Topic 6 – Online Lecture

Place
Marketing Channels:
Delivering Customer Value
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Recap: Marketing Process

Where are you in this simple model of marketing process?

 Product
 Price
 Place
 Promotion
Source: Kotler et al. (2017)
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Learning Objectives

 What is Place?
• Supply chain and Value Delivery
networks
• The nature of marketing
channels (distribution channels)
and value creation
 Channel Behavior and Channel
Organizations
 Channel Design and Management
Decisions

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Discussion
If you work in Lifebuoy’s Marketing team, what would you do to
make the product reach more consumers during Covid-19 period?

Source: Lifebuoy Vietnam (2020)

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Lifebuoy ad to support Shopee and Tiki

18% discount on Shopee 15% discount on Tiki

Source: Lifebuoy Vietnam (2019a) and Lifebuoy Vietnam (2019b)

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What is Place/Marketing
Channel/Distribution Channel?
1. Supply chains and value delivery network
2. The nature of marketing channels (distribution
channels) and value creation

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1. Supply Chain
Suppliers

Supply chain - A system of efficiently

and effectively producing, making and
getting products to end-users. eam
st r
Up
Company

A supply chain consists of two types of

partners:
 Upstream partners include raw
material suppliers, components, parts, Distribution channel
information, finances, and expertise to
create a product or service. Downst
r ea m
 Downstream partners include the
marketing channels or distribution Customers
channels that look toward the
customer.
Source: Kotler et al. (2017)
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Example of Supply chain

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1. Supply Chains and the Value Delivery

Network
 Nowadays, the term supply chain may be too limited – It takes a make-and-
sell view of the business. It suggests that raw materials, productive inputs,
and factory capacity should serve as the starting point for market planning.
We have better term: Value Delivery network.
 Value Delivery Network: The network made up of the marketing
organisation, suppliers, distributors and ,ultimately, customers who partner
with each other to improve the performance of the entire system in
delivering customer value.
 This topic focuses more on marketing channels – on the downstream side
of the value delivery network.

COMPANY

Source: Kotler et al. (2017)

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2. Marketing Channels
 Marketing channels (distribution
channel) is a network of interdependent
organisations - intermediaries - involved
in the process of making goods and
services available for use or consumption
by the consumer or business user.

 Intermediaries offer producers greater

efficiency in making goods available to
target markets. Through their contacts,
experience, specialization, and scale of
operations, intermediaries usually offer the
firm more than it can achieve on its own.

Source: Kotler et al. (2017)

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2. Marketing Channels
A company’s channel decisions directly affect every other marketing decision.
 Pricing depends on whether the company works with national discount
chains, uses high-quality specialty stores, or sells directly to consumers via
the Web.
 The firm’s sales force and communications decisions also depend on how
much persuasion, training, motivation, and support its channel partners need.
 Dislike other marketing mix elements, Distribution channel (or Place)
decisions often involve long-term commitments to other firms.

E.g. Companies such as Ford or McDonald’s can easily change their advertising,
pricing, or promotion programs. They can scrap old products and introduce new ones
as market tastes demand. However, when they set up distribution channels through
contracts with franchisees, independent dealers, or large retailers, they cannot quickly
or easily replace these channels.

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2. How Marketing Channels add values

 The role of marketing intermediaries is to transform the assortments of
products made by producers into the assortments wanted by consumers.

Source: Kotler et al. (2017)

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2. How Marketing Channels add values

Functions of marketing channel members:

 Information – gathering and distributing market­ing research and
intelligence information about actors and forces in the marketing
environment needed for planning and aiding exchange.
E.g. wholesalers or retailers such as Mega market or Big C can gather
information from consumers through their loyalty/membership cards.
 Promotion – developing and spreading persuasive communications about
an offer
E.g. Saigon Coop-mart supermarket helps Unilever promote its new skin care
products (new Pond’s) in its supermarket branches or vice versa.
 Contact – finding and communicating with prospective buyers (retailers &
their customers & the manufacturers).

