4 modifying channel design and arrangements no

This preview shows page 150 - 152 out of 199 pages.

4.Modifying Channel Design and ArrangementsNo channel strategy remains effective over the whole product life cycle. In competitive marketswith low entry barriers, the optimal channel structure will inevitably change over time. The
change could mean adding or dropping individual market channels or channel members ordeveloping a totally new way to sell goods.A producer must periodically review and modify its channel design and arrangements. Thedistribution channel may not work as planned, consumer buying patterns change, the marketexpands, new competition arises, innovative distribution channels emerge, and the productmoves into later stages in the product life cycle. Adding or dropping individual channel membersrequires an incremental analysis. Increasingly detailed customer databases and sophisticatedanalysis tools can provide guidance into those decisions. A basic question is: what would thefirm’s sales and profits look like with and without this intermediary?Perhaps the most difficult decision is whether to revise the overall channel strategy. Avon’s door-to-door system for selling cosmetics was modified as more women entered the workforce.Despite the convenience of automated teller machines, online banking, and telephone callcenters, many bank customers still want “high touch” over “high tech,” or at least they want thechoice. Banks are thus opening more branches and developing cross-selling and up-sellingpractices to capitalize on the face-to-face contact that results.VII.6.Conflict, Cooperation, and CompetitionNo matter how well channels are designed and managed, there will be some conflict, if onlybecause the interests of independent business entities do not always coincide. Channel conflictis generated when one channel member’s actions prevent another channel from achieving itsgoal. Software giant Oracle Corp., plagued by channel conflict between its sales force and itsvendor partners, decided to roll out new “All Partner Territories” where all deals except forspecific strategic accounts would go through selected Oracle partners.Channel coordination occurs when channel members are brought together to advance the goalsof the channel, as opposed to their own potentially incompatible goals. Here we examine threequestions: What types of conflict arise in channels? What causes conflict? What can marketersdo to resolve it?VII.6.1.Types of Conflict and CompetitionSuppose a manufacturer sets up a vertical channel consisting of wholesalers and retailers hopingfor channel cooperation and greater profits for each member. Yet horizontal, vertical, andmultichannel conflict can occur.Activity 5What is the role of channel power in regulating the behaviors of channel members and facilitating coordination among institutions?

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture