and strength evoked

to continue running The tagline for the brand is ‘Impossible isnothing’, stirring up the feeling of empowerment

Emotional Branding refers to the strategy of linking a brand with thehuman emotions through marketing and positioning of the brand It is atactics whose aim is to connect their brand with the consumer for thelong time Hence, they target to the emotional aspect of the consumerand associate their brand with it In this way, a consumer feels closewith the brand and related itself with the products that brand offer.The old paradigm THINK – DO – FEEL has shifted towards FEEL – DO –THINK That’s right, people are now making more decisions based onwhat they feel This does not mean that there is no thought processput into any decision or purchase, but more decisions are being based

on emotion Feelings have acquired more importance

In a time where consumers have so much information available andare bombarded with invasive messages all day it’s those that strikeemotion, in whatever way or form, that people actually remember.When a brand makes you feel something, the chances that you’ll want

to know or get more of that increases

Also, with the overload of information, attention spans are gettingshorter, especially for the millennial generation Therefore, to make animpression, brands must make an impact on what will be remembered:feelings An image, very short video, phrase, sound, whatever theresource chosen, it must appeal towards emotion in order to getnoticed

Example:

As it is a popular strategy, there are numerous brands which focus onemotional branding like Pepsi Co., Coca-Cola, McDonalds etc Bata is agood example which used emotional branding Being a European

company, it has positioned itself in such a way in India that a largeproportion of customers who wear Bata shoes thinks that it is an Indianbrand and thus, feel Indian Bata focused on emotional side of humansand advertised itself in such a way which triggers nationality,relationships bonding and generation bonding in customers.

What is emotional branding doing for FedEx on a tangible level? Well,

by using emotional branding with frustration and contempt, FedEx isable to reinforce its core emotion of “get ‘er done.” First, all the ads aresquarely based around how efficient FedEx is in the face of a crazyworld, and second, it forms a strong emotional bond with customersbecause they feel like FedEx truly understands them

Nike Advertising and Emotional Branding

Nike brand strategy is to build a powerful brand – so powerful that itinspires fervent customer loyalty from people literally all over theworld This is because Nike advertising uses the emotional brandingtechnique of archetypes in its advertising – more specifically, the story

of the Hero It’s an age old tale, a tale of a hero pitted against a greatfoe, and after a great struggle, emerging triumphant In a way, youcould say that Nikes marketing strategy is thousands of years old, andhas been inspiring customer loyalty the entire time

Nike Brand Strategy

Nike advertising takes the common hero story and turns it on its head.Instead of inspiring customer loyalty by singling out an externalenemy, it pulls out the stops and focuses on an internal foe – ourlaziness Nike advertising knows just how often we battle with our lazyside Every morning when that alarm goes off and it’s still totally darkoutside, the battle begins When we choose how long to run, the battlecontinues This is how Nike marketing uses emotional marketing toinspire customer loyalty They know that while some people mayidentify with an external foe, all people identify with an internal one.Nike brand strategy is excellent on this end because not only is the

way or another, we are all the hero of our own story, and Nikemarketing has long since identified that feeling – and used it to inspiretimeless customer loyalty

So to recap:

Nike advertising uses the emotional branding technique of Heroism toinspire incredible customer loyalty all over the world The hero startsfrom humble beginnings, challenges a foe greater than he, and againstall odds, prevails

Nike marketing isn’t the only group that uses this archetype Otherbrands use it by identifying a foe that their viewers can identify withhating and pit their product against it to build stronger customerloyalty

Nike brand strategy takes the emotional marketing story of the Heroand turns it inward You are the hero, and your lazy side is the villain

Another area of differentiation is through product offerings Innovativeproducts that meet customer needs can be an area where a companyhas an advantage over competitors The pursuit of new productofferings can be costly – research and development, as well asproduction and marketing costs can all add expenses to a companybefore the product has even been offered to the customer, making thisone of the riskier forms of differentiation The payoff, however, can be

great as customers flock to be among the first to have the newproduct.

