designing the marketing channel week 6 instructor: jungwan lee
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Designing the marketing channel
Week 6
Instructor: Jungwan Lee
What is channel design?
…refers to those decisions involving the development of new marketing channels where none had existed before, or to the modification of existing channels.
..is a key factor to gain a differential advantage
Paradigm of the channel design decision
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 5. Evaluating the variables affecting channel
structure 6. Choosing the best channel structure 7. Selecting channel members
Setting and coordinating distribution objectives
Firm’s overall objectives and strategies
General marketing objectives and strategies
Marketing mix’s objectives and strategies (product, price, promotion, distribution)
Developing possible alternative channel structures
1. Number of levels: two ~ five levels 2. Intensity at the various levels
Intensive:consumer convenience goods Selective: consumer shopping goods Exclusive: specialty goods
3. Types of intermediaries Wholesale trade, Retail trade
Number of possible channel alternatives 3 x 3 x 5 = 45 possible structures
Six basic variables affecting channel structure
Market variablesProduct variablesCompany variablesIntermediary variablesEnvironmental variablesBehavioral variables
Six variables (cont.)
Market variables market geography, market size, market density, market
behavior Product variables
bulk and weight, perishability, unit value,degree of standardization, technical versus nontechnical, newness
Company variables size, financial capacity, managerial expertise, objectives
and strategies
Six variables (cont.)
Intermediary variables Availability, costs, services
Environmental variables Economic, sociocultural, competitive, technolo
gical, legal environmentBehavioral variables
Differential goals, language differences, tendency of channel member
Choosing the best channel structure
Aspinwall’s approach: characteristic of goods theory Financial approach Transaction cost analysis approach Management science approach:
simulation model, mathematical model, bayesian statistics, comprehensive operations research model…etc.
Judgmental-heuristic approaches Straight qualitative judgment approach, weighted factor score
approach, distribution costing approach
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