Transcript Document

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Channel Management
McGraw-Hill/Irwin
Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
Channel Management
 Does it matter where you are sold?
Take a position:
1. Channel images do not really affect the
brand images of the products they
sell that much.
2. Channel images must be consistent with
the brand image.
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Channel Management
A channel of distribution is the
combination of institutions through which a
seller markets products to the user or
ultimate consumer
Sets of interdependent organizations
involved in the process of making a product
or service available for use or consumption.
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Example: Personal Computer
Distribution Channels
Manufacturers
VARs,
OEMs
Retail
Mail
End
customers
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Mass
reseller
Internet
Channel Management
Channel systems are not fixed, rigid structures
but are rather dynamic in nature.
It is a primary responsibility of the product
manager to always keep abreast of changes in
customer needs about how they want to
purchase the product or service and then
adapt the channel structure accordingly.
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Designing a Marketing Channel System
Analyze customer needs
Establish channel objectives
Identify major channel alternatives
Evaluate major channel alternatives
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Channel Management
Direct Vs. Indirect
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Direct Appears to Be Better
than Indirect When:
1. Information needs (often due to
technical complexity) are high.
2. Product customization is important.
3. Quality assurance matters – direct
control is needed.
4. Purchase orders are large.
5. Transportation and storage are
complex.
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Factors Pointing to Indirect Channels
1. One-stop shopping for many
products is important.
2. Availability is important.
3. After-sales service is important.
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The Distribution Value-Added Chain
Suppliers
Producer
Channel
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Channel
Customer
Value-Adds Versus Costs of Different
Channels
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Services Provided by Channel Members
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Channel Arrangements
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Power in Channel Relationships:
Channel Members Have it When
• The channel’s volume of sales of the product is
large relative to the product’s total sales volume
• The product is not well differentiated from
competitors
• The channel has low switching costs; it is
relatively easy to find an alternative to replace the
product
• The channel poses a credible threat of backward
integration or competing with the product
• The channel member has better information than
the product manager about market conditions
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Power in Channel Relationships:
Maintaining Power Over Retailers
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Protect the brand name
Customize products and promotions
Innovate constantly
Organize around the customers
Invest in technology
Cut costs to keep prices low
Support smaller retailers
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Putting the Internet into Perspective
1. It is not the first new communication
technology.
2. For most products, it is not a
sufficient channel.
3. Its “widespread availability” is
limited.
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Primary Benefits of the Internet
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It is interactive
It is inexpensive
It has broad scope
It is fast
Internet Can’t:
• Provide physical product
• Provide human contact
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The Direct Marketing Process
1.
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3.
4.
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6.
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8.
Set an objective
Determine the target market
Choose the medium/media
Get a list
Analyze the list
Develop the offer
Test the offer
Analyze the results
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Marketing Intermediaries
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Middleman – independent link between producers and consumers
Merchant middleman – actually buys goods and takes title/ownership
Agent – business unit that negotiates purchases and sales but does not take
ownership
Wholesaler – a merchant who primarily stores and handles goods in large
quantities
Retailer – merchant middleman who sells to final consumers
Broker – middleman who serves as a go-between for the buyer and seller
Manufacturer’s agent – an agent who operates by contract serving a geographic
territory
Distributor – wholesale middleman in lines with selective or exclusive distribution
Jobber – a middleman who buys from manufacturers and sells to retailers
Facilitating agent – a firm that performs distribution tasks other than buying,
selling and transferring
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Channel Function Analysis
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Good Stuff, Inc., Sales by Channel
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PC Sales Volumes by Channel
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Percentage of Company Sales to Wal-Mart
Tandy Brands
Mattel
Clorox
Hershey
Revlon
RJR Tobacco
P&G
Kraft Foods
39%
23%
23%
21%
20%
20%
17%
12%
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Company-to-Company Contacts
Company
Direct
Indirect
Agent/
Broker
rep
In
person
Wholesale/
Distributor
Phone
Mail
Customer
Retailer/
Dealer
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Electronic
Differing Perspectives between
Manufacturers and Channel Members
Firm perspective:
Firm
Channel 1
Channel 2
Channel 3
Customer
Channel perspective:
Firm 1
Firm 2
Channel
Customers
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Firm 3
A Hybrid Marketing Channel System
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Overall Surefoot Master Contribution
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Allocation of Costs by Function
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Allocation of Functional Costs to Channels
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Direct Mail vs. Direct E-mail
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Direct Marketing Planning
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