Marketing Mix

May 25, 2024 Module 4 1

Product
“Anything that can be offered to a market for attention, acquisition, use or
consumption that might satisfy a want or need”. Kotler

A product is a total package of attributes the customers obtains when making a

purchase. Quelch
Product is a bundle of satisfaction that a customers buys.
• People buy satisfaction not objects

May 25, 2024 Module 4 2

Goods and Services
Goods :
 “It can be defined as articles , devices , objects or things; goods are tangible
items that can be touched or held”.
Services:
 “It can be defined as acts, deeds, performances and efforts.”
 A form of product that consists of activities, benefits, or satisfactions offered for
sale that are essentially intangible and do not result in the ownership of
anything.”

Barista
May 25, 2024 Module 4 3
Product Classification
 Durable/Non durable
 Services
 Consumer Product
 Business Products

May 25, 2024 Module 4 4

Durable/Non Durable
 Durables: consumed over a long period of time.
 Example: refrigerators, washing machines, cameras etc.

 Non-durables: consumed over a short period of time (one or few

uses).
Example: toothpaste, soaps, soft drink etc.

Services

May 25, 2024 Module 4 5

Consumer Products
Consumer Products: Products used for family or individuals.
Consumer products can be further classified into :
 Convenience Products: Staple goods (milk, bread, newspapers, etc.)
and impulse goods e.g. magazines, chewing gum, fast foods,
chocolate etc.
 Shopping Products: Consumers spend time and they are relatively
costly i.e., refrigerators, PCs, washing machines, video cameras,
furniture, clothing etc.

May 25, 2024 Module 4 6

Consumer Products
• Specialty Products: These products are expensive and customers take
time in planning and purchase.
• Example: An antique car, a Mercedes, a Mont Blanc pen, designer
cloths, high-end electronics etc.
• Unsought Products: Products which are purchased during
uncertainties or problems
• Example : An umbrella, repair services, insurance policies,
encyclopedia, , burial plots, bathroom tissue etc.

May 25, 2024 Module 4 7

Business Products
 Major Equipment: machines, mainframe computers, airplanes and buildings
 Accessory Equipment: fax machines, personal computers, power tools
 Raw material: natural resources and agricultural products etc
 Component Parts and Materials: textiles, paper pulp and chemicals
 Processed Materials: Sheet metals, chemicals, and lumber
 Supplies : maintenance, repair, or operating supplies (MRO).
 Finished Products: Generators, heavy machinery etc.
 Business Services: advertising, legal, management consulting, marketing
research, and maintenance services.

May 25, 2024 Module 4 8

Product Mix
 A product mix is a set of all the products offer for sale by a company.
 All products that an organization sells.

 The combination / assortment of product lines offered by the

manufacturer.

May 25, 2024 Module 4 9

Product Line
• A group of closely related product items is a product line.
• Product line is a group of products that are closely related, function in
a similar manner, sold to the same customer groups and marketed
through the same types of outlets, or fall within given price ranges.
 Series of related products
• Sunsilk, Clinic Plus, Clinic all clear, Dove shampoo

May 25, 2024 Module 4 10

 Width/ Breadth : This is the total number of product lines a
company carries
 Length: The length of a product mix refers to the total number of
items in the mix.

 Depth: It is the assortment of sizes, colors, model and variations

offered in each product in the product line.

 Consistency: It refers to the closeness exhibited by the product lines

in the production requirements, distribution, end usage, etc.

May 25, 2024 Module 4 11

 Product Mix of HUL
Hair care Skin Care Oral Care Deodorants Detergents Toilet soaps Beverages Foods
Product Line Depth

Sunsilk Fair & lovely Pepsodent Axe Surf Liril 3 Roses Knorr
Clinic Plus Pond’s Close-Up Pond’s Rin Lifebuoy Lipton Annapurn
Denim Wheel Lux Taj Mahal a
Sunlight Breeze Brook Bond Moder
Vim Pears Bru foods
Hamam Kwality
Dove Wall’s
Savlon Kissan

