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PM-315-CHAPTER-5 For BSBA STUDENT mm3

Chapter 5 discusses the importance of marketing channel strategy in achieving distribution objectives and its integration within the marketing mix. It outlines six key distribution decisions firms must make, emphasizing the role of distribution in creating competitive advantage and addressing market demands. The chapter also highlights the significance of channel design and positioning in establishing a differential advantage over competitors.

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7 views14 pages

PM-315-CHAPTER-5 For BSBA STUDENT mm3

Chapter 5 discusses the importance of marketing channel strategy in achieving distribution objectives and its integration within the marketing mix. It outlines six key distribution decisions firms must make, emphasizing the role of distribution in creating competitive advantage and addressing market demands. The chapter also highlights the significance of channel design and positioning in establishing a differential advantage over competitors.

Uploaded by

pandanger07
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We take content rights seriously. If you suspect this is your content, claim it here.
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Developing the Marketing Channel

Chapter 5
Objectives
By the end of this topic, you should be able to:

 Understand the meaning of channel strategy.


 Be able to describe the six basic distribution decisions that firms face.
 Have an awareness of the potential for channel strategy to play a major role in the overall
corporate objectives.
 Recognize the relationship of distribution to the other variables in the marketing mix and the
role of channel strategy.
 Appreciate the role of channel strategy in creating a differential advantage through channel
design.
 Have a familiarity with the implications of the selection decision for channel strategy.
 Know the key strategic decisions faced by the channel manager in the management of the
marketing channel.
Marketing channel strategy: The broad principles by which the firm expects to achieve its
distribution objectives for its target markets. Thus, marketing channel strategy is
concerned with the place aspect of marketing strategy. To achieve its objectives a firm
will have to address six basic distribution decisions:

1. What role should distribution play in the firm’s overall objectives and strategies?

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?

6. How can channel member performance be evaluated?


Marketing Channel Strategy and the Role of
Distribution in Corporate Objectives and Strategy

When this three-cycle planning process is undertaken in a large and


diversified firm, all three levels (corporate, business, and program and
functional departments) will become involved in the strategic planning
process.

A) Determining the Priority Given to Distribution


Marketing Channel Strategy and
Maketing Mix
The role of distribution must be considered in the marketing mix along with price,
promotion, and product. How much emphasis to be placed on place has no
general answer. Each firm or marketing manager must make that determination for
his or her self.

What we do know is that a general case of stressing distribution strategy can be made
if any one of certain conditions prevails:

1) Distribution is the most relevant 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 enhance the firm by creating synergy from marketing


channels.
● Distribution Relevance to Target Market Demand

As firms have become more orientated to target markets over the past two decades by listening
more closely to their customers, the relevance of distribution has become apparent to an
increasing number of companies because it plays such a key role in providing customer service.

 Competitive Parity in Other Marketing Mix Variables

It is increasingly more difficult for a company to differentiate its marketing mix from that of the
competition. Price, product, and promotional strategies can easily and quickly be copied.

 Distribution Neglect and Competitive Vulnerability

Neglect of distribution strategy by competitors provides an excellent opportunity for those companies
who are willing to make the effort to develop distribution as a key strategic variable in the marketing
mix.

 Distribution and Synergy for the Channel

By “hooking up” with the right kind of channel members, the marketing mix can be substantially
strengthened to a degree not easily duplicated with other variables.
Channel Strategy and
Designing Marketing
Channels
A channel strategy is representing (among other things) management’s answer to
the question – how to pursue competitive advantage (Thompson & Stikcland,
2001)

Channel strategy should guide channel design to help the firm attain a differential
advantage.

1) Differential Advantage and Channel Design


● Differential advantage: Also called sustainable competitive advantage, this
refers to a firm’s attainment of an advantageous position in the market relative
to competitors – a place that enables it to use its particular strengths to satisfy
customer demands better than its competitors on a long-term (sustainable)
basis.
1) Positioning the Channel to Gain Differential Advantage

Channel position: “The reputation a manufacturer acquires among distributors


(channel members) for furnishing products, services, financial returns,
programs, and systems that are in some way superior to those offered by
competing manufacturers.”

Channel positioning: “What the firm does with its channel planning and decision
making to attain the channel position.” The key is to view the relationship with
channel members as a partnership or strategic alliance that offers recognizable
benefits to the manufacturer and channel members on a long-term basis.

In addition, Michael porter has three basic strategies a firm may follow to develop
industry position and generate superior profitability: cost leadership,
differentiation, and focus.
1. Cost-leadership strategy involves producing and distributing products at the very
lowest per- unit cost possible for price sensitive customer segments. When this
strategy is pursued the company will work hard to achieve lower costs of production
and distribution so that it can price its products lower than the competition and
achieve large market share.

2. A differentiation strategy emphasis product or service uniqueness in a manner


that is meaningful to non-price sensitive customers. When this strategy is pursued,
companies will try to achieve uniqueness in product and marketing programs to
appeal to non-price sensitive customers.
A focus strategy involves concentration on a particular market segment in an
industry. Whereas the above two strategies have targeted an entire industry, a
company that uses focus strategy will concentrate on a few or narrow market
segment. To serve the narrow market the firm may use either differentiation or
cost leadership strategy.
Thank
you!
Do you have any questions?

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