Marketing Channel Strategy

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Marketing 624
Channels of Distribution Management
Marketing Channel Strategy
Dr. Bert Rosenbloom Professor of Marketing
and Rauth Chair in Electronic Marketing
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Channel Strategy
The broad principles by which the firm expects to
achieve its distribution objectives for its
target market(s)
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Six Fundamental Strategic Distribution Decisions

• What role should distribution play in the firms
  overall objectives and strategies?
• What role should distribution play in the
  marketing mix?
• How should the firms marketing channels be
  designed to achieve its distribution objectives?

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Six Fundamental Strategic Distribution Decisions
(Contd)

• What kinds of channel members should be selected
  to meet the firms distribution objectives?
• How can the marketing channel be managed to
  implement the firms channel design effectively
  and efficiently?
• How can channel member performance be
  evaluated?

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Channel Design
Those decisions involving the development of new
marketing channels where none had existed before,
or the modification of existing channels
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Channel Design and Differential Advantage

• The design of the channel should contribute to
  the firms quest for Differential Advantage

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Paradigm of the Channel Design Decision

• Recognize need for channel design decision
• Set and coordinate distribution objectives
• Specify distribution tasks
• Develop possible alternative channel structures
• Evaluate variables affecting channel structure
• Choose the best channel structure
• Select the channel members

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Channel Design Decision

Phase 1 Recognize Need for Channel Design
Decision

• Obvious examples pp. 200-201 in text
• But many times the need to make channel design
  decisions is not obvious

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Channel Design Decision
Phase 2 Set Coordinate Distribution Objectives

• Become familiar with objectives of firm
• Set explicit distribution objectives
• Check for congruency

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Channel Design Decision
Phase 3 Specifying Distribution Tasks
Dont underestimate all of the nuts and bolts
necessary to make products and services
conveniently available to customers

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Channel Design Decision
Phase 4 Develop Alternative Channel Structures

• Number of levels
• Intensity at various levels
• Types of intermediaries

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Channel Design Decision
Phase 5 Evaluate Variables Affecting channel
Structure

• Market variables
• Product variables
• Company variables
• Intermediary variables
• Environmental variables
• Behavioral variables
• Heuristics play an important role

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Channel Design Decision
Phase 6 Choosing the Best Channel Structure

• Product-based models (Aspinwall)
• Financial Approach
• Transaction Cost Analysis Approach
• Management Science Approach
• Judgmental Heuristic Approach

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Channel Design Decision
Phase 7 Select the Channel Members

• Finding perspective channel members
• Applying selection criteria
• Securing perspective channel members

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Target Markets and Channel Design Strategy

• Work backwards from what the final customers
  wants. A bottom up approach.

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Framework for Market Analysis

• Market geography
• Market size
• Market density
• Market behavior
• when customers buy
• where customers buy
• how customers buy
• who buys

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Who Buys?

• Who makes physical purchase?
• Who uses the product?
• Who influences the buying decision?

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Channel Management
The administration of existing channels to secure
the cooperation of channel members in achieving
the firms distribution objectives
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Motivating Channel Members

• Find out needs and problems
• Offer support consistent with channel
  member needs
• Provide leadership

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Learning About Channel Members Needs and Problems

• Grapevine (informal communications network)
• Inside research
• Outside research
• Marketing channel audit
• Distributor advisory councils

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Support for Channel Members

• Cooperative approach
• Partnership approach
• Distribution programming approach

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Product Issues in Channel Management

• New Product Planning and Development
• Product Life Cycle
• Strategic Product Management

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New Product Planning and Development

• Channel member input
• Acceptability
• Fit with channel member assortments
• Education and training
• Problems?

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Product Life Cycle
What are the channel management implications
during each stage?

• Introduction
• Growth
• Maturity
• Saturation
• Absolute decline

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Strategic Product Management

• Product differentiation
• Product positioning
• Product line expansion and contraction
• Trading up and trading down
• Brand strategy
• Service strategy

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Pricing in Channel Management

• Cost
• Market
• Competition
• Channels

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Promotion Through the Channel
Vs.

• Pull versus Push Promotional Strategy

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Classic Push Promotional Strategies

• Cooperative advertising
• Promotional allowances
• Displays and selling aids
• In-store promotions
• Contests and incentives
• Special promotional deals and merchandise
  campaigns

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Kinder and Gentler Push Promotional Strategies

• Training
• Quotas
• Missionary selling
• Trade shows