Using Marketing Channels and Price to Create Value for Customerson the Samsung Galaxy answer each of the following four questions in order numbering each of your responses. There is no need to repeat the question.1. Marketing channels. To the best of your ability, outline the marketing channels of your product or service offering as they currently exist. Refer to Reference Material Figure 6.2 below for some ideas. Most product and service offerings will have more than one channel, so your system should include at least two, for example (1) a direct channel for internet sales: manufacturer > customer; and (2) an indirect channel such as manufacturer > distributor > wholesaler > retailer > customer. If your product or service only has only a direct channel, explain why. Would this channel strategy change as a result of your new target market? Why or why not? 2. Marketing channel strategy. Why type of distribution intensity strategy does your product or service currently use? How do you know this? Would this distribution intensity strategy change for your new target market? Why or why not? 3. Value chain. Referring back to your marketing channel diagram, discuss what each member of the value chain does to bring value to the consumer. 4. Pricing strategy. Referring to the various pricing strategies outlined in Reference Material below, which one does your product or service currently use. Would you recommend any changes for your new target market? If so, how would you change it and why? No need for additional references. Reference Material provided below Prepare as a word processed document (such as Microsoft Word). Your assignment should be the equivalent of two pages of double-spaced text, approximately 1/2 page for each of the four questions. Use a simple 12-point font such as Times New Roman.Previous AssignmentCreating offerings: Samsung Galaxy J7 Prime Features of the offering: Samsung Galaxy J7 Prime The Samsung Galaxy J7 Prime is an upgraded version of Samsung Galaxy J7, and it has excellent external and internal features. The display screen is made of glass for excellent display, and the back cover is made of plastic while the edges have a metallic finishing to ensure protection and durability (Gadget 360, 2016). Samsung Galaxy J7 Prime has sophisticated internal feature that gives it a competitive edge in the global smartphone market. It has a fingerprint sensor, which is an excellent security and privacy tool for this gadget. It has a full High Definition display screen of 5.5 inches that is sensitive to touch. It is a dual SIM gadget that has a 3GB RAM, 32GB internal memory, and expandable external memory of up to 256GB micro SD support. It also has a long-lasting battery of 3300mAh that can last between 10-12 hours when fully charged. It has a high-resolution rear camera of 13MP and an 8MP front camera with a LED flash and a f/1.9 aperture (Gadget 360, 2016). Samsung Galaxy J7 Prime has excellent connectivity capabilities such as Bluetooth, WI-FI, and GPS. This offering is more service dominant because it provides consumers with an excellent communication service through multimedia (video, images, and texts) contents. Samsung Galaxy J7 Prime is offered at an affordable price of $285. The ownership cost is very minimal, and it is estimated to be at $20 p.a. This is the cost of energy that will be required to re-charge the battery. There is no maintenance cost because if there are any issues with the phone, the company will incur the repair or replacement cost. The tangible feature of Samsung Galaxy J7 Prime if small rectangular size and black in color, whereas its luxurious and excellent communication experiences, are its intangible features. Type of consumer offering Based on the four types of offerings that are discussed in this course, Samsung Galaxy J7 Prime falls in the category of specialty offerings. According to Gaiardelli, Resta, Martinez, Pinto, and Ablores (2014), specialty offerings are products that are highly differentiated and whose brands are very different from those of other companies across the involved industry. Due to its sophisticated internal features that brings about excellent communication and amazing user experience, Samsung Galaxy J7 Prime is available in limited channels, and hence, it is considered a specialty offering. The target market for this product is both male and female are technology savvy consumers between 26 to 50 years. Based on this target market, the category of this offering might change from a specialty offering to a shopping offering. Samsung Galaxy J7 Prime will dominate the market and become a major brand among smartphone consumers, in this regard, its category will change to shopping offering because consumers will make an effort to acquire it because they believe it is the best brand (Desai, 2010). The shift in offering category will also change the marketing strategy from electronic media marketing to marketing over touch points such as social media, emails, phone calls, and email and website chat logs. Product line extensions or new product development Due to the nature of the target market of Samsung Galaxy J7 Prime, this product needs to be modified to meet the needs of its target consumers fully. The new change will constitute a product line extension. In this regard, besides placing a major focus on the production of this particular smartphone, Samsung Electronics will also engage in the