Channel Strategy

Marketing Channel Strategy and Management

A marketing channel consists of

individuals and firms involved in

the process of making a product or

service available for consumption

or use by consumers and industrial

users.

What is a marketing What is a marketing channel?channel?

Links a producer to buyers

Performs sales, advertising, and promotion

Influences the firm’s pricing strategy

Affects product strategy through branding policies, willingness to stock and customize offerings, install, maintain, offer credit, etc.

Role of the channel in Role of the channel in marketing strategymarketing strategy

The Channel-Selection The Channel-Selection DecisionDecision

Fundamental QuestionsFundamental Questions

Who are potential customers?

Where do they buy?

When do they buy?

How do they buy?

What do they buy?

The marketing manager must answer the following questions:

Traditional Marketing Channel Traditional Marketing Channel DesignsDesigns

Producer

Ultimate Buyers

Retailers or Dealers

Distributors or Wholesalers

Brokers or Agents

The Design of Marketing The Design of Marketing ChannelsChannels

Use intermediaries to reach target market

typelocationdensitynumber of channel levels

Contact ultimate buyers directly

using its own sales force or distribution outletsusing the Internet through a marketing Web site

vs.INDIRECT DIST. DIRECT DIST.

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Buyers are easily identifiable

Personal selling is a major component of the communication mix

Organization has a wide variety of offerings for the target market

Sufficient resources are available

Direct distribution is typically used when:

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Intermediaries are not available for reaching target marketsIntermediaries do not possess the capacity to service the requirements of target markets

Direct distribution must be considered when:


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Intermediaries can perform distribution functions more efficiently and less expensivelyCustomers are hard to reach directlyOrganization does not have resources to perform distribution function

Indirect distribution must be considered when:


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Electronic marketing channels employ some form of electronic communication, including the Internet, to make products and services available for consumption or use by consumers and industrial users.

Ultimate Buyers

Amazon.com Dell.comMakemytrip.com

Representative Electronic Marketing Representative Electronic Marketing ChannelsChannels

Book Publisher

Book Distributor

Amazon.com (Virtual Retailer)

Dell ComputersAirline

Makemytrip.com (Virtual

Agent)

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Disintermediation is the elimination of traditional intermediaries and direct distribution through electronic marketing channels.

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Channel Selection at the Channel Selection at the Retail LevelRetail Level

Channel Selection DecisionsChannel Selection Decisions

1. Which channel and intermediaries will provide the best coverage of the target market?

2. Which channel and intermediaries will best satisfy the buying requirements of the target market?

3. Which channel and intermediaries will be the most profitable?


Target Market CoverageTarget Market Coverage

Exclusive IntensiveSelective

When the firm distributes its brand through just one or two major outlets in the market, who exclusively deal in it and not all competing brands

When the firm selects some outlets to distribute its products.

using all available outlets.

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Effective Distribution occurs when a limited number of retail outlets account for a significant fraction of the market potential.

Example: A marketer distributes the product through 40% of available outlets, but these outlets account for 80% of the market.

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Satisfying Buyer RequirementsSatisfying Buyer Requirements

Information

Convenience

Variety

Attendant services

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ProfitabilityProfitability

Margins = Revenues – Channel Costs

Channel costs are:

- Distribution costs

- Advertising costs

- Selling costs

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Specialty wholesaler– Limited line of items within a product

line

General-merchandise wholesaler– Wide assortment of products

General-line wholesaler– Complete assortment of items in a

single retailing field

Combination

Channel Selection at Other Channel Selection at Other Levels of DistributionLevels of Distribution

Types of WholesalerTypes of Wholesaler

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occurs when an organization distributes its offering through two or more different marketing channels that may or may not compete for similar buyers

the main consideration is whether it will provide incremental sales revenue or cannibalize existing sales

Dual DistributionDual Distribution

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distribution to large and small retailers

multibrand strategy

geographic factors

Dual DistributionDual DistributionWhen is it usedWhen is it used

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HallmarkSells Hallmark brand cards through Hallmark stores and selected department stores

Dual DistributionDual DistributionExampleExample

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Multi-channel marketing involves the

blending of an electronic marketing

channel and a traditional channel in

ways that are mutually reinforcing in

attracting, retaining, and building

relationships with customers.

Multi-Channel MarketingMulti-Channel Marketing

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An electronic marketing channel can provide incremental revenue

An electronic marketing channel can leverage the presence of a traditional channel

Multi-channel marketing can satisfy buyer requirements

Multi-Channel MarketingMulti-Channel MarketingJustificationsJustifications

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Multi-Channel MarketingMulti-Channel MarketingConsiderationsConsiderations

Actual incremental revenue or merely cannibalization?

Incremental cost to launch and sustain an electronic forefront

Disintermediation – a traditional intermediary member is replaced by electronic storefront

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Improvements in product assortments

Trade discounts

Promotional support

Lead-time requirements

Satisfying Intermediary Satisfying Intermediary Requirements and Trade Requirements and Trade

RelationsRelationsIntermediary RequirementsIntermediary Requirements

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RelationsRelationsTrade RelationsTrade Relations

Channel Conflict arises when one

channel member believes another

channel member is engaged in

behavior that is preventing it from

achieving its goals.

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Channel member bypasses another member and sells or buys direct

Uneven distribution of profit margins among channel members

Manufacturer believes channel member is not giving its products adequate attention


RelationsRelationsSources of Channel ConflictSources of Channel Conflict

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RelationsRelationsChannel PowerChannel Power

Channel Captain is a channel

member that takes on the role of

coordinating, directing, and

supporting other channel members.

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Ability to reward or coerce other members

Expertness

Identification with a particular channel member (Referent Power)

Legitimate right to dictate the behavior of other members


RelationsRelationsForms of Channel Captain PowerForms of Channel Captain Power

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Channel-Modification Channel-Modification DecisionsDecisions

ReasonsReasons

Shifts in the geographical concentration of buyers

Inability of existing intermediaries to meet the needs of buyers

Costs of distribution

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Basic ObjectivesBasic Objectives

1. Provide the best coverage of the target market sought

2. Satisfy the buying requirements of the target market

3. Maximize revenue and minimize cost

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1. Will the change improve the effective coverage of the target markets sought? How?

2. Will the change improve the satisfaction of buyer needs? How?

3. Which marketing functions, if any, must be absorbed in order to make the change?

4. Does the organization have the resources to perform new functions?

5. What effect will the change have on other channel participants?

6. What will be the effect of the change on the achievement of long-range organizational objectives?


Qualitative FactorsQualitative Factors

Date post:	19-Feb-2016
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Channel Strategy

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