Channel Strategy

Explain the role of distribution channels in marketing strategy.

      Distribution channels refer to the various marketing institutions and the interrelationships responsible for the physical and title flow of goods and services from producer to consumer or industrial user. Wholesalers and retailers are the marketing intermediaries in the distribution channel. Distribution channels bridge the gap between producer and consumer. By making goods and services available when and where the consumer wants to purchase them and by arranging for transfer of title, distribution channels create time, place, and ownership utilities.

Describe the various types of distribution channels.

      A host of alternative distribution channels are available for makers of consumer and industrial goods and services. They range from selling directly to consumers or industrial users to using a variety of marketing intermediaries. Multiple channels are also becoming increasingly common today. A unique distribution system is the reverse channel used in recycling, product recalls, and some service situations.

Explain the concept of power as it relates to the distribution channel.

      Channel leadership is primarily a matter of relative power within the channel. Five bases for power are reward power, coercive power, legitimate power, referent power, and expert power. The current battle for shelf space in retail stores illustrates how channel power can shift over time.

Describe the concept of channel leadership.

      The marketing intermediary that makes the major decisions concerning the operation of a particular channel is called the channel captain. In some channels, the manufacturer or service provider is the channel captain. In others, powerful retailers, such as nationwide operations, may fill this role. In still  others, wholesalers serve as channel captains.

Discuss conflict and cooperation within the distribution channel.

      Channel conflict is a problem in distribution channels. There are two types of conflict: horizontal (occurring among channel members at the same level) and vertical (occurring among channel members at different levels). Marketers should work toward cooperation among all channel members as the remedy for channel conflict. The advent of gray goods illustrates channel conflict in an international setting.

Outline the major channel strategy decisions.

      Basic channel  strategy decisions involve channel selection, level of distribution intensity, and use of vertical marketing systems. The selection of a distribution channel based on market, product, producer, and competitive factors. The decision on distribution intensity involves choosing from among intensive distribution, selective distribution, and exclusive distribution. Another channel strategy decision concerns the use of vertical marketing systems.

Identify and discuss the various types of vertical marketing systems.

      Three major types of vertical marketing systems exist: corporate, administered and contractual. A corporate VMS refers to a situation in which there is single ownership of each stage of the distribution channel. An administered VMS is one in which a dominant channel member exercises its power to achieve channel coordination. A contractual VMS includes wholesaler&-sponsored chains, retail cooperatives, and franchises.