Product Mix Length

May 25, 2024 Module 4 12

Product Life Cycle

May 25, 2024 Module 4 13

Introductory Stage
• The introductory stage of the product life cycle represents the full-scale launch of
a new product into the marketplace.
 Little competition
 Frequent product modification
 Limited distribution
 High marketing and production costs
 Negative profits with slow sales increases
 Promotion focuses on awareness and information
 Communication challenge is to stimulate primary demand
 High failure rates
May 25, 2024 Module 4 14
Growth Stage
• If a product category survives the introductory stage, it advances to
the growth stage of the life cycle.
 Increasing rate of sales
 Competitors enter into the market
 Market consolidation, large company may acquire small pioneering
firms
 Profits rise rapidly, peak, and begin declining as competition
intensifies
 Aggressive advertising of the differences between brands
 Wider
May 25, 2024
distribution is key to establish
Module 4
a strong market position and
product success
15
Maturity
• At this stage sales start decreasing, new users cannot be added indefinitely, but this
is the longest stage of the product life cycle
 Market approaches saturation
 Sales decrease
 Product lines are lengthened to appeal to additional market segments.
 Service and repair assume more important roles as manufacturers strive to
distinguish their products from others.
 Product design changes tend to become stylistic (How can the product be made different?) rather
than functional (How can the product be made better?).
 As prices and profits continue to fall, marginal competitors start dropping out of the market.
Dealer margins also shrink, resulting in less shelf space for mature items, lower dealer
inventories, and a general reluctance to promote the product.
May 25, 2024 Module 4 16
Decline
 A long-run drop in sales signals the beginning of the decline stage.
 The reason for decline in sales could be (a) technological advances(innovation) (b) increase in
competition and (c) shift in consumer's tastes and preferences etc.
 Sales fall and profits decline and sometimes become negative
 Large inventories of unsold items
 Example: Telephone and Camera , Vinyl record
 Strategies:
 Company drops declining items from product lines and search for alternatives
 Elimination of all nonessential marketing expenses
 “Organized abandonment”
 Go for niche segment of diehard consumers
 Exit the market

May 25, 2024 Module 4 17

The Nature of Services
• A service is an act that one entity performs for another that is
essentially intangible and does not result in the ownership of
anything. It may or may not be tied to a physical product.
• Increasingly, manufacturers, distributors, and retailers are providing
value-added services, or simply excellent customer service, to
differentiate themselves.

May 25, 2024 Module 4 18

THE SERVICE ASPECT OF AN
OFFERING
• Service can be a major or minor component of a company’s offering.
Based on the degree to which they involve a service, we distinguish
five categories of offerings:
• A pure tangible good,
• A tangible good with accompanying services
• A hybrid offering
• A major service with accompanying minor goods and services,
• A pure service

May 25, 2024 Module 4 19

DISTINCTIVE CHARACTERISTICS OF
SERVICES
• Intangibility
• Inseparability.
• Variability
• Perishability.

May 25, 2024 Module 4 20

Brand as a Concept: Branding Basics
The AMA definition of a brand:
“A name, term, sign, symbol, or design, or a combination of these, intended to
identify the goods or services of one seller or group of sellers to differentiate
them from the competition.”

 A brand is collection of thought + feelings about your experience with it.

 A brand is a product , service, cause, or organization with perceived

intangible attributes.

May 25, 2024 Module 4 21

Product vs Brand examples
• A watch is a product; Rolex is a brand.
• A hotel is a product; Marriott is a brand.
• A candidate is a product; you're a brand.
• A car is a means of transportation; a BMW is a symbol of exclusivity.

May 25, 2024 Module 4 22

Importance of Branding

Customers Sellers
• Source of identification • Identifier
• Proxy for quality • Legal protection
• Source of evaluation • Differential advantage
• A tool to simplify decision making • Unique associations
• Price premiums
• Risk reducer
• Financial risk, performance risk, time risk, • Enhancing customer loyalty
social risk, psychological risk • Higher market share
• Tool to express self image • Inelastic response to price increase
• As a barrier to entry of other brands
• Can be bought and sold as an asset
May 25, 2024 Module 4 23
Brand Building Process
• Identifying and developing brand plans
• Designing and Implementing brand marketing programs
• Measuring and interpreting brand performance
• Growing and sustaining brand equity

May 25, 2024 Module 4 24

Brand Equity
• ‘Brand equity can be thought of as the additional cash flow achieved by
associating a brand with the underlying product or service’
(Biel 1992).
• ‘The differential effect the brand knowledge has on consumer response to
marketing of that brand’
Keller, 2004
Brand equity is a set of brand assets and liabilities linked to a brand, its name,
and symbol, that adds value to or subtracts from the value provided by a product
or service to a firm and/or to that firm’s customers’ (Aaker 1991).

