Channel Design & Decisions of Channel Design | Intensive, Exclusive and Selective Distribution (72)

Summary

This video covers the key decisions involved in marketing channel design. Manufacturers face challenges between ideal and practical approaches when structuring their channels. The process includes analyzing customer needs, setting channel objectives, identifying alternatives, and evaluating them based on factors like cost, control, and adaptability. Examples from companies like Tesla and Nike illustrate how different strategies—such as direct sales—can optimize customer experience and control. Tesla bypasses third-party dealerships, while Nike is shifting towards direct-to-consumer models, prioritizing online sales and their own stores.

Takeaways

• 🛠️ Manufacturers face various decisions in designing marketing channels, balancing ideal and practical approaches.
• 📊 Key steps in channel design include analyzing customer needs, setting channel objectives, identifying alternatives, and evaluating those alternatives.
• 📦 Lot size, waiting time, spatial convenience, service backup, and product variety are critical factors in understanding customer needs and channel design.
• 🎯 Channel objectives are influenced by company attributes, products, competition, and the marketing environment.
• 🚚 Product types influence channel decisions: perishable items may require direct marketing, while non-standard products might need specialized sales representatives.
• 🔄 Companies must evaluate types of intermediaries like sales agents, distributors, or internet channels, each with strengths and weaknesses.
• 🛍️ Three key distribution strategies are intensive distribution, exclusive distribution, and selective distribution, depending on the product and market goals.
• 🤝 Channel members must agree on terms such as pricing, sales conditions, and responsibilities to ensure smooth operations.
• 📈 Evaluating alternatives involves considering economic impact, control over the product, and the channel’s adaptability to change.
• 🚗 Examples include Tesla’s direct-to-consumer model and Nike’s direct sales strategy to enhance customer connections and control.

Q & A

What are the key aspects to consider when designing a marketing channel system?

When designing a marketing channel system, a marketer must consider analyzing customer needs and wants, establishing channel objectives and constraints, identifying major alternatives, and evaluating those alternatives.

How does analyzing customer needs and wants influence channel design?

Analyzing customer needs and wants helps businesses estimate customer preferences, such as lot size, waiting and delivery time, spatial convenience, service backup, and product variety. This analysis ensures that the marketing channels are tailored to meet customer expectations.

What are the five factors that help estimate customer needs and wants in channel design?

The five factors are: 1) Lot size, 2) Waiting and delivery time, 3) Spatial convenience, 4) Service backup, and 5) Product variety.

What is the difference between intensive, selective, and exclusive distribution strategies?

Intensive distribution places goods in as many outlets as possible (e.g., Walmart). Selective distribution involves choosing a few intermediaries (e.g., McDonald's franchises). Exclusive distribution limits distribution to a small number of dealers (e.g., Louis Vuitton).

What are some major channel alternatives in marketing channel design?

Major channel alternatives include varying the types of intermediaries (e.g., salesforce, distributors, internet), the number of intermediaries (intensive, selective, or exclusive distribution), and the responsibilities of channel members.

Why is it important for producers and channel members to agree on terms and conditions?

Agreement on terms like price policies, sale conditions, and territory rights ensures smooth and efficient functioning of the channel. Mutual understanding between all parties leads to an effective and profitable partnership.

What are the three criteria for evaluating channel alternatives?

The three criteria for evaluating channel alternatives are economic criteria (sales and cost), control issues (degree of control over product marketing), and adaptability criteria (ability to adapt to changing market conditions).

How does Tesla manage its marketing channel differently from traditional automakers?

Tesla skips third-party dealers and operates through direct sales, which gives it better control over the customer experience. This has led to disputes in some U.S. states but allows Tesla to explain the advantages of its vehicles more effectively.

What is Nike's 'Triple Double Strategy' in terms of marketing channels?

Nike's 'Triple Double Strategy' aims to double its innovation, speed to market, and direct customer connections. It focuses on increasing online sales and direct-to-customer relationships while reducing reliance on traditional retailers.

Why did Nike shift its focus from wholesale channels to direct sales?

Nike shifted its focus to direct sales through its own website and stores to better connect with customers and increase control over the customer experience. This move, part of its 'Customer Direct Offense,' helped direct sales grow significantly.