Steps of Channel Strategy Selection

Channel strategy include determining the type of channel arrangement,deciding the intensity of distribution and selecting the channel configuration.

 

Types of Channels-

The major type of channels are conventional channels and vertical marketing systems although horizontal marketing systems are important in some situations,along with emerging digital channels.

Conventional Channel:

The conventional channel of distribution is a group of vertically linked independent organizations,each trying to look out for itself,with limited concern for the total performance of the channel.The relationships between the conventional channel participants are rather informal and the member are not closely coordinated.

Vertical Marketing Systems:

The second type of distribution channel is the vertical marketing system.Marketing executives in an increasing number of firms realize the advantages to be gained by managing the channel as a coordinated or programmed system of participating organizations.

1.Ownership vertical marketing system-

Ownership of distribution channels from source of supply to end user involves a substantial capital investment by the channel coordinator.This kind of VMS is also less adaptable to change compared to the other VMS forms.For these reasons a more popular alternative may be to develop collaborative relationships with channel members.Such managements tend to reduce the coordinators control over the channel but overcome the disadvantages of control through ownership.

2.Contractual vertical marketing system-

The contractual form of the VMS may include various formal arrangements  between channel participants including franchising and voluntary chains of independent retailers .Franchising is popular in fast foods,lodging and many other retail lines.

3.Administered vertical marketing system-

The administered VMS exists because one of the channel members has the capacity to influence other channel members.This influence may be the result of financial strengths,brand image,specialized skills and assistance and support to channel members.

Horizontal marketing system:

The horizontal marketing system exists when two or more unrelated companies put together resources or programs to exploit a marketing opportunity.

Intensity of distribution:

The second step in channel strategy is selecting distribution intensity.Distribution intensity is best examined in reference to how many retail stores carry a particular brand in a geographical area.If a company decides to distribute its products in many of the retail outlets in a trading area that might normally carry such a product,it is using an intensive distribution approach.

Channel Configuration:

The third step in selecting the distribution strategy is deciding.The type of channel and the distribution intensity selected help in deciding how many channel levels to use and what types of intermediaries to select.

1.End User Considerations-

It is important to know where the targeted end users might expect to purchase the products of interest.The intermediaries that are selected should provide an avenue to the market segments targeted by the producer.

2.Product Characteristics-

The complexity of the product,special application requirements and servicing needs are useful in guiding the choice of intermediaries.

3.Manufacturer's Capabilities and Resources-

Large producers with extensive capabilities and resources have a lot of flexibility in choosing intermediaries.

4.Required Functions-

The functions that need to be performed in moving products from producer to end user include various channel activities such as storage,servicing and transportation.

5.Availability and Skills of Intermediaries-

Evaluation of the experience,capabilities and motivation of the intermediaries which are under consideration for channel membership is also important.

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