May 25, 2024 Module 4 25

Price
• Price is the amount of money charged for a product or service.
• Price is the sum of all values that customers give up in order to gain the benefits
of using a product or service.

Money Time Travelling Expense and Risk

May 25, 2024 Module 4 26

Factors to consider when setting the Price
• Estimated Demand
Determine whether there is a price the market expect,
Estimate what the sales volumes might be at different prices
• Similar product (Nike vs Adidas),
• Substitute (Tea vs Coffee)
• Unrelated product seeking the same consumer money (DVD vs a weekend
vacation)
• Cost of Product, Distribution and Promotions
• Competitive reactions

May 25, 2024 Module 4 27

Setting Pricing Objectives
 Survival: companies pursue this when having over capacity, high competition and
changing customers wants.
 Short term profit (Maximize Current Profit): Maximize the profit keeping the
competitors in mind.
 Market skimming: Sony skimmed the market HDTV in 1990 in Japan
 Market Penetration: (Increase Market Share) higher sales volume will lead to
lower unit cost and higher long run profits, Ikea
 Quality Leadership: Charge high prices to cover higher performance quality,
Starbucks, BMW, Taj Luxury Hotels

May 25, 2024 Module 4 28

SELECTING A PRICING METHOD
• Markup Pricing
• Target-Rate-of-Return Pricing
• Economic-Value-to-Customer Pricing
• Competitive Pricing
• Cost based Pricing

May 25, 2024 Module 4 29

Mark-up Pricing
 Marketers fix a selling price that generally exceeds the cost incurred in the manufacturing of that
product.

Variable costs per unit: Rs. 10 Fixed costs: Rs. 300,000

Expected unit sales: 50,000 units Desired Sales Markup: 20%

Unit Cost = Variable Cost + Fixed Costs/Unit Sales

Mark Up Price = Unit Cost/(1 – Desired Return on Sales)

30
Target Return Pricing
• Target return on investment
• Marketers fix the price of the product with a view to attain a target rate of ROI
made on the manufacturing of the product.
• Unit Cost : Rs. 16 Desired Return : 20%
• Invested capital : Rs 10,00000 Unit sales : 50,000
• Target return pricing = unit cost + (desired return X invested capital)/ unit sales

• GE, Ford , DuPont adopt this strategy

31
Economic-Value-to-Customer Pricing
• An increasing number of companies now base their price on the
customer’s economic value.
• Economic-value-to-customer pricing takes into account a host of
inputs, such as the buyer’s image of the product performance, the
channel deliverables, the warranty quality, customer support, and
softer attributes such as the supplier’s reputation, trustworthiness,
and esteem.
• Companies must deliver the value promised by their value
proposition, and the customer must perceive this value.

May 25, 2024 Module 4 32

Competition-Based Pricing
• In competitive pricing (or going-rate pricing), the firm bases its price largely on
competitors’ prices.
• All firms in industries that sell a commodity such as steel, paper, or fertilizer
normally charge the same price. Smaller firms “follow the leader,” changing their
prices when the market leader’s prices change, rather than when their own
demand or costs change.
• Some may charge a small premium or discount, but they preserve the difference.

33
Cost Based Pricing
• Cost-based pricing involved setting prices based on the costs for producing, distributing and
selling the product plus a fair rate of return for its effort and risk.
• Fixed costs are costs that do not vary with production or sales level. eg. Rent, utilities, insurance,
management salaries

• Variable costs vary directly with the level of production. Their total varies with the number of
units produced, such as raw materials, labor, supplies.

• Total costs are the sum of the fixed and variable costs for any given level of production.

34
Setting Final Price
• Customer-segment pricing.
• Product-form pricing.
• Channel pricing.
• Location pricing.
• Time pricing.

May 25, 2024 Module 4 35

PRODUCT-MIX PRICING
• Loss-leader pricing
• Optional-feature pricing.
• Captive pricing.
• Two-part pricing.
• By-product pricing.
• Product-bundling pricing.

