Chapter 2_Unconventional Channels

2 ] Unconventional Channels We are fully acquainted with conventional / traditional channels i.e. Manufacturer > Distributor > Wholesaler > Retailer > Shop-Keeper > Customer Extent of channel-partners organization.

vary

from

products-to-products

and

organization

to

Since last 5 years, it has been observed that, many organizations prefers to have contact with customers directly instead of through channel-partners. These channels are referred as “Direct Marketing Channels or Unconventional Channels”. These are unusual techniques in performing marketing activities with a goal of attaining maximized outputs from minimal resources and expenses. Marketing of products or services can be done by various ways-n-means. Direct marketing is one of the effective channel that takes the organization to the final customer / recipient by interaction between the two. It operates on one-to-one basis and totally opposite to conventional marketing. “Direct marketing is de-massified marketing; it deals with customer on a one-to-one basis. The marketer approaches the customers individually, communicates with them on singlelevel basis and even offers products that are modified to suit the requirements of the chosen customers.” Benefits • • •

•

•

supports accurate segmentation and sharper targeting of the market – formulation of more fine-tuned marketing strategies; establishing relationship with the customers due to closer contact which results into retention of the same-creation of competitive advantage; cost-effective due to elimination of costs associated with channels, advertisingdoes not involve marketing channels / stores, advertising / mass promotion; facilitates special attention to large accounts-every firm does not have equal weight-age of customers ( Pareto’s Law of 20:80 > 20% customers contribute 80% of revenue either of entire business or selective product ) : helps to pay due attention to customers who give the major chunk of the business; helps the customers also-shopping at doorstep, saves time, convenient and hasslefree, educating themselves about new products/brands-applicable to industrial consumers also.

Forms of Direct Marketing • • • • •

mail-order / catalogue; response; database; telemarketing; home-shopping;

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e-marketing ( on-line / on-web ).

Tele Marketing Telemarketing is a method of direct marketing in which a salesperson solicits to prospective customers to buy products or services, either over the phone or through a subsequent face to face or Web conferencing appointment scheduled during the call. Telemarketing can also include recorded sales pitches programmed to be played over the phone via automatic dialing. Telemarketing has come under fire in recent years, being viewed as an annoyance by many. Some people believe that in the 1950s, Dial-America Marketing, Inc became the first company completely dedicated to inbound and outbound telephone sales and services. The company, spun-off and sold by Time, Inc. magazine in 1976, became the largest provider of telephone sales and services to magazine publishing companies. The term telemarketing was first used extensively in the late 1970s to describe Bell System communications which related to new uses for the outbound WATS and inbound Toll-free services. The two major categories of telemarketing are Business-to-business and Business-toconsumer. Subcategories • • • •

Lead Generation - the gathering of information; Sales - using persuasion to sell a product or service; Outbound - proactive marketing in which prospective and pre-existing customers are contacted directly; Inbound - reactive reception of incoming orders and requests for information. Demand is generally created by advertising, publicity, or the efforts of outside salespeople.

Procedure > Telemarketing may be done from a company office, from a call centre, or from home. It may involve either a live operator or a recorded message, in which case it is known as "automated telemarketing" using voice broadcasting. "Robo-calling" is a form of voice broadcasting which is most frequently associated with political messages. An effective telemarketing process often involves two or more calls. The first call (or series of calls) determines the customer’s needs. The final call (or series of calls) motivates the customer to make a purchase. Means of identifying prospective customers • •

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past purchase history with Manufacturers / Dealers / Outlets / Franchisee; requests made by buyer in past;

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• • • •

mobile operators, credit / debit cards, shares trading account, investment made through Fund managers / Brokers / Asset management cos. & Telephone directory; information passed-on by prospective buyer who had received call earlier; collection of details from another company’s data-base either directly or through mediator : in kind or simply purchased; participation by customer in any of the competition / quiz / exhibition / fair etc.