production of other related products such hands free devices, new versions of android operating system, and Samsung watches. The product line extension will occupy an already contested market space, however, the products will come along with sophisticated and excellent features to bring about excellent experience to consumers. These products are also aimed at reaching more young consumers of smartphone who also form a large market share for the smartphone products (Van Gelder, 2005). It targets the female users of the Leone perfumes and is aimed at increasing the market share as well as generating more revenues for this company. Product lifecycle Samsung Galaxy J7 Prime is at the growth stage of a product lifecycle; however, after the introduction of the product line extension, the lifecycle of the product will change to maturity stage (Gecevska, Chiabert, Anisic, Lombardi, & Cus, 2010). Due to the competitive nature of this stage in a products lifecycle, the market strategy of will change to more intense and vigorous, for example, the company will have to use online and social media marketing. References Desai, K. S. (2010). A study on consumer buying behavior of cosmetic products in Kolhapur. Reviews of Literature, 1(10), 1-10. Gadget 360. (2016). Samsung Galaxy J7 Prime. Retrieved from, http://gadgets.ndtv.com/samsung-galaxy-j7-prime-3735 Gaiardelli, P., Resta, B., Martinez, V., Pinto, C., & Ablores, P. (2014). A Classification Model for Product-Service Offerings. Journal of Cleaner Production, 66, 507-519. Gecevska, V., Chiabert, P., Anisic, A., Lombardi, F., & Cus, F. (2010). Product lifecycle management through innovative and competitive business environment. JIEM, 3(2), 323-336. Reference MaterialUsing Marketing Channels and Price to Create Value for Customers Sometimes when you buy a good or service, it passes straight from the producer to you. But suppose every time you purchased something, you had to contact its maker? For some products or services, such as a haircut, this would work. But what about the items you purchase at the grocery store? You couldnt begin to contact and buy from all the makers of those products. It would be an incredibly inefficient way to do business.Fortunately, companies partner with one another, alleviating you of this burden. So, for example, instead of Procter & Gamble selling individual toothbrushes to consumers, it sells many of them to stores, which then sell them to everyone.The specific avenue a seller uses to make a finished good or service available for purchasefor example, whether you are able to buy it directly from the seller, at a store, online, or from a salespersonis referred to as the products marketing channel (or distribution channel). All of the people and organizations that buy, resell, and promote the product downstream as it makes its way to you are part of the marketing channel.Likewise, price creates value for customers and is the way the company makes its revenue and profit by exchanging value with the customer. When Chick-fil-A opens new locations, the company offers the first 100 customers a free meal every week for a year. Customers camp out overnight to get in line for the free meals. When KFC introduced its grilled chicken, the company put coupons good for a free piece of chicken in many Sunday newspapers.So how do sellers make any money if they always offer goods and services on sale or for a special deal? Many sellers give customers something for free, hoping theyll buy other products, but a careful balance is needed to ensure profit.Price is the only marketing mix variable or part of the offering that generates revenue. Buyers relate the price to value. They must feel they are getting value for the price paid. Pricing decisionsare extremely important. So how do organizations decide how to price their goods and services? This week, we explore both distribution and price as a means to add value for customers.6.1 Marketing Channels and Channel PartnersToday, marketing channel decisions are as important as the decisions companies make about the features and prices of products (Littleson, 2007). Consumers have become more demanding. They are used to getting what they want. If you cant get your product to them when, where, and how they want it, they will simply buy a competing product. In other words, how companies sell has become as important as what they sell (CBSNews.com, 2007). The firms a company partners with to actively promote and sell a product as it travels through its marketing channel to users are referred to by the firm as its channel members (or partners). Companies strive to choose not only the best marketing channels but also the best channel partners. A strong channel partner like Walmart can successfully promote and sell a product that might not otherwise turn a profit for its producer. In turn, Walmart wants to work with strong channel partners it can depend on to continuously provide it with great products. By contrast, a weak channel partner, like a bad spouse, can be a liability.The simplest marketing channel consists of just two partiesa producer and a consumer. Your haircut is a good example. When you get a haircut, it travels straight from your hairdresser to you. No one else owns, handles, or remarkets the haircut before you get it. However, many other products and services pass through multiple organizations before they get to you. These organizations are