May 25, 2024 Module 4 36

Interesting Pricing Strategies
• Dynamic Pricing
• Geographical Pricing
• Psychological Pricing
• Product Line Pricing

May 25, 2024 Module 4 37

Integrated Marketing Communications
An integrated Marketing Communication is the mixture of all
communication tools which link the marketing function with the
communication function to deliver Effective Marketing Messages.

May 25, 2024 Module 4

Dove’s Campaign for Real Beauty
38
The Communications Process

May 25, 2024 Module 4 39

DEVELOPING AN EFFECTIVE COMMUNICATION PROGRAM

i. Setting the objectives

ii. Iidentifying the target audience
iii. Crafting the message
iv. Deciding on the media
v. Developing the creative approach
vi. Measuring performance

May 25, 2024 Module 4 40

Setting the Communication Objectives

• Marketing communication objectives are specific, measurable,

achievable, relevant, and time-bound (SMART) goals set for marketing
communication activities.
• They define what you want to achieve through your messaging and
campaigns, and act as a guiding light for your marketing efforts.
• The main goal of marketing communication is to influence your target
audience's behavior, but this can be broken down into various specific
objectives depending on your campaign and overall marketing
strategy. Here are some common examples:

May 25, 2024 Module 4 41

 Communication Objectives
Possible Advertising Objectives
Informative Advertising
• Communicating customer value
• Building a brand and company image
• Telling the market about a new product
• Explaining how a product works
Persuasive Advertising
• Building brand preference
• Encouraging switching to a brand
• Changing customer perceptions of
product value
Reminder Advertising
• Maintaining customer relationships
• Reminding consumers that the product
may be needed in the near future
May 25, 2024
• Suggesting new uses for a product
• Informing the market of a price change
• Describing available services & support
• Correcting false impressions
• Persuading customers to purchase now
• Persuading customers to receive a sales
call
• Convincing customers to tell others
about the brand
• Reminding consumers where to buy
the product
• Keeping the brand in a customer’s mind
during off-seasons
Module 4 42
 Establish the Marketing Communication
Budget
 Affordable Methods and Arbitrary Allocation
 The Percentage of Sales Method: Based on last year, current year and future
sales
 The Fixed-Sum-Per-Unit Method: Allocating amount to each sales or production
unit basis.
 Automobiles companies use this method.
 Example: Our forecasts call for sales of 14000 units and we allocate promotion at
rate of $65 per unit.

May 25, 2024 Module 4 43

Identify the Target Audience
• Target audience is a market segment to which a marketer wants to
communicate a product or brand message.
• Target audience may be single (niche) segment, multiple segment or
mass segment
• Identify the specific needs of target audience before developing ad
program
• Identify current user, potential users, deciders, influencer etc.

May 25, 2024 Module 4 44

Crafting the Communication Messages
• Marketers are always seeking the “big idea” that resonates with consumers
rationally and emotion ally, distinguishes the brand from competitors, and
is broad and flexible enough to translate into different media, markets, and
time periods. Fresh insights are important for creating unique appeals and
position. A good ad normally focuses on one or two core selling
propositions. As part of refining the brand positioning, the advertiser
should conduct market research to determine which appeal works best
with its target audience and then prepare a creative brief, typically one or
two pages. This elaboration of the positioning strategy includes
considerations such as key message, target audience, communication
objectives (to do, to know, to believe), key brand benefits, support for the
brand promise, and media.
May 25, 2024 Module 4 45
Deciding on the Media: Selecting Communication Channel

• Personal communication let two or more people communicate, example, face to

face, person to audience, through a phone, email etc.
• Example: direct marketing, personal selling, WoM
• Non-Personal communication directed to more than one person
• Example: Media (print, electronic, digital), sales promotions, events and
experience, public relations.
• Amul ads, Lakme - fashion events, ITC – Polo, MRF- Rallies and races
• Integrate channels as per requirement