Source: Kotler et al. (2017)

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2. How Marketing Channels add values

 Matching – shaping and fitting the offer to the buyer’s needs, including activities such
as manufacturing, grading, assembling, and packaging.
E.g. Heinz ketchup redesigned its packaging to match with customer’s demand and
complaint.
 Negotiation – reaching an agreement on price and other terms of the offer so that
ownership or possession can be transferred.
E.g. When working with new retailers, the big manufacturers, such as Vinamilk, can
support with free freezer and do not force to pay the total bill immediately.
• Facilitating the completion of transactions
• Physical distribution – transporting and storing goods.
• Financing – acquiring and using funds to cover the costs of the channel work.
• Risk taking – assuming the risks of carrying out the channel work. For
example, when the supermarket accepts to carry the new products from the
manufacturers, it means the supermarket shares the risk with the
manufacturers. Source: Kotler et al. (2017)
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Behind the scenes of Amazon warehouse

What's it like to work with robots at an Amazon Amazon Fulfillment Center Tour with AWS
fulfillment center? Take this Fulfillment Center tour to see how Amazon
associates, robotics, miles of conveyors, advanced
automation and AWS come together to get packages to
customers in only one day for Prime members.

Source: Amazon News (2021) and Amazon News (2019)

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Coca Cola | Introducing Our Vision Picking

Technology
Coca-Cola HBC is the first
bottling partner in the global
Coca-Cola system to pioneer
the innovative use of smart
glasses for warehouse
picking activities.

By implementing this state-of-

the-art solution, we aim to
increase warehouse picking
productivity and improve
customer satisfaction.

Source: Coca-Cola HBC AG (2019)

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2. Number of Channel Levels

Channel level is a layer of intermediaries who perform some work in

bringing the product and its ownership closer to the final buyer. The number
of intermediary levels indicates the length of a channel.

Types of distribution channels of different lengths:

 A direct marketing channel has no intermediary levels. It consists of a
manufacturer selling directly to consumers.
 An indirect marketing channel contains one or more intermediaries.

From the producer’s point of view, a greater number of levels mean less
control and greater channel complexity.

Source: Kotler et al. (2017)

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Example of different types of Distribution

Channels of different lengths
 Consumer Marketing Channels

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Examples
Direct Marketing Channel: Zara sell their Indirect Marketing Channel:
products directly to end consumers on their  Manufacturer (Coca-Cola) => Wholesaler =>
website. Hence, there is no intermediary Retailer (grocery store) => end consumers
level, and this is a direct marketing channel.  Manufacturer (Coca-Cola) => Large retailer
(Coopmart) => end consumers

Source: Zara (2020)

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Channel Behavior and

Channel Organization

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Channel Behaviours

A marketing channel consists of firms that have partnered for their common good.
Each channel member depends on the others. Each channel member plays a
specialized role in the channel. The channel will be most effective when each
member assumes the tasks it can do best.

Channel Conflict Disagreements among marketing channel members on goals,

roles and rewards - that is, on who should do what and for what rewards
 Horizontal conflicts occurs among firms at the same level of the channel.
 Vertical conflicts occurs between different levels of the same channel.

Source: Kotler et al. (2017)

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Examples of Channel Conflict

 Horizontal Conflict: Some Ford  Vertical Conflict: Burger King has had a
dealers in Chicago might complain steady stream of conflicts with its
that other dealers in the city steal franchised dealers over everything from
sales from them by pricing too low increased ad spending and offensive
ads to the prices it charges for
or advertising outside their
cheeseburgers.
assigned territories.

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Channel Organization
Marketing channels perform best when channel members’ roles are well
defined and the potential for channel conflict is recognised and managed.

Different types of channel organization:

1. Conventional 2. Vertical Marketing 3. Horizontal 4. Multichannel

Marketing Channels Networks (VMNs) Marketing Networks Distribution Networks

Corporate VMN

Contractual VMN

Administered VMN

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1. Conventional Marketing Channel

 A Conventional Marketing Channel consists of one or more
independent producers, wholesalers and retailers, each
channel member is a separate business seeking to maximise
its own profits, perhaps even at the expense of profits for the
system as a whole.
 Historically, conventional distribution channels have lacked
such leadership and power, often resulting in damaging conflict
and poor performance.
 This is quite obsolete and is only applied by small
companies/businesses.