Organizational differentiation is yet another form of advantage.Maximizing the power of a brand, or using the specific advantages that

an organization possesses can be instrumental to a company’ssuccess Location advantages, name recognition and customer loyaltycan all provide additional ways for a company differentiate itself fromthe competition

EXAMPLES OF CORPORATE DIFFERENTIATION

Virgin Airlines

Spearheaded by Richard Branson, Virgin Airlines is one of the multipleindustries grouped under the “Virgin” label Described by Branson as acompany known for “innovation, quality and a sense of fun”, VirginAirlines has taken to the skies in an effort to make air travel affordableand enjoyable Virgin Atlantic, established in 1984, was born one nightwhen Branson’s flight to the Virgin Islands was cancelled Undaunted,

he charted a plane and offered his fellow travelers a seat on the newplane for $29 His airline was born Virgin America started in 2004,operating in the United States and other western countries Virgin’sbusiness model is offering inexpensive fares, full service flights andoutstanding customer service

Strategy Used

Virgin’s differentiation strategy is two-fold: pricing and service Byreducing the costs associated with air travel, Virgin Airlines is able toremain competitive with the cost-cutting airline companies Lowercosts, however, don’t translate into fewer services – Virgin is a fullservice airline with on-plane WIFI, touchscreen seatbackentertainment, and full service meals available with roomy cabins

Through acquisitions and subsidiaries, Virgin is able to operate indifferent markets around the world, capitalizing on the Virgin name and

brings new sets of regulations and procedures, depending on whatcountry the airline is operating in Virgin has remained consistent inmaintaining their business model: competitive pricing, excellentcustomer service; however, the airline has had its ups and downs inthe 30 years it has been airborne.

A clear strategy has enabled Virgin to maintain their presence in theglobal air travel market: remain true to the Virgin brand Promoting thebrand and capitalizing on the Virgin name has been essential to thesuccess of the company That helped to springboard the airline topopularity, but the well-positioned airline is relying on their soundbusiness strategy to keep them at the top of the airline list

Chapter 15

1. What is a marketing channel system and value network?

2. What work do marketing channels perform?

3. How should channels be designed?

4. What decisions do companies face in managing their channels?

5. How should companies integrate channels and manage channel conflict?

6. What are the key issues with e-commerce and m-commerce?

What is a marketing channel system and value network?

A VALUE NETWORK is a system of partnerships and alliances that a firmcreates to source , augment , and deliver its offerings

MARKETING CHANNELS : are sets of independent organizationsparticipating in the process of making a product or services availablefor use or consumption

What work do marketing channels perform?

Gather information about potential and current customers ,competitions and other actors and forces in marketing environment •Develop and disseminate persuasive communications to stimulatepurchasing • Place orders with manufacturers • Acquire the funds tofinance inventories at different levels in marketing channels • Assumerisks connected with carrying out channel work • Provide for the

successive storage and movement of physical • Oversee actualtransfer of ownership from one organization or person to another.

They gather information about potential and current customers,competitors, and other actors and forces in the marketingenvironment

• They develop and disseminate persuasive communications tostimulate purchasing

They reach agreements on price and other terms so that transfer ofownership or possession can be effected

• They place order with manufacturers

• They acquire the funds to finance inventories at different levels in themarketing channel

• They assume the risks connected with carrying out channel work

• They provide for the successive storage and movement of physicalproducts

• They provide for buyers’ payment of their bills through banks andother financial institutions

They oversee the actual transfer of ownership from one organization orperson to another

How should channels be designed?

In designing marketing channel companies analyze customer needsand preference for a given product Further marketing channel shouldfall in line with overall objectives of the company in cost and desiredoutput level Companies then need to explore various marketingchannels like direct marketing, tele-marketing, direct mail, etc to findthe right fit to reach the customer Each channel short listed has is to

be evaluated on operational, cost effective and flexibility criteria

What decisions do companies face in managing their channels?

