Chapter 2 marketing strategy and channel design
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Chapter 2 Marketing Strategy and Channel Design. Major Topics for Ch. 2. Major Decisions to Make When to Emphasize Channel strategy? Channel Design: Value Chain and Value Chain Analysis 4. Three Strategic Questions 5. Segmentation: Service Output Demand. I. Major Decisions To Make*.

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Chapter 2 Marketing Strategy and Channel Design

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Chapter 2 marketing strategy and channel design

Chapter 2Marketing Strategy and Channel Design


Major topics for ch 2

Major Topics for Ch. 2

  • Major Decisions to Make

  • When to Emphasize Channel strategy?

  • Channel Design: Value Chain and

  • Value Chain Analysis

  • 4. Three Strategic Questions

  • 5. Segmentation: Service Output Demand


I major decisions to make

I. Major Decisions To Make*

  • The role of distribution in the firm’s overall objectives & strategies (Strategy Level Issue)

  • The role distribution should play in the marketing mix (Program Level Issue)

    3. The design of the firm’s marketing channels

    -The selection of channel members

  • The management of the marketing channel

    -The evaluation of channel member performance


Ii when to emphasize distribution strategy

II. When to Emphasize Distribution Strategy

IF:

  • Distribution is the most relevant variable

  • Parity exists among competitors in the other three variables of the marketing mix.

  • A high degree of competitive vulnerability exists

  • Distribution can create synergy among marketing channels.

or

or

or

THEN:

The firm should choose distribution

strategy for strategic emphasis


Iii marketing strategy channel design

III. Marketing Strategy & Channel Design

Differential advantage occurs when a firm

attains a long-term, advantageous position

in the market relative to competitors.

• Caterpillar Versus Komatsu


Channel design

Channel Design

  • What is channel design?

    • Decisions associated with forming new or altering existing channels.

  • Why are channel design decisions critical?

    • Drectly influence all other marketing decisions.

    • Key external resource for many manufacturers.

©McGraw-Hill Companies, Inc. 2002


The value chain

The Value Chain

Firm infrastructure

Human resource management

Technology development

Human resource management

Margin

Support

Activities

Inbound Operations Outbound Marketing Service

logistics logistics& sales

Margin

Primary Activities


Iv three strategic questions

IV. Three Strategic Questions*

How close a relationship

should be developed

with the channel

members?

How should the

marketing mix be used to

enhance channel

member cooperation?

3

Strategic

Questions

How should the channel

members be motivated to cooperate

in achieving the manufacturer’s

distribution objectives?


Question1 closeness of channel relationships

5

Question1: Closeness of Channel Relationships

Factors to consider

  • Distribution intensity*

  • Targeted markets*

  • Products*

  • Company policies*

  • Middlemen

  • Environment

  • Behavioral dimensions


Number of intermediaries at each level

Outlet

Use as many outlets as possible

Use as few outlets (intermediaries) as possible

Outlet

Outlet

Intensive Distribution

Exclusive Distribution

Intermediaries

Outlet

Outlet

Outlet

Intermediaries

Intermediaries

Number of Intermediaries at Each Level

Not all available intermediaries are used

Selective Distribution

©McGraw-Hill Companies, Inc. 2002


Analyzing target market behaviors

Analyzing Target Market Behaviors

  • Current and potential buyer behaviors:

    • Who is doing the buying?

  • Where,when and how end-users buy:

    • Seasonal

    • Shopping from home

  • Knowledge of industry (and its language)

©McGraw-Hill Companies, Inc. 2002


Analyzing product characteristics

Analyzing Product Characteristics

  • Product Characteristics

    • Unit value: length

    • Standardization: length, intensity

    • Bulkiness: length

    • Complexity: length, intensity

    • Stage of Product Life Cycle: intensity, ownership

       Implications for Channel Design

©McGraw-Hill Companies, Inc. 2002


Changes in plc and channels the case of designer apparel

Utility Added by Channel

High

Low

Introductory Stage

Declining/ Death

Low

Boutique

(e.g., service utility)

Offprice Outlets

(e.g., convenience utility)

Market Growth Rate

Growth

Stage

Mature Stage

High

Merchandisers

(e.g., lot size utility)

Better Department Stores

(e.g., selection utility)

Changes in PLC and Channels: The Case of Designer Apparel

Value added by channel

Exhibit 3.4

©McGraw-Hill Companies, Inc. 2002


Question 2 marketing mix in channel management

Question 2: Marketing Mix inChannel Management

5

Product

Strategy

(Quality/Branding)

Marketing

Mix

Pricing

Strategy

(Wholesale/Retail/Consumer)

Distribution

strategy

Promotion

Strategy

(Push/Pull)


Question 3 motivation of channel members

Question 3: Motivation of Channel Members

5

Promotion Portfolio concept:

A set of tools for motivating different types

and sizes of channel members

Question: What makes a distributor work for you?


