1. Marketing Channel Strategy and Management
CHAPTER 7

2. AFTER READING THIS CHAPTER YOU SHOULD BE ABLE TO:
Describe the nature of a marketing channel and their functions as intermediaries.
Distinguish between traditional and electronic marketing channel designs.
Identify the factors organizations use to select and manage a single or multiple marketing channel(s).

3. AFTER READING THIS CHAPTER YOU SHOULD BE ABLE TO:
Describe the role intermediaries have in the marketing channel selection process.
Discuss how organizations modify marketing channel decisions.

4. Marketing Channel Intermediaries
MARKETING CHANNELS
A marketing channel consists of individuals and firms involved in the process of making an offering available for consumption or use by consumers and industrial users.
Channels link the producer and its buyers:
Producer
Marketing Channel Intermediaries
Consumers

5. MARKETING CHANNELS

6. Channel Members Add Value
Notes to Accompany Slide:
Figure 10.1A shows three manufacturers, each using direct marketing to reach three customers. This system requires nine different contacts.
Figure 10.1B shows the three manufacturers working through one distributor, which contacts the three customers. This system requires only six contacts. In this way, intermediaries reduce the amount of work that must be done by both producers and consumers.

7. Number of Channel Levels

8. Segmentation Strategy Communications Strategy
MARKETING CHANNELS
Marketing channels affect an organization’s:
Determines whether its chosen target markets are reached
Segmentation Strategy
Dictates its advertising, sales promotion, direct marketing, etc. activities
Communications Strategy
Influences its markup and discount policies
Pricing Strategy
Impacts its:
Branding policies
Willingness to stock and customize offerings
Ability to augment offerings
Offering Strategy

9. Go-to-Market Strategy
MARKETING CHANNELS
Go-to-Market Strategy
Marketers use this term to describe how organizations select and employ marketing channels to cost-effectively deliver a value proposition to each of its target markets.

10. THE CHANNEL-SELECTION DECISION
CHAPTER 7: MARKETING CHANNEL STRATEGY AND MANAGEMENT
THE CHANNEL-SELECTION DECISION

11. THE CHANNEL-SELECTION DECISION
Marketers must make these marketing channel decisions regarding intermediaries:
Type
Location
Density
Functions
Conduct a market analysis to identify the target markets served and their buying requirements that will be served by prospective marketing channels

12. Marketing Channel Design
THE CHANNEL-SELECTION DECISION
Marketing Channel Design
The number of levels in a marketing channel is determined by the number of intermediaries between the producer and ultimate buyers or users
As the number of intermediaries between the producer and the ultimate buyer increases, the channel increases in length

13. Channel Design Decisions
Marketing channel design includes designing
effective marketing channels by analyzing consumer needs, setting channel objectives, identifying major channel alternatives, and evaluating them.

14. Distributors or Wholesalers
INDIRECT CHANNEL DESIGNS
Distributors or Wholesalers
Retailers or Dealers
Brokers or Agents
Producer
Ultimate Buyers

15. Own Distribution Outlets
DIRECT CHANNEL DESIGN
Producer
Own Sales Force
Own Distribution Outlets
Ultimate Buyers
Producer
Own Marketing Website
Ultimate Buyers

16. E-Commerce Marketing Practices
Uses a Web site to transact or facilitate the sale of products and services online
Pure-click vs. brick-and-click companies
We can distinguish between pure-click companies, those that have launched a Web site without any previous existence as a firm, and brick-and-click companies, existing companies that have added an online site for information or e-commerce.

17. Direct vs. Indirect Distribution Technically Sophisticated
THE CHANNEL-SELECTION DECISION
Direct vs. Indirect Distribution
Marketers employ direct distribution when:
Personal selling is a major component of the organization’s communication program
Intermediaries are not available for reaching target markets
Intermediaries do not possess the capacity to service the requirements of target markets
Offerings possess certain characteristics:
Technically Sophisticated
Nonstandardized
High Unit Value

18. Electronic Marketing Channels
THE CHANNEL-SELECTION DECISION
Electronic Marketing Channels
Employ some form of electronic communication, including the Internet, to make offerings available for consumption or use by consumers and industrial users
Many services can be distributed through electronic marketing channels, while others still involve traditional intermediaries

19. Target Market Coverage
THE CHANNEL-SELECTION DECISION
Marketers ask three questions when selecting the type and location of retail outlets:
Target Market Coverage
Which retailers will provide the best coverage of the target market?
Buyer Requirement Satisfaction
Which retailers will best satisfy the target market’s buying requirements?
Profitability
Which retailers will be the most profitable?

