Marketing Channel Strategy



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Marketing Channel Strategy An Omni-Channel Approach

Ordering
and 
payment
costs are those incurred during the actual purchase of 
and payment for the product. They may seem unglamorous, but innovations are 
radically altering the performance of these functions today. Automatic replenishment 
not only reduces ordering costs but also improves in-stock rates.
Finally, 
information sharing
takes place among and between every channel 
member, in both routine and specialized ways. Retailers share information with 
their manufacturers about sales trends and patterns through electronic data inter-
changes; if used properly, this information can reduce the costs of many other 
channel functions. For example, with improved sales forecasts, the channel can 
lower its physical possession costs, because it holds less inventory. Such informa-
tion is so important that logistics managers refer to this function as an ability to 
“transform inventory into information.”
The costs associated with performing channel functions also demand that 
channels avoid performing unnecessarily or excessively well in any of their func-
tions. Knowing which service outputs their target end-users demand, at what 


CHANNEL BASICS
50
level of intensity and at what cost, helps channel managers design channel sys-
tems that provide targeted segments with the exact level of service outputs they 
demand, at the lowest cost.
SIDEBAR 2.1
CDW and PC Purchases by Small- and Medium-Sized Business Buyers: 
Channel Functions and Equity Principle Insights
8
The success of CDW (cdw.com), a $15-billion, multi-brand technology solutions provider, lies in 
serving small- and medium-sized business customers with a superior provision of service outputs. 
Its ability to do so rests on its strategic performance of key channel functions, in a more efficient 
(lower-cost) and effective (better at producing service outputs) manner than other channel part-
ners can. Key channel functions for CDW include physical possessionpromotionnegotiation
financing, and risk. In addition, CDW offers flexibility to its buyers; not all buyers are required 
to pay for or solicit all of the functions that CDW offers. Instead, CDW provides differentiated 
function “packages” to the market, through one overall channel structure.

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