Objective 1: 5

Chapter 5 Marketing Channel Strategy

Strategy in Marketing Channels

C hannel Strategy:

The broad principles by which the firm

expects to achieve its distribution
objectives for its
target market(s)

Objective 2: Objective 3:
5 5
Distribution Decisions Channel Strategy as Overall
Corporate Obj ectiv e
1. The role of distribution in the firm’s overall
objectives & strategies
2. The role distribution should play in the marketing
mix
3. The design of the firm’s mar keting channels
4. The selection of channel members
The higher the priority given to
5. The management of the mar keting channel in order distribution, the higher the level
to implement the firm’s channel design effectively & at which it should be considered
efficiently on a continuing basis in formulating the organization’s
6. The evaluation of channel member performance overall objecti ves and strategies

1
 5 Determining the Priority Giv en 5
The Value Chain
to Distribution

Firm infrastructure Distribution does increasingly warrant

the attention of top management,

Ma
Support Human resource management because competition has made the

rg
in
Activities issue of distribution too important for
Technology development top management to ignore.
Human resource management

in • Coca-Cola
Inbound Operations Outbound Marketing Service rg • Procter & Gamble Company
logistics lo gistics & sales Ma

Primary Activities

Objective 4: 5 Objective 5: 5

Channel Strategy & the Marketing Mix Emphasis on Distribution Strategy

The essence of modern marketing
management:
To dev elop a marketing
mix of product, price,
promotion, & distribution
(place)
IF • Distribution is the most relevant variable for
: satisfying target market demands.
or • Parity exists among competitors in the other three
variables of the marketing mix.
or • A high degree of vulnerability exists because of
competitors’ neglect of distribution.
or • Distribution can enhance the firm by creating
synergy from marketing channels.
THEN: The firm should choose distribution
strategy for strategic emphasis

2
 5 5
Target Market Demand Competitiv e Parity

Firms should stress distribution when it Distribution advantages are not easily
serves customers’ needs in the target copied by competitors.
market.

Marketing channels are so closel y linked to

customer need satisfaction because it is through Distribution advantages are based on a
combination of superior strategy, organization,
distribution that firms can provide the kinds and
and human capabilities.
levels of ser vice that make for satisfied
customers.

5 5
Distribution Neglect Distribution and S ynergy

Competitors’ neglect of distribution “Hooking up” with a mix of cooperative

strategies provides excellent opportunities. channel members will strengthen the
channel.

Because each channel member is an

The channel manager must anal yze target independent entity, rewarding opportunities exist
markets to determine whether competitors have for channel managers to cultivate cooperation
neglected distribution and whether vulnerabilities among members.
exist that can be exploited.

3
Objective 6: Differential Adv antage
& Channel Design
Differential advantage, also called sustainable
competitive adv antage, occurs when a firm
attains a long-term, advantageous position
in the market relati ve to competitors.
• Caterpillar
5 5
Positioning the Channel
A firm that plans the channel and makes
decisions by viewing the relationship
with channel members as a partnership
or strategic alliance that offers
recognizable benefits to the
manufacturer & channel members on a
long-term basis
• Infiniti
Objective 7: 5
Selection of Channel Members
Because customers perceive channel
members as an extension of the manufacturer’s own
organization, members should:
• Reflect channel strategies the firm has developed to
achieve its distribution objecti ves
• Be consistent with the firm’s broader mar keting
objectives & strategies
• Reflect the objecti ves & strategies of the organization
as a whole
4
 Objective 8: 5
Channel Strategy & Managing the
Channel

How close a relationship How should the

should be developed marketing mix be used to
with the channel enhance channel
members? member cooperation?
3
Strategic
Questions

How should the channel

members be motivated to cooperate
in achieving the manufacturer’s
distribution objectives?

5 Continuum portraying Degree of Closeness of Manufacturer with

Closeness of Channel Relationships Channel members

Factors to consider

• Distribution intensity
• Targeted markets
• Products
• Company policies
• Middlemen
• Environment
• Behavioral dimensions

5
 Continuum of Intensity of Distribution

Objective 9: 5 Menu of Common Channel Tactics for

Motivating Channel Members
Motivation of Channel Members

Portf olio concept:

A tool for motivating different types

and sizes of channel members participating
in various channel structures who may respond
differently to various motivation strategies.

6
 5
Matrix of Vertical & Horizontal portfolios of Channel Structures Marketing Mix in
& Members Channel Management

Product Relationships/
strategy Interfaces

Distribution Pricing
Marketing
strategy strategy
Mix

Promotion
strategy

Objective 10: 5
Channel Strategy &
Ev aluation of Channel Member
Performance

Channel manager’s involvement

in evaluating member performanc e 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 effecti vel y?