Part 2 Developing the Marketing Channel 5 Chapter 5 Marketing Channel Strategy What is a Marketing Channel Strategy The broad principles by which the firm expects to achieve its distribution objectives for its target market s Major Topics for Ch 5 1 Major Decisions to Make 2 When to Emphasize Distribution Strategy 3 Channel Design Value Chain and Value Chain Analysis 4 Three Strategic Questions for Channels 1 Closeness of Channel Relationships 5 Topic 1 Four Major Decisions To Make 5 1 The role of distribution in the firm s overall objectives strategies Strategy Level Issue 2 The role distribution should play in the marketing mix Program Level Issue 3 The design of the firm s marketing channels The selection of channel members 4 The management of the marketing channel The evaluation of channel member performance Channel Strategy as Overall Corporate Objective The higher the priority given to distribution the higher the level at which it should be considered 5 Topic 2 When to Emphasize Distribution Strategy IF Distribution is the most relevant variable or Parity exists among competitors in the other three variables of the marketing mix or A high degree of competitive vulnerability exists or Distribution can create synergy among marketing channels THEN The firm should choose distribution strategy for strategic emphasis 5 Target Market Demand Firms should stress distribution when channels serve customers needs in the target market best It is through distribution channels that firms can provide the kinds and levels of service that make for satisfied customers Ex Recent Trend in IT channel B2B B2C 5 Competitive Parity Distribution advantages are not easily copied by competitors Distribution advantages are based on a combination of superior strategy organization and human capabilities Ex Toyota vs Honda and Nissan in Japan 5 Distribution Neglect Competitors neglect of distribution strategies The channel manager must analyze target markets to determine whether competitors have neglected distribution and whether vulnerabilities exist Ex Nintendo versus SONY in the 5 Distribution and Synergy 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 Ex Online and Offline H P and Best Buy 5 Topic 3 Channel Strategy Channel Design Differential advantage occurs when a firm attains a long term advantageous position in the market relative to competitors Caterpillar Versus Komatsu 5 Channel Design What is channel design Decisions associated with creating new or altering existing channels Why are channel design decisions critical They directly influence all other marketing decisions Key external resource for many manufacturers McGraw Hill Companies Inc 2002 12 5 The Value Chain Firm Boundary Decision Firm infrastructure rgi Ma Human resource management n Support Activities Technology development Human resource management Inbound logistics Operations Outbound Marketing logistics sales Primary Activities Service in g r Ma Channel Position and Positioning 5 Channel Position The reputation a manufactu acquires among distributors Key to Channel Positioning Viewing the Relationship with channel members as a partnership or strategic alliance Infiniti p 166 7 of the textbook 5 Channel Strategy and Selection of Channel Members Customers perceive channel members as an extension of the manufacturer s own organization Channel members should Reflect channel strategies your 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 Topic 4 Channel Strategy Managing the Channel How close a relationship should be developed with the channel members 3 Strategic Questions 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 5 Question1 Closeness of Channel Relationships Factors to consider 1 Distribution intensity 2 Targeted markets 3 Product Characteristics 4 Company policies 5 Middlemen 6 Environment 7 Behavioral dimensions 5 1 Distribution Intensity Outlet Outlet Outlet Use as many outlets as possible Outlet Intensive Distributi on Outlet Outlet Use as few outlets intermediaries as possible Exclusive Distributi on Intermediaries Not all available intermediaries Selectiveare used Distributio Intermediaries Intermediaries n McGraw Hill Companies Inc 2002 18 2 Analyzing Target Market Behaviors Current and potential buyer behaviors Who is doing the buying Where when and how end users buy Seasonal Shopping from home Knowledge of industry and its language McGraw Hill Companies Inc 2002 19 3 Analyzing Product Characteristics Product Characteristics Unit value length Standardization length intensity Bulkiness length Complexity length intensity Stage of Product Life Cycle intensity ownership Implications for Channel Design McGraw Hill Companies Inc 2002 20 Changes in Life Cycle and Channels The Case of Designer Apparel ValueAdded added channel Utility byby Channel Hig h Introductory Stage Low Declining Death Boutique Offprice Outlets e g service utility e g convenience utility Market Growth Rate Exhibit 3 4 Low Hig h Growth Stage Mature Stage Better Department Stores e g selection utility Merchandisers e g lot size utility McGraw Hill Companies Inc 2002 21 Question 2 Marketing Mix in Channel Management 5 Product Strategy Quality Branding Distribution strategy Pricing Marketing Strategy Mix Wholesale Retail Consumer Promotion Strategy Push Pull Question 3 Motivation of Channel Members 5 Incentive Portfolio A set of tools for motivating different types and sizes of channel members Question What makes a distributor work for you 5 Evaluation of Channel Member Performance Channel manager s involvement in evaluating member performance is integral to developing managing channel Have provisions been made in the design and management of the channel to assure that channel member performance will be evaluated effectively Ex Measurement and Reward of Channel Performance