Chapter 7

Marketing Channel Strategy

and Management

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 ?

Marketing Channel Alternatives

Producer

Brokers or Agents

Distributors or Wholesalers

Retailers or Dealers
Ultimate Buyers

Direct versus Indirect Distribution

Direct - using firms 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

Direct versus Indirect Distribution

Indirect - using intermediaries

type, location, density and number of channels must be

determined

can sometimes perform distribution activities more efficiently

and less expensively

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

Representative Electronic Marketing Channels

Amazon.com

Travelocity.com

Dell.com

Book Publisher

Airline

Dell Computer

Book Wholesaler

Amazon.com
(Virtual Retailer)

Travelocity
(Virtual Agent)

Ultimate Buyers

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 firms

offering in a geographic area or density also
needs to be determined
8

Extent of Distribution Coverage

Exclusive

Lexus
Rolex

Selective

Levis
Sony

Intensive

Wrigleys
Coke

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
10

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

11

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

12

Channel-Modification Decisions
Reasons:

shifts in geographical concentration of buyers

inability of existing intermediaries to meet the needs of

buyers

costs of distribution

13

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?

14