Chapter 5

Strategy in Marketing Channels

Objective 1: 5
Marketing Channel Strategy

Channel Strategy:

The broad principles by which the firm expects

to achieve its distribution objectives for its
target market(s)
Objective 2:
5
Distribution Decisions

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 marketing channels
4. The selection of channel members
5. The management of the marketing channel in order to
implement the firm’s channel design effectively &
efficiently on a continuing basis
6. The evaluation of channel member performance
Objective 3:
5
Channel Strategy as Overall
Corporate Objective

The higher the priority given to

distribution, the higher the level
at which it should be considered
in formulating the organization’s
overall objectives and strategies
 5
The Value Chain

Firm infrastructure

Ma
Support Human resource management

rgi
Activities

n
Technology development

Human resource management

Inbound Operations Outbound Marketing Service g in

r
logistics logistics & sales Ma

Primary Activities
Determining the Priority Given 5
to Distribution

Distribution does increasingly warrant

the attention of top management,
because competition has made the
issue of distribution too important for
top management to ignore.

• Rayovac Corp.
• WD-40
• Coca-Cola
• Procter & Gamble Company
Objective 4: 5

Channel Strategy & the Marketing Mix

The essence of modern marketing

management:

To develop a marketing
mix of product, price,
promotion, & distribution
(place)
Objective 5: 5
Emphasis on Distribution Strategy

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
 5
Target Market Demand

Firms should stress distribution when it serves

customers’ needs in the target market.

Marketing channels are so closely linked to customer

need satisfaction because it is through distribution
that firms can provide the kinds and levels of service
that make for satisfied customers.
 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.
 5
Distribution Neglect

Competitors’ neglect of distribution strategies

provides excellent opportunities.

The channel manager must analyze target markets to

determine whether competitors have neglected
distribution and whether vulnerabilities exist that can
be exploited.
 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.
Objective 6: 5
Differential Advantage
& Channel Design

Differential advantage, also called sustainable

competitive advantage, occurs when a firm
attains a long-term, advantageous position
in the market relative to competitors.

• Caterpillar
 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 objectives
• Be consistent with the firm’s broader marketing objectives
& strategies
• Reflect the objectives & strategies of the organization as a
whole
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
Closeness of Channel Relationships

Factors to consider

• Distribution intensity
• Targeted markets
• Products
• Company policies
• Middlemen
• Environment
• Behavioral dimensions
 Marketing Mix in 5

Channel Management

Product
strategy

Distribution Pricing
Marketing
strategy strategy
Mix

Promotion
strategy
Objective 9: 5
Motivation of Channel Members

Portfolio 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.
Objective 10: 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?