A producer must periodically review And modify its channel arrangements. Modification becomes neeessarv when the distribution channel is not working as planned» consumer buying patterns change, the market expands, new competition arises, innovative distribution channels emerge, and the product moves into later stages in the product life cycle. Consider Apple.
To combat Its lowly 3.4 percent share d1 the U.S. personal computer market. Apple has opened more man 75 retail locations since 2001. The stores sell Apple products exclusively and target tech-savvy customers v.'itfi in-store product presentations and workshops; a full line of Apple products, software, and accessories: and a "Genius Bar' sidled by an Apple specialist. Although the move upset existing retailers, Apple explained that Since wwrw,appie.com generated fOLig.ily ?5 percent of;ofes, its mvn retail chain was a nat-■ oral extension.31
Nti marketing channel will remain effective over the whole product life cycle, Early buyers might be willing to pay lor high value-added channels, inn later buyers will switch So lower-cost chantre Is. Small office copiers tvere first sold by manufacturers" direct sales forces, later through office equipment dealers, still biter through mass merchandiser;, and now by mail-order firms and Internet marketers.
In competitive markets With low entry barriers, the optimal channel structure will inevitably change over time. The change could invoke addingor dropping individual channel members, adding or dropping particular market channels, or developing a totally new way to sell goods.
Adding or dropping Individual ehantiel members requires an incremental analysis, Whal would the firm's profits look like with and without this intermediary? An automobile manufacturer's decision to drop a dealer requires subtracting the dealer's sal es and estimating the possible sales loss or gain to the manufacturer's other dealers,
Sometimes a producer considers dropping all Intermediaries whose sales are below a certain amount- Look at Navistar:
A Navislar Imck c^li Ol Ute ninny nio(le-!s II'S Company produoes and sills through a Network or ttealerships Ihat have the lechnical expertise and locai contacts 1o Kecp Navistar in markets both larae and smail
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