Channel Management

Selecting andManaging Marketing Channels

Anas Iftikhar

2815

Strategic Marketing Management

1. What is meant by a marketing channel?

A: A marketing channel consists of individuals and firms involved in the process of making a product or service available for use or consumption by consumers or industrial users.

• Marketing Channels for Consumer Goods and Services

Direct Channel

Indirect Channels

CHANNEL STRUCTURE AND ORGANIZATION

FIGURE: Common marketing channels for consumer goods and services

• Marketing Channels for Business Goods and Services

Industrial Distributor

Agent

CHANNEL STRUCTURE AND ORGANIZATION

FIGURE 13-4 Common marketing channels for business goods and services

CHANNEL CHOICE AND MANAGEMENT

• Factors in Choosing a Marketing Channel

Provide the Best Target Market Coverage

Best Satisfy the Target Market’sBuying Requirements

Be the Most Profitable

CHANNEL CHOICE AND MANAGEMENT

Target Market Coverage

• Intensive Distribution

• Exclusive Distribution

• Selective Distribution

• Factors in Choosing a Marketing Channel

15 | 9

Intensity of Market Coverage

• Intensive Distribution– Using all available outlets to distribute a product.

• Convenience products with high replacement rates

– Provides availability and reduces search time

– Availability is more important than outlet type

15 | 10

Intensity of Market Coverage (cont’d)

• Selective Distribution– Using only some available outlets to distribute a

product• Shopping products and durable

goods with low replacement rates

– High qualification requirements for intermediaries to distribute, sell, service, and support products

Toyota’s Only

Authorized Dealer

15 | 11

Intensity of Market Coverage (cont’d)

• Exclusive Distribution– Using a single outlet in a fairly large geographic

area to distribute a product• Expensive, high-quality products purchased

infrequently

– Exclusive outlets provide an incentive to sellers in limited markets

– Dealers carry complete inventory and have trained staff for sales and service

CHANNEL CHOICE AND MANAGEMENT

Satisfying Buyer Requirements

• Lot Size

• Convenience

• Variety

• Services Backup

Reduction in number of contacts

• Factors in Choosing a Marketing Channel

• Waiting time

How a Distributor Reduces theNumber of Channel Transactions

= Customer= Manufacturer

A. Number of contacts without a distributor

M x C = 3 X 3 = 9

1

32

456

789

How a Distributor Reduces theNumber of Channel Transactions

= Distributor= Customer= Manufacturer

B. Number of contacts with a distributorM x C = 3 + 3 = 6

Store

1

2

3

4

5

6

Conventional Distribution Channel vs. Vertical Marketing Systems

Verticalmarketingchannel

Manufacturer

Retailer

Conventionalmarketingchannel

Consumer

Manufacturer

Consumer

Retailer

Wholesaler

Wh

ole

sale

r

Channel Conflict

• What types of conflict arise in channels?

• What causes channel conflict?

• What can be done to resolve conflict situations?

What is Channel Conflict?

• In channel distribution, conflict is not negative, rather, some conflict actually strengthen and improves a channel.

• “Channel conflict arises when the behavior of a channel member is in opposition, to its channel counterpart. It is opponent centered and direct, in which the goal or object sought is controlled by the counterpart.”

Coughlan, Anderson,

Types of Channel Conflict• Vertical Channel Conflict - conflict between different

levels within the same channel.

• Horizontal channel conflict - involves conflict between members at the same level within the channel.

• Multichannel conflict - exists when the manufacturer has established two or more channels that sell to the same market.

Horizontal and Vertical Conflict in Marketing Channels

Causes of Channel Conflict

• Goal Incompatibility

• Unclear Roles And Rights

• Differences In Perception

• Intermediaries’ Great Dependence

Managing Channel Conflict

• Adoption of superordinate goals• Exchange persons between channel levels• Cooptation• Diplomacy, mediation, arbitration for chronic

or acute conflict