3. Marketing Channel Strategy is
Growing in Importance. Why?
Five Reasons
(1) Search for Sustainable Competitive Advantage
(2) Growing Power of Retailers in Marketing
(3) The Need to Reduce Distribution Costs
(4) The Increased Role and Power of Technology
(5) The New Stress on Growth
Channels
5. Sustainable Competitive Advantage:
•
A competitive advantage that cannot be quickly and easily copied by
competitors
•
A sustainable competitive advantage is becoming
more difficult to attain through:
Product Strategy- rapid technology transfer enables
Strategy
competitors to quickly produce similar products
Pricing Strategy- global economy allows competitors
Strategy
to find low cost production to match prices
Promotion Strategy- high cost, clutter, and short life
Strategy
promotional campaigns limit competitive
advantage
6. A sustainable competitive
advantage is becoming more
difficult to attain through:
Product Strategy- rapid technology transfer enables competitors to
Strategy
quickly produce similar products
Pricing Strategy- global economy allows competitors to find low cost
Strategy
production to match prices
Promotion Strategy- high cost, clutter, and short life promotional
Strategy
campaigns limit competitive advantage
7. Competitive Advantage Based on
Superior Marketing Channel Strategy.
Which is More Difficult for Competitors
to Copy Because:
•
•
•
•
Channel Strategy is Long Term
Requires a Channel Structure
Depends on Relationships and People
Requires Effective Interorganizational Management
9. Retailers....
Are Growing Larger
Enjoy Substantial Channel Power
Act as Buying Agents for Customers Rather than Selling Agents
for Suppliers
Often Operate on Low Price / Low Margin Model
Operate in Saturated Markets and Fight for
Market Share
11. Kinds of Retailers Where Largest Four Firms
Account for At Least 50% of Total Sales
44%
56%
Conventional
Department Stores
31%
69%
Misc. General
Merchandisers
21%
45%
79%
55%
Discount
Mass Merchandisers
Variety Stores
36%
64%
Athletic Footwear
42%
58%
Toy Stores
Four
Largest
Firms
All Other
Firms
12. Percentage Distribution of Retail Firms and Sales
by Size of Firms
83.5
Sales as a percentage of
the total
Firms as a percentage
of the total
62.8
15.6
7.0
1.8
$10,000,000
or more
13.1
14.6
1.6
$5,000,000 to $1,000,000 to
$9,999,999
$4,999,999
Less than
$1,000,000
17. Power or Dominant Retailers are
therefore the “Gatekeepers” into the
Consumer Marketplace
Thus, Effective Channel Strategy
for Dealing with
Power Retailers is Crucial
18. III. The Need to Reduce Distribution
Costs
Distribution
Costs
19. Distribution Costs Often Account for
a Significant Percentage of the Final
Price of Products
Sometimes Distribution Costs
are Higher than the Manufacturing
Cost or the Costs of Raw
Materials and Component Parts
21. “rightsizing” have usually been
mentioned in the context of corporate
organizations, they also apply to
Marketing Channels.
The latest term....
Disintermediation
23. Technology has the power to greatly
enhance the effectiveness and
efficiency of Marketing Channels and
is changing the entire structure of
distribution around the world.
27. In American Business Circles
“Growth” has Overtaken
“Restructuring” as the #1 Buzzword
Out
In
Reengineering
Growth
Restructuring
Expansion
Downsizing
New Markets
Flat Organizations
Market Share
Lean and Mean
Top Line Revenue
28. In a relatively slow growth economy,
how can an individual company selling
mature products in mature markets
grow?
29. ANSWER
Share of Mind = Share of Market
By getting channel members to focus on your
products to a greater extent than your
competitors, you gain market share and
growth
30. Summary
(1) Search For Competitive Advantage
(2) Growing Size and Power of
Retailers
(3) Need to Reduce Distribution Costs
(4) Power and Potential of Technology
(5) Stress on Growth Instead of
Downsizing
33. Channel Strategy
The broad principles by which a
firm expects to achieve its
distribution objectives for
satisfying its customers
34. Basic Strategic Questions
(1) What role should distribution play in the firm’s
strategies?
overall objectives and
(2) What role should distribution play in the marketing mix?
(3) How should the firm’s marketing channels be designed to achieve its
distribution objectives?
(4) What kinds of channel members should be selected to meet the firm’s
distribution objectives?
(5) How can the marketing channel be managed to implement the firm’s
channel design effectively and efficiently on a continuing basis?
