Channel Strategy

MARK 4210 Professor Eugene R. Raitt Spring 2021

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 Course Roadmap
Fundamentals Elements of Marketing Strategy Application

Situation Analysis
(Customer, Competitor, Company)

Market Selection
- Quantitative Analysis Simulation Game
(Segmentation, Targeting, Positioning)
- Consumer Behavior PharmaSim

Marketing Mix Formulation

(Product,, Distribution, Pricing, Promotion)

MARK 4210 Professor Eugene R. Raitt Spring 2021

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 Marketing Channels: Refresher
What are channels?
A set of interdependent organizations involved in the process
of making a product or service available to consumers

Why do channels exist?

Product distribution
Information distribution
Carrying of inventory
Demand generation
After sales service

Source:
MARK Strategic Marketing
4210 Asia Edition,
Professor Jain & Haley,
Eugene Cengage
R. Raitt Learning,2021
Spring 2009
4
 Channel Design
 Analyze consumer needs
 Consider channel design
 Evaluate channel alternatives

Source:
MARK Strategic Marketing
4210 Asia Edition,
Professor Jain & Haley,
Eugene Cengage
R. Raitt Learning,2021
Spring 2009
5
 Analyze Consumer Needs

Soft drink Luxury bag Cell phone

Volume High Low Medium
Distance willing to
Low High Medium
travel
Willingness to wait Low High Medium
Assortment High Low High
Needs personal
Low High Medium
service
Number of outlets Many Few Some
Scope of
Intensive Exclusive Selective
distribution

MARK 4210 Professor Eugene R. Raitt Spring 2021

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 Consider Channel Design
Channel width/Scope of distribution
Intensive distribution: as many outlets as possible
Little manufacturer control and selling support
Customers’ cost of obtaining goods low
Usually for convenience goods
Exclusive distribution: single or very limited outlets per area
High manufacturer control and selling support
Customers’ cost of obtaining goods high
Usually for high price, low volume goods
Selective distribution: multiple but limited outlets per area
Tradeoff between manufacturer control & selling support and customers’
costs to obtain goods
Usually for shopping goods
MARK 4210 Professor Eugene R. Raitt Spring 2021
Source: Strategic Marketing Asia Edition, Jain & Haley, Cengage Learning, 2009 7
 Consider Channel Design
 Channel structure

Manufacturer

Wholesaler Agent/Broker

Retailer Retailer Retailer

Customer Customer Customer Customer

Direct Indirect
channel channels

Source:
MARK Strategic Marketing
4210 Asia Edition,
Professor Jain & Haley,
Eugene Cengage
R. Raitt Learning,2021
Spring 2009
8
 Direct vs Indirect Distribution Comparison
Direct Distribution Indirect Distribution
Large upfront cost and takes small upfront cost and rapid
Upfront Investment
time implementation
More efficiency allows
Channel Efficiency Less efficient
“fresher” products
Cost Efficiency Greater cost efficiency Intermediaries add extra margins
Control over
Greater control Less control
channel
Closer contact with end-
Contact with Decreased ability to directly
end-users
users (and thus better
communicate with customers
knowledge)
Difficult to achieve same Broad coverage that enables
level of breadth that could the company to reach
Coverage
be achieved with all/majority of its target
collaborating distributors customers
MARK 4210 Professor Eugene R. Raitt Spring 2021
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 Multi-Channel Structure
 Multi-channel structure refers to companies employing two or
more different channels for distribution
 Types of multi-channel structures
 Complementary
- When each channel serves a different non-competing market segment
- Ideal but difficult to achieve
 Competitive
- When the same brand is sold through different but competing channels
- The goal is to increase overall sales through extensive coverage. May
cause potential channel conflict

Source:
MARK Strategic Marketing
4210 Asia Edition,
Professor Jain & Haley,
Eugene Cengage
R. Raitt Learning,2021
Spring 2009
10
MARK 4210 Professor Eugene R. Raitt Spring 2021
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 Company-Owned Stores

Online Electronics Stores

MARK 4210 Professor Eugene R. Raitt Spring 2021

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 Newsstands for impulse, casual readers Subscription for planned, dedicated readers

MARK 4210 Professor Eugene R. Raitt Spring 2021

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 Evaluate Channel Alternatives
Criteria Key Considerations
Financial and time costs to establish the channel. Estimate the
Cost structure
relationship between sales & costs.
Coverage How much coverage does the channel structure provide.
(market penetration) Penetration rates predict future sales response
Customer needs Need for customer service (prior to and after purchase), need for
and behavior convenience and extensive availability , etc.
Communication with Channel willingness, capabilities & interest in providing market
the market information (e.g., competitive activities, customer attitudes)
Managing key product parameters (e.g., pricing) to meet
Control
marketing and business objectives
Whether the distribution network is compatible with company’s
Compatibility
strategic goal/positioning

MARK 4210 Professor Eugene R. Raitt Spring 2021

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 Channel Strategy:
Identify Strategic Alliance
 Strategic channel alliance
 An agreement whereby the products of one organization are distributed
through the marketing channels of another
 Important to identify an alliance that optimizes the distribution needs

MARK 4210 Professor Eugene R. Raitt Spring 2021

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 Channel Strategy:
Identify Strategic Alliance
 Strategic Channel Alliance
 An agreement whereby the products of one organization are distributed
through the marketing channels of another
 Important to identify an alliance that optimizes the distribution needs
 Sometimes it makes sense to leverage your competitor’s distribution

Place 10,000
drop boxes at
post offices

Use FedEx planes to

ship express priority
and first class
MARK 4210 Professor Eugene R. Raitt Spring 2021
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 Channel Strategy: Vertical Integration
 Traditional channel arrangements consisted of loosely
aligned entities serving their own needs
 Vertical integration is designed to achieve operating
economies and maximum market impact, from production to
end users
 Channel control can lead to improved profits as
inefficiencies are corrected. It also allows rapid changes to
operations to better suit the rapidly changing environment.

MARK 4210 Professor Eugene R. Raitt Spring 2021

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 The Rise of mCommerce
and mobile Payment
 mCommerce is the delivery of electronic commerce
capabilities directly into the consumer’s hand via wireless
technology

Source:
MARK Duffey,4210
The Global Mobile Commerce
Professor Eugene Forum, 1997; Coda
R. Raitt Research
Spring Consultancy; ABI Research
2021
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MARK 4210 Professor Eugene R. Raitt Spring 2021
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 The Rise of mPayment

MARK 4210 Professor Eugene R. Raitt Spring 2021

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 Key Takeaways
Channel design involves analyzing consumer needs and
design channels that meet their needs as well as yours
Also important to understand the needs of your channel
members – have implications on how to motivate them
Identifying the right strategic channel alliance is
instrumental to business success
Channel innovations can bring huge business success –
but things change rapidly!
MARK 4210 Professor Eugene R. Raitt Spring 2021
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 Looking Ahead
 Optical Distortion case study due on Friday.

MARK 4210 Professor Eugene R. Raitt Spring 2021

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