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Channel Strategy

The broad principles by which the firm expects to achieve its distribution objectives for its target market(s)

Channel Design
Those decisions involving the development of new marketing channels where none had existed before, or the
modification of existing channels

Channel Design Decision


Phase 1: Recognize Need for Channel Design Decision
Phase 2:Set & Coordinate Distribution Objectives
Phase 3:Specifying Distribution Tasks
Phase 4:Develop Alternative Channel Structures
Phase 5:Evaluate Variables Affecting channel Structure
• Market variables
• Product variables
• Company variables
• Intermediary variables
• Environmental variables
• Behavioral variables

Phase 6:Choosing the “Best” Channel Structure


• Product-based models (Aspinwall)
• Financial Approach
• Transaction Cost Analysis Approach
• Management Science Approach
• Judgmental –Heuristic Approach

Phase 7:Select the Channel Members

• Finding perspective channel members


• Applying selection criteria
• Securing perspective channel members

Framework for Market Analysis


• Market geography
• Market size
• Market density
• Market behavior
• when customers buy
• where customers buy
• how customers buy
• who buys

Who Buys?

• Who makes physical purchase?


• Who uses the product?
• Who influences the buying decision?
Channel Management

The administration of existing channels to secure the cooperation of channel members in achieving the firm’s
distribution objectives

Motivating Channel Members


 Find out needs and problems
 Offer support consistent with channel member needs
 Provide leadership

Support for Channel Members

• Cooperative approach
• Partnership approach
• Distribution programming approach

New Product Planning and Development


• Channel member input
• Acceptability
• Fit with channel member assortments
• Education and training
• Problems?

Product Life Cycle


• Introduction
• Growth
• Maturity
• Saturation
• Absolute decline

Strategic Product Management


 Product differentiation
 Product positioning
 Product line expansion and contraction
 Trading up and trading down
 Brand strategy
 Service strategy

Pricing in Channel Management


• Cost
• Market
• Competition
• Channels

Classic Push Promotional Strategies


• Cooperative advertising
• Promotional allowances
• Displays and selling aids
• In-store promotions
• Contests and incentives
• Special promotional deals and merchandise campaigns

Kinder and Gentler” Push Promotional Strategies


• Training
• Quotas
• Missionary selling
• Trade shows

Special measures are required to motivate new channel intermediaries


Intermediaries are likewise motivated by their partner's willingness to provide them with adequate support.
Profit making is a principal requirement of business
Profits are a prime motivator

value bundle- benefit package

Improving Service to Channel Partners

Efforts aimed at securing relationships by providing better service should feature more than product-related
functions or camaraderie among boundary personnel

Get and keep close to customers

Several key factors have been identified for downstream channel members. Their expectation of doing future
business on behalf of a principal strengthens for:

• Producers whom they trust


• Producers with whom they enjoy two-way communication, including active give and take of ideas
• Producers who enjoy a reputation for treating other channel members fairly
• Producers with whom they have been doing business for some time already

Consider that you are a distributor dealing with a supplier. You will gauge the supplier's commitment to you
based on its past behaviour. You focus on two critical aspects:

(1) Have you had an acrimonious past with this supplier? and
(2) What actions do you see the supplier taking to tie itself to doing business with you?

Actions That Bind Distributors to Suppliers

Thus, supplier-specific investments serve three purposes:

(1) They expand the channel pie,


(2) they keep the distributor motivated to stay in the alliance, and
(3) they are a convincing signal to the supplier that the distributor really is committed - which invites the
supplier to reciprocate with its own commitment.
Another important element is reputation.

Non-economic Satisfaction Also Matters - A satisfied channel member finds interactions with the channel
partner fulfilling, gratifying, and easy.

Goal congruence is effective in dampening conflict

Recognizing the Channel Relationship Life Cycle

How To Secure Channel Membership

Relationship Life Cycle Desired Channel Member Behaviours


• Birth Explain its operating philosophies, goals, and objectives
• Growth Address initial problems; don't let issues linger unresolved
Honestly and sincerely strive to be opportunity driven
Seek efficiency within and through the relationship
• Maturity Communicate, communicate, communicate
Continuously strive to strengthen relationship
• Death Get out - fast

The Life-Cyle of a Marketing Channel Partnership

Phase 1: Awareness.
Phase 2: Exploration
Phase 3: Expansion

What It Takes and When It Pays To Create A Marketing Channel Alliance


An alliance is more likely to hold together and to meet their expectations when:

1. One side has special needs.


2. The other side has the capability to meet these needs.
3. Each side faces barriers to exiting the relationship.