Marketing Strategy: Key Concepts 8

Channel Selection Issues

• information flow

• promotion

• negotiation

• ordering

• financing

• risk taking

• physical possession

• payment and title

• Improve exchange efficiency (5 mf. and 5 customers = 25 transactions with no intermediary; 10 transactions with one intermediary)

• specialize in functions listed above

• Time

• Place

• Possession

• Form

• direct selling versus using 1 or 2 or more intermediaries
  Manufacturer -> Consumer
  Manufacturer -> Retailer -> Consumer
  Manufacturer -> Wholesaler -> Retailer -> Consumer
  Manufacturer -> Distributor -> Wholsesaler -> Retailer -> Consumer
  Examples

• analyze customers' desired service outputs (size, waiting time, spatial convenience, support etc.)

• channel objectives and contraints (based on product characteristics, intermediaries, environment and competitors channels)

• buyer behavior (consumer and channel)

• buyer demongraphics

• identify channel alternatives (exclusive (BMW) vs. selective (clothes lines) vs. intensive (orange juice))

• competitors' channels

• channel terms and responsibilities

• channel incentives (trade promotions etc.)

• evaluate channel by economic, adaptive and control criteria

• Greater fixed cost

• Greater effectiveness / control over contacts

• Greater control over targeting

• Greater variable cost

• Less control / responsibility

• Greater coverage

• Knowledge of customer within channel

• What role do partner play?

• What margin do we give?

• Can / do they carry competing / complementary product, private labels

• How do we incentivize

• Do they pass on price cuts?

• How do we control for cannibalization w/ other channels (direct)?

Channel decisions impact on other elements of the mix

Life cycle issues change channel strategy.
Early stage: Specialized channels
Growth stage: Alternative channels
Maturity stage: Mass channels
Early stage: high control, service and delivered price
Later stage: increasing conflict, range of providers, complexity of channel

Channel member relationships

Impact of trade promotions: distortion effects?
Zero sum Relationship w/ channel members?
Need to build symbiotic relationships with channel members.

Channel modification issues

Trends include vertical, horizontal and multi-channel conflict.

Internet has had significant impact re: building new channels and changing industries through disintermediation and information flow issues.

Legal and ethical issues:

• Exclusive dealing

• Exclusive territories

• Tying agreements

• Dealers' rights

Retailing

• Store retailing (specialty, department stores, supermarkets, convenience, superstores, discount stores, warehouse stores, hypermarkets and catalog showrooms)

• Non-store retailing (direct selling, direct mail billing, catalogs, web, vending machines)

• Retail organizations (corporate chains, voluntary chains / retailer cooperatives, consumer cooperatives, franchises, independents)

• target audiences

• product: assortment and service

• product: positioning (Kmart vs. Wal Mart and Target)

• product: services and store atmospherics

• product: symbiotic relationships

• pricing

• promotion

• place

• new forms

• shortening life cycles

• non store growth

• intertype competition, polarity, category killers

• one-stop shopping

• global expansion

• stores as meeting places

Wholesaling

Functions include:

• selling and promotion

• buying and assortment-building

• bulk-breaking

• warehousing

• transporting

• financing

• risk bearing

• supplying market information

• merchant wholesalers (take possession, full service vs. limited service)

• agents and brokers (do not take possession, paid commission)

• manufacturers' and retailers' branches

• miscellaneous wholesalers (eg agricultural, bulk chemicals)

Logistics decisions:

• order processing (shorten order to remittance cycle)

• warehousing

• inventory

• transportation (rail, air, trucks, waterways, and pipelines)

Interesting sites:

• Carmax.com for used cars
• Amazon.com for used books
• Napster and Gnutella for music

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