Marketing 624Channels of Distribution ManagementMarketing Channel StrategyDr. Bert Rosenbloom Professor of Marketing andRauth Chair in Electronic Marketing

Channel StrategyThe broad principles by which the firm expects to achieve its distribution objectives for its target market(s)

What role should distribution play in the firms overall objectives and strategies?

What role should distribution play in the marketing mix?

How should the firms marketing channels be designed to achieve its distribution objectives?

Six Fundamental Strategic Distribution Decisions

What kinds of channel members should be selected to meet the firms distribution objectives?

How can the marketing channel be managed to implement the firms channel design effectively and efficiently?

How can channel member performance be evaluated?

Six Fundamental Strategic Distribution Decisions (Contd)

Channel DesignThose decisions involving the development of new marketing channels where none had existed before, or the modification of existing channels

The design of the channel should contribute to the firms quest for Differential AdvantageChannel Design and Differential Advantage

Recognize need for channel design decisionSet and coordinate distribution objectivesSpecify distribution tasksDevelop possible alternative channel structuresEvaluate variables affecting channel structureChoose the best channel structureSelect the channel membersParadigm of the Channel Design Decision

Obvious examples pp. 200-201 in text But many times the need to make channel design decisions is not obviousChannel Design DecisionPhase 1: Recognize Need for Channel Design Decision

Channel Design Decision Phase 2:Set & Coordinate Distribution Objectives Become familiar with objectives of firm Set explicit distribution objectives Check for congruency

Channel Design Decision Phase 3:Specifying Distribution TasksDont underestimate all of the nuts and bolts necessary to make products and services conveniently available to customers

Channel Design Decision Phase 4:Develop Alternative Channel Structures Number of levels Intensity at various levels Types of intermediaries

Channel Design Decision Phase 5:Evaluate Variables Affecting channel Structure Market variables Product variables Company variables Intermediary variables Environmental variables Behavioral variables Heuristics play an important role

Channel Design Decision Phase 6:Choosing the Best Channel Structure Product-based models (Aspinwall) Financial Approach Transaction Cost Analysis Approach Management Science Approach Judgmental Heuristic Approach

Channel Design Decision Phase 7:Select the Channel Members Finding perspective channel members Applying selection criteria Securing perspective channel members

Work backwards from what the final customers wants. A bottom up approach.Target Markets and Channel Design Strategy

Market geography Market size Market density Market behavior when customers buy where customers buy how customers buy who buys

Framework for Market Analysis

Who Buys? Who makes physical purchase? Who uses the product? Who influences the buying decision?

Channel ManagementThe administration of existing channels to secure the cooperation of channel members in achieving the firms distribution objectives

Find out needs and problems Offer support consistent with channel member needs Provide leadershipMotivating Channel Members

Grapevine (informal communications network) Inside research Outside research Marketing channel audit Distributor advisory councilsLearning About Channel Members Needs and Problems

Cooperative approach Partnership approach Distribution programming approachSupport for Channel Members

New Product Planning and DevelopmentProduct Life CycleStrategic Product ManagementProduct Issues in Channel Management

Channel member input Acceptability Fit with channel member assortments Education and training Problems?New Product Planning and Development

Introduction Growth Maturity Saturation Absolute decline Product Life CycleWhat are the channel management implications during each stage?

Product differentiationProduct positioningProduct line expansion and contractionTrading up and trading downBrand strategyService strategyStrategic Product Management

Cost Market Competition ChannelsPricing in Channel Management

Pull versus Push Promotional StrategyVs.Promotion Through the Channel

Cooperative advertising Promotional allowances Displays and selling aids In-store promotions Contests and incentives Special promotional deals and merchandise campaignsClassic Push Promotional Strategies

Training Quotas Missionary selling Trade showsKinder and Gentler Push Promotional Strategies