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Posted: July 12th, 2020
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CHANNEL MANAGEMENT
This report aims at understanding “channel management” in depth through the use of various strategic marketing tools like Fishers (1997) model, Porters Value Chain analysis etc. Furthermore, the report reflects a clear understanding of how such strategic marketing tools can be used in evaluating NextCare’s strategic position in the marketplace. Through analysing and interpreting data and knowledge on the subject, the report is concluded with a few reccomendations to the CEO regarding the supply chain as well as marketing strategy of the firm.
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A ‘channel’ in the simplest words is a route taken by an organisation to distribute and market its product and services, for example wholesalers, retailers, and now even the internet. Distribution channels are carefully designed as they demonstrate an organisations long term commitment and responsibility towards its markets and distribution decisions are seen to be more difficult than pricing and advertising decisions (Rangan, 1987).
The easiest channel is direct selling between the organisation and the final consumer. However, growing markets and customer demand facilitated the need for more complex channels and just as a usual business firm needs ‘management’ to function smoothly, so do the partnerships within a channel.
“Channel Management” (CM) also known as channel relationship management or partner relationship management reflects on the distribution i.e. it emphasizes on the 4th P in the marketing mix, “place”. CM is defined as a process wherein an organisation develops and implements guidelines and procedures to maintain and boost coordination and cooperation of the several organizations in the channel in order to reach a wide customer base effectively (The Economic Times, 2019). Channel management aids organizations in administering activities and the flow of information and data among the various channel partners (Zhang et al., 2018). The success of management, value creation and distribution strategy of a firm are directly proportional to the success of the organizational management structure of distribution channels (Paksoy, Pehlivan and Kahraman, 2012).
Scarce resources, increasing competition, rising customer demands, the unpredictable nature of market are a few factors that made it extremely necessary for organisations to have an efficient and effective distribution channel management force. Furthermore, pressures from strong distributors is another very crucial reason for companies to accurately manage their distribution channels. In other words, since distributors are key to reaching retailers, they have the knowledge about the changing market trends and customer demands and if not managed properly, distributors can compete against manufacturers by producing their own brands. For example, Waitrose has 2 brands, one of which is in-store called “essential brand” and the other is a premium brand which compete against each other.
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Manufacturers try to use a combination of different ways to reach customers. As shown in figure 1 the manufacturer can either reach out to the consumer directly or through the medium of intermediaries. It is important to note that the increased intermediaries are directly related to increased costs at each level.
Here, in the 4th channel a key role is that of an “agent” who is the sole dealer in 1 country responsible for promoting a particular branded product
Figure 1: Structure Of Marketing Channels (Source: Authors Own)
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