The Environment of Marketing Channels. Marketing Channel and the Environment Marketing channels...

The Environment of Marketing Channels

Marketing Channel and the Environment

• Marketing channels develop and operate in a complex environment that is continually changing.

• Channel managers must therefore have an understanding of the environment and how it can influence channel management in order to plan effective marketing channel strategies for meeting these changes successfully.

Major Environment

• Economic environment• Competitive environment• Sociocultural environment• Technological environment• Legal environment

Impact of Environment in a Marketing Channel Context

Environment:1.Economic2.Sociocultural3.Competitive4.Legal5.Technological

Producers and manufacturers

Intermediaries

Target markets

Facilitating agencies

Locus of channel management

Channel manager’s analysis of environmental impact must include all channel participants

Member participants

Nonmember participants

1. Economic Environment

• The most obvious and pervasive category of variables affecting all members and participants in the channel.


Major economic phenomena:• Recession: 2 consecutive quarters of decline

in the Gross Domestic Product (GDP), any period in which the GDP is stagnant or increasing very slowly is often referred to as ‘recessionary” or at least and “economic slowdown.”


Major economic phenomena:• Inflation: Inflation is the rate of increase in prices

for goods and services. When the price level rises, each unit of currency buys fewer goods and services.

• There are a number of different measures of inflation in use. The most frequently quoted and most significant ones are the Consumer Prices Index (CPI) and the Retail Prices Index (RPI).

www.bbc.com/news/business-12196322


Major economic phenomena:• Deflation: When the overall price level

decreases so that inflation rate becomes negative, it is called deflation. It is the opposite of the often-encountered inflation.

http://economictimes.indiatimes.com/definition/deflation


Major economic phenomena:• Other economic issues: – Trade deficit– National debt/ budget deficit– High interest rate

2. Competitive Environment

Types of competition:1.Horizontal competition2.Intertype competition3.Vertical competition4.Channel system competition

1) H1) Horizontal (Intratype) orizontal (Intratype) CompetitionCompetition

• Competition between firms of the same type.

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2) I2) Intertype Competitionntertype Competition

• Competition between different types of firms at the same channel level.

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3) V3) Vertical Competitionertical Competition

• Competition between channel members at different levels in the channel.

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4) C4) Channel System hannel System CompetitionCompetition

• Complete channels competing with other complete channels.

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3. Sociocultural Environment

• Age patterns of population• Changing ethnic mix• Educational trends• Family or household structure• Changing role of women

3. Sociocultural Environment

Population Age Patterns

Ethnic Mix

Educational Trends

Family or Household Structure

U.S. pop. Becoming both younger & older # of minority-owned businesses Levels = people more demanding Smaller & more varied

Role of Women # = changing shopping needs

4. Technological Environment

Help retailers & wholesalers closely monitor success orfailure of products they handle

ScannersComputerized inventory management

& Portable computers

4. Technological Environment

• Electronic data interchange

EDI – ElectronicData

Interchange

• Links together channel information systems• Provides real-time responses• Enhanced by Internet

= Enhanced Distribution

Efficiency

5. Legal Environment

The set of laws that impact marketing channels

• Continually evolving • Affected by changing values, norms, politics,

& precedents• Knowledge of basics helps channel manager

avoid serious & costly legal problems


• Legal issues in channel management

• Dual Distribution, or multi-channel distributionProducer or manufacturer uses 2 or more different channel structures

for distributing the same product• Exclusive Dealing

Supplier requires its channel members to sell only its products or to refrain from selling directly to competitive suppliers

•Full-Line ForcingSupplier requires channel members to carry a full-line of its products in

order to sell any particular products in supplier’s line



• Price DiscriminationSupplier sells at different prices to the same class of channel

members• Price Maintenance

Supplier dictates prices charged by channel members to their customers

• Refusal to DealSupplier has right to refuse to deal with whomever they want as

channel members



• Resale RestrictionsManufacturer attempts to stipulate to whom and in what geographical market channel

members may resell the manufacturer’s products

• Tying AgreementsSupplier sells a product to a channel member on condition that the channel member also

purchase another product

• Vertical IntegrationFirm owns and operates organizations at other levels of the distribution channel

The Environment of Marketing Channels. Marketing Channel and the Environment Marketing channels...

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