Source: Kotler et al. (2017)

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2. Vertical Marketing Network (VMN)

 VMN provides channel leadership.
 VMN a distribution channel structure in which producers,
wholesalers and retailers act as a unified network; one
channel member owns the others, has contracts with them
or wields so much power that all channel members
cooperate.
 Different types of VMS (each type uses a different means of
setting up leadership and power in the channel):
a. In a Corporate VMN, coordination and conflict
management are attained through common
ownership at different levels of the channel
b. In a Contractual VMN, they are attained through
contractual agreements among channel members.
c. In an Administered VMN, leadership is assumed by
one or a few dominant channel members.
Source: Kotler et al. (2017)
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Conventional Marketing Channel vs. Vertical

Marketing Network

Source: Kotler et al. (2017)

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2a. Corporate Vertical Marketing Network

 Corporate VMN A vertical marketing network that combines successive stages of
production and distribution under single ownership; channel leadership is
established through common ownership.
E.g. TH True Milk, Vinamilk, Dalat Hasfarm

Source: Kotler et al. (2017)

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2b. Contractual Vertical Marketing Network

 A contractual VMN consists of independent firms at different levels of
production and distribution who join together through contracts to obtain
more economies or sales impact than each could achieve alone.

 The most common form is the franchise organization. In this type of

network, a channel member, called a franchisor, links several stages in the
production – distribution process. There are different forms of franchises,
such as:
 Manufacturer-sponsored retailer franchise networks
 Service-firm-sponsored retailer franchise networks, in which a
service firm licenses a network of retailers to bring its service to
consumers

Source: Kotler et al. (2017)

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Example of Contractual VMN

Manufacturer-sponsored retailer Service-firm-sponsored retailer
franchise system: Ford and its franchise system (link): McDonald’s,
network of independent franchised Burger King, KFC, Pizza Hut, The Coffee
dealers. Bean & Tea Leaf

Source: Burger King (n.d.)

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2c. Administered Vertical Marketing Network

Administered VMN: A vertical marketing network that coordinates successive
stages of production and distribution - not through common ownership or
contractual ties but through the size and power of one of the dominant
channel members.
 Manufacturers of top brand such as Procter & Gamble, Kraft, Unilever can
command unusual cooperation from resellers regarding displays, shelf
space, promotions and pricing.
 In turn, large retailers such as Walmart; or in case of Vietnam Saigon
Coopmart or Big C can have strong influence on the many manufacturers
that supply the products they sell.

. .

Source: Kotler et al. (2017)

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3. Horizontal Marketing Network

 Horizontal Marketing Network happens when two or more companies at
one level join together to follow a new marketing opportunity. By working
together, companies can combine their financial, production, or marketing
resources to accomplish more than any one company could alone.
 Companies might join forces with competitors or non-competitors. They
might work with each other on a temporary or permanent basis, or they
may create a separate company.
E.g. Bphone + Mobiphone (only 3,9 million VND per Bphone if customers use
Mobiphone service)

Source: Kotler et al. (2017)

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4. Multichannel Distribution Network

 In the past, many companies used a
single channel to sell to a single
market or market segment. Today,
with the proliferation of customer
segments and channel possibilities,
more and more companies have
adopted multichannel distribution
systems
 Multichannel Distribution Network:
A multichannel distribution system in
which a single firm sets up two or
more marketing channels to reach
one or more marketing segments.

Source: Kotler et al. (2017)

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Changing Channel Organisation

 Changes in technology and the explosive growth of direct and online

marketing are having a profound impact on the nature and design of
marketing channels. One major trend is towards disintermediation.

 Disintermediation occurs when product or service producers cut out

intermediaries and go directly to final buyers, or when radically new types
of channel intermediaries displace traditional ones.