May 25, 2024 Module 4 46

Defining the Communication Media Mix

• Advertising
• Online and social media communication
• Mobile communication
• Direct marketing
• Events and experiences
• Word of mouth
• Publicity and public relations
• Personal selling
• Packaging
May 25, 2024 Module 4 47
Advertising
Advertising is any paid form of non-personal mass communication
through various media to present and promote product, service and
ideas etc. by an identified sponsor.
Reach large population at low cost
Message can be repeated
It uses movement, visuals, sound and color,
Enhances company and brand image
• Print and broadcast ads, Packaging inserts, motion pictures, Brochures
and booklets, Posters, Billboards, PoS displays , Videotapes
May 25, 2024 Module 4 48
Online and Social Media Marketing
• Designed to engage customers, raise awareness, improve image, or
elicit sales of products and services.
• Companies can offer or send tailored information or messages that
engage consumers by reflecting their special interests and behavior.
• Can trace effects by clicks on a page/ad
• Contextual placement
• Can place advertising based on search engine keywords

May 25, 2024 Module 4 49

Mobile Communications
• Mobile communication is a special form of online communication that
places messages on consumers’ cell phones, smart phones, or tablets
(text messages, online communication, and social media
communication).
• Increasingly, online marketing and social media rely on mobile forms
of communication such as smart phones or tablets. Mobile
communication is timely—messages can be very time-sensitive and
reflect when and where a consumer is—and pervasive, meaning that
messages are always at consumers’ fingertips.

May 25, 2024 Module 4 50

Direct Marketing
• Direct marketing involves the use of mail, phone, e-mail, online messaging, or in-
person inter action to communicate directly with, or solicit response or dialog
from, specific customers and prospects.
• The advent of data analytics has given marketers the opportunity to learn even
more about consumers and develop more personal and relevant marketing
communications.

May 25, 2024 Module 4 51

Event and Experiences
• Events and experiences are company-sponsored activities and programs
designed to create brand-related interactions with consumers.
• Examples include sports, arts, entertainment, festivals, factory tours, company
museums, and street activities, as well as events for causes and less formal
activities.
• Events and experiences offer many advantages as long as they are engaging and
implicit, meaning that they involve indirect soft sell.

May 25, 2024 Module 4 52

Publicity and Public Relations
Publicity: a non-personal stimulation of demand for a product by planting
commercially significant news about it… in different media
 Not paid, presentation is not programmed,
 Less control, may be negative

Public Relation: A broad set of planned communication activities used to promote

and protect company’s image or its products.
 Personal form of communication, Not – paid for, less costly.
 The target may be customers , employees, stock holders, a government agency,
media, general public etc.
 High credibility, ability to catch buyers off guard, dramatization
May 25, 2024 Module 4 53
Personal Selling
 Personal selling—Face-to-face interaction with one or more
prospective purchasers for the purpose of making
presentations, answering questions, and procuring orders.
 Provides detailed explanation/demonstration of product
 Message can be varied according to motivations of each customer
 Can be directed only to qualified prospects
 Most effective promotion form in obtaining sale and satisfying
customer

May 25, 2024 Module 4 54

Packaging
Contain and Protect

Promote

Facilitate Storage, Use,

and Convenience

Facilitate Recycling

May 25, 2024 Module 4 55

Sales Promotions
 Advertising offers a reason to buy, sales promotion offers an
incentive.
 Collection of incentive tools, mostly short term, designed to
stimulate quicker or greater purchase of particular products or
services by consumers or the trade.
• Attracts attention, offers strong purchase incentives, boosts sagging
sales
• Stimulates quick response
• Not effective in building long-term brand preferences

May 25, 2024 Module 4 56

DEVELOPING A MEDIA PLAN
• The media planner must determine the most cost-effective vehicles
within each chosen media type.
• Media planners must consider factors such as audience size, audience
quality, audience-attention probability, the medium’s editorial quality
and media cost and then calculate the cost per thousand persons
reached.
• Communication programs involve a range of different media that
should seamlessly convey the desired message to the target audience.
• Determining the Media Reach, Frequency, and Impact.
• Selecting Media Timing and Allocation.
May 25, 2024 Module 4 57
Developing the Creative Approach
Developing the Creative Approach
• DETERMINING THE MESSAGE APPEAL
• SELECTING THE MESSAGE SOURCE
• DEVELOPING THE CREATIVE EXECUTION

