Chapter 7

Marketing Channel Strategy

and Management

2

The Channel Selection Decision

Fundamental Questions

Who are potential customers ?

Where do they buy ?

When do they buy ?

How do they buy ?

What do they buy ?

3

Marketing Channel Alternatives

Producer

Ultimate Buyers

Brokers or Agents

Distributors or Wholesalers

Retailers or Dealers

4

Direct versus Indirect Distribution

Direct - using firm’s own distribution, usually used when:

intermediaries are not available or are not capable of satisfying target market needs

target markets are easily identifiable

personal selling is an important communication tool for the

company

the company has a wide variety of offerings for the target

market

organizational resources are available

5

Indirect - using intermediaries

type, location, density and number of channels must be

determined

can sometimes perform distribution activities more efficiently

and less expensively

Direct versus Indirect Distribution

6

Electronic Marketing Channels

...use the Internet to make goods and

services available to consumers

Disintermediation -- elimination of traditional

intermediaries and direct distribution

through electronic marketing channels

7

Ultimate Buyers

Amazon.com

Book Publisher

Book Wholesaler

Amazon.com(Virtual Retailer)

Dell Computer

Dell.com

Representative Electronic Marketing Channels

Airline

Travelocity(Virtual Agent)

Travelocity.com

8

Channel Selection at the Retail Level

Type and place decisions depend on the

buying requirements of the target market and

the potential profitability of the outlets

Number of intermediaries carrying the firm’s

offering in a geographic area or density also

needs to be determined

9

Exclusive IntensiveSelective

Extent of Distribution Coverage

Wrigley’sCoke

Levi’sSony

LexusRolex

10

Dual Distribution

occurs when an organization distributes its

offering through 2 or more different marketing

channels that may or may not compete for

similar buyers

the main consideration is whether it will

provide incremental sales revenue or

cannibalize existing sales

11

Intermediary Requirements

Intermediaries

are concerned with the adequacy of the offering

require marketing support

seek a degree of exclusivity

expect a profit margin consistent with the functions

they are expected to perform

12

Trade Relations

Channel Conflict

Sources of Channel Conflict:

when one channel member bypasses another

over how profit margins are distributed

when manufacturers believe that retailers or wholesalers

are not giving their products enough attention

dual distribution

13

Channel-Modification Decisions

Reasons:

shifts in geographical concentration of buyers

inability of existing intermediaries to meet the needs of

buyers

costs of distribution

14

Factors in Modification Decisions

• Will the change improve the effective coverage of the sought

target markets?

• Will the change improve customer satisfaction?

• Which marketing functions must be absorbed?

• Does the organization have the resources to perform the new

functions?

• What will be the effect on other channel members?

• What will be the effect on long-term organizational objectives?