What do channels move?
goods, services, information
- good businesses know that information helps attract and keep customers
Example: Zara
information channels are very clear for consumers. Have 3 lines Classic, Fashion and Trend. These lines have different production methods that reflect what the customer wants from each.
Example: Dell
using channels to build a competitive advantage over your competitors
- bypassed dealer network and sold directly to consumer
- used the internet and telephone
- practise JIT and negative cash conversion cycle
- less storage costs, can pay suppliers, all advantages
Virtual Integration
providing accurate up-to-date info to channel partners so they can work in a synchronized way to serve the customer
Why are channel strategies important in a business?
- use information to attract and maintain customers
- create competitive advantage
- compensate for weakness in marketing mix
- differentiate a brand
- build brand loyalty
Example: Papa John’s
using channels to compensate for weaknesses in marketing mix
- trailing behind Pizza Hut and Dominos
- used new online ordering and text messages as a new channel (5 years before competitors)
Example: Nokia
differentiate brand
- makes mobile phone network operators its channel partners to compete with Apple
Example: Saturn
Build Customer Loyalty
- “build a better car, not based on engineers, but on the customer’s perspective”
- secured brand loyalty by changing the maintenance process and the buying process
- developed supply chain strategy based on the customer needs
- each dealer is given a region so that they don’t compete with each other but focus on the brand/customer
Consequences of Bad Channel Strategy
- high channel costs
- lost market share
- lost profits
- wasted effort (not effective channels will yield no results)
How to Pick the Right Channels
- Define Realistic Channel Range (use table grid)
- Calculate channel economics
- Guide to customer channels
- Touch customers at each point
- Mitigate channel conflict
- evolve channel strategy
Multi-Channel
- increasing the number of channels increases customer expectations, so it is difficult to remove them later
- more difficult to manage and market across
- may reduce profits by increasing the cost to serve customer
Defining Realistic Channels
- Will customer use this channel?
- Is this channel a good fit with our product?
- Will channel impact our brand positively?
- Is channel a good fit with our overall strategy?
Channel economics
- look at the cost per transaction as well as the revenues gained to make informed decision
- channel profitability = (expense/revenue)
- channel capacity
Guide customers to channels
- get right customer to the right channel
- will under-serve or over-serve resulting in wasted efforts and profit loss
Customer Purchase Process
- Brand Awareness
- Product Knowledge
- Purchase
- Post-Sale Service
Example: Charles Schwab
How to Maintain a Multi-Channel Model While Reducing the Cost of Providing It
- uses branches to acquire customers but uses other (less expensive) channels to keep them
Touch Customers at Each Point
- provide incentives/disincentives to direct to appropriate channel
- make it easy to switch channels (assistance - i.e. Air Canada)
- provide a safety net
Mitigate Channel Conflict
Example: WW Grainger
- conflicts arise vertically and horizontally in the channel
- had to navigate backlash from sales force when online sales took away potential commissions
- repurposed sales force to focus on building customer loyalty with more lucrative clients
Evolve Channel Strategy
Example: LEGO
despite high sales and innovation, LEGO continued to make losses due to an outdated channel strategy
- refined suppliers and waste to reduce overall costs and increase efficiency
- worked closely with larger retailers to forecast inventory and make decisions
Arbol Channel Strategy
Evolve its Supply Chain
- focused on value chain rather than supply chain!!
- salespeople were not educated about the differences and benefits of diff plywood
- created an education program that made supply chain stronger and customer more satisfied, increasing value of brand
Example: Sony
Tweaks product features to ensure the different channels are not competing for the “same” product, reducing channel conflict across retailers
