Market Channels and Value Networks

1. Market Channels and Value Networks Arild Aspelund IØT, NTNU

2. Outline • What are Market Channels? • What does a market channel look like and how can you design and manage it for your purposes • Some typical examples of problems and conflict in market channel management • Value Networks

3. Sets of interdependent organizations involved in the process of making a product or service available for use or consumption. Market Channels

4. What Shall a Market Channel Deliver? • Information about buyer needs and behavior • Market research, sales information, contacts, competitive behavior, price sensitivity • Information to potential buyers about market offer • Attention, communication, promotion and branding, customization, and price negotiation • Physical distribution • Physical flow at customer convenience • Financing • Payment, risk-taking • Maintenance and control of exchange process • Service, repair, rebuy

5. A Market Channel Needs to Be a Suitable Carrier of Your Marketing Mix The four P’s • Product • Price • Place • Promotion The four C’s • Customer solution • Customer cost • Convenience • Communication

6. Market Channel Development

7. …and with the multiple tasks it tends to become rather complex…

8. Analyze customer needs Establish channel objectives Identify major channel alternatives Evaluate major channel alternatives Designing a Market Channel

9. Some Market Channel Alternatives and Their Characteristics

10. Channel Management Decisions • Selecting channel members • To customers, the channel is the company.. • Training channel members • Reduce variation of offers and services • Motivation channel members • Do you have the power to change the channel’s behavior? • Evaluating channel members • Goal achievements and growth opportunities • Modifying channel arrangements • Life-cycle perspectives and simply change a loosing team

11. Channel Integration and Systems • Vertical Marketing Systems (VMS) • Corporate VMS • Administered VMS • Contractual VMS • Horizontal Marketing Systems • Multi-channel Marketing Systems

12. Typical Market Channel Problems • Principal – agent issues • Information asymmetry • Moral hazard • Resource dependence • What if your channel is far bigger than you…? • Make others dependent on you, but never depend on others… • Channel conflicts • Can you prioritize channels? • What if you decide to establish new channels, and your old ones don’t agree?

13. E-commerce Channel Conflicts • Pure-click • Brick-and-click • Brick-and-mortar

14. What are Value Networks • Some argue that the market channel scope is insufficient to explain the behavior and decision-making of a value chain • They conceptualize the company as the center of a value network • Value Network – a system of partnerships and alliances that a firm creates to source, augment, and deliver its offerings • The value network includes suppliers, sub-suppliers, customers, end-users and all governmental and facilitation organizations • Lifts the focus of the company out of the market channels which is has direct control

15. Summary and continuation • Summary • Defined what you want from a marketing channel and how you can design them for your own purposes • Some typical market channels and their characteristics • Review of some of the major challenges of market channel management • Considered some perspectives of value networks • Continuation • Market communication