May 25, 2024 Module 4 58

DETERMINING THE MESSAGE APPEAL

• Creative strategy: are the ways marketers translate their messages into a specific
communication.
• Creative strategy can be classify as informational or transformational appeals.
• An informational appeal elaborates on product or service attributes or benefits.
• Godrej washing machine can also brush (product demonstration)
• Transformational Appeal elaborates on non product related benefits or images
• Example: who uses Raymond’s (young, successful elegantly dressed men)
• What experience come from using the brand @ Liril- freshness soap

May 25, 2024 Module 4 59

SELECTING THE MESSAGE SOURCE
• Source should have expertise, trustworthiness, and likeability credible etc
• Who endorses Taj Mahal Tea , Amitabh Bachchan – Cadbury
• Pharma companies use doctors in ads for credibility
• Brett Lee – Timex, Pierce Brosnan – Reid and Taylor, Jackie Chan – Bajaj
Discovery (to create international appeal)
• What will happen when a likable celebrity praise a brand you dislike ???
• Celebrity manages brand crises, Amitabh – cadbury, Aamir Khan Coke, Pepsi –
Rajeev Bakshi (CEO)

May 25, 2024 Module 4 60

DEVELOPING THE CREATIVE
EXECUTION
• Turn big idea into actual execution to capture attention and interest.
• Find the best approach, style, tone, words and format.
• Problem – Solution: Saridon stops headache
• Slice of life: Kellogg's ad shows a young professional starting the day with
healthier breakfast and high hopes
• Life Style: this style shows how a product fits in a particular life style, mountain
dew, levis, VW
• Example: Timond watch ad shows Karan Johar, he says that success deserves a
special embrace.
• Fantasy: create fantasy around the product or it use.
• Example Axe deodorant, Hummer
May 25, 2024 Module 4 61
DEVELOPING THE CREATIVE
EXECUTION
• Mood and image: build mood around the products, service, such as peace, love,
beauty
• Example: Singapore Airlines feature soft lighting, refined flight attendants, happy
customers
• Musicals: people and cartoons singing about the products
• Example: jingle and words in Limca fresh ho jao
• Personality Symbol: create a character that represent the product, Mr. Clean,
Britannia Tiger, Guttu Asian paints
• Technical Expertise: shows company’s expertise in making the products, SAP talks
about affordable business solutions,
• Dilmah’s Watte tea, leaves from single origin tea garden owned by them
May 25, 2024 Module 4 62
Measuring Communication Effectiveness

 Share of expenditures
 Share of voice
 Share of mind/heart
 Share of market

May 25, 2024 Module 4 63

Global Adaptation of Marketing Communications
• Following the law and customs of the country, segment they address should be
legal
• Should know the style of the ad is acceptable or not
• Ads should be created locally or at HQ
• Following glocal strategy
• Multinational companies are attempting to build global brand image by using the
same ads in all markets

May 25, 2024 Module 4 64

Managing Integrated Marketing Communications

• Ideally marketing communication from each promotional elements should be integrated

• IMC is careful coordination of all promotional messages
• Message reaching to consumers should be same in all channels
• Carefully work out roles promotional elements play in the marketing mix
• Timing of promotional activities is coordinated, coordinate with media
• Results of each campaign are monitored
• Example: Bhuddah Hoga Tera Baap
• Bring back Amitabh Bachcan in angry young man avatar, Sang title tract song, print ads used his
dialogues, images and style from past movies
• Amitabh gave FM radio interview

May 25, 2024 Module 4 65

Designing and Managing Distribution Channels
• A set of interdependent organizations (intermediaries) involved in
the process of making a product or service available for use or
consumption by the consumer or business user.

• A Marketing Channel is… a set of interdependent organizations that

eases the transfer of ownership as products move from producer to
business user or consumer.

