Part 2Part 2

Developing the Marketing Channel

Chapter 5Chapter 5

Strategy in Marketing Channels

Marketing Channel StrategyMarketing Channel Strategy

55Objective 1:

The broad principles by which the firm expects to achieve its

distribution objectives for its target market(s)

Channel Strategy:

55

Distribution DecisionsDistribution Decisions

Objective 2:

1. The role of distribution in the firm’s overall objectives & strategies

2. The role distribution should play in the marketing mix

3. The design of the firm’s marketing channels4. The selection of channel members5. The management of the marketing channel in

order to implement the firm’s channel design effectively & efficiently on a continuing basis

6. The evaluation of channel member performance

55

Channel Strategy as Overall Channel Strategy as Overall Corporate ObjectiveCorporate Objective

Objective 3:

The higher the priority given to distribution, the higher the levelat which it should be consideredin formulating the organization’s overall objectives and strategies

55The Value ChainThe Value Chain

Firm infrastructure

Human resource management

Technology development

Human resource management

Inbound Operations Outbound Marketing Service logistics logistics & sales Margin

MarginSupportActivities

Primary Activities

55Determining the Priority Given Determining the Priority Given to Distributionto Distribution

Distribution does increasingly warrantthe attention of top management,because competition has made the

issue of distribution too important fortop management to ignore.

• Rayovac Corp.• WD-40• Coca-Cola• Procter & Gamble Company

55Channel Strategy & the Channel Strategy & the

Marketing MixMarketing Mix

Objective 4:

The essence of modern marketingmanagement:

To develop a marketing mix of product, price,

promotion, & distribution(place)

55Objective 5:

Emphasis on Distribution Emphasis on Distribution StrategyStrategy

• 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.

IF:

THEN:

or

or

or

The firm should choose distribution strategy for strategic emphasis

Target Market DemandTarget Market Demand55

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.

55Competitive ParityCompetitive Parity

Distribution advantages are not easily copied by competitors.

Distribution advantages are based on a combination of superior strategy,

organization, and human capabilities.

55Distribution NeglectDistribution 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.

Distribution and SynergyDistribution and Synergy 55

“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.

55Differential Advantage Differential Advantage & Channel Design& Channel Design

Objective 6:

Differential advantage, also called sustainablecompetitive advantage, occurs when a firm attains a long-term, advantageous position

in the market relative to competitors.

• Caterpillar

55Positioning the ChannelPositioning the Channel

A firm that plans the channel and makesdecisions by viewing the relationship

with channel members as a partnershipor strategic alliance that offersrecognizable benefits to the

manufacturer & channel members on a long-term basis

• Infiniti

55Selection of Channel MembersSelection of Channel Members

Objective 7:

• 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

Because customers perceive channelmembers as an extension of the

manufacturer’s own organization, members should:

Channel Strategy & Managing Channel Strategy & Managing the Channelthe Channel

55Objective 8:

3StrategicQuestions

How close a relationship should be developed

with the channelmembers?

How should the channelmembers be motivated to cooperate

in achieving the manufacturer’s distribution objectives?

How should the marketing mix be used to

enhance channelmember cooperation?

Closeness of Channel Closeness of Channel RelationshipsRelationships

55

• Distribution intensity• Targeted markets• Products• Company policies• Middlemen• Environment• Behavioral dimensions

Factors to consider

Marketing Mix inMarketing Mix inChannel ManagementChannel Management

55

MarketingMix

Product strategy

Pricing strategy

Promotionstrategy

Distributionstrategy

Motivation of Channel MembersMotivation of Channel Members55Objective 9:

Portfolio concept:

A tool for motivating different typesand sizes of channel members participating

in various channel structures who may responddifferently to various motivation strategies.

55

Evaluation of Channel MemberEvaluation of Channel MemberPerformancePerformance

Objective 10:

Have provisions been made in the design andmanagement of the channel to assure that

channel member performance will be evaluated effectively?

Channel manager’s involvementin evaluating member performance is integral to

developing & managing channel