Marketing 624 Channels of Distribution Management Marketing Channel Strategy Dr. Bert Rosenbloom Professor of Marketing and Rauth Chair in Electronic Marketing Channel Strategy The broad principles by which the firm expects to achieve its distribution objectives for its target market(s) Six Fundamental Strategic Distribution Decisions What role should distribution play in the firm’s overall objectives and strategies? What role should distribution play in the marketing mix? How should the firm’s marketing channels be designed to achieve its distribution objectives? Six Fundamental Strategic Distribution Decisions (Cont’d) What kinds of channel members should be selected to meet the firm’s distribution objectives? How can the marketing channel be managed to implement the firm’s channel design effectively and efficiently? How can channel member performance be evaluated? Channel Design Those decisions involving the development of new marketing channels where none had existed before, or the modification of existing channels Channel Design and Differential Advantage The design of the channel should contribute to the firm’s quest for Differential Advantage Paradigm of the Channel Design Decision Recognize need for channel design decision Set and coordinate distribution objectives Specify distribution tasks Develop possible alternative channel structures Evaluate variables affecting channel structure Choose the best channel structure Select the channel members Channel Design Decision Phase 1: Recognize Need for Channel Design Decision Obvious examples pp. 200-201 in text But many times the need to make channel design decisions is not obvious 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 Tasks Don’t 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 Target Markets and Channel Design Strategy Work “backwards” from what the final customers wants. A “bottom up” approach. Framework for Market Analysis Market geography Market size Market density Market behavior when customers buy where customers buy how customers buy who buys Who Buys? Who makes physical purchase? Who uses the product? Who influences the buying decision? Channel Management The administration of existing channels to secure the cooperation of channel members in achieving the firm’s distribution objectives Motivating Channel Members  Find out needs and problems  Offer support consistent with channel member needs  Provide leadership Learning About Channel Members Needs and Problems “Grapevine” (informal communications network) Inside research Outside research  Marketing channel audit Distributor advisory councils Support for Channel Members Cooperative approach Partnership approach Distribution programming approach Product Issues in Channel Management  New Product Planning and Development Product Life Cycle Strategic Product Management New Product Planning and Development Channel member input Acceptability Fit with channel member assortments Education and training Problems? Product Life Cycle What are the channel management implications during each stage? Introduction Growth Maturity Saturation Absolute decline Strategic Product Management  Product differentiation  Product positioning  Product line expansion and contraction  Trading up and trading down  Brand strategy  Service strategy Pricing in Channel Management Cost Market Competition Channels Promotion Through the Channel Vs. Pull versus Push Promotional Strategy Classic Push Promotional Strategies Cooperative advertising Promotional allowances Displays and selling aids In-store promotions Contests and incentives Special promotional deals and merchandise campaigns “Kinder and Gentler” Push Promotional Strategies Training Quotas Missionary selling Trade shows