Strategy In Marketing

Channels
Chapter 3
 Chapter 3 Outline
 Channel Strategy Defined
 1) Marketing Channel Strategy and the Role of
Distribution in Corporate Objectives and Strategy
 2) Marketing Channel Strategy and the Marketing Mix
 3) Channel Strategy and Designing Marketing Channels
 4) Channel Strategy and the Selection of Channel
Members
 5) Channel Strategy and Managing the Marketing
Channel
 6) Channel Strategy and the Evaluation of Channel
Member Performance
 Channel Strategy Defined
 Marketing strategy is defined as the
broad principles by which the business
unit expects to achieve its marketing
objectives in a target market.
 Marketing channel strategy can be
considered as a special case of the
more general marketing strategy.
 Marketing channel strategy is
defined as the broad principles by which
companies expect to achieve their
distribution objectives for its target
 Channel Strategy Defined
 Marketing channel strategy is narrower
than marketing strategy because it
focuses on achieving the company’s
distribution objectives instead of the
general marketing objectives (which
include product, price, and promotional
objectives).
 Marketing channel strategy is focused on
the place component of the marketing
mix.
 The other three Ps focus on product,
 Channel Strategy Defined
 To achieve their distribution objectives, companies
need to address the following six basic decisions:
 1) What role should distribution play in the company’s overall
objectives and strategies?
 2) What role should distribution play in the marketing mix?
 3) How should the company’s marketing channels be
designed to achieve its distribution objectives?
 4) What kinds of channel members should be selected to
meet the company’s distribution objectives?
 5) How can the marketing channel be managed to implement
the company’s channel strategy and design effectively and
efficiently on a continuous basis?
 6) How can the channel member performance be evaluated?
 1) Marketing Channel Strategy and the Role of
Distribution in Corporate Objectives and Strategy

 1) Marketing Channel Strategy and the

Role of Distribution in Corporate
Objectives and Strategy:
 The most basic distribution decision for any
company to consider is the role that
distribution will play in the company’s long-
term overall objectives and strategies.
 Companies have to decide if the achievement
of specific distribution objectives is essential
to the long-term success of the company.
1) Marketing Channel Strategy and the Role
of Distribution in Corporate Objectives and
Strategy
 If the answer is yes, then the role of distribution
should be considered at the highest level of
management in the company, including the
president and CEO.
 For example: BMW had made a strategic
marketing channel strategy to allow its customers
to custom-build their cars when ordering their cars.
 This strategy has saved BMW and its dealers a
great deal of money by reducing inventory
carrying costs and rebates on cars that are not
selling.
 Class Exercise
 Give one example of a company where
distribution strategy plays a critical role
in the company’s overall strategy.
1) Marketing Channel Strategy and the Role
of Distribution in Corporate Objectives and
Strategy
 Determining the Priority Given to
Distribution: The question of how
much priority or importance to place on
distribution is one that can be answered
only by the specific firm involved.
 If a company’s top managers believe
that distribution strategy is a critical
part of its corporate strategy for
achieving long-term goals, a high priority
for, and a strong focus on distribution
strategy is essential.
1) Marketing Channel Strategy and the Role
of Distribution in Corporate Objectives and
Strategy
 Example 1: Amazon.com’s CEO, Jeff
Bezos uses a single, online strategy for
his company.
 Amazon.com’s channel strategy is the
foundation of its business model
because it is designed to create an
extraordinary customer experience by
providing an easy and exciting customer
interface, outstanding selection, super
efficient checkout, and quick delivery.
1) Marketing Channel Strategy and the Role
of Distribution in Corporate Objectives and
Strategy
 Example 2: Giant consumer packaged
goods manufacturer, Procter and &
Gamble Company, has placed great
importance on distribution, especially by
building strategic alliances with giant
retailers such as Wal-Mart.
 2) Marketing Channel Strategy
and the Marketing Mix
 2) Marketing Channel Strategy and the
Marketing Mix: Developing a marketing
mix of product, price, promotion, and
Ts =
distribution F( P1,
(place) P2,that
strategies P3,meet the
demands of the company’s target market
P4) is the heart of
better than the competition
modern marketing management.
 The job of the marketing manager is to develop
the right combination of the 4Ps to provide
and maintain the desired level of target market
satisfaction.
Channel Strategy & the Marketing Mix

