Market Channels and Value Networks Arild Aspelund IØT, NTNU

Senter for entreprenørskap – Truls Erikson 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

Senter for entreprenørskap – Truls Erikson Market Channels Sets of interdependent organizations involved in the process of making a product or service available for use or consumption.

Senter for entreprenørskap – Truls Erikson 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

Senter for entreprenørskap – Truls Erikson 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

Senter for entreprenørskap – Truls Erikson Market Channel Development

Senter for entreprenørskap – Truls Erikson …and with the multiple tasks it tends to become rather complex…

Senter for entreprenørskap – Truls Erikson Designing a Market Channel Analyze customer needs Evaluate major channel alternatives Identify major channel alternatives Establish channel objectives

Senter for entreprenørskap – Truls Erikson Some Market Channel Alternatives and Their Characteristics

Senter for entreprenørskap – Truls Erikson 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

Senter for entreprenørskap – Truls Erikson Channel Integration and Systems Vertical Marketing Systems (VMS) –Corporate VMS –Administered VMS –Contractual VMS Horizontal Marketing Systems Multi-channel Marketing Systems

Senter for entreprenørskap – Truls Erikson 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?

Senter for entreprenørskap – Truls Erikson E-commerce Channel Conflicts Pure-click Brick-and-click Brick-and-mortar

Senter for entreprenørskap – Truls Erikson 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

Senter for entreprenørskap – Truls Erikson 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