Revel flashcards 8.4 What does channel strategy involve?e?
What is channel strategy?
refers to the plan to reach its target audience through a different mix of direct and indirect marketing channels.
What are conventional channels?
The various channel activities are agreed by negotiation and compromise, recognising that both sides need each other.
What is a dual/multiple distribution approach?
- Each target market may be reached by two or more different routes.
- Works well if discreetness is maintained.
- However, problems can emerge if the same product is sold to the same target market through different channels.
Palamountain (1955) identified 4 types of competition: Competition in channels.
1) Horizontal competition - competition between intermediaries of the same type. e.g. visible competition between supermarkets.
2) Intertype competition - Competition at the same level in the channel but between different types of outlet e.g. battle between department stores.
3) Vertical competition - potential threat to the integrity and effectiveness of a channel. Competition is between different levels within the channel, which can soon lead to internal rivalry.
4) Channel system competition - where a channel is in competition with different, parallel channels. There is high emphasis on total channel efficiency.
What is a vertical marketing system?
Is when companies that produce products in the same market work together to deliver the product to the buyer.
Components of this system are the manufacturer, wholesaler and retailer of this product.
All 3 companies work together to maximise their profits.
What are the 3 types of vertical marketing systems?
- Corporate VMS
- Contractual VMS
- Administered VMS
Corporate VMS?
- Exists when an organisation owns and operates other levels in the channel.
- The dominant organisation may be the manufacturer, wholesaler or retailer.
One of them controls the whole process, the process of production, market distribution and retail sale.
Example: ZARA, use a corporate VMS.
Contractual VMS?
- Most prevalent form of VMS.
- Members of the channel retain their independence but negotiate contractual agreements which specify their rights, duties and obligations.
- This prevents unnecessary internal conflicts.
What are the 3 types of Contractual VMS which are commonly found?
Retail cooperative - where groups of retailers agree to work together to combine and increase their purchasing power by supporting their own wholesaling operation. Specifically benefits smaller retailers.
Wholesaler voluntary chain - where a wholesaler promotes a contractual relationship with independent retailers, whereby the latter agree to organised purchasing, inventory and merchandising programmes.
Franchising - fast becoming a major model of contractual agreement across Europe. Is a contractual relationship between franchisor and franchisee.
Administered VMS?
Achieved through the domination of one key member. This dominant member is usually a large powerful company and dominates by exerting its market power instead of through direct ownership or legal agreements.
For example, Walmart may influence manufacturers to produce and price their goods in a way that aligns with Walmart’s objectives.
Advantages of using VMS are…
- increased efficiency.
- Easily identify problems and identify solutions.
- Parties can reduce costs.
What is market coverage about?
Reaching the end customer in the most cost effective way while satisfying their needs.
What is intensive distribution?
(market coverage)
Where a product or service is placed in as many outlets as possible and no interested intermediary is barred from stocking the product.
Advantage to the consumer is the convenience and availability.
What is selective distribution?
(market coverage)
Using a small number of carefully chosen outlets within a defined geographic area.
What is exclusive distribution?
(market coverage)
Where only 1 outlet covers a relatively large geographic area. May reflect very large infrastructure investments.
In consumer markets, this may provide some inconvenience to the consumer.
