Transcript MARKETING 430

MARKETING 430
CHAPTER 6
DESIGNING THE
MARKETING
CHANNEL
Classification of Channel Systems
Conventional
(Classical)
Vertical Marketing
Systems (VMS)
Administered
Contractual
Franchises
•Wholesale Sponsored Voluntary Chain
Retail
Cooperative
Corporate
(Vertical
Integration)
WSVC *
What is Channel Design?

Decisions about the development of new
marketing channels or the modification of
existing channels
–
–
–
–
Part of the marketer’s marketing strategy
decisions
New or existing channels
Allocation of tasks
Selection of channel members
Rationale for the Design Process





New products or
product lines
New target market
Change in other parts
of the marketing mix
Incorporation of new
firm into the
organization
Changing policies of
intermediaries





Changing availability of
intermediaries
New geographic
markets
Environmental changes
Conflict in the channel
Response to evaluation
process
Setting and Coordinating Distribution
Objectives




What are the overall objectives of the
company?
What is the strategy in the other marketing
mix elements?
Set and State the distribution objectives
Reaffirm that all marketing mix objectives are
compatible.
What distribution tasks are needed to
accomplish the objectives?

Examples of tasks in
the consumer market:
–
–
–
–
–
–
Research shopping
behaviors
Promote the product
Maintain inventory
Provide product samples
Transport the product
Provide credit, warranty
work, etc.

Examples of tasks in
the business market:
–
–
–
–
–
–
Maintain inventory
Provide storage space
Provide technical
assistance
Monitor quality
Process orders
Manage packaging and
special handling
Develop Alternative Channel
Structures

Determine levels and intensity
–


Intensive, selective, exclusive
Decide on types of intermediaries
Decide on possible alternatives of channel
structure
Attempt to evaluate all variables
affecting the channel structure






Market variables
Product variables
Company variables
Intermediary variables
Environmental variables
Behavioral variables
Market Variables




Market Geography
Market Size
Market Density
Market Behavior
Product Variables






Bulk and weight
Perishability
Unit value
Degree of standardization
Technical versus non-technical
Degree of newness
Company Variables




Size
Financial capacity
Managerial expertise
Objectives and desired strategies
Intermediary Variables



Availability
Cost
Services
Environmental Variables


Review chapter 3
Economic, sociocultural, competitive,
technological, legal
Behavioral Variables




Communications flow
Power relationship
Control issues
Conflict potential
Choose the “Best” Channel Structure





Aspinwall’s Characteristics of Goods and
Parallel Systems approach
Financial approach
Transaction Cost analysis approach
Management Science approach
Judgmental-Heuristic approaches
Zero Based Channel Design

A zero-based channel
design is one that
–
–
meets the target market
segment’s demands for
service outputs
at minimum cost of
performing the
necessary channel flows
that produce those
service outputs.
To move toward that goal,
consider…




What flows/tasks are being
offered that could be
eliminated?
Are there tasks/flows being
performed that are
duplications of effort?
Could any flows/tasks be
reorganized to improve
efficiency?
Could we reduce costs by
modifying any tasks/flows?
Channel Gaps

Anything within the channel structure that is
preventing the channel from being a zerobased design.