35. The Relationship between customer
satisfaction and the company’s marketing
mix can be represented as:
Cs = f (P1, P2, P3, P4)
where:
Cs= degree of customer satisfaction
P1= product strategy
P2= pricing strategy
P3= promotional strategy
P4= place (channel strategy)
36. Distribution Channel Strategy should receive
especially heavy emphasis if one or more of the
following conditions prevails:
Distribution appears to be the most relevant variable for satisfying
customers
Parity exists among competitors in the other three marketing mix
variables
High degree of vulnerability exists because of competitors’ neglect
of distribution
Distribution channel strategy can foster synergies
37. Classic Marketing Channel Strategies
Still Relevant Today
Dual Distribution
Exclusive Dealing
Full-Line Forcing
Price Differentiation
Price Maintenance
Refusal to Deal
Resale Restrictions
Tying Agreements
38. The Most Basic Questions in the
Design of Marketing Channels
When Do Customers Buy?
Where Do Customers Buy?
How Do Customers Buy?
Who Buys?
Who makes the actual purchase?
Who uses the product?
Who takes part in the buying decision?
40. Is this just another “buzzword” for
logistics - getting the right product in
the right quantity, at the right time
and right place?
OR
Is there something more substantive
to this term?
41. ANSWER
There is something more than
semantics here:
Supply Chain Management takes a broader
perspective by viewing logistics as an
integral part of the marketing channel
relationship
42. Supply Chain Management Can
Therefore be Defined as:
A long-term “partnership” among marketing channel participants aimed at
reducing inefficiencies, costs, and redundancies in the logistical system in
order to provide high levels of customer service
43. Contrasts Between a Traditional Logistics System and Supply Chain Based System
Factor
Traditional
Supply Chain Mgmt. System
Inventory Management
Logistics System
Total Cost Approach
Independent Effort
Minimize Firm Costs
Short-Term
Limited to Needs of
Current Transaction
Transaction Based
Not Relevant
Joint Effort to Reduce
Channel Inventories
Channel-Wide Cost Efficiencies
Time Horizon
Information Sharing and
Monitoring
Joint Planning
Compatibility of Corporate
Philosophies
Channel Leadership
Sharing of Risks and
Rewards
Inventory Flow
Not Needed
Each Channel Member
on Their Own
“Warehouse” Mentality
Storage Safety Stocks
Long-Term
Continuous Effort to
Gather and Monitor
Ongoing
Important for Major Initiatives
Required for
Coordination and Focus
Risks and Rewards Shared
over Long-range
“Distribution Center”
Orientation-JIT, Quick
Response, Cross Docking
45. Definition:
Continuing and mutually supportive
relationship between the manufacturer and its
channel members in an effort to provide a
more highly motivated team, network, and
alliance of channel partners
46. Requirements for Partnerships or
Strategic Alliances in Marketing
Channels
(1) Recognition of interdependence of channel
members
(2) Close cooperation between channel members
(3) Careful specification of roles, rights, and
the relationship
responsibilities in
(4) Coordinated effort focused on common goals
(5) Good communications and trust between
members
channel
48. Relationship Marketing
The practice of building long-term relations with key parties - customers, suppliers,
distributors- in order to retain their long-term preference and business
Because of the importance of channels of distribution, building good relationships in the
marketing channel is key to successful relationship marketing
49. Building Relationships with Channel
Members
Find Out the Needs and Problems of Channel Members
-informal information system (“grapevine”)
-research studies of channel members
-research studies by outside parties
-marketing channel audit
-distributor advisory councils
50. Offer Support to Channel Members that is Consistent with Their
Needs and Helps Solve their Problems
-cooperative arrangements
-partnerships and strategic alliances
-distribution programming
Provide Leadership to Motivate Channel Members
-use power effectively
-recognize causes of conflict
-resolve conflicts
51. Bases of Power in the Marketing
Channel
Reward Power
Coercive Power
Legitimate Power
Referent Power
Expert Power
Effective Channel Management Depends
on How Well These Power Bases are
Combined and Used
52. Causes of Marketing Channel
Conflict
Role Incongruities
Resource Scarcities
Perceptual Divergencies
Expectational Differences
Decision Domain Disagreements
Goal Incompatabilities
Communication Difficulties
53. Ten Trends in Marketing Channels as We
Move into the Next Millennium
1. Growing Emphasis on Marketing Channel
Strategy
2. More and More Stress on Technology
3. Focus on Efficiency and Reducing Distribution
4. Shortening and Flattening of Distribution
(Disintermediation)
Costs
Channels
5. Development of New Types of Intermediaries in Channels
(Reintermediation)
54. Trends Continued...
6. Continued Growth in Partnerships and
Marketing)
Alliances (Relationship
7. Increasing Power for Retailers and
Wholesalers (Gatekeepers)
8. Mergers and Acquisitions to Gain
Distribution Clout
9. Flexible and Focused Distribution to Match Micro, Niche, and
Database Marketing
10. Attention to the Behavioral Dimensions of
Augment Technology
Distribution to
55. Lets look at where a
product fits into all of this