1. Channel-Management Decisions

2. 4 1 Selectingchannel members To customers, the channel is thecompany To facilitate selection, producers should determine whatcharacteristics distinguish the better intermediaries

3. 5 2 Training & motivating channel members •Channel power*

•Channel partnership* A company needs to view itsintermediaries the same way it views its end users It shoulddetermine their needs and wants and tailor its channel offering toprovide them with superior value

4. 6 Channel Power Ability to alter channel members’ behavior sothey take actions that they would not have taken otherwise

5. 7 Coercive power manufacturer threatens to terminaterelationship if intermediaries fail to cooperate

11. 13 3 Evaluating Channel Members

12. 14 4 Modifying Channel Design and Arrangements Optimalchannel structure will change over time

13. 15 5 Channel modification decisions Adding/ dropping individualmembers requires an incremental analysis

14. 16 6 Global Channel Considerations International markets posechallenges and opportunities at the same time

CHANNEL MANAGEMENT DECISIONS After a company has chosen achannel system, it must train, motivate, and evaluate individualintermediaries for each channel

3 SELECTING CHANNEL MEMBERS

4 TRAINING AND MOTIVATING CHANNEL MEMBERS

5 CHANNEL POWER : Ability to alter channel members; behaviour sothey take actions they would not have taken otherwise

6 CHANNEL PARTNERSHIP : Sophisticated companies try to forge term partnership with distributors.To streamline the supply chain andcut costs, many manufacturers have adopted efficient consumerresponse(ECR)

long-7 EVALUATING CHANNEL MEMBERS

8 Producers must periodically evaluate intermediaries performanceagainst su

9 MODIFYING CHANNEL DESIGN AND ARRANGE

10 CHANNEL EVOLUTION : A new firm starts as local operation selling

in a fairly circumscribed market, using a few existing intermediaries

11 CHANNEL MODIFICATION DECISIONS

12 A producer must periodically review and modify its channel designand arrangements

13 GLOBAL CHANNEL CONSIDERATIONS

How should companies integrate channels and manage channel conflict?

8 MANAGING CHANNEL CONFLICTS

9 JOINT MEMBERSHIP : Marketers can encourage joint memberships intrade associations

10 DUAL COMPENSATION : It pays existing channels for sales madethrough new channels

11 LEGAL RECOURSE : If nothing else prove effective, a channelpartner may choose to file a lawsuit

12 EMPLOYEE EXCHANGE : TO exchange persons between two or morechannel levels

13 STRATEGIC JUSTIFICATION : A convincing strategic justificationserve distinctive segments and do not compete as much as they thinkcan reduce potential for conflict among channel members

14 CO-OPTATION : Co-optation is an effort by one organisation to winthe support of the leaders of another by including them into advisorycouncils, board of directors, etc

15 SUPERORDINATE GOALS : Channel members can come to anagreement on the superordinate goal they are jointly seeking.

16 DIPLOMACY, MEDIATION AND ARBITRATION : When conflict is acute,the parties resort to these stronger means

Roles of marketing channels

1) Information Provider:

Middlemen have a role in providing information about the market tothe manufacturer Developments like changes in customerdemography, psychography, media habits and the entry of a newcompetitor or a new brand and changes in customer preferences aresome of the information that all manufacturers want Since thesemiddlemen are present in the market place and close to the customerthey can provide this information at no additional cost

3) Promotion:

Promoting the product/s in his territory is another function thatmiddlemen perform Many of them design their own sales incentiveprogrammes, aimed at building customers traffic at the other outlets

4) Financing:

Middlemen finance manufacturers’ operation by providing thenecessary working capital in the form of advance payments for goodsand services The payment is in advance even though themanufacturer may extend credit, because it has to be made even

before the products are bought, consumed and paid for by the ultimateconsumer.

