Designing the Marketing Channel What is Channel Design

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Designing the Marketing Channel

Designing the Marketing Channel

What is Channel Design There are variations in usage of the term ‘design’ of

What is Channel Design There are variations in usage of the term ‘design’ of marketing channel: • a noun to describe channel structure • The formation of a new channel from scratch/ modifications to existing channels • ‘Selection’

What is Channel Design • It refers to those decisions involving the development of

What is Channel Design • It refers to those decisions involving the development of new marketing channels where none had existed before, or to modification of existing channels.

Channel Design Key distinguished points associated with channel design: • It is presented as

Channel Design Key distinguished points associated with channel design: • It is presented as a decision faced by the marketer (same as other marketing mix). • It is used in the broader sense to include either setting up channels from the scratch or modifying existing channels (reengineering). • The management has taken a proactive role in the development of the channel. • The term ‘selection’ refers to only 1 phase of channel design (selection of the actual channel members). • It is a strategic tool for gaining a differential advantage.

Who Engages in Channel Design Producers/ Manufacturers Wholesalers Retailers Market

Who Engages in Channel Design Producers/ Manufacturers Wholesalers Retailers Market

A Paradigm of the Channel Design Decision The channel design decision can be broken

A Paradigm of the Channel Design Decision The channel design decision can be broken down into 7 phases or steps: 1. Recognizing the need for a channel design decision 2. Setting and coordinating distribution objectives 3. Specifying the distribution tasks 4. Developing possible alternative channel structures

A Paradigm of the Channel Design Decision The channel design decision can be broken

A Paradigm of the Channel Design Decision The channel design decision can be broken down into 7 phases or steps: 5. Evaluating the variables affecting channel structures 6. Choosing the best channel structure 7. Selecting the channel members

Phase 1: Recognizing the Need for a Channel Design Decision Many situations can indicate

Phase 1: Recognizing the Need for a Channel Design Decision Many situations can indicate the need for a channel design decision. Among them are the following: 1. Developing a new product/product line 2. Aiming an existing product at a new target market (i. e. additional channel from b 2 b to b 2 c) 3. Making a major change in some other component of the marketing mix (i. e. new pricing policy emphasizing lower prices) 4. Establishing a new firm 5. Adapting to changing intermediary policies (i. e. if intermediaries begin to emphasize their own private brands, adding new distributors for the manufacturer may be needed. )

Phase 1: Recognizing the Need for a Channel Design Decision Many situations can indicate

Phase 1: Recognizing the Need for a Channel Design Decision Many situations can indicate the need for a channel design decision. Among them are the following: 6. Dealing with changes in availability of particular kinds of intermediaries (i. e. reducing number of prestigious department stores in the U. S. affected French manufacturers of luxury goods) 7. Opening up new geographic marketing areas (territories) 8. Facing the occurrence of major environmental changes 9. Meeting the challenge of conflict or other behavioral problems (i. e. A loss of power by a manufacturer to his/her distributors or communication difficulties) 10. Reviewing and evaluating undertaking by a firm may point to the need for changes in existing channels/ need for new channels

Phase 2: Setting and Coordinating Distributing Objectives In order to set distribution objectives that

Phase 2: Setting and Coordinating Distributing Objectives In order to set distribution objectives that are well coordinated with other marketing and firm objectives and strategies, the channel manager needs to perform 3 tasks: 1. Become familiar with the objectives and strategies in the other marketing mix areas 2. Set distribution objectives and state them explicitly 3. Check to see if the distribution objectives set are congruent with marketing and other general objectives and strategies of the firm

Phase 2: Setting and Coordinating Distributing Objectives 1. Becoming familiar with the objectives and

Phase 2: Setting and Coordinating Distributing Objectives 1. Becoming familiar with the objectives and strategies in the other marketing mix areas Short shelf life Uses almost 13, 000 drivers/salespeople to deliver products directly to grocery stores “Freshness” Longer shelf life

Phase 2: Setting and Coordinating Distributing Objectives 2. Set distribution objectives and state them

Phase 2: Setting and Coordinating Distributing Objectives 2. Set distribution objectives and state them explicitly Example: IBM originally was to “have retailers displaying PCs within driving distance of anyone in the U. S. who wanted to buy one”. Later, when IBM decided to use mail order channels, its distributor objective was broadened to “make its PCs directly available wherever its customers are”

Phase 2: Setting and Coordinating Distributing Objectives 3. Check to see if the distribution

Phase 2: Setting and Coordinating Distributing Objectives 3. Check to see if the distribution objectives set are congruent with marketing and other general objectives and strategies of the firm Firm’s overall objectives and strategies *Interrelationships and Hierarchy of Objectives and Policies in the Firm General marketing objectives and strategies Product objectives and strategies Pricing objectives and strategies Promotion objectives and strategies Distribution objectives and strategies

Phase 3: Specifying the Distribution Tasks (Functions) • The kinds of tasks required to

Phase 3: Specifying the Distribution Tasks (Functions) • The kinds of tasks required to meet specific distribution objectives must be precisely stated. Example: A manufacturer of high-quality tennis racquets aimed at serious amateur tennis players would need to specify distribution tasks as the following:

Phase 3: Specifying the Distribution Tasks (Functions) Example: 1. Gather info. on target market

Phase 3: Specifying the Distribution Tasks (Functions) Example: 1. Gather info. on target market shopping patterns 2. Promote product availability in the target market 3. Maintain inventory storage to assure timely availability 4. Compile info. about product features 5. Provide for hands-on tryout of product 6. Sell against competitive products

Phase 3: Specifying the Distribution Tasks (Functions) Example: 7. Process and fill specific customer

Phase 3: Specifying the Distribution Tasks (Functions) Example: 7. Process and fill specific customer orders 8. Transport the product 9. Arrange for credit provisions 10. Provide product warranty service 11. Provide repair and restringing service 12. Establish product return procedure

TO BE CONTINUED WITH PETER!

TO BE CONTINUED WITH PETER!

Midterm Exam (25%) • Ch 1 Marketing Channel Concepts • Ch 2 Channel Participants

Midterm Exam (25%) • Ch 1 Marketing Channel Concepts • Ch 2 Channel Participants • Ch 4 Behavioral Processes in Marketing Channels • Ch 17 Marketing Channels for Services • Ch 18 International Channel Perspectives • Ch 6 Designing the Marketing Channel (*only up to phase 3)

Midterm Exam • Part A: T or F (with the correction) 10% • Part

Midterm Exam • Part A: T or F (with the correction) 10% • Part B: Short answer questions 15% -----§ Implications of service characteristics for channel management § Environment of international channel management § Conflict in marketing channel