Distribution Channel Strategy PDF

DISTRIBUTION MANAGEMENT **Strategy in Marketing Channels** **Chapter 5:** **Marketing Channel Strategy** A **marketing channel strategy** is a plan to connect to your audience and meet customer needs through various marketing channels both online and offline. Some examples of typical market...

DISTRIBUTION MANAGEMENT **Strategy in Marketing Channels** **Chapter 5:** **Marketing Channel Strategy** A **marketing channel strategy** is a plan to connect to your audience and meet customer needs through various marketing channels both online and offline. Some examples of typical marketing channels include email marketing, websites, social media, mobile marketing, and digital and print advertising. **6 Distribution Decisions for Firms to Address** 1\. The role of distribution in the firm's overall objectives & strategies 2\. The role distribution should play in the marketing mix 3\. The design of the firm's marketing channels 4\. The selection of channel members 5\. The management of the marketing channel in order to implement the firm's channel design effectively & efficiently on a continuing basis 6.The evaluation of channel member performance **Channel Strategy as Overall Corporate Objective** The higher the priority given to distribution, the higher the level at which it should be considered in formulating the organization's overall objectives and strategies. **Direct Marketing Logistical Structure**  **Types of channel strategy** **1. Direct channel** In this type, the company sells the product/service directly to the end customer by bypassing the channel intermediaries such as wholesalers and retailers. This type of strategy can be implemented online, offline (physical stores), or a combination of both. It offers more control to the manufacturers over product delivery and overall performance. However, it is not ideal for large-scale businesses that want to reach wider audiences. **2. Indirect channel** In this type, companies sell products to customers via intermediaries such as wholesalers and retailers. These intermediaries share the risk with the manufacturers, and therefore, they get products at a cheaper price, especially wholesalers who buy products in bulk. For manufacturers, keeping a good relationship with these intermediaries and communicating their objectives is important. **3. Dual channel** It is a combination of direct and indirect channels. Some distribution is handled by the company itself and the rest is delegated to the intermediaries. Companies could have a direct link with the end customers while ensuring wide-scale **Channel Strategy Examples** 1. **Tesla uses a direct distribution channel** in its business model. It sells directly to its customers via online and physical stores worldwide. It helps the company to build a direct connection with the customers and bypass distributors. 2. **The automotive industry is a classic example of indirect distribution.** - Car manufacturers like Toyota, Honda, or Ford sell - their cars through a network of authorized dealers. - Consumers who want to buy a car go to a car dealer - to select and purchase a vehicle. - These dealers are middlemen that help - manufacturers sell their products to consumers. 3. **Apply uses a dual distribution channel strategy i.e., selling to customers directly through its stores and thirdparty mobile carriers.** **Determining the Priority Given to Distribution** Distribution does increasingly warrant the attention of top management, because competition has made the issue of distribution too important for top management to ignore. Changes in distributive channels may not matter much to GNP and macroeconomics. But they should be a major concern to every business and industry... Everyone knows how fast technology is changing. Everyone knows about markets becoming global and about shifts in the work force and in demographics. But few people pay attention to changing distribution channels. **Peter Drucker** A solid marketing channel strategy ensures you're showing up where your customers are. Which creates an even better experience with your brand. Meaning more opportunities for conversion. **Benefits of a channel strategy** **Expanded market reach:** - A channel strategy allows businesses to extend their market reach by leveraging different distribution channels. - This enables them to tap into new customer segments, geographic regions, or market niches, increasing brand visibility and potential sales opportunities. **Improved customer accessibility:** - By utilizing multiple channels, businesses can provide customers with more convenient and accessible ways to purchase their products or services. - This enhances the overall customer experience and helps build stronger relationships with customers. **Enhanced customer engagement:** - A well-planned channel strategy enables businesses to engage customers in meaningful ways. - By aligning channels with customer preferences and behaviors, businesses can deliver targeted and personalized experiences that resonate with their audience, fostering customer loyalty and advocacy. **Increased sales opportunities:** - An effective channel strategy helps businesses identify and capitalize on additional sales opportunities. - By offering products or services through multiple channels, businesses can reach customers at different touchpoints, increasing the chances of conversion and revenue generation. **Components of a channel strategy** **1. Channel selection and management:** **Channel evaluation:** Businesses must evaluate different channels based on suitability, reach, and alignment with target customers. Market coverage, channel capabilities, and customer preferences should be considered when selecting the appropriate channels. **Channel partner management:** Building and nurturing relationships with channel partners is crucial for channel strategy success. This involves effective communication, training, support, and collaboration