A Channel Strategy describes the levels organization and distribution intensity

A channel strategy describes the levels organization

This preview shows page 12 - 14 out of 21 pages.

A Channel Strategy describes the levels, organization, and distribution intensity of a marketing channel. When formulating a channel strategy, marketers have to make the following three decisions: 1. How many levels of intermediaries will be used? A channel could distribute directly to customers or involve one or more intermediaries. 2. How will the channel be organized? All channel members could be owned b the same firm or associated with each other in the same way. 3. What will be the intensity of distribution? There could be many points of distribution within geographic areas, or only a few.
Image of page 12
A zero-level, or direct channel, is quite “short”, because a producer sells directly to its consumers (B2C) or to its business customers (B2B). One benefit of a direct channel is that it gives the manufacturer greater control over every step in the distribution process. On the other hand, indirect channels leverage the growing importance of retailers (ex. Home depot, best buy, etc.) Channel organization defines how channel members will work together and the role each one should play. Three methods for channel organization are as follows: Conventional – Under a conventionally organized channel, each member works independently of the others, buying and selling products or services. The channel is self-regulating according to market forces. Vertical Marketing System (VMS) – A VMS exists when a firm takes on the role of another channel member, either through acquisition or by developing its own distribution capabilities. Horizontal – Channels are organized horizontally when two or more channel members at the same level (ex. Two or more wholesalers, two or more retailers) form an alliance. Distribution intensity is the final decision marketers must make when developing a channel strategy. Intensity describes the number of outlets or locations where a product will be sold. Products with higher intensity are sold at many locations within a geographic area, and are therefore easily obtained. Convenience products usually follow an intensive distribution strategy and are sold through a large number of outlets, so they are readily available. In contrast, shopping products often employ a more selective distribution strategy. Many luxury or high-ticket items use exclusive distribution , where retailers or wholesalers are given exclusive rights to sell a product. This level of intensity is frequently used to maintain a perception of exclusivity and prestige for these products. Because the purpose of marketing channels is to delight customers, all channel decisions must be aligned with a customer's desires. Dual distribution (or multichannel distribution ) is the use of two or more types of distribution channels. The main reason for using multiple channels is to better satisfy customer wants and needs.
Image of page 13
Image of page 14

You've reached the end of your free preview.

Want to read all 21 pages?

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture