fn designing the marketing channel. the marketer must understand the service output levels desired bv targel customers. Channels produce five service outputs:
!, I.ol size - The number of units the channel permits a typical customer in purchase on Orte occasion, fn buying ears for its fleet. Hertz prefers a channel from which it can buy a large lot si?.c; a household wants a channel that permits buying a lot Size of one.
2. Wailing and delivery time - I he average time Customers of that channel %vait for receipt of the goods, Customers increasingly prefer faster and faster delivery channels. Spatial convenience-The degree to which the marketing channcl makes it easy for customers to purchase the product. Chevrolet, for esample. offers greater spatial eonve-
A customer cperales a Kcii^ rciiilab ia $ rem 1 outlet Mm labs often appear in tela* slccs lhat also have photo processing departments, tike Vtelgrcens and CVS stores.
nieuce ihan Cadillac, because die re arËmûreChevrolet dealers. ( Hit;violet's greater market decentralization helps customers save on transportation and search crisis in buying and repairing an automobile, it. Product tttriefy-The assortment breadth provided by the marketing channel. Normally, customers prefer a greater assortment because more choices increase the chanced F finding what ihey need, 5, Servlcebackifp-The add-on services (credit, delivery Installation, repairs) provided by the channel, The greater (he service backup, the greaier the work provided by the channel,"1
I'he ruarketing'Charinel designer knows thai providing greaier service outputs means Increased channel costs and higher prices for customers. Different customers have ditïcrent service needs. The success of discount Stores indicates that many consumers are willing to accept smaller service outputs if they can save money
Channel objectives should he stated in terms of targeted service output levels. Under competitive conditions, channel institutions should arrange their functional tasks to minimize total channel costs and still provide desired levels of service outputs.1,1 Usually, planners can identify several market segments that want different service levels. Effective planning requires determining which market segments to serve and the best channels for each,
Channel Objectives vary with product characteristics, I'erisliable products require more direct marketing, EHrlky products, such as building materials, require channels that minl-inize the shipping distance and I he amount of handling. Nonstandard products, such as custom-built machinery and specialized business forms, are sold directly by company sales representatives. Products requiring installation or maintenance services, such as heating and cooling systems, arc usually sold and main lamed by the company or by franchised dealers. I tigh-un il-value products suc h as generators and turbines tire often sold through a company sales force rather than intermediaries.
Channel design must take into account ihc strengths and weaknesses of different types of intermediaries. I'or example, mauufacHirers' reps an! able to contact customers at a low cost per customer because the total cost is shared by several clients, but the selling effort per custom er is I ess i nie n se i ha ti i I' company sales reps d id the sell i ng. < ha n nei design i s also i nfl u-enced by competitors' channelsChannel design must adapt to the larger environment. When economic conditions are depressed, producers want to move their goods to market using shortev channels and without services that add to the final price of the goods. I.egal regulations and restrictions also affect channel design. U.S. Jaw looks unfavorably on channel arrangements that may tend to substantially lessen competition or create a monopoly.
Companies can choose from a wide variety of channels for reaching customers, -from sales forces to agents, distributors, dealers, direct mail, telemarketing, and the Internet, Each channel has unique strengths as well as weaknesses. Sales forces can handle complex products and transactions, but they are expensive. The Internet is much less expensive, but it cannot ha (telle com plex prod nets. Dis t ri butors ca n create sales. In (t the co mpanv loses d i rec t contact with customers.
The problem is further coin pi lea ted by the fact that most companies now use a mix of channels. Each channel hopefully reaches a different segment of buyers and delivers the right products in each at the lea si co si. When this does not happen, there is usually channel conflict and excessive tost.
A channel alternative is described by three elements: I he types of available business in terni ediariL1 s, the number of intermediaries needed, and the terms ant! responsibilities of each channel member.
types OF INTERMEDIARIES A firm needs 10 identify the types of intermediaries available to carry on its channel work.
Innovalive markfiii'.g Ctennefr Calyx arid Corolla pells Isomers through direct dsli^fjy wilh a or 'it catalog and an online store.
i'or example, n iC5t*equt}itnem n■ ¡.lhlifitctlinrr developed an audio device for delecting poor mechanical ¡connections in machines with moving parts. Company executives feU (Ms product would sell in all industries where electric, combustion, or steam engines were used, such as aviation, automobiles, railroads, food canning, construction, anil oil-The sales forte was smalt. The problem was how to reach these diverse industries effectively. The following alternatives were identified;
o Expand the company's direct sales force. Assign sales representatives lo contact all prospects in ah area, or develop separate sales forces for the diiferent industries.
s Hire manufacturers' agents In different regions or end-use industries to sell the new equipment.
a l-ind distributors in the different regions or end-use industries tfiat will buy and carry the device Give them exclusive distribution, adequate margins, product (raining, and promotional support.
Table 15.2 lists channel alternatives identified by a consumer electronics company that produces cellular car pi ¡on essoin panies should search for innovative market big channels. Med ion sold 600,000 i'CJs in Europe, mostly via major one- or two-week 'burst promotions" eh Aldi's supermarkets20 Columbia 1 louse hasstit&cessfully merchandised music albums through Hie mall. Other sellers such as Marry ami David and Calyxg Corolla have creatively sold fruit and flowers, respectively, through direct delivery. (See "Marketing Insight: How CarMax Is Transforming the Auto HusineKS.")
Di:SIGNING AMO MANAGING VALUE NETWORKS AND CHANNELS
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