called intermediaries (or middlemen or resellers).Companies partner with intermediaries not because they necessarily want to (ideally they could sell their products straight to users) but because the intermediaries can help them sell the products better than they could working alone. In other words, they have some sort of capabilities the producer needs: contact with many customers or the right customers, marketing expertise, shipping and handling capabilities, and the ability to lend the producer credit are among the types of help a firm can get by using a channel partner.Intermediaries also create efficiencies by streamlining the number of transactions an organization must make, each of which takes time and costs money to conduct. As Figure 6.1, Using Intermediaries to Streamline the Number of Transactions shows, by selling the tractors it makes through local farm machinery dealers, manufacturer John Deere can streamline the number of transactions it makes from eight to just two.Figure 6.1 Using Intermediaries to Streamline the Number of Transactions The marketing environment is always changing, so what was a great channel or channel partner yesterday might not be a great channel partner today. Changes in technology, production techniques, and your customers needs mean you have to continually reevaluate your marketing channels and channel partners. Moreover, when you create a new product, you cant assume the channels that were used in the past are the best ones (Lancaster & Withey, 2007). A different channel or channel partner might be better.Consider Microsofts digital encyclopedia, Encarta, which was first sold on CD and via online subscription in the early 1990s. Encarta nearly destroyed Encyclopedia Britannica, a firm that had dominated the print encyclopedia business for literally centuries. Ironically, Microsoft had actually tried to partner with Encyclopedia Britannica to use its encyclopedia information to make Encarta but was turned down.But today, Encarta no longer exists. Its been put out of business by the free online encyclopedia Wikipedia. The point is that products and their marketing channels are constantly evolving. Consequently, you and your company have to be ready to evolve, too. Types of Channel Partners Lets now look at the basic types of channel partners. To help you understand the types of channel partners, we will go over the most common types of intermediaries. The two types you hear about most frequently are wholesalers and retailers. Keep in mind, however, that the categories we discuss in this section are just that categories. The lines between wholesalers, retailers, and producers have begun to blur. Microsoft is a producer of goods, but it has opened its own retail stores to sell products to consumers, much as Apple has done (Lyons, 2009). Walmart and other large retailers now produce their own brands and sell them to other retailers. Similarly, many producers have outsourced their manufacturing, and although they still call themselves manufacturers, they act more like wholesalers. Wherever organizations see an opportunity, they are beginning to take it, regardless of their positions in marketing channels. Wholesalers Wholesalers obtain large quantities of products from producers, store them, and break them down into cases and other smaller units more convenient for retailers to buy, a process called breaking bulk. Wholesalers get their name from the fact that they resell goods whole to other companies without transforming the goods. If you are trying to stock a small electronics store, you probably dont want to purchase a truckload of iPads. Instead, you probably want to buy a smaller assortment of iPads as well as other merchandise. Via wholesalers, you can get the assortment of products you want in the quantities you want. Some wholesalers carry a wide range of different products; others carry narrow ranges of products.Most wholesalers take title to goodsor own them until purchased by other sellers. Wholesalers such as these assume a great deal of risk on the part of companies farther down the marketing channel. For example, if the iPad you plan to purchase is stolen during shipment, damaged, or becomes outdated because a new model has been released, the wholesaler suffers the lossnot you. Electronic products, in particular, become obsolete very quickly. Think about the cell phone you owned just a couple of years ago. Would you want it today? Retailers Retailers buy products from wholesalers, agents, or distributors and then sell them to consumers. Retailers vary by the types of products they sell, their sizes, the prices they charge, thelevel of service they provide consumers, and the convenience or speed they offer. You are familiar with many of these types of retailers because you have purchased products from them.Supermarkets, or grocery stores, are self-service retailers that provide a full range of food products to consumers, as well as some household products. Supermarkets can be high, medium, or low range in terms of the prices they charge and the service and variety of products they offer. Whole Foods and Central Market are grocers that offer a wide variety of products, generally at higher prices. Midrange supermarkets include stores such as Albertsons and Kroger. Aldi and Sack n Save are examples of supermarkets with a limited selection of products and service but low prices. Drugstores specialize in selling