The qualification process is intended to determine which customers are most likely to purchase the product or service. Charitable organizations, alumni associations, and political parties often use telemarketing to solicit donations. Marketing research companies use telemarketing techniques to survey the prospective or past customers of a client’s business in order to assess market acceptance of or satisfaction with a particular product, service, brand, or company. Public opinion polls are conducted in a similar manner. Telemarketing techniques are also applied to other forms of electronic marketing using email or fax messages, in which case they are frequently considered spam by other people. Negative perceptions and Criticism

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Telemarketing has been negatively associated with various scams and frauds, such as pyramid schemes, and with deceptively overpriced products and services. Telemarketing is often criticized as an unethical business practice due to the perception of high-pressure sales techniques during unsolicited calls. Telemarketing calls are often considered an annoyance, especially when they occur during the dinner hour, early in the morning, or late in the evening. Regulations Telemarketing is subject to regulatory and legislative controls related to consumer privacy and protection. The Many professional associations of telemarketers have codes of ethics and standards that member businesses follow to encourage public confidence. Some jurisdictions have implemented "Do Not Call" lists through industry organizations or legislation; telemarketers are restricted from initiating contact with participating consumers. Legislative versions often provide for heavy penalties on companies which call individuals on these listings. Technology • • • • •

Auto-dialer Automatic call distributor Customer relationship management Predictive dialer Private Branch exchange

Benefits of Telemarketing •

Accelerates development - external telemarketing not only accelerates your business growth, it can also respond flexibly to your changing needs at different times of the year;

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• • • •

Makes your Company seem bigger - pitching for the larger contracts is always competitive. What better way to profile yourself as a Company of reasonable size than by the initial contact coming from another "member of the team"; Immediate feedback - trends, competitive information and Clients changing requirements are a valuable bi-product of your project; Reduces your work load – Allows you and your team to focus on the brightest opportunities; Preserves your time for your specialist skills - Your Clients in professional and creative spheres especially welcome this aspect.

Features of Telemarketing1. Decide what you want to gain from each call - information or an appointment ? 2. Plan your call accordingly: have to hand a list of key companies for whom your company has worked, as well as the range of benefits of the service or product in question. 3. Work with a tidy desk and be specific with the subject. 4. Make a clear introduction, including your name and the company name. 5. Ask open-ended questions, the ones beginning, WHAT, WHY, WHEN, HOW, WHERE, WHO. 6. Give the person time to answer and don't feel tempted to fill silences with more words. 7. Match your most relevant area of service/type or product to the type and size of company your are calling --no-one is interested in everything you do. 8. Listen for buying signals, very often not what is said but what is not said ... "not interested at the moment" ...."Not looking for quite that type of product" ... "not the person dealing with it" .... Dealing with what? What type of product would they like? And when will they be interested? 9. Listen all the time, not interrupting and at the end of the call summarize agreed action to the potential customer. 10. Try to match your voice and enthusiasm to the other person; generally speaking it doesn't impress to either underwhelming or overwhelming ! Examples : • • •

BPO - Business Process Outsourcing ( Wipro, Infosys, Mphasis, Godrej, Satyam, Accenture, WNS etc. ) KPO - Knowledge Process Outsourcing; LPO – Legal Process Outsourcing;

E-Marketing Marketing has pretty much been around forever in one form or another. Since the day when humans first started trading whatever it was that they first traded, marketing was there. Marketing was the stories they used to convince other humans to trade. Humans have come a long way since then, ( Well, we like to think we have) and marketing has too. The methods of marketing have changed and improved, and we've become a lot more efficient at telling our stories and getting our marketing messages out there. E-marketing is the product of the meeting between modern communication technologies and the age-old marketing principles that humans have always applied.

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That said, the specifics are reasonably complex and are best handled piece by piece. So we’ve decided to break it all down and tackle the parts one at a time. This week we’ll be looking at the "what" and "why" of E-marketing, outlining the benefits and pointing out how it differs from traditional marketing methods. By the end of the series we're pretty sure you'll have everything you need to tell better marketing stories. Meaning of E-marketing > Very simply put, E-marketing or electronic marketing refers to the application of marketing principles and techniques via electronic media and more specifically the Internet. The terms e-Marketing, Internet marketing and online marketing, are frequently interchanged, and can often be considered synonymous. E-marketing is the process of marketing a brand using the Internet. It includes both direct response marketing and indirect marketing elements and uses a range of technologies to help connect businesses to their customers. By such a definition, E-marketing encompasses all the activities a business conducts via the worldwide web with the aim of attracting new business, retaining current business and developing its brand identity. Why is it important ? When implemented correctly, the “Return on investment (ROI)” from e-marketing can far exceed that of traditional marketing strategies. Whether you're a "bricks and mortar" business or a concern operating purely online, the Internet is a force that cannot be ignored. It can be a means to reach literally millions of people every year. It's at the forefront of a redefinition of way businesses interact with their customers’ reach. Reach > The nature of the internet means businesses now have a truly global reach. While traditional media costs limit this kind of reach to huge multinationals, e-marketing opens up new avenues for smaller businesses, on a much smaller budget, to access potential consumers from all over the world. Scope > Internet marketing allows the marketer to reach consumers in a wide range of ways and enables them to offer a wide range of products and services. E-marketing includes, among other things, information management, public relations, customer service and sales. With the range of new technologies becoming available all the time, this scope can only grow. Interactivity - Whereas traditional marketing is largely about getting a brand's message out there, e-marketing facilitates conversations between companies and consumers. With a two-way communication channel, companies can feed off of the responses of their consumers, making them more dynamic and adaptive. Immediacy - Internet marketing is able to, in ways never before imagined, provide an immediate impact. Imagine you're reading your favourite magazine. You see a doublepage advertisement for some new product or service, maybe BMW's latest luxury sedan or Apple's latest iPod offering. With this kind of traditional media, it's not that easy for you, the consumer, to take the step from hearing about a product to actual acquisition.