to ensure partners understand the business objectives and effectively represent the brand. **2. Inventory and logistics:** **Inventory planning:** Businesses need to manage their inventory effectively to ensure optimal product availability across different channels. This involves forecasting demand, coordinating with suppliers, and maintaining sufficient stock levels to meet customer expectations. **Logistics and distribution:** A well-designed channel strategy includes efficient logistics and distribution management. This entails managing transportation, warehousing, and order fulfillment processes to ensure timely delivery and customer satisfaction. **3. Performance monitoring and optimization:** **Data analysis:** Regular monitoring and analysis of channel performance are critical to identifying areas for improvement. Key performance indicators (KPIs) such as sales volume, market share, channel profitability, and customer satisfaction help businesses assess the effectiveness of their channel strategy and make datadriven decisions. **Continuous improvement:** Businesses should continually refine and optimize their channel strategy based on insights gained from performance monitoring. This may involve adjusting the channel mix, refining partner relationships, or exploring new channels that align with evolving market dynamics. **6 Cs of Channel Strategy** **Customer:** Understand your target audience's needs, preferences, and behaviors. For example, a wedding planning business could conduct an online survey to determine what local brides and grooms want. **Cost:** Determine profitability and optimize resources by analyzing the expenses associated with each channel. Once the wedding planner knows their audience, they can figure out the most cost-effective way to reach them. Is it on social media or through banner ads? **Convenience:** Make sure selected channels are easy to access and buy from. Does the wedding planner need only a social presence? Or should they invest in banner ads? **Control:** Manage, adjust, and refine channel operations to meet dynamic business and market demands. If a post focused on "say yes to the dress" didn't do the trick, the planner could create a new one spotlighting great wedding venues in the area. **Collaboration:** Work with channel stakeholders to amplify reach and effectiveness. The wedding planner could collaborate with local influencers to amplify their message. **Competitive advantage:** Use unique strengths or differentiators to beat your competitors. If the wedding planner has a stronger social presence than a rival across town, they're more likely to get ahead. **Emphasis on Distribution Strategy** **IF:** Distribution is the most relevant variable for satisfying target market demands. **Or:** Parity exists among competitors in the other three variables of the marketing mix. **or:** A high degree of vulnerability exists because of competitors' neglect of distribution. **or:** Distribution can enhance the firm by creating synergy from marketing channels. **THEN**: The firm should choose distribution strategy for strategic emphasis. 1. **Target Market Demand** - Firms should stress distribution when it serves customers' needs in the target market. - Marketing channels are so closely linked to customer need satisfaction because it is through distribution that firms can provide the kinds and levels of service that make for satisfied customers. **2. Competitive Parity** - Distribution advantages are not easily copied by competitors. - Distribution advantages are based on a combination of superior strategy, organization, and human capabilities. **3. Distribution Neglect** - Competitors' neglect of distribution strategies provides excellent opportunities. - The channel manager must analyze target markets to determine whether competitors have neglected distribution and whether vulnerabilities exist that can be exploited. **4. Distribution and Synergy** - "Hooking up" with a mix of cooperative channel members will strengthen the channel. Because each channel member is an independent entity, rewarding opportunities exist for channel managers to cultivate cooperation among members. **Differential Advantage & Channel Design** **Differential advantage***:* Also called sustainable competitive advantage, occurs when a firm attains a long-term, advantageous position in the market relative to competitors. 6 **Positioning the Channel** *... 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. - Narus and Anderson* **Positioning the Channel** A firm that plans the channel and makes decisions by viewing the relationship with channel members as a *partnership* or *strategic* *alliance* that offers recognizable benefits to the manufacturer & channel members on a long-term basis. **Selection of Channel Members** Because customers perceive channel members as an extension of the manufacturer's own organization, members should: Reflect channel strategies the firm has developed to achieve its distribution objectives Be consistent with the firm's broader marketing objectives & strategies Reflect the objectives & strategies of the organization as a Whole  How close a relationship should be developed with the channel members? **Closeness of Channel Relationships** **Factors to consider:** Although not a precise paradigm, the general rule is that the greater the distribution intensity, the looser the channel relationship. Conversely, the more exclusive the distribution intensity, the closer the channel relationship. How should the channel members be motivated to cooperate in achieving the manufacturer's distribution objectives? **Ways to Motivate Your Channel Partners** 1\. Implement an incentive program 2.Choose the appropriate reward for outstanding performance 3\. Establish a user-friendly platform for reward redemption 4\. Understand and address their needs 5\. Offer comprehensive support 6\. Maintain regular communication with channel partners 7\. Provide exclusive benefits