• Example: Raymond, Titan

May 25, 2024 Module 4 66

Marketing Channels Functions
• Gather information about potential and current customers, competitors, and other actors and
forces in the marketing environment.
• Develop and disseminate persuasive communications to stimulate purchasing and foster
brand loyalty.
• Negotiate and reach agreements on price and other terms so that transfer of ownership or
pos session can be effected.
• Place orders with manufacturers.
• Acquire the funds to finance inventories at different levels in the marketing channel.
• Assume risks connected with carrying out channel work. • Provide buyers with financing and
facilitate payment.
• Provide for buyers’ payment of their bills through banks and other financial institutions.
• Oversee actual transfer of ownership of goods from one organization or person to another.
May 25, 2024 Module 4
Channel Levels
 Zero Level: Door to door, mail order, catalogue, telemarketing, company owned outlets
 Example: Amway and Eureka Forbes, Singer, Tupperware, Asian sky shop, Otto Burlington.
 A one-level channel represents a single intermediary
 Example: Automobile and petrol pump dealers etc.
• A two-level channel represents two intermediaries, such as a distributers and
retailer/wholesalers who sell the product to the final consumers.
 Example HUL, Whirlpool, Videocon, Philips, Sony, etc
• A three-level channel represents more than two intermediaries such as wholesaler,
agents/broker(Jobber) retailer etc
 Example: In the meat packing industry company- wholesalers - jobbers - to small retailers.

May 25, 2024 Module 4 68

Channel Management Decisions
a) Establishing Channel Objectives
b) Selecting Channel Members
c) Identifying major channel alternatives
d) Motivating channel members
e) Evaluating Channel Members
f) Channel cooperation and conflict
g) Legal and Ethical Issues

May 25, 2024 Module 4 69

Establishing Channel Objectives
• Effective coverage of target market
• Efficient and cost effective distribution
• Ensure ease of procuring the products, provide wide range of choices to
customers
• Provide speedy delivery
• Project exclusive image of the company, make purchase enjoyable experience
• Helping the firm to carry on manufacturing uninterrupted believing that the
channels will take care of sales
• Build brand through merchandising

May 25, 2024 Module 4 70

 Selecting Channel Members
 Experience (number of years in business)
 Growth and profits records
 Financial strength
 Cooperativeness
 Service reputations
 Sales efficiency
 Product knowledge(lines carried)
 Size and quality of work force
 Administrative ability
May 25, 2024 Module 4 71
Identifying Major Channel Alternatives
 Intensive Distribution : distributing the products through all available channels in a
trade area. Bank uses atm, branches, franchise, direct marketing
 Example: snack foods, soft drink, chocolates, soaps, Titan watches
 Selective Distribution: choosing only a limited number of retailers in a market areas to
handle its lines.
 Example: Samsonite, Red Tape, DKNY clothing, Burn energy drink of Coke are available
only in pubs, discos, restro bars
 Exclusive Distribution: severely limiting the number of intermediaries, maintain control
over service levels, granting the exclusive rights to a retailer to sell its products in a
specific geographical region/ stores.
 Example: Automobiles, major high-end apparels(Gucci), appliances brands
 Apple has exclusive contact with AT&T in US for I-phone sales
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Motivating Channel Members
 Conducting training programs to increase the efficiency. E.g. Ford,
BPCL
 Adopting a relationship marketing approach to motivate distributors
to achieve higher sales volumes.
 Reduce the capital employed, operating costs and risks involved,
enhance customer finance schemes and adopt sales promotional
schemes.

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Evaluating Channel Members
• Periodically evaluate intermediaries performance
• Sales target attainment
• Average inventory level
• Customer delivery time
• Treatment of damaged and lost goods
• Cooperation in promotional and training program
• Under performers need to be counseled, retrained and motivated or
terminated

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Channel Cooperation and Conflict
• No matter how well channels are designed and managed, there will
be some conflict.
• Channel conflict occurs when one channel member’s actions prevent
another channel member from achieving its goal.
• Companies distributing their offerings through different channels are
likely to face a certain level of channel conflict.
• In this context, a manager’s goal is to reduce the channel conflict by
minimizing the frictions between channel members.

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Types of Channel Conflict
• Horizontal channel conflict
• Vertical channel conflict
• Multichannel conflict

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MANAGING CHANNEL CONFLICT
 Negotiation,
 Diplomacy, mediation
 Developing cooperation and coordination between channel
members
 Joint memberships in trade associations
 Legal recourse

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Legal and Ethical Issues
 Dual distribution: Samsung selling through distribution channel as
well as own web site with reduced price
 Exclusive distribution agreement, prevent from distributing competing
products
 Product tying
 Restricting sales territory

 Example: Deceptive advertising, sales people exaggerating the

product capabilities and unfair pricing policies of companies
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May 25, 2024 Module 4 79