Marketing 624Marketing 624

Channels of Distribution Management

Marketing Channel Strategy

Dr. Bert Rosenbloom Professor of Marketing and

Rauth Chair in Electronic Marketing

The broad principles by which the firm expects to achieve its distribution objectives for its

target market(s)

Channel StrategyChannel Strategy

What role should distribution play in the firm’s overall objectives and strategies?

What role should distribution play in the marketing mix?

How should the firm’s marketing channels be designed to achieve its distribution objectives?

Six Fundamental Strategic Distribution

Decisions

What kinds of channel members should be selected to meet the firm’s distribution objectives?

How can the marketing channel be managed to implement the firm’s channel design effectively and efficiently?

How can channel member performance be evaluated?

Six Fundamental Strategic Distribution Decisions

(Cont’d)

Those decisions involving the development of new marketing

channels where none had existed before, or the modification of

existing channels

Channel DesignChannel Design

The design of the channel should contribute to the firm’s quest for

Differential Advantage

Channel Design and Differential Advantage

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

Paradigm of the 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 1:

Recognize Need for Channel Design Decision

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

Don’t 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 DecisionPhase 5:

Evaluate Variables Affecting channel Structure

Market variables

Product variables

Company variables

Intermediary variables

Environmental variables

Behavioral variables

Heuristics play an important roleHeuristics 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

Work “backwards” from what the final customers wants. A “bottom

up” approach.

Target Markets and Channel Design Strategy

Market geography

Market size

Market density

Market behavior

when customers buy

where customers buy

how customers buy

who buys

Framework for Market Analysis

Who makes physical purchase?

Who uses the product?

Who influences the buying decision?

Who Buys?Who Buys?

The administration of existing channels to secure the cooperation of channel members in achieving the firm’s distribution objectives

Channel Channel ManagementManagement

Find out needs and problems Offer support consistent with

channel member needs Provide leadership

Motivating Channel Members

“Grapevine” (informal communications network)

Inside research

Outside research Marketing channel audit

Distributor advisory councils

Learning About Channel Members Needs and

Problems

Cooperative approach

Partnership approach

Distribution programming approach

Support for Channel Members

New Product Planning and Development

Product Life Cycle

Strategic Product Management

Product Issues in Channel

Management

Channel member input

Acceptability

Fit with channel member assortments

Education and training

Problems?

New Product Planning and Development

Introduction

Growth

Maturity

Saturation

Absolute decline

Product Life CycleWhat are the channel management

implications during each stage?

Product differentiationProduct positioningProduct line expansion

and contractionTrading up and trading

downBrand strategyService strategy

Strategic Product Management

Cost

Market

Competition

Channels

Pricing in Channel Management

Pull versus Push Promotional Strategy

Vs.

Promotion Through the Channel

Cooperative advertising

Promotional allowances

Displays and selling aids

In-store promotions

Contests and incentives

Special promotional deals and merchandise campaigns

Classic Push Promotional Strategies

Training

Quotas

Missionary selling

Trade shows

“Kinder and Gentler” Push Promotional

Strategies