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Marketing Channel Strategy and Management

The document discusses marketing channel strategy and management. It defines what a marketing channel is and explains the role of channels in linking producers to buyers and influencing pricing and product strategies. It discusses factors to consider in channel selection like target market coverage, satisfying buyer requirements, and profitability. It also addresses multi-channel marketing, satisfying intermediary requirements, and reasons for modifying marketing channels.

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Happy Valley Business School
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© © All Rights Reserved
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Download as PPT, PDF, TXT or read online on Scribd
123 views

Marketing Channel Strategy and Management

The document discusses marketing channel strategy and management. It defines what a marketing channel is and explains the role of channels in linking producers to buyers and influencing pricing and product strategies. It discusses factors to consider in channel selection like target market coverage, satisfying buyer requirements, and profitability. It also addresses multi-channel marketing, satisfying intermediary requirements, and reasons for modifying marketing channels.

Uploaded by

Happy Valley Business School
Copyright
© © All Rights Reserved
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
You are on page 1/ 32

Chapter 7

Marketing Channel
Strategy and
Management
What is a marketing
channel?

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.

7-2
Role of the channel in
marketing strategy

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.

7-3
The Channel-Selection
Decision
Fundamental Questions

The marketing manager must


answer the following questions:
Who are potential customers?
Where do they buy?
When do they buy?
How do they buy?
What do they buy?
- Avon Cosmetics example

7-4
Traditional Marketing Channel
Designs
Producer

Brokers or Agents

Distributors or Wholesalers

Retailers or Dealers

Ultimate Buyers
The Design of Marketing
Channels

INDIRECT DIST. vs. DIRECT DIST.


Use intermediaries to Contact ultimate
reach target market buyers directly
type using its own
location sales force or
density distribution outlets
number of using the Internet
channel levels through a
marketing Web
site or electronic
storefront
7-6
The Design of Marketing
Channels

Direct distribution is typically used


when:
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
7-7
The Design of Marketing
Channels

Direct distribution must be considered


when:

Intermediaries are not available


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

7-8
The Design of Marketing
Channels

Indirect distribution must be considered


when:
Intermediaries can perform distribution
functions more efficiently and less
expensively
Customers are hard to reach directly
Organization does not have resources
to perform distribution function
7-9
The Design of Marketing
Channels

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.

7-10
Representative Electronic Marketing
Channels
Amazon.com Autobytel.com Travelocity.com Dell.com
Book Auto Dell
Airline
Publisher Manufacturer Computers

Book
Auto Dealer
Distributor

Amazon.com Auto-By-Tel Travelocity


(Virtual (Virtual (Virtual
Retailer) Broker) Agent)

Ultimate Buyers
The Design of Marketing
Channels

Disintermediation is the elimination of


traditional intermediaries and direct
distribution through electronic
marketing channels.

7-12
Channel Selection at the
Retail Level
Channel 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?
7-13
Channel Selection at the
Retail Level
Target Market Coverage

Exclusive Selective Intensive

Rolex Levi’s Wrigley’s


Faberge Sony Coke
Channel Selection at the
Retail Level

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.

7-15
Channel Selection at the
Retail Level
Satisfying Buyer Requirements

Information
Convenience
Variety
Attendant services

7-16
Channel Selection at the
Retail Level
Profitability

Margins = Revenues – Channel Costs


Channel costs are:
- Distribution costs
- Advertising costs
- Selling costs

7-17
Channel Selection at Other
Levels of Distribution
Types of Wholesaler

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
7-18
Dual Distribution

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

7-19
Dual Distribution
When is it used

own brand and private store brand

distribution to large and small retailers

multibrand strategy

geographic factors

7-20
Dual Distribution
Example

Hallmark
Sells Hallmark brand cards through
Hallmark stores and selected
department stores
Sells Ambassador brand cards through
discount drugstore chains

7-21
Multi-Channel Marketing

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.

7-22
Multi-Channel Marketing
Justifications

An electronic marketing channel can


provide incremental revenue (Victoria’s
Secret)
An electronic marketing channel can
leverage the presence of a traditional
channel (Ethan Allen)
Multi-channel marketing can satisfy
buyer requirements (Clinique division of
Estée Lauder)

7-23
Multi-Channel Marketing
Considerations

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

7-24
Satisfying Intermediary
Requirements and Trade
Relations
Intermediary Requirements

Improvements in product assortments


Trade discounts
Fill-rate standards
Promotional support
Lead-time requirements
Product-service exclusivity agreements

7-25
Satisfying Intermediary
Requirements and Trade
Relations
Trade Relations

Channel Conflict arises when one


channel member believes another
channel member is engaged in
behavior that is preventing it from
achieving its goals.

7-26
Satisfying Intermediary
Requirements and Trade
Relations
Sources of Channel Conflict

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

7-27
Satisfying Intermediary
Requirements and Trade
Relations
Channel Power

Channel Captain is a channel


member that takes on the role of
coordinating, directing, and
supporting other channel members.

7-28
Satisfying Intermediary
Requirements and Trade
Relations
Forms of Channel Captain Power

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
7-29
Channel-Modification
Decisions
Reasons

Shifts in the geographical


concentration of buyers
Inability of existing intermediaries
to meet the needs of buyers
Costs of distribution

7-30
Channel-Modification
Decisions
Basic 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

7-31
Channel-Modification
Decisions
Qualitative Factors
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?
7-32

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