Marketing 624

Channels of Distribution Management

Marketing Channel Strategy

Dr. Bert Rosenbloom Professor of Marketing and
Rauth Chair in Electronic Marketing

Channel Strategy

The broad principles by which the firm expects to achieve its distribution objectives for its target market(s)

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?

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?

Channel Design

Those decisions involving the development of new marketing channels where none had existed before, or the modification of existing channels

Channel Design and Differential Advantage

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

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

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

Channel Design Decision

Phase 2:
Set & Coordinate Distribution Objectives
Become familiar with objectives of firm

Set explicit distribution objectives

Check for congruency

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

Channel Design Decision

Phase 4:

Develop Alternative Channel Structures

Number of levels Intensity at various levels Types of intermediaries

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

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

Channel Design Decision

Phase 7:
Select the Channel Members
Finding perspective channel members Applying selection criteria Securing perspective channel members

Target Markets and Channel Design Strategy

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

Framework for Market Analysis

Market geography

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

Who Buys?

Who makes physical purchase?

Who uses the product?

Who influences the buying decision?

Channel Management

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

Motivating Channel Members

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

Learning About Channel Members Needs and Problems

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

Support for Channel Members

Cooperative approach Partnership approach Distribution programming approach

Product Issues in Channel Management

New Product Planning and Development

Product Life Cycle Strategic Product Management

New Product Planning and Development

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

Product Life Cycle

What are the channel management implications during each stage?
Introduction Growth Maturity Saturation Absolute decline

Strategic Product Management

Product differentiation Product

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

Pricing in Channel Management

Cost Market Competition Channels

Promotion Through the Channel

Vs.

Pull versus Push Promotional Strategy

Classic Push Promotional Strategies

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

Kinder and Gentler Push Promotional Strategies

Training Quotas Missionary selling Trade shows