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Summary Papers Marketing Channel Management Tilburg University 2019

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Summary of all papers of Marketing Channel Management Tilburg University for school year . Contains all papers posted on Canvas. For the master Marketing Management.

Voorbeeld 3 van de 26  pagina's

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  • 10 oktober 2019
  • 26
  • 2019/2020
  • Samenvatting

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Voorbeeld van de inhoud

1. RETAILER POWER IN THE GROCERY INDUSTRY

INTRODUCTION

Though their sheer size, retailers have become the gatekeepers to shoppers, the end users of CPG
products. A relative handful of retailers now controls access to enormous numbers of consumers. As
a result, these retailers can confront suppliers with various demands (lower pricing, accelerated
delivery times, more tailored promotional programs, more sustainable products and processes) and
may temporarily stop selling certain products if a manufacturer does not comply with their demands.
Two sources of retailer power:
1. Growing retailer scale: internationalization, consolidating wave of mergers and acquisitions,
buying group membership
2. Growing retailer sophistication: organically through multi-channel operations and have
become competitors to their suppliers by selling private labels

SOURCES OF RETAILER POWER: GROWING RETAILER SCALE

INTERNATIONALIZATION
Retailing companies that were formerly characterized by a local or national orientation have
increasingly developed into global players with worldwide operations. The true internationalization
fever started in the late 1980s.
The fact that retailers are starting to focus on certain regions and withdrawing from others may be a
signal that they cannot be leading players everywhere around the world, although they can be very
powerful on a more limited regional basis.

MERGERS AND ACQUISITIONS
Being able to preempt the most attractive store sites may substantially increase the sales potential of
the retailer’s new stores in the country. Firms considering an entry in countries where many retailers
are already active (Czech Republic, Poland) should realize that the most attractive positions have
been taken for some time. This issue is less important when opting for a merger and acquisition as
the retailer may acquire or merge with an earlier entrant that occupies the better locations.
In 2011, Dutch Jumbo acquired all 460 stores of rival retailer C1000, making it the second largest
retailer in the country and the fastest growing retailer in the world.
- Research find that consumers exhibit outlet loyalty after a store changes ownership.
Acquiring outlets with a clientele in place leads to higher store traffic levels than the
acquiring retailer could reach by opening new outlets  acquisitions increase retail power
more than organic growth does
- Larger retailers are better able to withstand the increased competition due to Walmart’s
entry as they have better resources and more room to invest in strategic changes  size can
be increased through mergers and acquisitions

BUYING GROUPS
Buying groups = horizontal, typically cross-border collaborations through which retailers purchase
from suppliers. Most powerful participants in the market.
By pooling volume and using their clout, larger buying groups can keep suppliers ‘on their toes’ and
extract better buy-in prices than might be achieved through individual negotiation. Lower buy-in
prices may result in higher margins but also enable retailers to (selectively) reduce retail prices,
which in turn may increase retailer sales.


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,Buying groups generate scale advantages for their members: group scale increases members’
productivity and sales and decreases their cost of goods sold.
Retailers benefit less from buying group scale when the group is more heterogeneous in terms of
member size. Relatively smaller members win the least, because they have to agree with the whims
and wishes of their larger counterparts. When buying groups are on the lookout for new members,
they should try to attract similarly sized retailers.
A high-degree of geographic-market overlap between members should be avoided. If geographic
overlap is high, advantages of buying groups participation are also available to direct competitors.
While a wider geographic market scope of a buying group increases retailers’ power, a wider
product-market scope (the number of different store formats represented in the buying group) does
not. The narrower the product-market scope of the buying group, the larger the beneficial effect of
the group’s scale on its members’ performance.

SOURCES OF RETAIL POWER: GROWING RETAILER SOPHISTICATION

The better availability of customer data is contributing to retailers’ power surge. Due to these data,
retailers have become much closer to the consumer than manufacturing companies. They have
seized that opportunity to diversify into different channels (to target different consumers) and to
develop their own private labels (to increase consumer loyalty to their chains).

FORMAT DIVERSIFICATION
Many successful retailers are diversified multi-format operators.
Diversification is an important strategic option that can be taken in search of new opportunities.
While not every store format may be a long-term success, this diversification strategy allows retailers
to target different consumers and cater to different shopping occasions.
In their diversification move, retailers are prioritizing growth channels, viz. the discount, the
convenience and the online channel.
Shifting demographics (ageing populations, shrinking households, urbanization, and fast-paced
lifestyles) are driving demand for proximity retailing, which explains the diversification of retailers
into the convenience channel. Through diversifying into discount and convenience formats, retailers’
stores are better tailored to meet the different consumers needs in individual catchment areas,
thereby increasing retailers’ sales and their power in the supply chain.
By diversifying into click and collect (buy online, pick up in store), retailers hold another revenue-
generating gateway to shoppers, thus further increasing their power position.

PRIVATE LABELS
Private labels, also known as store brands or retailer brands, have been extremely successful in the
past years. Through private labels, retailers’ channel power over brand manufacturers increases
because retailers can threaten not to buy manufacturers’ products, as they now also have private
labels as alternatives.
Creating true private labels:
1. Development of multi-tiered offerings (premium-standard-economy tiers)
2. Brand name: allows consumers to more easily differentiate among various private labels
o Using store-banner name to provide a signal that product claims are credible

CONCLUSION

- Internationalization and private labels: economies of scale arise in case a retailer’s private
label sells across multiple countries, contributing to increasing retailer power

2

, - Internationalization and format diversification: format diversification into international
marketplaces further increases retailer power
- Buying groups and private labels: medium-sized retailers are increasingly seeking to partner
with a buying group for sourcing private labels

2. WILL THE REAL CHANNEL MANAGER PLEASE STAND UP?

WHAT ARE MARKETING CHANNELS?

Marketing channels (distribution channels) comprise groups of interdependent organizations that
work together to make products and services available for purchase by consumers or businesses.
Pipelines to markets through which products flow from manufacturers to ultimate users with various
middlemen (wholesalers, distributors, retailers).
These middlemen perform a variety of distribution tasks to move products to end users: gathering
and sharing information, buying and selling diverse product assortments, grading, storing and
transporting products, providing financing, and taking market risks.
From the customer standpoint, marketing channels create three basic kinds of utilities:
1. Time utility: makes products and services available when consumers want them
2. Place utility: provides them where customers want them
3. Possession utility: enables the customer to purchase or lease products and then take them
elsewhere for use as needed
Efficient exchanges
- Reduce the number of transactions, streamlining distribution and slashing costs
- Handle discrepancies in the assortment or variety of products desired

IS MARKETING CHANNEL MANAGEMENT REALLY IMPORTANT?

As products become more and more like commodities with little significant differentiation (as
perceived by consumers), competition is moving rapidly away from products toward efficiencies in
distribution.
Close cooperation between channel members can lead to efficiencies, lower costs, the elimination of
redundancies in the marketing channel, and the development of innovative approaches to satisfy
customers and create competitive advantages.
Channel managers must not only satisfy their customers, they must also make every effort to keep
them as loyal buyers  most profitable: buy the most, cost less to serve, refer other customers,
willingly pay price premiums for value, tend to be the most forgiving.

WHAT DOES A MARKETING CHANNEL MANAGER DO?

To be fully effective and efficient and to command customer satisfaction and loyalty, channels
require leadership, cooperation and management of all relationships.
Roosenbloom (1995, 1999) lists seven critical activities a channel manager performs:
- Formulating marketing channel strategy
o Long-run planning and implementation efforts needed
- Designing marketing channels
o Developing new channels or modifying existing channel structures
o Devising structure (according to Anderson, Day, Rangan):
 Number intermediary levels between manufacturer and end user
 Intensity: number of intermediaries at each level
 Types of intermediaries

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