 The essence of modern marketing

 management – to develop an appropriate and
complementary marketing mix
 Product Strategy e.g., quality and benefits desired)
 Pricing Strategy (e.g., level of pricing and/or price
points)
 Promotional Strategy (e.g., the “right” combination
of “push” & “pull” promotion to apply)
 Distribution Strategy (e.g., intensity of distribution)
 2) Marketing Channel Strategy and the
Marketing Mix

 The following are situations where

companies should emphasize the
distribution strategy:
 1) Distribution strategy is the most important
variable for satisfying target market demands.
 2) Parity exists among competitors in the other
three variables of the marketing mix.
 3) A high degree of vulnerability exists because
of competitors’ neglect of distribution.
 4) Distribution can improve the company
creating synergy from marketing channels.
 2) Marketing Channel Strategy and the
Marketing Mix

 1) Distribution strategy is the most important variable

for satisfying target market demands: Why are
marketing channels so closely connected to customer
satisfaction?
 Because it is through distribution that the company can
provide the kinds and levels of service that make
for satisfied customers.
 Example: Volvo GM Heavy Truck Corporation
developed a distribution strategy to meet their
customers demand for truck parts on an emergency
basis by working with FedEx Logistics Services to set
up warehouses that stocked the full line of truck parts.
 Class Exercise
 Go online and find an example of a
company that focuses more on one
specific variable in the 4Ps (product,
price, promotion, and distribution) to
satisfy the needs of it target market.
 Class Exercise
 Give examples of signs that a company
is neglecting its distribution strategy.
 2) Marketing Channel Strategy and the
Marketing Mix

 2) Parity exists among competitors in the

other three variables of the marketing mix:
Using the first three Ps (product, price, and
promotion) to gain an competitive advantage
is becoming increasingly difficult.
 Distribution, the fourth variable in the
marketing mix can offer a more favorable
basis for developing a competitive advantage
because advantages achieved in distribution
are not as easily copied by competitors.
 2) Marketing Channel Strategy and the
Marketing Mix

 3) A high degree of vulnerability exists

because of competitors’ neglect of
distribution: Neglect of distribution
strategy by competitors creates an
excellent opportunity for those
companies who want to develop
distribution as a key strategic variable in
the marketing mix.
 The channel manager has to make an
effort to analyze target markets to find
out if distribution is be neglected by
 2) Marketing Channel Strategy and the
Marketing Mix

 4) Distribution can improve the company

by creating synergy from marketing
channels: By selecting the right kind of
channel members, a manufacturer's
competitive position can be greatly
enhanced.
 Example: If a Manufacturers can secure
distribution of its products by
wholesalers and retailers who have a
stronger reputation than them, this
manufacturer immediately improves its
 3) Channel Strategy and
Designing Marketing Channels
 3) Channel Strategy and Designing
Marketing Channels: Channel strategy
should guide channel design in order to help the
company gain an differential advantage.
 Differential advantage which is also called
sustainable competitive advantage occurs when
had an advantageous position in the market
relative to competitors.
 This advantage allows the company to satisfy
their customers better than their competition on
a long-term basis.
Q:
 Which term means that a brand can be
purchased from many possible outlets in
a trading area?
 A) intensive distribution
 B) exclusive distribution
 C) intra-brand competition
 D) dual distribution
 E) local monopoly
 Answer: A
Q:
 Sierra Water, a bottled water brand, is
available in every possible outlet in the trading
area. What channel intensity strategy is most
likely being used for Sierra Water?
 A) saturation
 B) monopolistic
 C) mass marketing
 D) intensive distribution
 E) exclusive distribution
 Answer: A
Q:
 Which channel intensity strategy is most
likely preferred by downstream channel
members?
 A) exclusive distribution
 B) intensive distribution
 C) dual distribution
 D) zero-based
 E) saturation
 Answer: A
Q
 Which of the following is not one of the basic distribution
decisions that most firms must address?
 a. Which individual should be chosen as channel manager
 b. The role distribution should play in the firm’s overall
objectives and strategies
 c. The role distribution should play in the marketing mix
 d. How the firm’s channels should be designed to achieve
its distribution objectives
 e. How channel member performance can be evaluated

 ANS:A
Q:
 ___________ is, the broad principles by which the
firm expects to achieve its distribution
objectives for its target market(s).:
 a. Corporate strategy
 b. Channel strategy.
 c. Marketing strategy.
 d. Service to customers.
 e. Inbound logistics.

