Session 2 Marketing channel strategy.ppt

Session 2 Marketing channel strategy.ppt

1. Marketing Channel Strategy
and Management

2. 2
The Channel Selection Decision
Fundamental Questions

Who are potential customers ?

Where do they buy ?

When do they buy ?

How do they buy ?

What do they buy ?

3. 3
Marketing Channel Alternatives
Producer
Ultimate Buyers
Brokers or Agents
Distributors or Wholesalers
Retailers or Dealers

4. 4
Direct versus Indirect Distribution
Direct - using firm’s own distribution, usually used when:
intermediaries are not available or are not capable of satisfying
target market needs
target markets are easily identifiable
personal selling is an important communication tool for the
company
the company has a wide variety of offerings for the target market
organizational resources are available

5. 5
Indirect - using intermediaries
type, location, density and number of channels must be
determined
can sometimes perform distribution activities more efficiently
and less expensively
Direct versus Indirect Distribution

6. 6
Electronic Marketing Channels
...use the Internet to make goods and
services available to consumers
Disintermediation -- elimination of traditional
intermediaries and direct distribution
through electronic marketing channels

7. 7
Ultimate Buyers
Amazon.com
Book Publisher
Book Wholesaler
Amazon.com
(Virtual Retailer)
Dell Computer
Dell.com
Representative Electronic Marketing Channels
Airline
Travelocity
(Virtual Agent)
Travelocity.com

8. 8
Channel Selection at the Retail Level
Type and place decisions depend on the
buying requirements of the target market and
the potential profitability of the outlets
Number of intermediaries carrying the firm’s
offering in a geographic area or density also
needs to be determined

9. 9
Exclusive IntensiveSelective
Extent of Distribution Coverage
Wrigley’s
Coke
Levi’s
Sony
Lexus
Rolex

10. 10
Dual Distribution

occurs when an organization distributes its
offering through 2 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

11. 11
Intermediary Requirements
Intermediaries
are concerned with the adequacy of the offering
require marketing support
seek a degree of exclusivity
expect a profit margin consistent with the functions
they are expected to perform

12. 12
Trade Relations

Channel Conflict

Sources of Channel Conflict:

when one channel member bypasses another

over how profit margins are distributed

when manufacturers believe that retailers or wholesalers
are not giving their products enough attention

dual distribution

13. 13
Channel-Modification Decisions
Reasons:

shifts in geographical concentration of buyers

inability of existing intermediaries to meet the needs of
buyers

costs of distribution

14. 14
Factors in Modification Decisions
•Will the change improve the effective coverage of the sought
target markets?
•Will the change improve customer satisfaction?
•Which marketing functions must be absorbed?
•Does the organization have the resources to perform the new
functions?
•What will be the effect on other channel members?
•What will be the effect on long-term organizational objectives?

15. Marketing Channel StrategyMarketing Channel Strategy
55
Objective 1:
The broad principles by which the firm expects to achieve its
distribution objectives for its target market(s)
This definition, though parallel to Kotler’s definition of
marketing strategy
Thus, marketing channel strategy is concerned with the place aspect
of marketing strategy
To achieve their distribution objectives, six basic distribution
decisions:
Channel Strategy:

16. 55
Distribution DecisionsDistribution Decisions
Objective 2:
1.The role of distribution 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 channels
4.The selection of channel members
5.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

17. 55Channel Strategy as Overall Channel Strategy as Overall
Corporate ObjectiveCorporate Objective
Objective 3:
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 Consider,
For example,
BMW, the internationally prestigious maker of high-
performance luxury cars. BMW wants to revolutionize the way
its automobiles are distributed in the United States. Rather
than manufacturing automobiles ahead of time and placing
them in dealer inventories,

18. 55
The Value ChainThe Value Chain
Firm infrastructure
Human resource management
Technology development
Human resource management
Inbound Operations Outbound Marketing Service
logistics logistics& sales M
a rg in
M
a
r
g
i
n
Support
Activities
Primary Activities

19. 55
Determining the Priority Given Determining the Priority Given
to Distributionto Distribution
Peter Drucker, had this to say about the importance of distribution:
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 Apple CEO Steve Jobs made a strategic distribution decision include the
establishment of its own “bricks and mortar” retail stores.
If we fail to manage the distribution of our products and services properly, our
revenue, gross margin and profitability could suffer.

20. 55
Channel Strategy & the Marketing MixChannel Strategy & the Marketing Mix
To fulfill the criteria of marketing mix we are not able to neglect the
role of distribution
The job of the marketing manager is to develop the right
combination of the four Ps to provide and maintain the desired level
of target market satisfactions (Ts). To do so, the marketing manger
has to consider the possible contributions of each variable in
meeting the demands of the target market.

21. Distribution Relevance to Target Market Demand
1. Distribution is the most relevant variable for satisfying
target market demands.
2. Parity exists among competitors in the other three
variables of the marketing mix.
3. A high degree of vulnerability exists because of
competitors’ neglect of distribution.
4. Distribution can enhance the firm by creating synergy
from marketing channels.

22. 55Objective 5:
Emphasis on Distribution StrategyEmphasis on Distribution Strategy
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.
IF:
THEN:
or
or
or
The firm should choose distribution
strategy for strategic emphasis

23. Target Market DemandTarget Market Demand
55
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.

24. 55
Competitive ParityCompetitive Parity
Distribution advantages are not easily
copied by competitors.
Distribution advantages are based on a
combination of superior strategy,
organization, and human capabilities.

25. 55
Distribution NeglectDistribution 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.

26. Distribution and SynergyDistribution and Synergy
55
“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.

27. 55
Differential Advantage Differential Advantage
& Channel Design& Channel Design
Objective 6:
Differential advantage, also called sustainable
competitive advantage, occurs when a firm
attains a long-term, advantageous position
in the market relative to competitors.
• Caterpillar

28. 55
Positioning the ChannelPositioning 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
• Infiniti

29. 55
Selection of Channel MembersSelection of Channel Members
Objective 7:
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
Because customers perceive channel
members as an extension of the manufacturer’s
own organization, members should:

30. Channel Strategy & Managing the Channel Strategy & Managing the
ChannelChannel
55Objective 8:
3
Strategic
Questions
How close a relationship
should be developed
with the channel
members?
How should the channel
members be motivated to cooperate
in achieving the manufacturer’s
distribution objectives?
How should the
marketing mix be used to
enhance channel
member cooperation?

31. Closeness of Channel RelationshipsCloseness of Channel Relationships
55
Distribution intensity
Targeted markets
Products
Company policies
Middlemen
Environment
Behavioral dimensions
Factors to consider

32. Marketing Mix inMarketing Mix in
Channel ManagementChannel Management
55
Marketing
Mix
Product
strategy
Pricing
strategy
Promotion
strategy
Distribution
strategy

33. Motivation of Channel MembersMotivation of Channel Members
55
Objective 9:
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.

34. 55
Evaluation of Channel MemberEvaluation of Channel Member
PerformancePerformance
Objective 10:
Have provisions been made in the design and
management of the channel to assure that
channel member performance will be
evaluated effectively?
Channel manager’s involvement
in evaluating member performance is integral to
developing & managing channel