Developing the Marketing Channel Part 2 Developing the Marketing Channel

Strategy in Marketing Channels Chapter 5 Strategy in Marketing Channels

Marketing Channel Strategy Objective 1: 5 Marketing Channel Strategy Channel Strategy: The broad principles by which the firm expects to achieve its distribution objectives for its target market(s)

Distribution Decisions Objective 2: 5 Distribution Decisions The role distribution should play in the firm’s overall objectives & strategies The role distribution should play in the marketing mix Development of the firm’s channel strategy(s)* 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

Distribution Decisions (Steps in Channel Strategy Process) Objective 2: 5 Distribution Decisions (Steps in Channel Strategy Process) Role of Distribution @ Corp. Level Role of Distribution @ Mktg Mix Level Development of Channel Strategy(s)* Design One’s Channel Structure(s) Selection of Channel Members Manage (Run) Channel Structure(s) Evaluation of Channel Performance

Channel Strategy as an Overall Objective 3: 5 Channel Strategy as an Overall Corporate Objective Three (3) general ways to view the importance of distribution in overall corporate strategy-making: Who’s in charge? Corporate executives or functional managers? Type of strategy-making Long-range vs. short-term (i.e., tactical ~ x < 1yr.) Value-Chain analysis How pervasive is it in creating customer value?

The Value Chain 5 Firm infrastructure Human resource management Technology development Procurement* Support Activities Sales Inbound Operations Outbound Marketing Service logistics logistics & sales Primary Activities

Determining Priority Given 5 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.

Channel Strategy and the Objective 4: 5 Channel Strategy and the “Marketing Mix” The essence of modern marketing management: To develop a marketing mix of product, price, promotion, & distribution (place)

Distribution Strategy Objective 5: 5 Emphasis Placed on Distribution Strategy Firms should place a high priority on distribution when… Customers’ needs highlight distribution as important Homogeneity exists on other 3 Ps Competitors are weak in their distribution efforts Efficiency gains are possible over current efforts

5 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).

Distribution advantages are not easily copied by competitors. 5 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.

5 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.

4. Synergy in Distribution 5 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.

Differential Advantage & Objective 6: 5 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. (e.g., Zara’s corporate channel) Remember: A differential advantage occurs when a firm attains a long-term, advantageous position in the market relative to its competitors. (Ch. 1)

Positioning the Channel 5 Positioning the Channel Channel Position* The reputation a [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 [members*]. Channel Positioning Is what a firm does with its channel planning and decision-making to attain the channel position it desires. Note the definition here is somewhat different from the text in that the words [member] and [members] have replaced manufacturers from the original definition. This was done so as to realize the increasing prevalence of not only retailers, but also wholesalers acting as “channel captains”, or those that “run” the overall channel due to some formal source of power (as discussed in Ch. 4).

Positioning the Channel 5 Positioning the Channel By taking a channel positioning point-of-view, 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.

Selection of Channel Members Objective 7: 5 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.

Channel Strategy & Managing the Channel Objective 8: 5 Channel Strategy & Managing the Channel Three (3) strategic questions must be asked: How close a relationship should be developed with the channel members? How should the marketing mix be used to enhance channel member cooperation? How should the channel members be motivated to cooperate in achieving the manufacturer’s distribution objectives?

Closeness of Channel Relationships 5 Closeness of Channel Relationships Factors to consider: Distribution intensity Target markets Products Company policies Middlemen Environment Behavioral dimensions

The “Marketing Mix” in Channel Management 5 The “Marketing Mix” in Channel Management Product strategy Marketing Mix Pricing strategy Distribution strategy Promotion strategy

Motivation of Channel Members Objective 9: 5 Motivation of Channel Members Portfolio concept to motivating others… A tool for motivating different types and sizes of channel members participating in various channel structures who may respond differently to various motivation strategies.

Channel Member Performance Objective 10: 5 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?