Marketing Channels
Part 2: Developing the Marketing Channel
A Management View
8e
Rosenbloom
5
Part 2:CHAPTER
Developing the Marketing Channels
5
Strategy in Marketing
Channels
CHAPTER
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Learning Objectives
① Marketing Channel Strategy
② Distribution decisions
③ Channel strategy as overall corporate objectives
④ Channel strategy and the marketing mix
⑤ Emphasis on distribution strategy
⑥ Differential advantage and channel design
⑦ Selection of channel members
⑧ Channel strategy and managing the channel
⑨ Motivation of channel members
⑩ Evaluation of channel member performance
2
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Objective
1
Marketing Channel Strategy
Channel Strategy: the broad
principles by which the firm expects to
achieve its distribution objectives for
its target market(s) – says by Kotler
(pg.151)
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6 Distribution Decisions for
Firms to Address
Objective
2
1.
2.
3.
4.
5.
6.
The role of distribution in the firm’s overall
objectives & strategies
The role distribution should play in the marketing
mix
The design of the firm’s marketing channels
The selection of channel members
The management of the marketing channel in
order to implement the firm’s channel design
effectively & efficiently on a continuing basis
The evaluation of channel member performance
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Objective
3
Channel Strategy as Overall
Corporate Objective
The higher the priority given to
distribution, the higher the level
at which it should be considered
in formulating the organization’s
overall objectives and strategies
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Companies that use Distribution
Strategically
•
Dell Computer
•
BMW
•
Amazon.com
•
Apple Computer
•
Edward Jones
•
Rayovac Corporation
•
Proctor & Gamble Company
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Determining the Priority Given
to Distribution
Distribution does increasingly warrant
the attention of top management,
because competition has made the
issue of distribution too important for
top management to ignore.
Changes in distributive channels may not matter much to
GNP and macroeconomics. But they should be a major concern
to every business and industry … Everyone knows how fast
technology is changing. Everyone knows about markets
becoming global and about shifts in the work force and in
demographics. But few people pay attention to changing
distribution channels.
Peter Drucker
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Objective
4
Channel Strategy & the Marketing
Mix
The essence of modern marketing
management – to develop an appropriate and
complementary marketing mix
1. Product Strategy e.g., quality and benefits
desired)
2. Pricing Strategy (e.g., level of pricing and/or
price points)
3. Promotional Strategy (e.g., the “right”
combination of “push” & “pull” promotion to
apply)
4. Distribution Strategy (e.g., intensity of
distribution)
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Objective
5
Emphasis on Distribution Strategy
IF:
or
or
or
• Distribution is the most relevant variable for
•
•
•
satisfying target market demands.
Parity exists among competitors in the other
three variables of the marketing mix.
A high degree of vulnerability exists because
of competitors’ neglect of distribution.
Distribution can enhance the firm by creating
synergy from marketing channels.
THEN: The firm should choose distribution
strategy for strategic emphasis
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Target Market Demand
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.
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Competitive Parity
Distribution advantages are not easily
copied by competitors.
Distribution advantages are based on a
combination of superior strategy, organization,
and human capabilities.
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Distribution Neglect
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.
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Distribution and Synergy
“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.
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Objective
6
Differential Advantage
& Channel Design
Differential advantage: Also
called sustainable competitive
advantage, occurs when a firm
attains a long-term, advantageous
position in the market relative to
competitors.
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Positioning the Channel
… the reputation a manufacturer
acquires among distributors [channel
members] for furnishing products,
services, financial returns, programs,
and systems that are in some way
superior to those offered by competing
manufacturers.
Narus and Anderson
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Positioning the Channel
A firm that plans the channel and
makes decisions by viewing the
relationship with channel members as
a partnership or strategic alliance
that offers recognizable benefits to
the manufacturer & channel
members on a long-term basis
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Objective
Selection of Channel Members
7
Because customers perceive channel members as
an extension of the manufacturer’s own
organization, members should:
•
Reflect channel strategies the firm has developed to
achieve its distribution objectives
•
Be consistent with the firm’s broader marketing
objectives & strategies
•
Reflect the objectives & strategies of the
organization as a whole
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Objective
8
Channel Strategy & Managing the
Channel
How
close a relationship
should be developed
with the channel
members?
3
Strategic
Questions
How should the
marketing mix be used
to enhance channel
member cooperation?
How should the channel
members be motivated to cooperate
in achieving the manufacturer’s
distribution objectives?
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Closeness of Channel Relationships
Factors to consider:
– Distribution intensity
– Targeted markets
– Products
– Company policies
– Middlemen
– Environment
– Behavioral dimensions
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Interrelationships among 4 Strategic
Variables of the Marketing Mix
Product
strategy
Distribution
strategy
Marketing
Mix
Pricing
strategy
Promotion
strategy
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Objective
9
Motivation of Channel Members
Portfolio Concept: A tool for motivating
different types and sizes of channel
members participating in various channel
structures who may respond differently to
various motivation strategies.
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Objective
10
Evaluation of Channel Member
Performance
Channel manager’s involvement
in evaluating member performance is integral to
developing & managing channel
Have provisions been made in the design and
management of the channel to assure that
channel member performance will be
evaluated effectively?
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