Channel decisions

Your team is starting a new business. You have
developed a line of fashion t-shirts. What channel of distribution are you going to use?

• “the biggest reason for Caterpillar’s success has been our system of distribution and product support and the close customer relationships it fosters.” • – Chairman and CEO of Caterpillar

Retailers Are Growing Larger

Enjoy Substantial Channel Power
Retailer

Basic Strategic Questions
1) What role should distribution play in the firm’s overall objectives and strategies? 2) What role should distribution play in the marketing mix? 3) How should the firm’s marketing channels be designed to achieve its distribution objectives? 4) What kinds of channel members should be selected to meet the firm’s distribution objectives? 5) How can the marketing channel be managed to implement the firm’s channel

What is different about the Marketing Mix model as we are moving in this century?

Over the past decades, the overwhelming emphasis in the Marketing Mix has been on:

Product Strategy with Pricing Strategy and Promotional Strategy also being stressed.

BU T…

Marketing Channel Strategy

(Place); the fourth “P” in the Marketing Mix has been largely neglected

But this is changing....

Marketing Channel Strategy is Growing in Importance. Why?

Five Reasons
1) Search for sustainable competitive advantage 2) Growing power of retailers in marketing channels 3) The need to reduce distribution costs 4) The increased role and power of technology 5) The new stress on growth

Distribution costs often account for a significant percentage of the final price of products

Sometimes distribution costs are higher than the manufacturing cost or the costs of raw materials and component parts

Some Examples...

AUTO S DISTRIBUTIO N

SOFTWARE

GAS

15%

25% 65% 10%

28% 19% 53%

FAX MACHINE S

PACKAGE DFOODS

30% 30% 40%

41% 33% 26%

MANUFACTURING40%

RAW MATERIAL & COMPONENTS

45%

The Need to Reduce Distribution Costs

Distribution Costs

Technology has the power to greatly enhance the effectiveness and efficiency of marketing channels and could potentially change the entire structure of distribution around the world.

MARKETING CHANNELS

 A marketing channel consists of individuals and firms involved in the process of making an offering available for consumption or use by consumers and industrial users.

 Channels link the producer and its buyers:

Producer

Marketing Channel Intermediaries

Consumers

Task
Explore Subhiksha’s distribution strategy