5) Title:

Most middlemen take the title to the goods, services and trade in theirown name This helps in diffusing the risks between the manufacturerand middlemen This also enables middlemen to be in physicalpossession of the goods, which in turn enables them to meet customerdemand at very moment it arises

6) Help in Production Function:

The producer can concentrate on the production function leaving themarketing problem to middlemen who specialize in the profession.Their services can best utilized for selling the product The finance,required for organising marketing can profitably be used in productionwhere the rate of return would be greater

7) Matching Demand and Supply:

The chief function of intermediaries is to assemble the goods frommany producers in such a manner that a customer can affectpurchases with ease The goal of marketing is the matching ofsegments of supply and demand

The matching process is undertaken by performing the following functions:

Sales promotion activities.

9) Standardizing Transactions:

Standardizing transactions is another function of marketing channels.Taking the example of the milk delivery system, the distribution isstandardized throughout the marketing channel so that consumers donot need to negotiate with the sellers on any aspect, whether it isprice, quantity, method of payment or location of the product

By standardizing transactions, marketing channels automate most ofthe stages in the flow of products from the manufacturer to thecustomers

10) Matching Buyers and Sellers:

The most crucial activity of the marketing channel members is tomatch the needs of buyers and sellers Normally, most sellers do notknow where they can reach potential buyers and similarly, buyers donot know where they can reach potential sellers From this perspective,the role of the marketing channel to match the buyers’ and sellers’needs becomes very vital For example, a painter of modern art maynot know where he can reach his potential customers, but an art dealerwould surely know

Added Value

In certain markets, channel partners add value to a transaction Theymay increase the value of a product, for example, by customizing it forcustomers in specific industries a process that could prove expensivefor your business Channel partners can also add value by groupingrelated products and services into packaged solutions that enablecustomers to obtain all their needs from a single source Distributorsthat add value enhance your reputation by meeting customers’ needseffectively

Logistical Functions

Distributors and wholesalers provide an important logistical function inyour channel to market Some channel partners take responsibility forthe physical distribution of products to your customers They store theproducts and provide transport to fulfill customers’ orders Otherpartners may take bulk deliveries from your company and split theminto the smaller quantities that customers order By taking on thisfunction, they reduce the burden on your logistics operations

Facilitating Functions

Channel partners provide a range of services that facilitate and supportsales of your products They use their sales force to deal withcustomers, negotiate sales and provide customer service The salesforce also gathers market intelligence, which can help you to marketproducts more effectively In some cases, channel partners mayprovide credit and other forms of financing to make it easier forcustomers to buy

Support

If your products are complex and require support, you can allocateresponsibility to your channel partners They can set up serviceoperations that can install, maintain, service and repair your products

in their territories This support reduces the workload for your service

teams and ensures that customers can obtain prompt, local supportwhen they need it.

Types of Marketing Channels

Marketing channels are the ways that goods and services are madeavailable for use by the consumers All goods go through channels ofdistribution, and your marketing will depend on the way your goods aredistributed The route that the product takes on its way fromproduction to the consumer is important because a marketer mustdecide which route or channel is best for his particular product

Manufacturer to Customer

Manufacturer makes the goods and sells them to the consumer directlywith no intermediary, such as a wholesaler, agent or retailer Goodscome from the manufacturer to the user without an intermediary ormiddleman For example, a farmer may sell some produce directly tocustomers For example, a bakery may sell cakes and pies directly tocustomers

Manufacturer to Retailer to Consumer

Purchases are made by the retailer from the manufacturer and thenthe retailer sells the merchandise to the consumer This channel isused by manufacturers that specialize in producing shopping goods.For example, clothes, shoes, furniture and fine china This merchandisemay not be needed immediately and the consumer may take her timeand try on the items before making a buying decision Manufacturersthat specialize in producing shopping goods prefer this method ofdistribution

Manufacturer to Wholesaler to Customer

Consumer’s can buy directly from the wholesaler The wholesalerbreaks down bulk packages for resale to the consumer The wholesalerreduces some of the cost to the consumer such as service cost or salesforce cost, which makes the purchase price cheaper for the consumer

may have to buy a membership in order to buy directly from thewholesaler.