over-the-counter medications, prescriptions, and health and beauty products, and offer services such as photo developing.Convenience stores are miniature supermarkets. Many of them sell gasoline and are open 24 hours. Often they are located on corners, making it easy and fast for consumers to get in and out. Some of these stores contain fast-food franchises such as Subway. Consumers pay for the convenience in the form of higher markups on products.Specialty stores sell a certain type of product, but they usually carry a deep line of it. Zales, which sells jewelry, and Williams-Sonoma, which sells an array of kitchen and cooking-related products, are examples of specialty stores. The personnel who work in specialty stores are usually knowledgeable and often provide customers with a high level of service. Specialty stores vary by size. Many are small. However, giant specialty stores called category killers have emerged. A category killer sells a high volume of a particular type of product and, in doing so, dominates the competition, or category. Petco and PetSmart are category killers in the retail pet-products market. Best Buy is a category killer in the electronics-product market.Department stores, by contrast, carry a variety of household and personal types of merchandise such as clothing and jewelry. Many are chain stores. The prices department stores charge range widely, as does the level of service shoppers receive. Neiman Marcus, Saks Fifth Avenue, and Nordstrom sell expensive products and offer extensive personal service. Department stores such as JCPenney, Sears, and Macys charge midrange prices, and offer a midrange level of service. Walmart, Kmart, and Target are discount department stores with cheaper goods and a limited amount of service.Superstores are oversized department stores that carry a broad array of general merchandise as well as groceries. Banks, hair and nail salons, and restaurants such as Starbucks are often located within these stores for the convenience of shoppers. You have probably shopped at a SuperTarget or a huge Walmart with offerings such as these.Warehouse clubs are supercenters that sell products at a discount. They require people to become members by paying an annual fee. Costco and Sams Club are examples. Off- price retailers are stores that sell a variety of discount merchandise that consists of seconds, overruns, and the previous seasons stock other stores have liquidated. Big Lots, Ross Dress for Less, and dollar stores are off-price retailers. A new type of retail store that turned up in the last few years is the pop-up store. Pop-up stores are small, temporary stores. They can be kiosks that temporarily occupy unused retail space. The goal is to create excitement and buzz for a retailer that then drives customers to their regular stores. In 2006, JCPenney created a pop-up store in Times Square for a month. Kate Coultas, a spokesperson for JCPenney, said the store got the attention of Manhattans residents. Many hadnt been to a JCPenney in a long time. It was a real dramatic statement, Coultas said. It kind of had a halo effect on the companys stores in the surrounding boroughs of New York City (Austin, 2009).Not all retailing goes on in stores, however. Nonstore retailingretailing not conducted in storesis a growing trend. Door-to-door sales; party selling; selling to consumers via television, catalogs, the Internet, and vending machines; and telemarketing are examples of nonstore retailing. So is direct marketing. Companies that engage in direct marketing develop and send promotional materials such as catalogs, letters, leaflets, e-mails, and online ads straight to consumers urging them to contact their firms directly to buy products. 6.2 Typical Marketing ChannelsFigure 6.2, Typical Channels in Business-to-Consumer (B2C) Markets, shows the typical channels in business-to-consumer (B2C) markets. As we explained, the shortest marketing channel consists of just two partiesa producer and a consumer. A channel such as this is a direct channel. By contrast, a channel that includes one or more intermediariessay, a wholesaler, distributor, or broker or agentis an indirect channel. In an indirect channel, the product passes through one or more intermediaries. That doesnt mean the producer will do no marketing directly to consumers. Levis runs ads on TV designed to appeal directly to consumers. The makers of food products run coupon ads. However, the seller also has to focus its selling efforts on these intermediaries because the intermediary can help with the selling effort. Not everyone wants to buy Levis online.Figure 6.2 Typical Channels in Business-to-Consumer (B2C) MarketsDisintermediationYou might be tempted to think middlemen, or intermediaries, are bad. If you can cut them out of the deala process marketing professionals call disintermediation products can be sold more cheaply, cant they? Large retailers, including Target and Walmart, sometimes bypass middlemen. Instead, they buy their products directly from manufacturers and then store and distribute them to their own retail outlets. Walmart is increasingly doing so and even purchasing produce directly from farmers around the world (Birchall, 2010).However, cutting out the middleman is not always desirable. A wholesaler with buying power and excellent warehousing capabilities might be able to purchase, store, and deliver a product to a seller more cheaply than its producer could alone. Likewise, hiring a distributor will cost a producer money. But if the distributor can help the producer sell greater quantities of a product, it can increase the producers profits.Moreover, when you cut out the middlemen, you have to perform the functions they once did. Those functions could include storing the product or dealing with hundreds of retailers. More than one producer has ditched its intermediaries only to rehire them later.The trend today is toward disintermediation. The Internet has facilitated a certain amount of disintermediation by making it easier for consumers to contact one another without going through any middlemen. The Internet has also made it easier for buyers to shop for the lowest prices. Today, most people book trips online without going through travel agents. People also shop for homes online rather than using real estate agents. To remain in business, resellers need to find new ways to add value to products.However, for some products, disintermediation via the Internet doesnt work so well. Insurance is an example. You can buy it online directly from companies, but many people want to buy through an agent they can talk to for advice. Most large insurance companies offer consumers both options, and each method of selling insurance products has a different pricing structure based on the level of service.Sometimes its simply impossible to cut out middlemen. Would the Coca-Cola Company want to take the time and trouble to personally sell you an individual can of Coke? No. Coke is no more capable of selling individual Cokes to people than Santa is capable of delivering toys to children around the globe.Even Dell, which initially made its mark by selling computers straight to users, now sells its products through retailers such as Best Buy as well. Dell found that to compete effectively, itsproducts needed to be placed in stores alongside Hewlett-Packard, Acer, and other computer brands (Kraemer & Dedrick, 2002). Multiple Channels and Alternate ChannelsMarketing channels can get a lot more complex than the channels shown in Figure 6.2, Typical Channels in Business-to-Consumer (B2C) Markets, though. Look at the channels in Figure 6.3, Alternate Channel Arrangements. Notice how in some situations, a wholesaler will sell to brokers, who then sell to retailers and consumers. In other situations, a wholesaler will sell straight to retailers or straight to consumers. Manufacturers also sell straight to consumers, and, as we explained, sell straight to large retailers like Target.Figure 6.3 Alternate Channel Arrangements The point is that firms can and do use multiple channels. Take Levis, for example. You can buy a pair of Levis jeans from a retailer such as Kohls, or you can buy a pair directly from Levis at one of the outlet stores it owns around the country. You can also buy a pair from the Levis website.The key is understanding the different target markets for the product and designing the best channel to meet the needs of customers in each. Is there a group of buyers who would purchase your product if they could shop online from their homes? Perhaps there is a group of customers interested in your product, but they do not want to pay full price. The ideal way to reach these people might be with an outlet store and low prices. Each group then needs to be marketed to accordingly. Many people regularly interact with companies via numerous channels before making buying decisions.Using multiple channels can be effective. At least one study has shown that the more marketing channels your customers use, the more loyal they are likely to be to your products (Fitzpatrick, 2005). Companies work hard to integrate their selling channels so users get a consistent experience. For example, QVCs TV channel, website, and mobile servicewhich sends alerts to customers and allows them to buy products via their cell phonesall have the same look and feel.Would you like to purchase gold from a vending machine? You can in Germany. Germans like to purchase gold because its considered a safe alternative to paper money, which can become devalued during a period of hyperinflation. So, in addition to selling gold the usual way, TG-Gold- Super-Market company has installed gold to go machines in German-speaking countries. The gold is dispensed in metal boxes, and cameras on the machine monitor the transactions to prevent money laundering (Wilson & Blas, 2009). 6.3 Functions Performed by Channel Partners Different organizations in a marketing channel are responsible for different value-adding activities. The following are some of the most common functions channel members perform. However, keep in mind that who does what can vary, depending on what the channel members actually agree to in their contracts with one another. Disseminate Marketing Communications and Promote BrandsSomehow, wholesalers, distributors, retailers, and consumers need to be informedvia marketing communicationsthat an offering exists and that theres a good reason to buy it. Sometimes, a push strategy is used to help marketing channels accomplish this. A push strategy (discussed in greater detail in Week 7, Public Relations and Sales Promotions) is one in which a manufacturerconvinces wholesalers, distributors, or retailers to sell its products. Consumers are informed via advertising and other promotions that the product is available for sale, but the main focus is to sell to intermediaries.By contrast, a pull strategy focuses on creating demand for a product among consumers so that businesses agree to sell the product. A good example of an industry that uses both pull and push strategies is the pharmaceutical industry. Pharmaceutical companies promote their drugs to pharmacies and doctors, but they now also run ads designed to persuade individual consumers to ask their physicians about drugs that might benefit them.In many cases, two or more organizations in a channel jointly promote a product to retailers, purchasing agents, and consumers and work out which organization is responsible for what type of communication to whom. The actual forms and styles of communication will be discussed more in the promotions and sales section of the book. Sorting and Regrouping Products As we explained, many businesses dont want to receive huge quantities of a product. One of the functions of wholesalers and distributors is to break down large quantities of products into smaller units and provide an assortment of different products. Storing and Managing Inventory If a channel member has run out of a product when a customer wants to buy it, the result is often a lost sale. Thats why most channel members stock, or carry, reserve inventory. However, storing products is not free. Warehouses cost money to build or rent and heat and cool; employees have to be paid to stock shelves, pick products, and ship them. Some companies, including Walmart, put their suppliers in charge of their inventory. The suppliers have access to Walmarts inventory levels and ship products when and where the retailers stores need them. Distributing Products Physical goods that travel within a channel need to be moved from one member to another and sometimes back again. Some large wholesalers, distributors, and retailers own their own fleets of trucks for this purpose. In other cases, they hire third-party transportation providerstrucking companies, railroadsto move their products.Being able to track merchandise like you can track a FedEx package is important to channel partners. They want to know where their products are and what shape they are in. Losing inventory or having it damaged or spoiled can wreak havoc on profits. Other problems include not getting products on time or being able to get them at all when your competitors can. Assume Ownership Risk and Extend Credit If products are damaged during transit, one of the first questions asked is who owned the product at the time. In other words, who suffers the loss? Generally, no one channel member assumes all of the ownership risk in a channel. Instead, it is distributed among channel members depending on the contracts they have with one another and their free on board provisions. A provision designates who is responsible for what shipping costs and who owns the free on board (FOB) title to the goods and when. Share Marketing and Other Information Each of the channel members has information about the demand for products, trends, inventory levels, and what the competition is doing. The information is valuable and can be doubly valuable if channel partners trust one another and share it. More information can help each firm in the marketing channel perform its functions better and overcome competitive obstacles (Frazier, Maltz, Antia, & Rindfleisch, 2009).6.4 Marketing Channel Strategies Channel Selection Factors Selecting the best marketing channel is critical because it can mean the success or failure of your product. One of the reasons the Internet has been so successful as a marketing channel is because customers get to make some of the channel decisions themselves. They can shop virtually for any product in the world when and where they want to, as long as they can connect to the web. They can also choose how the product is shipped. Type of CustomerThe Internet isnt necessarily the best channel for every product, though. For example, do you want to closely examine the fruits and vegetables you buy to make sure they are ripe enough or not overripe? Then online grocery shopping might not be for you. Clearly, how your customers want to buy products will have an impact on the channel you select. In fact, it should be your prime consideration.First of all, are you selling to a consumer or a business customer? Generally, these two groups want to be sold to differently. Most consumers are willing to go to a grocery or convenience store to purchase toilet paper. The manager of a hospital trying to replenish its supplies would not. The hospital manager would also be buying a lot more toilet paper than an individual consumer and would expect to be called upon by a distributor, but perhaps only semiregularly. Thereafter, the manager might want the toilet paper delivered on a regular basis and billed to the hospital via automatic systems. Likewise, when businesses buy expensive products such as machinery and computers or products that have to be customized, they generally expect to be sold to personally via salespeople. And often they expect special payment terms. Type of Product The type of product youre selling will also affect your marketing channel choices. Perishable products often have to be sold through shorter marketing channels than products with longer shelf lives. For example, a yellowfin tuna bound for the sushi market will likely be flown overnight to its destination and handled by few inter