20. A case study
Gavina Coffee

21. THE CHANNEL-SELECTION DECISION
Target Market Coverage
Three degrees of distribution density are:
Intensive Distribution
Selective Distribution
Exclusive Distribution

22. Intensive Distribution Selective Distribution
TARGET MARKET COVERAGE: DISTRIBUTION DENSITY
The firm’s offerings are sold through as many retail outlets as possible
Intensive Distribution
The marketer selects a few retail outlets in a specific area to carry its offerings
Selective Distribution
One retail outlet in a geographic area or one retail chain sells the firm’s offerings
Some retailers sign exclusive distribution agreements with manufacturers
Exclusive Distribution

23. Target Market Coverage: Distribution Density
THE CHANNEL-SELECTION DECISION
Target Market Coverage: Distribution Density
Distribution density selection rests on:
How buyers purchase the manufacturer’s offering
The amount of control over resale desired by the manufacturer
The degree of exclusivity intermediaries seek
The contribution of intermediaries to the manufacturer’s marketing effort

24. Target Market Coverage: Distribution Density
THE CHANNEL-SELECTION DECISION
Target Market Coverage: Distribution Density
This strategy is chosen when:
The offering is purchased frequently
Buyers wish to expend little effort purchasing it
Example: Convenience goods
Intensive Distribution
These limited-distribution strategies are chosen when:
The offering requires personal selling at the point of purchase
Example: Shopping/specialty goods
Exclusive Distribution
Selective Distribution

26. THE CHANNEL-SELECTION DECISION
Profitability
Profitability is determined by the:
Margins earned (revenues – costs) for each channel member
Channel as a whole
Extent to which channel members share costs
Costs include distribution, advertising, and selling expenses associated with different types of marketing channels

27. MULTI-CHANNEL MARKETING
Multi-channel marketing involves the blending of an electronic or direct marketing channels and a traditional channel in ways that are mutually reinforcing in attracting, retaining, and building customer relationships.

29. Benefits of Multi-channel approach
MULTI-CHANNEL MARKETING
Benefits of Multi-channel approach
A firm uses multi-channel marketing because:
The addition of another marketing channel can provide incremental revenue
An additional marketing channel can leverage the presence of a traditional channel
It can satisfy buyer requirements

30. MULTI-CHANNEL MARKETING
Multi-channel marketing is viable if additional marketing channels:
Generate incremental revenue
Don’t cannibalize sales from traditional intermediaries
Reach different market segments than the traditional channel
Reinforce with traditional channels in attracting, retaining, and building customer relationships

31. MULTI-CHANNEL MARKETING
Disintermediation is the practice whereby a traditional intermediary member is dropped from a marketing channel and replaced by an electronic storefront.

32. MULTI-CHANNEL MARKETING
Disintermediation
Is considered more serious than cannibalization by intermediaries— it affects reseller survival
May cause firms to avoid multi-channel marketing due to complaints and threats by intermediaries, particularly retailers, to discontinue carrying their products and delivering their services

33. SATISFYING INTERMEDIARY REQUIREMENTS AND TRADE RELATIONS
MARKETING CHANNEL STRATEGY AND MANAGEMENT
SATISFYING INTERMEDIARY REQUIREMENTS AND TRADE RELATIONS

34. Industrial Distributors
SATISFYING INTERMEDIARY REQUIREMENTS
Sales department generally manages intermediary relations
Intermediaries choose more profitable suppliers
Are concerned with the adequacy of a firm’s offerings in improving the assortment for its own target markets
Intermediaries seek marketing support from manufacturers:
Wholesalers
Want promotional assistance
Industrial Distributors
Want technical assistance

35. SATISFYING TRADE RELATIONS
Channel Conflict
Marketing managers recognize that conflicts often occur in trade relations
Channel conflict arises when one channel member (such as a manufacturer or an intermediary) believes another channel member is engaged in behavior that is preventing it from achieving its goals

36. SATISFYING TRADE RELATIONS
Channel Conflict
Occurs when:
A channel member bypasses another member and sells or buys direct
There is a dispute over how profit margins are distributed among channel members
Manufacturers believe wholesalers or retailers are not giving their offerings adequate attention
A manufacturer engages in dual distribution—particularly when different retailers or dealers carry the same brands

37. CHANNEL MODIFICATION DECISIONS
CHAPTER 7: MARKETING CHANNEL STRATEGY AND MANAGEMENT
CHANNEL MODIFICATION DECISIONS

38. CHANNEL-MODIFICATION DECISIONS
Bases of the channel modification decision:
Provide the best target market coverage
Satisfy the target market’s buying requirements
Maximize revenue and minimize cost

39. CHANNEL-MODIFICATION DECISIONS: QUALITATIVE FACTORS
When modifying existing or adding new channels, ask :
Will the change improve the effective coverage of the target markets sought?
How will the change improve the satisfaction of buyer needs?
Which marketing functions must be absorbed in order to make the change?
Does the firm have the resources to perform the new functions?
What effect will the change have on other channel members?
What will be the effect of the change on the achievement of long-range organizational objectives?

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