Manufacturer to Agent to Wholesaler to Retailer to Customer

Distribution that involves more than one intermediary involves anagent called in to be the middleman and assist with the sale of thegoods An agent receives a commission from the producer Agents areuseful when goods need to move quickly into the market soon after theorder is placed For example, a fishery makes a large catch of seafood;since fish is perishable it must be disposed of quickly It is timeconsuming for the fishery to contact many wholesalers all over thecountry so he contacts an agent The agent distributes the fish to thewholesalers The wholesalers sell to retailers and then retailers sell toconsumers

Horizontal marketing system

A horizontal marketing system is a distribution channel arrangementwhereby two or more organizations at the same level join together formarketing purposes to capitalize on a new opportunity For example: abank and a supermarket agree to have the bank’s ATMs located at thesupermarket’s locations; two manufacturers combining to achieveeconomies of scale otherwise not possible with each acting alone tomeet the needs and demands of a very large retailer; or twowholesalers joining together to serve a particular region at a certaintime of year.[1]

An example is Apple and Starbucks, who announced a musicpartnership in 2007 The purpose of this partnership was to allowStarbucks' customers to wirelessly browse, search, preview, buy, anddownload music from iTunes Store onto their iPod touch, iPhone, or PC

or Mac running iTunes Apple’s leadership in digital music, togetherwith the unique Starbucks experience, created a partnership thatoffered customers a world class digital music experience.[clarificationneeded]

Examples

Apple benefits from this partnership with higher iTunes sales asStarbucks has a vast and loyal customer base When Apple firstintroduced its iTunes Store, it had hoped to sell one million songs in sixmonths, but to its surprise, sold over one million songs within the firstsix days of launching With such loyal online music consumers,Starbucks benefits from higher sales, increase in market share, andstronger customer loyalty This example demonstrates how twocompanies can join forces to follow a new market opportunity Thisopportunity allowed Starbucks and Apple to both achieve greaterresults than otherwise would have been possible if they somehowattempted this strategy independently.[3]

Horizontal marketing system

Definition: A Horizontal Marketing system is a form of distributionchannel wherein two or more companies at the same level unrelated toeach other come together to gain the economies of scale

In other words, Horizontal marketing system is the merger of twounrelated companies who have come together to exploit the marketopportunities

Generally, this type of marketing system is followed by companies wholack in capital, human resources, production techniques, marketingprograms and are afraid of incurring the huge losses In order toovercome these limitations, the companies join hands with othercompanies who are big in size either in the form of joint venture –thatcan be temporary or permanent, or mergers to sustain in the business.Horizontal marketing system has gained popularity in the recent timesdue to an immense competition in the market where everybody isstriving to gain a good position in the market along with huge profits

Examples of Horizontal Marketing:

Nike and Apple have entered into a partnership, with the intent to have

a Nike+ footwear in which the iPod can be connected with these shoes

that will play music along with the display of information about time,distance covered, calories burned and heart pace on the screen.

Johnson & Johnson, a health care company, have joined hands withGoogle, with an objective of having a robotic-assisted surgicalplatform That will help in the integration of advanced technologies,thereby improving the healthcare services

Vertical Marketing System

Definition: A Vertical Marketing system (VMS) comprises of the

main distribution channel partners- the producer, the wholesaler andthe retailer who work together as a unified group to serve thecustomer needs

In conventional marketing system, the producer, wholesaler and theretailer worked separately with the intention to maximize their profitseven at the expense of one another This led to the unending conflictsbetween the channel partners resulting in less profits for the business

as a whole

In order to overcome these conflicts, several firms have started using avertical marketing system wherein producers, wholesalers and retailershave joined hands with each other and are working in unison towardsthe accomplishment of the business objective as a whole This has led

to the increased profits for each involved in the channel of distribution

Efficiency: The major advantage of a vertical marketing channel is

efficiency In contrast to a conventional marketing channel, each stage

of the supply chain dynamically optimizes itself to conform to theactivities and needs of the other stages For example, a singledatabase system might control all levels of the supply chain, allowingmanufacturers to prioritize production based on which retail ordersneed to be shipped first

