Part 2
Developing the Marketing Channel
Chapter 5
Strategy in Marketing Channels
Objective 1:
Marketing Channel Strategy
• Channel Strategy:
– The broad principles by which the firm
expects to achieve its distribution objectives
for its target market(s)
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Objective 2:
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Distribution Decisions
1.
2.
3.
4.
5.
6.
The role distribution should play 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:
Channel Strategy as an Overall
Corporate Objective
• Three (3) general ways to view the
importance of distribution in overall
corporate strategy-making:
1. Who’s in charge?
•
Corporate executives or functional managers?
2. Type of strategy-making
•
Long-range vs. short-term (i.e., tactical ~ x < 1yr.)
3. Value-Chain analysis
•
How pervasive is it in creating customer value?
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The Value Chain
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Firm infrastructure
Support
Activities
Human resource management
Technology development
Inbound
logistics
Operations
Outbound Marketing Service
logistics
& sales
Primary Activities
Sales
Procurement*
Determining Priority Given
to Distribution
• Increasingly distribution is warranting more
attention from top management because
competition on the other 3Ps has become
too difficult to generate any long-term
differential advantage.
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Objective 4:
Channel Strategy and the
“Marketing Mix”
The essence of modern marketing
management:
To develop a marketing
mix of product, price,
promotion, & distribution
(place)
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Objective 5:
Emphasis Placed on
Distribution Strategy
• Firms should place a high priority on
distribution when…
1. Customers’ needs highlight distribution as
important
2. Homogeneity among competitors exists on
other 3 Ps
3. Competitors are weak in their distribution
efforts
4. Efficiency gains are possible over current
efforts
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1. 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 (remember convenience is becoming
increasingly important ~ Ch. 3).
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2. Competitive Parity
Distribution advantages are not easily
copied by competitors.
Distribution advantages are based on a
combination of superior strategy, organization,
and human capabilities.
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3. 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.
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4. Synergy in Distribution
“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 that possess specialized skills
that would be too costly to develop or perform
in-house.
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Objective 6:
Differential Advantage &
Channel Design
• Channel Strategy affects channel design in
that…
– Appropriate strategies will guide the design
phase so as to help the firm realize a differential
advantage.
• Remember:
– A differential advantage (sustainable
competitive advantage) occurs when a firm
attains a long-term, advantageous position in
the market relative to its competitors.
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Positioning the Channel
• Channel Position*
– The reputation a manufacturer [member*]
acquires among its other channel participants
for furnishing products, services, financial
returns, programs, and systems that are in some
way superior to those offered by competing
manufacturers [members*].
• Channel Positioning
– Is what a firm does with its channel planning
and decision-making to attain the channel
position it desires.
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Positioning the Channel
• By taking a channel positioning point-ofview, the channel manager…
– Asks the question, “How can I design the
channel so that members will view my firm as
having done a better job than my competitors
they may represent or deal with?”
– Seeks to understand the needs/wants of a firm’s
“corporate” or “business” customers.
– Effective positioning is likely to lead to
“cheerleading” from other members.
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Objective 7:
Selection of Channel Members
• As such, chosen members should…
– Reflect the channel’s positioning efforts while
simultaneously assisting the firm to achieve its
distribution objectives
– Reflect the objectives & strategies of the
organization as a whole
• Remember a company’s image will affect its
positioning efforts.
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Objective 8:
Channel Strategy &
Managing the Channel
• Three (3) strategic questions must be asked:
1. How close a relationship should be developed
with the channel members?
2. How should the marketing mix be used to
enhance channel member cooperation?
3. How should the channel members be
motivated to cooperate in achieving the
manufacturer’s distribution objectives?
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Closeness of Channel Relationships
• Factors to consider:
–
–
–
–
–
–
–
Distribution intensity
Target markets
Products
Company policies
Middlemen
Environment
Behavioral dimensions
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Very close

Very loose

Medium
Objective 9:
Motivation of
Channel Members
• Portfolio concept to motivating others…
– A tool (see table 5.1) for motivating different
types and sizes of channel members
participating in various channel structures who
may respond differently to various motivation
strategies.
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The “Marketing Mix” in
Channel Management
Product
strategy
Decision to change the features of product
Distribution
strategy
Marketing
Mix
Channel members selling product
may need to be informed about the
changed product features. This can
affect their attitudes towards selling
the new price product vs.
Promotion
competitive products.
Pricing
strategy
Increase in price
strategy
Require changes in promotion to explain
the new product feature and justify the
higher price
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Objective 10:
Evaluation of
Channel Member Performance
• Channel manager’s involvement in
evaluating member performance is integral
to developing & managing channel
• Always important to ask…
– Have provisions been made in the design and
management of the channel to assure that
channel member performance will be evaluated
effectively?
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