Marketing Channels Part 2 Developing the Marketing Channel

Marketing Channels Part 2: Developing the Marketing Channel A Management View 8 e Rosenbloom 5 Part 2: CHAPTER Developing the Marketing Channels 5 Strategy in Marketing Channels CHAPTER © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Learning Objectives ① Marketing Channel Strategy ② Distribution decisions ③ Channel strategy as overall corporate objectives ④ Channel strategy and the marketing mix ⑤ Emphasis on distribution strategy ⑥ Differential advantage and channel design ⑦ Selection of channel members ⑧ Channel strategy and managing the channel ⑨ Motivation of channel members ⑩ Evaluation of channel member performance 2 © 2013 Cengage Learning. All bebe scanned, copied or duplicated, or posted to a publicly accessible website, in whole orininwhole part. or in part. © 2013 All Rights Reserved. Maynot scanned, copied or duplicated, or posted to a publicly accessible website,

Objective 1 Marketing Channel Strategy: the broad principles by which the firm expects to achieve its distribution objectives for its target market(s) – says by Kotler (pg. 151) © 2013 Cengage Learning. All bebe scanned, copied or duplicated, or posted to a publicly accessible website, in whole orininwhole part. or in part. © 2013 All Rights Reserved. Maynot scanned, copied or duplicated, or posted to a publicly accessible website,

6 Distribution Decisions for Firms to Address Objective 2 1. 2. 3. 4. 5. 6. The role of distribution in the firm’s overall objectives & strategies The role distribution should play in the marketing mix The design of the firm’s marketing channels The selection of channel members The management of the marketing channel in order to implement the firm’s channel design effectively & efficiently on a continuing basis The evaluation of channel member performance © 2013 Cengage Learning. All bebe scanned, copied or duplicated, or posted to a publicly accessible website, in whole orininwhole part. or in part. © 2013 All Rights Reserved. Maynot scanned, copied or duplicated, or posted to a publicly accessible website,

Objective 3 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 © 2013 Cengage Learning. All bebe scanned, copied or duplicated, or posted to a publicly accessible website, in whole orininwhole part. or in part. © 2013 All Rights Reserved. Maynot scanned, copied or duplicated, or posted to a publicly accessible website,

Companies that use Distribution Strategically • Dell Computer • BMW • Amazon. com • Apple Computer • Edward Jones • Rayovac Corporation • Proctor & Gamble Company © 2013 Cengage Learning. All bebe scanned, copied or duplicated, or posted to a publicly accessible website, in whole orininwhole part. or in part. © 2013 All Rights Reserved. Maynot scanned, copied or duplicated, or posted to a publicly accessible website,

Determining the Priority Given to Distribution does increasingly warrant the attention of top management, because competition has made the issue of distribution too important for top management to ignore. Changes in distributive channels may not matter much to GNP and macroeconomics. But they should be a major concern to every business and industry … Everyone knows how fast technology is changing. Everyone knows about markets becoming global and about shifts in the work force and in demographics. But few people pay attention to changing distribution channels. Peter Drucker © 2013 Cengage Learning. All bebe scanned, copied or duplicated, or posted to a publicly accessible website, in whole orininwhole part. or in part. © 2013 All Rights Reserved. Maynot scanned, copied or duplicated, or posted to a publicly accessible website,

Objective 4 Channel Strategy & the Marketing Mix The essence of modern marketing management – to develop an appropriate and complementary marketing mix 1. Product Strategy e. g. , quality and benefits desired) 2. Pricing Strategy (e. g. , level of pricing and/or price points) 3. Promotional Strategy (e. g. , the “right” combination of “push” & “pull” promotion to apply) 4. Distribution Strategy (e. g. , intensity of distribution) © 2013 Cengage Learning. All bebe scanned, copied or duplicated, or posted to a publicly accessible website, in whole orininwhole part. or in part. © 2013 All Rights Reserved. Maynot scanned, copied or duplicated, or posted to a publicly accessible website,

Objective 5 Emphasis on Distribution Strategy IF: or or or • Distribution is the most relevant variable for • • • satisfying target market demands. Parity exists among competitors in the other three variables of the marketing mix. A high degree of vulnerability exists because of competitors’ neglect of distribution. Distribution can enhance the firm by creating synergy from marketing channels. THEN: The firm should choose distribution strategy for strategic emphasis © 2013 Cengage Learning. All bebe scanned, copied or duplicated, or posted to a publicly accessible website, in whole orininwhole part. or in part. © 2013 All Rights Reserved. Maynot scanned, copied or duplicated, or posted to a publicly accessible website,

