การจัดการช่องทางการจัด จำหน่าย Distribution Channel Management Supply Side Channel Analysis: Channel Structure and Intensity Learning Objectives Chapter 4

Chapter 4 Outlines To understand why manufacturers prefer more coverage, especially in the fast moving consumer goods. To understand why downstream channel members prefer less coverage, while preferring more assortment in the manufacturer’s product category. To understand why limited distribution is preferable for brands with a high-end positioning or a narrow target market. To understand the mechanism by which limiting the number of trading partners raises motivation and increase power. To understand the special challenges of multiple formats and of dual distribution. Learning Objectives

Channel Structure and Intensity Channel structure summarizes the types of channel members, the intensity or numbers of members of each type that coexist in the market, and the number of distinct channels that coexist in the market “Channel design” presents three challenges: The level of intensity needed: How much coverage should the producer have? How many different channel types should the producer have? Should the producer use its own channels or via third parties or both (dual or concurrent distribution)?

Channel Structure and Intensity Intensive distribution means that a brand can be purchased through many of the possible outlets in a trading area. Exclusive distribution means that a brand can be purchased only through one vendor in a trading area. The more intensively a manufacturer distributes its brand in the market, the less influence the manufacturer can have over the channel members. The upstream members (manufacturers) consider how many outlets to pursue (degree of selectivity). The downstream members (resellers) consider how many competing brands to carry in a product category (category selectivity).

Points of Discussion: Coverage vs Assortment Which one is your preferred distribution strategy; intensive distribution or exclusive distribution? Why intensive distribution is better for manufacturers of convenience goods? Why downstream channel members dislike intensive distribution? Can the manufacturer sustain intensive distribution? How many brands a downstream channel member should carry for each product category? Channel Structure and Intensity

FIGURE 4- 1: SAMPLE REPRESENTATIONS OF THE COVERAGE/MARKET SHARE RELATIONSHIP FOR FAST MOVING CONSUMER GOODS Based on Reibstein, David J., and Paul W. Farris (1995), "Market Share and Distribution: A Generalization, A Speculation, and Some Implications," Marketing Science, 14 (3), G190-G % 15% 30% 50%

FIGURE 4- 2: SELECTIVE COVERAGE— THE MANUFACTURER’S CONSIDERATIONS

FIGURE 4- 3: CATEGORY SELECTIVITY: THE DOWNSTREAM CHANNEL MEMBER’S CONSIDERATIONS

Points of Discussion-How Much Selectivity to Trade Away The threat of complacency The nature of the product category Brand Strategy: Quality Positioning and Premium Pricing Brand Strategy: Target Market Channel Structure and Intensity

Points of Discussion- Bargaining for Influence Over Channel Members Desired coordination Manufacturer-specific Investments by downstream channel members Dependence balancing: trading territory exclusivity for category exclusivity Reassurance: using selectivity to stabilize fragile relationships The price of the concession: factoring in opportunity costs Channel Structure and Intensity

Points of Discussion- Back to the basics: cutting costs and raising sales Saving money by limiting the number of trading partners Do more trading partners really mean more revenue? A caution on the issue of limiting the number of trading partners Channel Structure and Intensity

Points of Discussion Going to market via multiple types of channels Dual distribution: going to market via independent channels and self- owned channels Carrier-rider relationships Channel Structure and Intensity