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- 1. Chapter 1 Understanding ChannelStrategy Marketing Channel Strategy Marketing Channel Strategy © 2015 by Pearson Education 1-1
- 2. Agenda Marketing Channel Strategy Importance of Marketing Channel Strategies What is a Marketing Channel Strategy Who Participates in a Marketing Channel Why Do Marketing Channels Exist Key Functions Performed By Marketing Channels Channel Strategy Framework © 2015 by Pearson Education 1-2
- 3. Importance of MarketingChannel Strategies Represents a large portion of the world’s business A gatekeeper between the manufacturer and the end-user Channel experience strongly affects perception of manufacturer’s brand image An under utilized source of sustainable competitive advantage A strong channel system is a strong source of sustainable competitive advantage Marketing Channel Strategy © 2015 by Pearson Education 1-3
- 4. Agenda Importance ofMarketing Channel Strategies What is a Marketing Channel Strategy Who Participates in a Marketing Channel Why Do Marketing Channels Exist Key Functions Performed By Marketing Channels Channel Strategy Framework Marketing Channel Strategy © 2015 by Pearson Education 1-4
- 5. What is aMarketing Channel? Marketing Channel Strategy It’s one of four key marketing mix elements(4Ps) Product, Price, Promotion, and Place (Channel) Marketing Channel: a set of interdependent organizations involved in the process of making a product or service available for use or consumption Not just one firm, many entities are involved Each channel member depends on others Running a marketing channel is a process © 2015 by Pearson Education 1-5
- 6. Marketing Channel Process MarketingChannel Strategy Distribution process frequently takes time to accomplish Even when a sale is finally made, the relationship with the end-user is usually not over Example: A hospital’s demands for post-sale service after purchasing a piece of medical equipment Process makes a product or service available for use or consumption Purpose is to satisfy the end-users in the market, can be either consumers or final business buyers © 2015 by Pearson Education 1-6
- 7. Marketing Channel Strategy MarketingChannel Strategy All channel members should focus attention on end- users Managers invest their limited resources to make marketing channels a strategic asset Increases customers satisfaction Reduces distribution costs Minimizes competitor rivalry Results in superior financial performance for their firm Market Channel Strategy: the set of activities focused on designing and managing a marketing channel to enhance a firm’s sustainable competitive advantage and financial performance © 2015 by Pearson Education 1-7
- 8. Agenda Marketing Channel Strategy Importance of Marketing Channel Strategies What is a Marketing Channel Strategy Who Participates in a Marketing Channel Why Do Marketing Channels Exist Key Functions Performed By Marketing Channels Channel Strategy Framework © 2015 by Pearson Education 1-8
- 9. Marketing Channel Strategy Manufacturers A prime mover in establishing and maintaining channel links Can be the “channel captain” Intermediaries Wholesale Retail Specialized End-users Business customers Consumers Three Key Entities © 2015 by Pearson Education 1-9
- 10. Manufacturer: Upstream Channel Members MarketingChannel Strategy Producer or originator of the product or service being sold Branded manufacturing: brand their products and thus are known by name to end-users Private-label manufacturing: do not invest in building a brand name The lack of a physical product to move through the channel does not mean that a services company has no channel design or management issues © 2015 by Pearson Education 1-10
- 11. Intermediaries: Middle Channel Members MarketingChannel Strategy Refers to any channel member other than the manufacturer or the end-user Three basic types: Wholesalers Retailers Specialized © 2015 by Pearson Education 1-11
- 12. Wholesalers Marketing Channel Strategy Include merchant wholesalers or distributors, manufacturers’ representatives, agents, and brokers Sell to other channel intermediaries, such as retailers, or to business end-users, but not to individual consumer end-users Takes title to and physical possession of inventory Earns the difference between buying at a wholesale price and selling at a marked-up price to their downstream customers Major function: promotion and negotiation © 2015 by Pearson Education 1-12
