Channel Behavior and Marketing Strategies Explained

Channel Behavior

Channels are behavioral systems made up of real companies and people who interact to accomplish their individual and collective goals. Sometimes they work well, and sometimes they don't. Disagreements over goals, roles, and rewards generate channel conflict.

Types of Channel Conflict

1. Horizontal Conflict: Among firms at the same level of the channel. Example: Between different car dealers of the same brand or between different franchisees.
2. Vertical Conflict: Among firms at different levels of the channel. Example: Between franchisor and franchisees, or between producer and wholesaler.

Channel Organization

For the channel as a whole to perform well, each member's role must be specified, and channel conflict must be managed. Conventional distribution has resulted in damaging conflict and poor performance. One of the biggest channel developments has been the emergence of other systems:

1. Vertical Marketing Systems
2. Horizontal Marketing Systems
3. Multichannel Distribution Systems

Vertical Marketing Systems

A distribution channel structure in which producers, wholesalers, and retailers act as a unified system. One channel member owns the others (corporate VMS), has contracts with them (contractual VMS), or has power that they all cooperate with (administered VMS).

Horizontal Marketing Systems

A channel arrangement in which two or more companies at one level join together to follow a new marketing opportunity. Example: McDonald's Express + Walmart.

Multichannel Distribution Systems

A distribution system in which a single firm sets up two or more marketing channels to reach one or more customer segments.

Identifying Major Alternatives

When the company has defined its channel objectives, it should next identify the types of intermediaries and its number (exclusive, selective, or intensive distribution).

Communication Strategies

Advertising

Any paid form of nonpersonal presentation and promotion of goods, services, or ideas. Advertisers include:

1. Businesses
2. Non-profit organizations
3. Governments

Advertising is handled in different ways according to the size of the company:

1. Small companies
2. Large companies

Setting Advertising Objectives

• Informative
• Persuasive
• Reminder
• Reinforcement

Deciding on the Ad Budget

• Stage in the product life cycle
• Market share
• Competition
• Ad frequency
• Product substitutability

Choosing the Ad Message

Deciding on Media and Measuring Effectiveness