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With e-marketing, it’s easy to make that step as simple as possible, meaning that within a few short clicks you could have booked a test drive or ordered the iPod. And all of this can happen regardless of normal office hours. Effectively, Internet marketing makes business hours 24 hours per day, 7 days per week for every week of the year. By closing the gap between providing information and eliciting a consumer reaction, the consumer's buying cycle is speeded up and advertising spend can go much further in creating immediate leads. Demographics and Targeting - Generally speaking, the demographics of the Internet are a marketer's dream. Internet users, considered as a group, have greater buying power and could perhaps be considered as a population group skewed towards the middle-classes. Buying power is not all though. The nature of the Internet is such that its users will tend to organize themselves into far more focused groupings. Savvy marketers who know where to look can quite easily find access to the niche markets they wish to target. Marketing messages are most effective when they are presented directly to the audience most likely to be interested. The Internet creates the perfect environment for niche marketing to targeted groups. Adaptivity and Closed Loop marketing - Closed Loop Marketing requires the constant measurement and analysis of the results of marketing initiatives. By continuously tracking the response and effectiveness of a campaign, the marketer can be far more dynamic in adapting to consumers' wants and needs. With e-marketing, responses can be analyzed in real-time and campaigns can be tweaked continuously. Combined with the immediacy of the Internet as a medium, this means that there's minimal advertising spend wasted on less than effective campaigns. Maximum marketing efficiency from e-marketing creates new opportunities to seize strategic competitive advantages. The combination of all these factors results in an improved ROI and ultimately, more customers, happier customers and an improved bottom line.

Guerrilla Marketing This is an unconventional system of promotions that relies on time, energy and imagination rather than a big marketing budget. The end users / consumers are referred or targeted unexpectedly. Customers may not be aware about the product / service. • • •

Buzz marketing – Interaction with prospective / potential buyers so as emphasize the product value and benefits. Such efforts create anticipation and excitement amongst the customers. Experimental marketing – An emotional appeal to the customers towards buying products and or service. Attachment to a Brand, Product, Individual or Concept. Viral marketing – Marketing is being done through social networks with a goal of creation of brand / product awareness ultimately for Sales and Profits. Internet and Verbal publicity are the examples.

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Distribution Channels - Terminology and Structure

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Distribution is the physical flow of goods through channels; Channels are made up of a coordinated group of individuals or firms that perform functions that add utility to a product or service; Distributor – wholesale intermediary that typically carries product lines or brands on a selective basis; Agent – an intermediary who negotiates transactions between two or more parties but does not take title to the goods being purchased or sold.

Channels : Consumer Goods, Industrial Products, Services Consumer Products

Piggyback Marketing –

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channel innovation that has grown in popularity;

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• •

One manufacture distributes product by utilizing another company’s distribution channel; Requires that the combined product lines be complementary and appeal to the same customer.

Industrial Products

Establishing Channels

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Direct involvement – the company establishes its own sales force or operates its own retail stores; Indirect involvement – the company utilizes independent agents, distributors, and/or wholesalers; Channel strategy must fit the company’s competitive position and marketing objectives with in each national market.

Working with Channel Intermediaries

• • •

Select distributors – don’t let them select you; Look for distributors capable of developing markets, rather than those with a few good customer contacts; Treat local distributors as long-term partners, not temporary market-entry vehicles;

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Support market entry by committing money, managers, and proven marketing ideas; From the start, maintain control over marketing strategy; Make sure distributors provide you with detailed market and financial performance data; Build links among national distributors at the earliest opportunity.

We have already studied various “Types of Channels” in Chapter 1. However, some more text is added below. Global Retailing

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Department stores; Specialty retailers; Supermarkets; Convenience stores; Discount stores and warehouse clubs; Hypermarkets; Super Centers; Category killers; Outlet stores.