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. © 2013 Cengage Learning. All bebe scanned, copied or duplicated, or posted to a publicly accessible website, in whole orininwhole part. or in part. © 2013 All Rights Reserved. Maynot scanned, copied or duplicated, or posted to a publicly accessible website,

Competitive Parity Distribution advantages are not easily copied by competitors. Distribution advantages are based on a combination of superior strategy, organization, and human capabilities. © 2013 Cengage Learning. All bebe scanned, copied or duplicated, or posted to a publicly accessible website, in whole orininwhole part. or in part. © 2013 All Rights Reserved. Maynot scanned, copied or duplicated, or posted to a publicly accessible website,

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. © 2013 Cengage Learning. All bebe scanned, copied or duplicated, or posted to a publicly accessible website, in whole orininwhole part. or in part. © 2013 All Rights Reserved. Maynot scanned, copied or duplicated, or posted to a publicly accessible website,

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. © 2013 Cengage Learning. All bebe scanned, copied or duplicated, or posted to a publicly accessible website, in whole orininwhole part. or in part. © 2013 All Rights Reserved. Maynot scanned, copied or duplicated, or posted to a publicly accessible website,

Objective 6 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. © 2013 Cengage Learning. All bebe scanned, copied or duplicated, or posted to a publicly accessible website, in whole orininwhole part. or in part. © 2013 All Rights Reserved. Maynot scanned, copied or duplicated, or posted to a publicly accessible website,

Positioning the Channel … the reputation a manufacturer acquires among distributors [channel members] for furnishing products, services, financial returns, programs, and systems that are in some way superior to those offered by competing manufacturers. Narus and Anderson © 2013 Cengage Learning. All bebe scanned, copied or duplicated, or posted to a publicly accessible website, in whole orininwhole part. or in part. © 2013 All Rights Reserved. Maynot scanned, copied or duplicated, or posted to a publicly accessible website,

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 © 2013 Cengage Learning. All bebe scanned, copied or duplicated, or posted to a publicly accessible website, in whole orininwhole part. or in part. © 2013 All Rights Reserved. Maynot scanned, copied or duplicated, or posted to a publicly accessible website,

Objective Selection of Channel Members 7 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 © 2013 Cengage Learning. All bebe scanned, copied or duplicated, or posted to a publicly accessible website, in whole orininwhole part. or in part. © 2013 All Rights Reserved. Maynot scanned, copied or duplicated, or posted to a publicly accessible website,

Objective 8 Channel Strategy & Managing the Channel How close a relationship should be developed with the channel members? 3 Strategic Questions How should the marketing mix be used to enhance channel member cooperation? How should the channel members be motivated to cooperate in achieving the manufacturer’s distribution objectives? © 2013 Cengage Learning. All bebe scanned, copied or duplicated, or posted to a publicly accessible website, in whole orininwhole part. or in part. © 2013 All Rights Reserved. Maynot scanned, copied or duplicated, or posted to a publicly accessible website,

Closeness of Channel Relationships Factors to consider: – Distribution intensity – Targeted markets – Products – Company policies – Middlemen – Environment – Behavioral dimensions © 2013 Cengage Learning. All bebe scanned, copied or duplicated, or posted to a publicly accessible website, in whole orininwhole part. or in part. © 2013 All Rights Reserved. Maynot scanned, copied or duplicated, or posted to a publicly accessible website,

Interrelationships among 4 Strategic Variables of the Marketing Mix Product strategy Distribution strategy Marketing Mix Pricing strategy Promotion strategy © 2013 Cengage Learning. All bebe scanned, copied or duplicated, or posted to a publicly accessible website, in whole orininwhole part. or in part. © 2013 All Rights Reserved. Maynot scanned, copied or duplicated, or posted to a publicly accessible website,

Objective 9 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. © 2013 Cengage Learning. All bebe scanned, copied or duplicated, or posted to a publicly accessible website, in whole orininwhole part. or in part. © 2013 All Rights Reserved. Maynot scanned, copied or duplicated, or posted to a publicly accessible website,

Objective 10 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? © 2013 Cengage Learning. All bebe scanned, copied or duplicated, or posted to a publicly accessible website, in whole orininwhole part. or in part. © 2013 All Rights Reserved. Maynot scanned, copied or duplicated, or posted to a publicly accessible website,