Chapter 5
Strategy in Marketing Channels
Objective 1:
5
Marketing Channel Strategy
Channel Strategy:
The broad principles by which the firm
expects to achieve its distribution
objectives for its
target market(s)
Objective 2:
5
Distribution Decisions
1.
2.
3.
4.
5.
6.
The role of distribution in the firm’s overall
objectives & strategies
The role distribution should play in the marketing
mix
The design of the firm’s marketing channels
The selection of channel members
The management of the marketing channel in order
to implement the firm’s channel design effectively &
efficiently on a continuing basis
The evaluation of channel member performance
Objective 3:
5
Channel Strategy as Overall
Corporate Objective
The higher the priority given to
distribution, the higher the level
at which it should be considered
in formulating the organization’s
overall objectives and strategies
5
The Value Chain
Firm infrastructure
Support
Activities
Human resource management
Technology development
Human resource management
Inbound
logistics
Operations
Outbound Marketing
logistics
& sales
Primary Activities
Service
Determining the Priority Given
to Distribution
Distribution does increasingly warrant
the attention of top management,
because competition has made the
issue of distribution too important for
top management to ignore.
• Rayovac Corp.
• WD-40
• Coca-Cola
• Procter & Gamble Company
5
Objective 4:
5
Channel Strategy & the Marketing Mix
The essence of modern marketing
management:
To develop a marketing
mix of product, price,
promotion, & distribution
(place)
Objective 5:
5
Emphasis on Distribution Strategy
IF
:
or
or
or
• Distribution is the most relevant variable for
satisfying target market demands.
• Parity exists among competitors in the other three
variables of the marketing mix.
• A high degree of vulnerability exists because of
competitors’ neglect of distribution.
• Distribution can enhance the firm by creating
synergy from marketing channels.
THEN:
The firm should choose distribution
strategy for strategic emphasis
5
Target Market Demand
Firms should stress distribution when it
serves customers’ needs in the target
market.
Marketing channels are so closely linked to
customer need satisfaction because it is through
distribution that firms can provide the kinds and
levels of service that make for satisfied
customers.
5
Competitive Parity
Distribution advantages are not easily
copied by competitors.
Distribution advantages are based on a
combination of superior strategy, organization,
and human capabilities.
Distribution Neglect
Competitors’ neglect of distribution
strategies provides excellent opportunities.
The channel manager must analyze target
markets to determine whether competitors have
neglected distribution and whether vulnerabilities
exist that can be exploited.
5
5
Distribution and Synergy
“Hooking up” with a mix of cooperative
channel members will strengthen the
channel.
Because each channel member is an
independent entity, rewarding opportunities exist
for channel managers to cultivate cooperation
among members.
Objective 6:
Differential Advantage
& Channel Design
Differential advantage, also called sustainable
competitive advantage, occurs when a firm
attains a long-term, advantageous position
in the market relative to competitors.
• Caterpillar
5
Positioning the Channel
A firm that plans the channel and makes
decisions by viewing the relationship
with channel members as a partnership
or strategic alliance that offers
recognizable benefits to the
manufacturer & channel members on a
long-term basis
• Infiniti
5
Objective 7:
5
Selection of Channel Members
Because customers perceive channel
members as an extension of the manufacturer’s own
organization, members should:
• Reflect channel strategies the firm has developed to
achieve its distribution objectives
• Be consistent with the firm’s broader marketing
objectives & strategies
• Reflect the objectives & strategies of the organization
as a whole
Objective 8:
5
Channel Strategy & Managing the
Channel
How close a relationship
should be developed
with the channel
members?
How should the
marketing mix be used to
enhance channel
member cooperation?
3
Strategic
Questions
How should the channel
members be motivated to cooperate
in achieving the manufacturer’s
distribution objectives?
5
Closeness of Channel Relationships
Factors to consider
•
•
•
•
•
•
•
Distribution intensity
Targeted markets
Products
Company policies
Middlemen
Environment
Behavioral dimensions
Marketing Mix in
Channel Management
Product
strategy
Distribution
strategy
Marketing
Mix
Promotion
strategy
Pricing
strategy
5
Objective 9:
5
Motivation of Channel Members
Portfolio concept:
A tool for motivating different types
and sizes of channel members participating
in various channel structures who may respond
differently to various motivation strategies.
Objective 10:
5
Evaluation of Channel Member
Performance
Channel manager’s involvement
in evaluating member performance is integral to
developing & managing channel
Have provisions been made in the design and
management of the channel to assure that
channel member performance will be
evaluated effectively?