Source: Kotler et al. (2017)

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Channel Design and

Management Decisions

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Marketing Channel Design

Source: Kotler et al. (2017)

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Identifying Major Alternatives

 Types of Intermediaries: A firm should identify the types of channel
members available to carry out its channel work.

 Number of Marketing Intermediaries: Companies must also determine

the number of channel members to use at each level. Three strategies are
available:
Few Many

Number of
Outlets

EXCLUSIVE SELECTIVE INTENSIVE

Source: Kotler et al. (2017)

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Distribution Strategies (based on

number of marketing intermediaries)
 Intensive distribution – Ideal for producers of convenience products and
common raw materials. It is a strategy in which they stock their products in
as many outlets as possible.

Source: Kotler et al. (2017)

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Distribution Strategies (based on

number of marketing intermediaries)
 Exclusive distribution – Is when producers purposely limit the number of
intermediaries handling their products. The producer gives only a limited
number of dealers the exclusive right to distribute its products in their
territories.

Saigon: 802 Nguyễn

Văn Linh, Tân
Phú, Dist. 7, HCMC

Hanoi: 562 Nguyễn

Văn Cừ, Gia Thụy,
Long Biên Dist.,
Hanoi

Source: Kotler et al. (2017)

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Distribution Strategies (based on

number of marketing intermediaries)
 Selective distribution – Is the use of more than one, but fewer than all, of
the intermediaries who are willing to carry a company’s products.

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Review
Which distribution intensity would you recommend for
the following products?

Source: Cartier (2021) and Closeup (2021))

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Topic 6 - Tutorial
Place
Marketing Channels:
Delivering Customer Value
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Case Study Analysis (Group

discussion): Clear

 Open the case study of Clear on Canvas

 Read the case study and answer the questions

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Group Activity

 Form a team from 5 – 6 students.

 Select a brand of your interest.
 Do some research on social media, websites, e-commerce platforms, etc. about
this brand. Then:
1. Identify all Place strategies used by your brand in Vietnam.
2. Evaluate what is working well and/or not working well. Why?

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Further Reading: Marketing 4.0

(This part will not be taught in class)

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3 From Selling the Four P’s

to Commercializing the Four C's
4P's 4C's
Companies develop products Co- Customers can customize and
Product
developed according to customers' Creation personalize products and services
needs and wants

Companies use cost-based, Dynamic pricing – flexible prices

competition-based, and customer Price Currency based on market demand and
value-based pricing capacity utilization

Peer-to-peer distribution – access

Companies decide where to distribute Communal to products and services are served
the products for customers' Place
Activation instantly with the peers in close
convenience proximity

Companies sending messages to Social media allows customers to

customers as audiences through ads, Promotion Conversion
converse with each other.
PR, sales promo, etc.
Source: Kotler, Kartajaya, and Setiawan (2017)​
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Communal Activation
 The most powerful concept is peer-to-peer distribution.
 E.g. Airbnb and Grab provide customers easy access to products and services not
owned by them but by other customers.

Source: Kotler, Kartajaya, and Setiawan (2017)​

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The new Customer Path: 5As Will it replace AIDA?

AWARENESS INTEREST DESIRE ACTION

• Create brand • Generate interest in • Create emotional • Call-to-action

awareness product's benefits connection

AWARE APPEAL ASK ACT ADVOCATE

• "I Know" • "I Like" • "I'm Convinced" • "I'm Buying" • "I Recommend"

Source: Kotler, Kartajaya, and Setiawan (2017)​

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The new Customer Path: 5As

AWARE APPEAL ASK ACT ADVOCATE

• "I Know" • "I Like" • "I'm Convinced" • "I'm Buying" • "I Recommend"

Source: Kotler, Kartajaya, and Setiawan (2017)​

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The new Customer Path: 5As

AWARE APPEAL ASK ACT ADVOCATE

• "I Know" • "I Like" • "I'm Convinced" • "I'm Buying" • "I Recommend"

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Omnichannel Marketing
The practice of integrating multiple channels to create a seamless and consistent
customer experience.