Environmental Factors – Saturation in the home country market – Recession or other economic factors – Strict regulation on store development – High operating costs – Critical Question - What advantages do we have relative to the local competition? Global Retailing Strategies

 Organic - Company uses its own resources to open a store on a green field site or acquire one or more existing retail facilities;

 Franchise - Appropriate strategy when barriers to entry are low yet the market is  

culturally distant in terms of consumer behavior or retailing structures; Chain Acquisition - A market entry strategy that entails purchasing a company with multiple existing outlets in a foreign country; Joint Venture - This strategy is advisable when culturally distant, difficult-to-enter markets are targeted. Culturally Close D : Organic

A : Chain Acquisition

Easy

to

Enter

Difficult to Enter C : Franchise

B : Joint Venture

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Culturally Distant

Innovation in Global Retailing

a) Innovation takes place only in the most highly developed systems; b) The ability of a system to successfully adapt innovations is directly related to its level of economic development;

c) Even when the economic environment is conducive to change, the process of adaptation may be either hindered or helped by local demographic factors, geographic factors, social mores, government action, and competitive pressures; d) The process of adaptation can be greatly accelerated by the actions of aggressive individual firms

Service Marketing A service is the action of doing something for someone or something. It is largely intangible [ i.e. not material ]. A product is tangible [ i.e. material ] since you can touch it and own it. A service tends to be an experience that is consumed at the point where it is purchased, and cannot be owned since is quickly perishes. A person could go to a café one day and have excellent service, and then return the next day and have a poor experience. So often marketers talk about the nature of a service as:1) Inseparable - From the point of providing to point of consumption. For example, you cannot take a live theatre performance home to consume it [ a DVD of the same performance would be a product, not a service ]; 2) Intangible - cannot have a real, physical presence as does a product. For example, motor insurance may have a certificate, but the financial service itself cannot be touched i.e. it is intangible; 3) Perishable - in that once it has occurred it cannot be repeated in exactly the same way. For example, once a 100 meters Olympic final has been run, there will be not other for 4 more years, and even then it will be staged in a different place with many different finalists; 4) Variability- since the human involvement of service provision means that no two services will be completely identical. For example, returning to the same garage time and time again for a service on your car might see different levels of customer satisfaction, or speediness of work. 5) Right of ownership - is not taken to the service, since you merely experience it. For example, an engineer may service your air-conditioning, but you do not own the service, the engineer or his equipment. You cannot sell it on once it has been consumed, and do not take ownership of it. Characteristics of a Service What exactly are the characteristics of a service? How are services different from a product? In fact many organizations do have service elements to the product they sell, for example McDonald’s sell physical products i.e. burgers but consumers are also concerned about the quality and speed of service. Is staff cheerful and welcoming and do they serve with a smile on their face? There are 5 characteristics to a service which will be discussed below :-

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1. Lack of ownership You cannot own and store a service like you can a product. Services are used or hired for a period of time. For example when buying a ticket to the USA the service lasts may be 9 hours each way , but consumers want and expect excellent service for that time. Because you can measure the duration of the service however consumers become more demanding of it;

2. Intangibility - You cannot hold or touch a service unlike a product. In saying that although services are intangible the experience consumers obtain from the service has an impact on how they will perceive it. What do consumers perceive from customer service ? The location, and the inner presentation of where they are purchasing the service; 3. Inseparability - Services cannot be separated from the service providers. A product when produced can be taken away from the producer. However a service is produced at or near the point of purchase. Take visiting a restaurant, you order your meal, the waiting and delivery of the meal, the service provided by the waiter / waitress is all apart of the service production process and is inseparable, the staff in a restaurant are as apart of the process as well as the quality of food provided. 4. Perishable Nature - Services last a specific time and cannot be stored like a product for later use. If traveling by train, coach or air the service will only last the duration of the journey. The service is developed and used almost simultaneously. Again because of this time constraint consumers demand more. 5. Heterogeneity - It is very difficult to make each service experience identical. If traveling by plane the service quality may differ from the first time you traveled by that airline to the second, because the airhostess is more or less experienced. A concert performed by a group on two nights may differ in slight ways because it is very difficult to standardize every dance move. Generally systems and procedures are put into place to make sure the service provided is consistent all the time, training in service organizations is essential for this, however in saying this there will always be subtle differences. Service Marketing Mix - Having discussed the characteristics of a service, let us now look at the marketing mix of a service. The service marketing mix comprises off the 7’p’s -