 ANS:B
 3) Channel Strategy and Designing
Marketing Channels

 In order to gain a differential advantage

through channel design , the concept of
channel position can serve as a helpful
guide.
 A channel position is defined as the
reputation a manufacturer gains among
distributors (channel members) for
furnishing products, services, financial
returns, programs, and systems that are
in some way better to those offered by
competing manufacturers.
 3) Channel Strategy and Designing
Marketing Channels

 Channel positioning is what the

company does with its channel planning
and decisions in order to obtain the
channel position.
 In order for companies to obtain the
channel position, they must view the
relationship with channel members as
a partnership or strategic alliance
that offers benefits to both the
manufacturer and channel members on
long-term basis.
 3) Channel Strategy and Designing
Marketing Channels

 Example channel positioning: Lexus

automobiles positions its independent
dealer channel as the best in the
automobile industry.
4) Channel Strategy and the Selection of
Channel Members

 4) Channel Strategy and the Selection of

Channel Members: The approach taken by
companies in channel member selection and the
types of intermediaries chosen to become
should match the channel strategies that
companies have developed achieve their
distribution objectives.
 Intermediaries who sell the manufacture's
products are viewed as an extension of the
manufacturers and therefore great care must be
taken in choosing the right channel members.
 Class Exercise
 What are some criteria that
manufacturers can use to select
intermediaries (wholesalers and
retailers) for their marketing channel.
4) Channel Strategy and the Selection of
Channel Members

 For example: Rolex is extremely careful

when selecting its intermediaries.
 Rolex only selects the most reputable
retailers.
 Rolex also advertises in different medias
that only authorized Rolex jewelers can
provide the superior selection, service,
and warranty protection that customers
who buy such prestigious products
expect.
 5) Channel Strategy and
Managing the Marketing Channel
 5) Channel Strategy and Managing
the Marketing Channel: Channel
management from the manufacturer’s
viewpoint involves all the plans and
actions taken by the manufacturer to
secure the cooperation of the channel
members in achieving the
manufacturer’s distribution objectives.
 5) Channel Strategy and Managing the
Marketing Channel

 The channel manager who is attempting to

plan and implement a program to gain the
cooperation of channel members is faced
with three strategic questions:
 1) How close a relationship should be
developed with the channel members?
 2) How should the channel members be
motivated to cooperate in achieving the
manufacturer's distribution objectives?
 3) How should the marketing mix be used
to improve channel member cooperation?
 5) Channel Strategy and Managing the
Marketing Channel

 1) How close a relationship should be developed

with the channel members? The question of how
close a channel relationship that any manufacturer
should develop with its channel members is a question
of strategy.
 For example: For a manufacturer of an
undifferentiated commodity sold through thousands of
retailers would have a difficult time developing a close
relationship with each retailer.
 On the other hand, a manufacturer who is selling a B2B
product through a small group of wholesalers will need
to develop a close relationship with them in order to
better serve its customer.
 5) Channel Strategy and Managing the
Marketing Channel

 2) How should the channel members

be motivated to cooperate in achieving
the manufacturer's distribution
objectives? The strategic challenge here
for manufactures is to secure strong
channel member cooperation in order to
achieve their distribution objectives.
 5) Channel Strategy and Managing the
Marketing Channel

 Methods used by manufacturers to motivate

channels members include:
 1) Pay higher “slotting allowances” (payment for shelf
space) than the competitors.
 2) Offer higher trade discounts (margins) than the
competitors.
 3)Provide strong advertising and promotional support
to channel members.
 4) Protect channel members’ sales through highly-
selective distribution.
 5) Provide sales training for channel members’
salespeople.
 5) Channel Strategy and Managing the
Marketing Channel

 3) How should the marketing mix be

used to improve channel member
cooperation? Companies must understand
the relationship among the 4Ps (product,
price, promotion, place).
 This means that plans and decisions made
in one of the variables in the marketing mix
has implications for the other variables.
 6) Channel Strategy and the
Evaluation of Channel Member
Performance
 6) Channel Strategy and the
Evaluation of Channel Member
Performance: The main strategic
importance of channel member
performance evaluation is concerned
with the following question:
 Have plans been made in the design and
management of the channel to ensure
that channel member performance will
be evaluated effectively?
6) Channel Strategy and the Evaluation of
Channel Member Performance

 This question will ensure that the

channel manager views performance
evaluation as an essential part of the
development and management of the
marketing channel.
 Reference
 Rosenbloom, B. (2016). Marketing
Channels, 8th Edition, International
Edition, Cengage Learning, International
Edition.