Key Factors in Designing a Distribution Channel

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From the course by IE Business School

Marketing Mix Fundamentals

158 оценки

IE Business School

Marketing Mix Fundamentals

158 оценки

Course 3 of 5 in the Specialization Marketing Strategy

Marketing Mix Fundamentals prepares you for arguably the most important stage of bring your product to market - how and where are you going to market it? It sets out a detailed introduction to the four P’s of Marketing (Product, Pricing, Place and Promotion), this course forces you to strategically analyze your product and/or service. The Product session is designed to provide you with the knowledge to understand and manage the strategic role of brands and products in generating business results, whilst the focus on Pricing will cover the main concepts and techniques to formulate prices. Compliment this with skills from the “P” session Place, where you consider channels and retail strategies with the overriding objective of defining a distribution strategy for your product or service. Finally, through the Promotional activities (Communication) session, explore the different communication channels available and understand the importance of the media plan, dealing specifically with social media and omni-channel strategy. IE Professors Maria Teresa Aranzabal and Fernando Cortiñas will guide you through this incredibly important stage of marketing strategy using expert interviews with industry professionals. After this course you will be ready to decide where and how you want to market your product.

From the lesson

Channel Management and Retailing

At the end of this module you will know the steps to designing and managing a distribution channel. You will also be able to distinguish the various types of distribution channels and conflicts that arise among them, as well as ways to combat these conflicts. You will also understand the current nature, structure, key players, and future of trade marketing.

Why are Marketing Channels so Important?5:30

Key Factors in Designing a Distribution Channel6:27

How to Manage Channels and Resolve Conflict5:32

Meet the Instructors

Maria Teresa Aranzabal
Professor
Marketing
Fernando Cortiñas
Professor
Marketing

[MUSIC]

Welcome back.

Today, we are going to learn to design a distribution channel.

Where we'll find out what important aspects do we need to take into account.

In designing marketing channels,

manufacturers struggle between what's ideal and what is practical.

A marketing channel design goes for four steps.

Analyzing customer needs, setting general objectives,

identify the remedial alternatives and evaluating those alternatives.

Step number one, we need to start by analyzing customer needs and

wants, find out what the target customer want from the channel.

Providing the fastest delivery, the greatest assortment and

the master pieces may not be possible and practical.

Step number two, we have to establish general objectives and constraints.

A company states objectives in terms of target levels of customer service,

their associated cost and the support level.

And also decides which segments to serve

at the best channels to use in each of the cases.

Channel objectives are also influences by the nature of the company, its product,

marketing intermediaries, competitors and environmental factors.

For example, in cosmetics, we have Medicaid using direct channels versus

[INAUDIBLE] using intermediaries like department stores.

The third factor would be to identify major channel alternatives.

When the company has defined its channel objectives,

it should next identify its major channel alternatives.

In terms of type of intermediaries,

number of intermediaries and responsibilities of each channel member.

If we start with type of intermediaries.

They are the type of channel members available to carry out its channel work.

Using many type of resellers in a channel provides

both benefits will reach more and different buyers.

And also drawbacks is difficult to manage and control.

And they compete and conflict may arise.

Depending on the length, that means number of intermediary levels or

each layer performing channel functions.

Channels can be short or long and what we call either direct or indirect.

So a [INAUDIBLE] level channel or a short or also called direct channel is

the one in which the manufacturer sells directly to the final customer.

For example, Internet, the manufacturer-owned shop, the mail order,

the home party, the TV selling, the door-to-door, the special [INAUDIBLE].

You see that there are many of them and the rest will be the indirect or

longer channels.

Most of the companies use a mix of both channels simultaneously, for

example, you can say with Coca-Cola, with a banks.

And the length depends on several factors.

I mean the length of the channels.

Factors such as the nature of that product, the client,

the complexity of the purchasing process, the maturity of the costumer.

And even on other factors like traditions, habits,

legislation, a physical concentration or

dispersion of the population, educational level, the weather.

All these other factors also influence a channel being shorter or longer.

A second aspect to establish channel objectives and

constraints is the number of intermediaries

who have to determine the number of channel members to use at each level.

Three strategies are available.

The intensive one, the intensive distribution.

The stock is available in many outlets.

The examples are the convenience products.

Would be examples like 7-Eleven or Spar, we have the exclusive distribution.

We limit purposely the number of intermediaries handling this products.

The main example are the luxury products, Hermes, Rolex, Rolls-Royce.

And there is a third type that is the selective distribution, it uses more

than one channel but fewer than all the ones willing to carry the product.

And example would be for example, the TV distribution,

the furniture, the home appliances, would be brands like Samsung or Sony.

Finally, we need to agree and know the responsibilities of a channel member.

Producer and intermediaries meet to agree on the terms and

responsibilities of each channel member.

And agrees especially in the first policies, in the conditions of sale,

in the territory rights and in the specific service to be performed.

To finalize, we have the step four in designing a distribution channel,

we need to evaluate the major alternatives.

Each alternative should be evaluated against economic, control and

adaptability criteria.

The economic one would be using criterias to compare ratios

such as likely sales, cost, profitability control.

We have to decide how much control we are going to give to the intermediaries.

And finally, adaptability.

Channels often involve long-term commitment.

However, the company wants to keep channel flexibility to adopt

to environmental changes.

So if you choose a long-term commitment channel,

it must show you a clear superiority in economic and control terms.

Okay, now that we know the steps to follow to design a distribution channel,

in the next class, we will learn how to manage them and to solve conflict.

See you.

[MUSIC]

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