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Part 2Part 2
Developing the Marketing Channel
Chapter 5Chapter 5
Strategy in Marketing Channels
55Marketing Channel StrategyMarketing Channel Strategy
Objective 1:
• Channel Strategy:
– The broad principles by which the firm expects to achieve its distribution objectives for its target market(s)
55
Distribution DecisionsDistribution Decisions
Objective 2:
1. The role distribution should play in the firm’s overall objectives & strategies
2. The role distribution should play in the marketing mix
3. The design of the firm’s marketing channels4. The selection of channel members5. The management of the marketing channel in
order to implement the firm’s channel design effectively & efficiently on a continuing basis
6. The evaluation of channel member performance
55Channel Strategy as an OverallChannel Strategy as an Overall
Corporate ObjectiveCorporate Objective
Objective 3:
• Three (3) general ways to view the importance of distribution in overall corporate strategy-making:1. Who’s in charge?
• Corporate executives or functional managers?
2. Type of strategy-making• Long-range vs. short-term (i.e., tactical ~ x < 1yr.)
3. Value-Chain analysis• How pervasive is it in creating customer value?
Firm infrastructure
Human resource management
Technology development
Procurement*
Inbound Operations Outbound Marketing Service logistics logistics & sales
SupportActivities
Primary Activities
Sale
s55
The Value ChainThe Value Chain
55Determining Priority GivenDetermining Priority Given
to Distributionto Distribution
• Increasingly distribution is warranting more attention from top management because competition on the other 3Ps has become too difficult to generate any long-term differential advantage.
The essence of modern marketingmanagement:
To develop a marketing mix of product, price,
promotion, & distribution(place)
55Channel Strategy and theChannel Strategy and the
““Marketing Mix”Marketing Mix”
Objective 4:
55Emphasis Placed onEmphasis Placed on
Distribution StrategyDistribution Strategy
Objective 5:
• Firms should place a high priority on distribution when…1. Customers’ needs highlight distribution as
important
2. Homogeneity exists on other 3 Ps
3. Competitors are weak in their distribution efforts
4. Efficiency gains are possible over current efforts
Firms should stress distribution when it serves customers’ needs in the
target market.
Marketing channels are so closely linked to customer need satisfaction because it is through distribution that firms can provide the kinds and levels of service that make
for satisfied customers (remember convenience is becoming increasingly
important ~ Ch. 3).
551. Target Market Demand1. Target Market Demand
Distribution advantages are not easily copied by competitors.
Distribution advantages are based on a combination of superior strategy,
organization, and human capabilities.
552. Competitive Parity2. Competitive Parity
Competitors’ neglect of distribution strategies provides excellent
opportunities.
The channel manager must analyze target markets to determine whether
competitors have neglected distribution and whether vulnerabilities exist that can
be exploited.
553. Distribution Neglect3. Distribution Neglect
“Hooking up” with a mix of cooperative channel members will
strengthen the channel.
Because each channel member is an independent entity, rewarding
opportunities exist for channel managers to cultivate cooperation among members that possess specialized skills that would be too costly to develop or perform in-
house.
554. Synergy in Distribution4. Synergy in Distribution
55Differential Advantage &Differential Advantage &
Channel DesignChannel Design
Objective 6:
• Channel Strategy affects channel design in that…– Appropriate strategies will guide the design phase so
as to help the firm realize a differential advantage. (e.g., Zara’s corporate channel)
• Remember:– A differential advantage occurs when a firm attains
a long-term, advantageous position in the market relative to its competitors. (Ch. 1)
55Positioning the ChannelPositioning the Channel
• Channel Position*– The reputation a [member*] acquires among its other
channel participants for furnishing products, services, financial returns, programs, and systems that are in some way superior to those offered by competing [members*].
• Channel Positioning– Is what a firm does with its channel planning and
decision-making to attain the channel position it desires.
55Positioning the ChannelPositioning the Channel
• By taking a channel positioning point-of-view, the channel manager…– Asks the question, “How can I design the channel so
that members will view my firm as having done a better job than my competitors they may represent or deal with?”
– Seeks to understand the needs/wants of a firm’s “corporate” or “business” customers.
– Effective positioning is likely to lead to “cheerleading” from other members.
55Selection of Channel MembersSelection of Channel Members
Objective 7:
• As such, chosen members should…– Reflect the channel’s positioning efforts while
simultaneously assisting the firm to achieve its distribution objectives
– Reflect the objectives & strategies of the organization as a whole
• Remember a company’s image will affect its positioning efforts.
55Channel Strategy &Channel Strategy &
Managing the ChannelManaging the Channel
Objective 8:
• Three (3) strategic questions must be asked:1. How close a relationship should be developed
with the channel members?
2. How should the marketing mix be used to enhance channel member cooperation?
3. How should the channel members be motivated to cooperate in achieving the manufacturer’s distribution objectives?
55Closeness of Channel Closeness of Channel
RelationshipsRelationships
• Factors to consider:– Distribution intensity– Target markets– Products– Company policies– Middlemen– Environment– Behavioral dimensions
MarketingMix
Product strategy
Pricing strategy
Promotionstrategy
Distributionstrategy
55The “Marketing Mix” inThe “Marketing Mix” inChannel ManagementChannel Management
55Motivation ofMotivation of
Channel MembersChannel Members
Objective 9:
• Portfolio concept to motivating others…
– A tool for motivating different types and sizes of channel members participating in various channel structures who may respond differently to various motivation strategies.
55Evaluation ofEvaluation of
Channel Member PerformanceChannel Member Performance
Objective 10:
• Channel manager’s involvement in evaluating member performance is integral to developing & managing channel
• Always important to ask…– Have provisions been made in the design and
management of the channel to assure that channel member performance will be evaluated effectively?