Product

Price

Servic e Place

Physical Distributi on Process

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Promotio n

People

Lets now look at the remaining 3 p’s :•

People - An essential ingredient to any service provision is the use of appropriate staff and people. Recruiting the right staff and training them appropriately in the delivery of their service is essential if the organization wants to obtain a form of competitive advantage. Consumers make judgments and deliver perceptions of the service based on the employees they interact with. Staff should have the appropriate interpersonal skills, aptitude, and service knowledge to provide the service that consumers are paying for. Many British organizations aim to apply for the Investors In People accreditation, which tells consumers that staff are taken care off by the company and they are trained to certain standards;

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Process - Refers to the systems used to assist the organization in delivering the service. Imagine you walk into Burger King and you order a Whopper Meal and you get it delivered within 2 minutes. What was the process that allowed you to obtain an efficient service delivery? Banks that send out Credit Cards automatically when their customers old one has expired again require an efficient process to identify expiry dates and renewal. An efficient service that replaces old credit cards will foster consumer loyalty and confidence in the company;

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Physical Evidence - Where is the service being delivered ? Physical Evidence is the element of the service mix which allows the consumer again to make judgments on the organization. If you walk into a restaurant your expectations are of a clean, friendly environment. On an aircraft if you travel first class you expect enough room to be able to lay down ! Physical evidence is an essential ingredient of the service mix, consumers will make perceptions based on their sight of the service provision which will have an impact on the organizations perceptual plan of the service.

To certain extent managing services are more complicated then managing products, products can be standardized, and to standardize a service is far more difficult as there are more input factors i.e. people, physical evidence, process to manage then with a product.

Horizontal Marketing Joining of two or more agencies on the same level for the purposes of pursuing a new marketing opportunity. Usually a horizontal marketing system is established so that the individual members can combine resources to make the most out of the marketing situation. Products from each member can be marketed and / or distributed together. The two products are marketed together, allowing the two companies to combine their marketing resources and accomplish much more than either one might accomplish alone. Agencies in a horizontal marketing system also have the option of combining their capital and production capabilities, in addition to their marketing and distribution resources, to produce synergistic benefits for all members. Some of the examples are given below :•

Stereos / DVDs are offered along with Cars / Buses / Trucks either having tie-up with manufacturers or with dealers etc.;

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•

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Ice-Cream varieties are offered along with Lunch / Dinner in dining halls; Soaps / Detergents are offered with House-hold appliances; Financial products viz. Banking / Insurance / Mutual Funds

E.g. Tata-Fiat Strategic alliance-cum-JV, Strategic alliance between various Banks and Private Organizations offering Financial products

Multi-Channel Marketing It is marketing process using many different marketing channels to reach a customer. In this sense, a channel might be a retail store, a web site, a mail order catalogue, or direct personal communications by letter, email or text message. The objective of the company doing the marketing is to make it easy for a consumer to buy from them in whatever way is most appropriate. To be effective multi-channel marketing needs to be supported by good supply chain management systems ( SCM ), so that the details and prices of goods on offer are consistent across the different channels. It might also be supported by detailed analysis of the return on investment from each different channel, measured in terms of customer response and conversion of sales. Some companies target certain channels at different demographic segments of the market or at different socio-economic groups of consumers Multi-channel marketing is offering customers more than one way to buy something - for example, from a Web site as well as in retail stores. For manufacturers, multi-channel marketing also includes the use of partners, sometimes known as channels, who market directly to the customer as consultants, re-packers, or retailers. For retailers, it is claim that, in addition to offering the customer more options, multichannel marketing allows a business more opportunities to interact with customers - each channel can help promote the other channels. Since Web site and phone-in mail orders collect information about the customer that a retail sale may not, these channels make it possible to develop mailing lists for future promotions and branding campaigns. e.g. FMCG, Consumer Goods, Mobile Products & Services, Insurance & Financial Products.

Vertical Channel Marketing This phenomenon is being widely used by the business-houses / marketers in almost every segments. This is nothing but “Traditional Channel”. Process starts with the manufacturer and he reaches the final / end customer either through conventional way or direct / unconventional way. Strategy depends upon the nature of product / service as well as market-currents / market potential. Joining producers, wholesalers, and retailers in the production and distribution of products. There are three major types of vertical marketing systems, and each uses different means for setting up leadership and power in the system :• • •

corporate, where coordination and conflict management are attained by common ownership; contractual, where coordination and conflict management are attained through contractual agreements among members of the system; administered, where leadership is assumed by one dominant system member.

The purpose of a vertical marketing system is to eliminate conflicts arising from each company's pursuit of its own financial objectives.

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