Source: Kotler, Kartajaya, and Setiawan (2017)​

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Common purchase scenarios in the digital era

 Customers are increasingly mobile, channel agnostic, moves from one channel to another,
and expects a seamless and consistent experience without a noticeable disconnect

Source: [Link] (2014)

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Rise of Omnichannel Marketing

TREND 1: Focusing on Mobile TREND 2: Bringing "Webrooming" TREND 3: Bringing "Showrooming"
Commerce in the "Now" Economy into Offline Channels into Online Channels

Tesco's Virtual store (wallpaper resembling

grocery store shelves) in a subway station
Customers can watch a video describing a
([Link] 2019)
product (Smart Insights n.d.)

Mobile phones is in close proximity to

customers.

IKEA's Augmented Reality Shopping App

Macy's AR makeup browsing ([Link] 2018) ([Link] 2017)

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Step-by-step Omnichannel Marketing

Source: Kotler, Kartajaya, and Setiawan (2017)​

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Step-by-step Omnichannel Marketing

Source: Kotler, Kartajaya, and Setiawan (2017)​

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Reference List
 Amazon 2016, Amazon Prime Air’s First Customer Delivery, YouTube, 14 December, viewed 20 March 2021, <[Link]
 Amazon News 2019, What's it like to work with robots at an Amazon fulfillment center?, YouTube, 9 April, viewed 20 March 2021, <[Link]
v=l8gTvuXVkw&list=PLf6elP8Q0znrwNRqbOu_0NaREsTolhpOP&index=5>.
 Amazon News 2021, Amazon ranks #2 on Fortune’s World’s Most Admired Companies list, YouTube, 30 March, viewed 4 April 2021, <[Link]
v=K2-R9tLiT0c>.
 Burger King n.d., Franchising, Burger King, viewed 20 March 2021, <[Link]
 Business Casual 2017, Zara: How a Spaniard Invented Fast Fashion, YouTube, 29 March, viewed 20 March 2021, <[Link]
 Cartier 2021, Love Bracelet Diamond-paved, Cartier, viewed 30 March 2021, <[Link]
bracelet,-[Link]>.
 Closeup 2021, Closeup Natural Glow Toothpaste, viewed 30 March 2021, <[Link]
 Coca-Cola HBC AG 2019, Introducing Our Vision Picking Technology, YouTube, 31 May, viewed 20 March 2021, <[Link]
 Kotler, P, Armstrong, G, Ang, SH, Tan, CT, Yau, OHM & Leong, SM 2017, Principles of Marketing, An Asian Perspective, Pearson Education Limited, Harlow, United
Kingdom.
 Kotler, P, Kartajaya, H & Setiawan, I 2017, Marketing 4.0: moving from traditional to digital, Wiley, Hoboken, New Jersey.
 Lifebuoy Vietnam 2019a, TIKI Sales 12.12 | Phòng bệnh Tiêu Chảy với nước rửa tay Lifebuoy!, YouTube, 5 December, viewed 20 March 2021,
<[Link]
 Lifebuoy Vietnam 2019b, [Shopee Super Brand Day] Nước rửa tay Lifebuoy - Bảo vệ khỏi vi khuẩn gây bệnh Tiêu Chảy!YouTube, 17 December, viewed 20 March 2021,
<[Link]
 Lifebuoy Vietnam 2020, [MỚI] GEL RỬA TAY KHÔ LIFEBUOY ĐÃ XUẤT HIỆN TẠI VIỆT NAM!!!, YouTube, 6 March, viewed 20 March 2021,
<[Link]
 Porsche Vietnam n.d., Porsche Việt Nam, Porsche Vietnam, viewed 10 March 2021, <[Link]
 Samsung 2020, [Virtual In-store Experience] Galaxy A Series | Samsung, YouTube, 7 November, viewed 20 March 2021, <[Link]
v=vD1trdGTTbg>.
 Zara 2020, Homepage, Zara, viewed 1 August 2020, <[Link]

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Thank you!

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