- 13. Retail Intermediaries Marketing ChannelStrategy Include department stores, mass merchandisers, hypermarkets Sell directly to individual consumers Role of today’s retailers goes much further May contract for private label goods, vertically integrating upstream in the supply chain May sell to buyers other than consumer end-users Office Depot: have significant sales to businesses, although their storefronts identify them as retailers © 2015 by Pearson Education 1-13
- 14. Specialized Intermediaries Marketing ChannelStrategy Financing function Insurance companies Finance companies Credit card companies Promotion function Advertising agencies Physical possession function Logistics and shipping firms Ordering or payment functions Information technology firms © 2015 by Pearson Education 1-14
- 15. End-Users (Downstream Channel Members) MarketingChannel Strategy End-users (either business customers or individual consumers) are often channel members as well Reason: they can and frequently do perform channel functions, just as other channel members do Ex. Consumers who shop at Costco Stock up on paper towels → physical possession Pay for the paper towels before they use them, thus injecting cash into the channel → financing function © 2015 by Pearson Education 1-15
- 16. Agenda Marketing Channel Strategy Importance of Marketing Channel Strategies What is a Marketing Channel Strategy Who Participates in a Marketing Channel Why Do Marketing Channels Exist Key Functions Performed By Marketing Channels Channel Strategy Framework © 2015 by Pearson Education 1-16
- 17. Benefits for DownstreamChannel Members Marketing Channel Strategy Sorting out: breaking down a heterogeneous supply into separate stocks that are relatively homogeneous Accumulation: brings similar stocks from a number of sources together into a larger homogeneous supply Allocation: break a homogeneous supply down into smaller and smaller lots Assorting: build up of an assortment of products for resale in association with each other Intermediaries → create possession, place , and time utilities for the end-users © 2015 by Pearson Education 1-17
- 18. Benefits for UpstreamChannel Members Marketing Channel Strategy Routinization of transactions Every transaction is subject to bargaining, with an accompanying loss of efficiency Costs of distribution can be minimized if the transactions are routinized Routinization leads to standardization of goods and services Reduction in number of contacts Without intermediaries, every producer would interact with every potential buyer Intermediaries serve to reduce the complexity of this exchange system and thus facilitate transactions © 2015 by Pearson Education 1-18
- 19. Example of aDecentralized System of Exchange Marketing Channel Strategy © 2015 by Pearson Education 1-19
- 20. Example of aCentralized System of Exchange Marketing Channel Strategy © 2015 by Pearson Education 1-20
- 21. Agenda Marketing Channel Strategy Importance of Marketing Channel Strategies What is a Marketing Channel Strategy Who Participates in a Marketing Channel Why Do Marketing Channels Exist Key Functions Performed By Marketing Channels Channel Strategy Framework © 2015 by Pearson Education 1-21
- 22. Nine Universal ChannelFunctions Marketing Channel Strategy © 2015 by Pearson Education 1-22
- 23. Channel Function Directions MarketingChannel Strategy Some functions move forward through the channel Physical possession Ownership Promotion Some functions move “backwards” through the channel (up from the end-users) Ordering Payment Other functions can move in either direction Negotiation Financing Risking Information sharing © 2015 by Pearson Education 1-23
- 24. Agenda Marketing Channel Strategy Importance of Marketing Channel Strategies What is a Marketing Channel Strategy Who Participates in a Marketing Channel Why Do Marketing Channels Exist Key Functions Performed By Marketing Channels Channel Strategy Framework © 2015 by Pearson Education 1-24
- 25. Framework Marketing Channel Strategy Analysis Phase Decision Phase Benchmarking Implementing •End-user analysis • Channel analysis • Make-or-buy analysis • Focuses on making three key design decisions • Mix of channel types • Power • Conflict • Relationships • Policies and legalities • logistics • Compare and contrast well-developed channel systems • Compare and contrast to newly emerging channel systems © 2015 by Pearson Education 1-25
- 26. Takeaways Marketing Channel Strategy Concept of a marketing channel Purpose for using marketing channels to reach the marketplace Functions and activities that go on in marketing channels Membership in marketing channels Framework Design © 2015 by Pearson Education 1-26
Editor's Notes
- #14 Office Depot: about 1/3 of its sales are to business, not consumer end-users Sells to businesses using a mixture of direct salespeople, catalogs, phone centers, and internet sites. Chapter 6 discusses retailing in depth