Marketing Channel Basics

Channel (or Distribution Channel): A set of interdependent organizations

(channel members) that help make a product available for consumption, use,
or re-sell by the consumer or business buyer.

Marketing Channels Why Channel Members?

They offer efficiency in making products available to target markets through:
- Contacts,
- Experience,
- Specialization, and
- Scale of operation

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Customer Analysis
Channel Design / Strategy - Example

What benefits are sought?

Analysis e.g. training, delivery time,
Customer, Channel,
product customization, price,
Competitor, Company
product variety, service level ?
What activities are required?

Design
e.g. cost, service level?
Objective?
Strategic Aspects

Implementation, Control
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Source: Winer, 2000
 Strategic Aspects / Alternatives 1. Direct vs. Indirect

1. Number of Channel Levels: Direct vs. Indirect Length? Direct vs. indirect channels.
Direct and indirect channels may be employed together
2. Number of Members (at a level): Exclusive vs. Selective vs. Intensive

3. Allocating Channel Functions / Responsibilities

4. Type of Marketing System

vs.

number of levels : channel length

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2. Exclusive vs. Selective vs. Intensive 3. Allocating Channel Functions / Responsibilities

Channel functions:
Intensity? exclusive / selective / intensive Contacts with prospective buyers

It is about having adequate customer access Matching buyers and sellers

Negotiation
Customer needs drive the choice Physical distribution
Marketing research, information
Customer service
vs. Promotion
Financing
Pricing
channel width Buying
Training

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 4. Type of Marketing System

Autonomy? Conventional, Vertical, Horizontal systems

Variety? Single channel vs. Multichannel (hybrid)

Many firms evolve to multiple channels

vs. vs. vs.

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Channel Behavior and Conflict Cooperation and Control in Channels

Channel will be most effective when: Vertical Marketing System

Each member is assigned tasks it can do best.
Traditional Administered Contractual Corporate
All members cooperate for overall channel goals and satisfy the target market
(Conventional)
When this doesnt happen, (horizontal or vertical) conflict occurs.
Amount of
Channels are always in some degree of conflict. Cooperation
strategic actions to minimize chances of conflict
managing conflict: with power, expertise, negotiation, communicating skills Control Market Power Contracts Ownership
Maintained by forces

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