Evaluation of channel member performance

Evaluation of Channel MemberPerformance

Channel manager’s involvement

in evaluating member performance is integral to

developing & managing channel

Have provisions been made in the design and

management of the channel to assure that

channel member performance will be

evaluated effectively?

Ex) Measurement and Reward of Channel Performance


Table 2 3 business to business channel segments for a new high technology product

TABLE 2-3: BUSINESS-TO-BUSINESS CHANNEL SEGMENTS FOR A NEW HIGH-TECHNOLOGY PRODUCT

Respondents allocated 100 points among the following supplier-provided service outputs according to their importance to their company:

= Additional Important Attributes

= Greatest Discriminating Attributes

Source: Reprinted with permission of Rick Wilson, Chicago Strategy Associates, 2000.


Chapter 2 marketing strategy and channel design

FIGURE 2-1: IDEAL CHANNEL SYSTEM FOR BUSINESS-TO-BUSINESS SEGMENTS BUYING A NEW HIGH-TECHNOLOGY PRODUCT

Manufacturer

(New High Technology Product)

Associations,

Events,

Awareness

Efforts

Third-Party Supply

Out-source

VARs

Pre-Sales

Dealers

TeleSales/

TeleMktg

Sales

Internal Support

- Install, Training & Service Group

Post-Sales

Full-Service

Responsive

Support

References/

Credentials

Lowest

Total

Cost

Segment

Source: Reprinted with permission of Rick Wilson, Chicago Strategy Associates, 2000.


Chapter 2 marketing strategy and channel design

FIGURE 2-2: ADVERTISING COPY FOR AN AD FOR BN.COM

Source: advertisement for bn.com in Wall Street Journal, November 20, 2002, p. A11.


Table 2 5 the service output demands sod template

TABLE 2-5: THE SERVICE OUTPUT DEMANDS (SOD) TEMPLATE

INSTRUCTIONS:If quantitative marketing-research data are available to enter numerical ratings in each cell, this should be done. If not, an intuitive ranking can be imposed by noting for each segment whether demand for the given service output is high, medium, or low.


Chapter 2 marketing strategy and channel design

TABLE 1-1: SERVICE OUTPUT DEMAND DIFFERENCES

(an example of segmentation in the book-buying market)


Chapter 2 marketing strategy and channel design

TABLE 2.1: SERVICE OUTPUT DEMAND DIFFERENCES

(an example of segmentation in the soft drink market)

FAMILY

OFFICE EMPLOYEE

SERVICE OUTPUT

DESCRIPTOR

SERVICE OUTPUT DEMAND LEVEL

DESCRIPTOR

SERVICE OUTPUT DEMAND LEVEL

Bulk-breaking

“I buy groceries weekly for my family, and all of us like soft drinks”

LOW

“I’m on my coffee break and I have only have time for one can of soft drink”

HIGH

Spatial convenience

“I drive to the supermarkets in my area to shop”

LOW

“I only have 15 minutes for my break, so I need to buy whatever is handy”

HIGH

Quick delivery

“We usually have some extra cans of soft drinks in the house, so I’ll just come back the next time if I can’t find the drinks I want on this trip”

LOW

“If I don’t get my soft drink right at 3:00 when my break starts, I’ll never have a chance to go back later and get one”

HIGH

Assortment and variety

“My husband and I like Coke and Pepsi, but our kids aren’t permitted to drink caffeinated soft drinks. They like caffeine-free fruit-flavored soft drinks”

HIGH

“I can’t be too particular about which soft drink I pick. It’s important to me to get one, as long as it has caffeine”

MODERATE


Trade offs

Trade-offs

  • Firm

    • Service Output Demands Versus Cost, Competition, and Ease of Entry

  • Consumers

    • Product Attributes

    • Price

    • Service Outputs

©McGraw-Hill Companies, Inc. 2002


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