Transcript Part 1

Part 2
Developing the Marketing Channel
5
Chapter 5: Marketing Channel Strategy
What is a Marketing Channel Strategy?
The broad principles by which
the firm expects to achieve its
distribution objectives for its
target market(s)
Major Topics for Ch. 5
1. Major Decisions to Make*
2. When to Emphasize Distribution Strategy?*
3. Channel Design: Value Chain and
Value Chain Analysis
4. Three Strategic Questions for Channels*
1. Closeness of Channel Relationships
2. Consistency with Marketing Mix
3. Motivating Channel Members
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Topic 1
5
Four Major Decisions To Make*
1. The role of distribution in the firm’s overall
objectives & strategies (Strategy Level Issue)
2. The role distribution should play in the
marketing mix (Program Level Issue)
3. -The design of the firm’s marketing channels
-The selection of channel members
4. -The management of the marketing channel
-The evaluation of channel member
performance
5
Channel Strategy as Overall
Corporate Objective
The higher the priority given to
distribution, the higher the level
at which it should be considered
Topic 2
5
When to Emphasize Distribution Strategy
IF
:
• Distribution is the most relevant variable
or
• Parity exists among competitors in the other
three variables of the marketing mix.
or
• A high degree of competitive vulnerability
exists
or
• Distribution can create synergy among
marketing channels.
THEN:
The firm should choose distribution
strategy for strategic emphasis
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Target Market Demand
Firms should stress distribution
when channels serve customers’
needs in the target market best.
It is through distribution channels that
firms can provide the kinds and levels
of service that make for satisfied
customers.
Ex) Recent Trend in IT channel
- B2B
- B2C
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.
Ex) Toyota vs. Honda and Nissan in Japan
Distribution Neglect
Competitors’ neglect of distribution
strategies
The channel manager must analyze
target markets to determine whether
competitors have neglected distribution
and whether vulnerabilities exist
Ex) Nintendo versus SONY (in the past)
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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.
Ex) Online and Offline; H-P and Best Buy
Topic 3
Channel Strategy
& Channel Design
Differential advantage occurs when a firm
attains a long-term, advantageous position
in the market relative to competitors.
• Caterpillar Versus Komatsu
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Channel Design
• What is channel design?
– Decisions associated with creating new or
altering existing channels.
• Why are channel design decisions critical?
– They directly influence all other marketing
decisions.
– Key external resource for many manufacturers.
©McGraw-Hill Companies, Inc. 2002
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The Value Chain = Firm Boundary Decision
Firm infrastructure
Support
Activities
Human resource management
Technology development
Human resource management
Inbound
logistics
Operations
Outbound Marketing
logistics
& sales
Primary Activities
Service
5
Channel Position and Positioning*
5
Channel Position: The reputation a manufacturer
acquires among distributors
Key to Channel Positioning: Viewing the
Relationship with channel members as
a partnership or strategic alliance**
• Infiniti (p. 166-7 of the textbook)
Channel Strategy and Selection of Channel 5
Members
Customers perceive channel members as
an extension of the manufacturer’s own
organization  Channel members should:
• Reflect channel strategies your 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
Topic 4
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?
Question1: Closeness of Channel
Relationships
Factors to consider
1)
2)
3)
4)
5)
6)
7)
Distribution intensity*
Targeted markets*
Product Characteristics*
Company policies*
Middlemen
Environment
Behavioral dimensions
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1) Distribution Intensity:
Outlet
Use as many
outlets as possible
Outlet
Outlet
Intensive
Distribution
Outlet
Outlet
Use as few outlets
(intermediaries) as
possible
Exclusive
Distribution
Intermediaries
Outlet
Not all available
intermediaries are
Selective used
Distribution
Intermediaries
©McGraw-Hill Companies, Inc. 2002
Intermediaries
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2) Analyzing Target Market Behaviors
• Current and potential buyer behaviors:
– Who is doing the buying?
• Where,when and how end users buy:
– Seasonal
– Shopping from home
• Knowledge of industry (and its language)
©McGraw-Hill Companies, Inc. 2002
19
3) Analyzing Product Characteristics
• Product Characteristics
– Unit value: length
– Standardization: length, intensity
– Bulkiness: length
– Complexity: length, intensity
– Stage of Product Life Cycle: intensity, ownership
 Implications for Channel Design
©McGraw-Hill Companies, Inc. 2002
20
Changes in Life Cycle and Channels: The
Case of Designer Apparel
ValueAdded
addedbyby
channel
Utility
Channel
High
Introductory
Stage
Low
Exhibit 3.4
Declining/
Death
Boutique
(e.g., service utility)
Offprice Outlets
(e.g., convenience utility)
Growth
Stage
Mature
Stage
Better Department Stores
(e.g., selection utility)
Merchandisers
(e.g., lot size utility)
Market
Growth Rate
High
Low
©McGraw-Hill Companies, Inc. 2002
21
Question 2: Marketing Mix in
Channel Management
5
Product
Strategy
(Quality/Branding)
Distribution
strategy
Marketing
Mix
Pricing
Strategy
(Wholesale/Retail/Consumer)
Promotion
Strategy
(Push/Pull)
Question 3: Motivation of Channel
Members
Incentive
Portfolio
A set of tools for motivating different types
and sizes of channel members
Question: What makes a distributor work for you?
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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?
Ex) Measurement and Reward of Channel Performance