2.Channel Management

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Definition of Marketing Channel

A Marketing Channel is.

consists of individuals and firmsinvolved in the process of making a

product or service available for use or

consumption by consumers orindustrial users


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Definition

Value Delivery Network

The network made up of thecompany, suppliers, distributors,and ultimately customers who

partner with each other toimprove the performance of theentire system.


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Channel choices affect

other decisions in themarketing mix

A strong distributionsystem can be a

competitive advantageChannel decisions involvelong-term commitments toother firms

Nature & Importance of

Marketing Channels


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How Channel Members

Add Value


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How Channel Members

Add Value Intermediaries

Require fewer contacts tomove the product to thefinal purchaser.

Help match productassortment demandwith supply.

Help bridge major time,place, and possession gaps


Marketing Channels


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Marketing ChannelsKey Functions Performed

by Channel Members

Information

PromotionContact

Matching

Negotiation

PhysicalDistribution

Financing

Risk taking


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Marketing Channels


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Number of Channel Levels The number of intermediary levels

indicates the length of a marketingchannel.

Direct Channels

Indirect Channels

Producers lose more control and facegreater channel complexity as

additional channel levels are added.


Marketing Channels


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Marketing ChannelsChannel Members Are Connected

Via A Variety of FlowsPhysicalFlow

PaymentFlow

InformationFlow

PromotionFlow

Flow of Ownership


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Channel Conflict Occurs when channel members

disagree on roles, activities, orrewards.

Types of Conflict:Horizontal conflict:occurs among

firms at the same channel level

Vertical conflict: occurs among firms

at different channel levels

Channel Behavior and

Organization


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Conventional Versus Vertical

Marketing System


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Vertical Marketing Systems

Corporate VMS

Contractual VMS

Manufacturer-sponsoredretailer franchise system

Manufacturer-sponsoredwholesaler franchise system

Service-firm-sponsoredretailer franchise system

Administered VMS


Organization


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HorizontalMarketing Systems

Two or morecompanies at one

level join together tofollow a newmarketingopportunity.


Organization

Nestle and General Mills work together to

market cereal outside of North America


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Multichannel Distribution

System


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Multichannel

Distribution Systems

Also called hybridmarketing channels

Occurs when a firm usestwo or more marketingchannels

Hybrid marketing hasmany advantages


Organization


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Changing Channel Organization

Disintermediation has hurt manyestablished companies


Organization


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Disintermediation:

Traditional brick andmortar travel agenciesface competition fromonline travel agencies,airlines, and reverse

auction web sites suchas Priceline.


Organization


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Step 1:Analyzing

Consumer Needs Cost and feasibility

of meeting needs

must be considered

Channel Design Decisions


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Step 2:

Setting Channel Objectives Set channel objectives in terms of

targeted level of customer service

Many factors influence channelobjectives



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Step 3:

Identifying Major Alternatives


Types ofIntermediaries

Company sales

force Manufacturers

agency

Industrialdistributors


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Step 3:

Identifying Major Alternatives Number of marketing intermediaries

Intensive distribution

Selective distribution

Exclusive distribution

Responsibilities of channel members



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Step 4:Evaluating

Major Alternatives Economic criteria

Sales, costs,profitability

Control issues

Adaptive criteria



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Designing InternationalDistribution Channels

Global marketers usuallyadapt their channel strategiesto structures that exist withinforeign countries

Key challenges:

Channels may be complexor hard to penetrate

Channels may bescattered, inefficient, ortotally lacking



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Selecting Channel

Members Identify characteristics that

distinguish the best channelmembers

Managing and MotivatingChannel Members

Partner relationshipmanagement (PRM) is key

Channel Management

Decisions


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Evaluating Channel

Members Performance

should be checkedagainst standards

Channel members

should be rewardedor replaced asdictated byperformance

Channel Management

Decisions


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Exclusive distribution

Only certain outlets areallowed to carry a firms

products

Exclusive dealing

Exclusive territorialagreements

Tying agreements

Public Policy and

Distribution Decisions


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Marketing Logistics

Outbound distribution

Inbound distribution

Reverse distribution Involves the entire supply chain

management system

Marketing Logistics and

Supply Chain Management


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Supply Chain

Management


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Why Greater Emphasis is Being Placed

on Logistics: Offers firms a competitive advantage

Can yield cost savings

Greater product variety requires improvedlogistics

Improvements in distribution efficiency arepossible due to information technology




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Goals of the Logistics System

No system can both maximizecustomer service and minimizecosts.

Firms must first weigh the

benefits of higher serviceagainst the costs.

State goals in terms of a targetedlevel of customer service at the least cost.




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Major Logistics Functions

Warehousing

Inventory Management

Transportation

Logistics Information Management




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Integrated Logistics

Management Cross-functional

teamwork inside thecompany is critical

Logisticspartnerships are alsobuilt through sharedprojects



2.Channel Management

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