Marketing Channel Strategy



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Marketing Channel Strategy An Omni-Channel Approach

productive activity

even if what they produce is intangible. In this sense, productivity derives from 
the value that end-users place on the service outputs that result from channel 
efforts. The activities that produce the service outputs demanded by end-users 
are the 
channel functions
.


CHANNEL BASICS
46
Auditing what channel functions get performed by each channel member in the 
existing channel systemby whomat what levels, and at what cost, provides several 
important benefits:
1. Detailed knowledge of the capabilities of each channel member allows them 
to diagnose and remedy shortcomings in the pricing and provision of service 
outputs to targeted segments.
2. An audit may identify gaps in service outputs desired by targeted end-user seg-
ments, such that service providers can add necessary new channels or revise 
currently existing ones to address the shortcomings.
3. Knowing which channel members have incurred the costs of performing which 
channel functions helps members allocate channel profits equitably. In turn, 
channel members can better preserve a sense of fairness and cooperation and 
avert channel conflicts.
Our discussion in this section accordingly focuses on identifying and describing 
channel functions, as well as outlining how managers can audit channel systems to 
identify a zero-based channel, service gaps, or excessive costs.
Specific channel members can specialize in one or more channel functions, even 
as they remain excluded from other activities. This exclusion condition may make 
it appear tempting to remove another member from the channel (i.e., change the 
channel structure). But the specialized functions performed by that channel mem-
ber cannot simply be eliminated. After a channel member leaves the channel, its 
functions must shift to some other channel member, to preserve the service output 
provision. An exception arises only if the eliminated channel member was per-
forming activities that also were being addressed elsewhere in the channel, such 
that its contributions to the service output were redundant. For example, when an 
employed salesperson and an independent distributor’s sales rep call on the same 
customer, they waste effort and resources. The channel may be better off using one 
or the other, not both, types of salespeople.
Every channel function contributes to the production of valued service outputs 
and also produces costs. Table 2.1 uses CDW as an example and offers some exam-
ples of channel cost-generating activities associated with each function.

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