Cost Savings: Another benefit of a vertical marketing channel is cost

savings For example, in a conventional marketing channel, theseparate customer service departments of the various businesses

might perform redundant activities But in a vertical marketingchannel, the functions can be combined under one department thatserves the entire supply chain This would allow, for instance, a retailstore to expedite a customer return by synchronizing its activities withboth the distributor and manufacturer via a single customer servicedepartment In contrast, a retail store in a conventional marketingchannel would have to negotiate with the customer servicedepartment of the wholesale distributor, which in turn might negotiatewith the manufacturer’s customer service department.

Vertical Marketing System is further divided into three parts which areexplained below:

1. Corporate Vertical Marketing System– In Corporate VMS, one

member of the distribution channel be it a producer, a wholesaler

or a retailer Owns all the other Members of the Channel, thereby having all the elements of production and distribution channel under a single ownership.For example,:

Amway is an American cosmetic company, which manufacturesits own product range and sell these products only through itsauthorized Amway stores Here the ownership of production anddistribution is with the company itself

2. Contractual Vertical Marketing System– In Contractual VMS,

every member in the distribution channel works independently

and integrate their activities on a Contractual Basis to earn

more profits that are earned when working in isolation The most

common form of Contractual VMS is Franchising In franchising,

the producer authorizes the distributor to sell its product under

the producer’s name against some annual license fee For example, Mc-Donalds, Dominos, Pizza Hut, etc are all forms of

the franchise which are working on a contractual basis

3. Administered Vertical Marketing System– Under

Administered VMS, there is no contract between the members ofproduction & distribution channel but their activities do get

influenced by the Size and Power of any one of the member In

simple words, any powerful and influential member of the channel

dominate the activities of other channel members For example, Big brands like HUL, ITC, Procter& Gamble, etc.

command a high level of cooperation from the retailers in terms

of display, shelf space, pricing policies, and promotional schemes.Thus, through a vertical marketing system, the channel partnersestablishes a close contact with each other and work in unison towardsthe accomplishment of common objectives thereby enjoying moreprofits which they would have been earning when working alone

Horizontal VS Vertical Marketing

Horizontal Marketing

Businesses that operate in a horizontal marketing system seek toappeal to a wide demographic that’s not really niche For example, areseller of general office furniture is probably not going to target (sellto) other companies that specialize in office furniture Rather, they’regoing to target businesses despite the industry – whether they’reaccounting firms, travel agencies, insurance agencies, etc In otherwords, they’re really going after anyone who needs office furniture

Vertical Marketing

On the other hand, businesses that operate in a vertical marketingsystem seek to appeal to a very niche demographic – usually, otherbusinesses that operate within the same industry For example, thiscould include a manufacturer of solar panel technology Such a firm willlikely sell their goods to solar contractors and installers In other words,those they sell to are usually businesses that compete against oneanother.

Chapter 17

What is the role of marketing communications?

How do marketing communications work?

What are the major steps in developing effective communications?

What is the communications mix and how should it be set?

What is an integrated marketing communications program?

What is the role of marketing communications?

Voice of the Company Represent the voice of the company and itsbrands The goal is to stimulate a dialogue that will lead to a succession

of purchases

7 Contribute to Customer Equity Means by which a firm can establish adialogue and build relationships with consumers Strengthen Customerloyalty

8 Contribute to Brand Equity By creating brand awareness and brandimage in consumer’s memories, Every brand delivers an impressionthat can strengthen or weaken a customer’s view of a company

9 Provide product information Companies can tell or show consumershow and why a product is used, by whom, when and where Consumerscan also learn who makes the product, and what the company andbrand stand for

10 Lead to purchase They boost sales, strengthen brand loyalty, and