Distribution Channel Strategy.ppt

Distribution Channel Strategy Todays Menu Some Basic Channel Concepts The Course in Brief Design of the End-User Interface Some Basic Channel Concepts The concept of a channel The concept of value added The concept of channel strategy The process of channel design The process of channel management What is a Channel? A channel comprises the set of institutions and related activities that bring products/services to the end user from their manufacturing source From the perspective of any individual firm, the channel comprises the means by which its end users are served; its goods and service requirements are met Arrow Channel Structure Arrow Channel with Express Value Added in the Channel Value added represents the benefits provided by one channel member to another Basic services may be roughly divided into two parts Logistic – nearby inventories (stores), fast delivery Informational – product specs, suitability, availability Additional value added services may include manufacturing, consulting, credit, sub-system management (supply chain, ordering) Delivering Efficient Value Determining value added and related pricing characterizes the firm’s channel model Stern admonishes that decisions about the degree of value added must derive from an understanding of end user needs Value added must be balanced against its cost Building a channel and its VA characteristic is central to being market driven Channel Components The Commercial Channel: The network of organizations cooperating to provide value added services to end-users Commercial channels are distinguished by their number, type and juxtaposition of members and degree of closure Channel length refers to the number of levels in the channel Juxtaposition is their geographical relationship to each other Closure reflects the degree of channel membership control The End-User: an active channel member, consumer Performs channel functions such as purchasing, transport, storage Incurs significant real and opportunity costs