Running head: DESIGNING DISTRIBUTION CHANNELS
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Designing and managing distribution channels
Dena Kopsic
Liberty University
Running head: DESIGNING DISTRIBUTION CHANNELS
Abstract
Marketing channels are necessary to employ corporate marketing strategies. There are several
modes of marketing strategies a corporation may utilize, such as a push strategy. By
incorporating multiple marketing strategies, the product will have high visibility to the target
market. Distribution channels are also a vital for the success of a corporation. As with
marketing channels, there are many modes of distribution channels which can benefit the
corporation. Choosing the most beneficial channels will lead to the success of a corporation.
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Running head: DESIGNING DISTRIBUTION CHANNELS
Designing and managing distribution channels
When a product is manufactured, the question arises on how to best to distribute it.
Choosing the correct marketing channel is vital for the success of the product. Kolter and Keller
(2016) explain, “marketing channels are sets of independent organizations participating in the
process of making a product or service available for use or consumption”. Each channel
intermediary holds a personal stake in the distribution of the product and they must work tin
unison to ensure the success of distribution.
Concept of designing distribution channels
“A marketing channel system is the particular set of marketing channels a firm employs,
and decisions about it are among the most important management faces” Kolter and Keller
(2016). The marketing channels created pave the way for all other marketing decisions. It is
essential for managers to design a pricing strategy for the product, salespeople need to be trained,
advertising campaigns must be designed, and long-term relationships must be established (Kolter
& Keller, 2016).
There are two types of marketing strategies which may be employed, or a combination of
both. The “push strategy uses the manufacturer’s sales force, trade promotion money, or other
means to induce intermediaries to carry, promote, and sell the product to end users” (Kolter &
Keller, 2016). This strategy works well when the brand is not established or it is a product
people will purchase regardless of the brand. The “pull strategy uses advertising, promotion, and
other forms of communication to persuade consumers to demand the product from
intermediaries, thus inducing the intermediaries to order it” (Kolter & Keller, 2016). This
strategy is best used for brands that are established and have a loyal customer base. One may
also choose to use a push pull combination strategy.
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Running head: DESIGNING DISTRIBUTION CHANNELS
Many corporations will employ a multichannel strategy to market and distribute their
goods. Within the multichannel marketing, one may see either an omnichannel marketing or
integrated marketing channel system being employed. In the omnichannel marketing system,
“multiple channel members work seamlessly together and match each target customer’s preferred
ways of doing business, delivering the right product information and customer service” (Kolter
& Keller, 2016). The integrated marketing system is a bit different. The selling strategies of one
channel reflect the other channels selling strategies (Kolter & Keller, 2016). Employing multiple
channels benefits the corporation. The market can be saturated with ease and there are lower
costs associated with multiple channels.
The corporation will execute demand chain planning. Demand chain planning is looking at
the target consumer and planning the supply chain from the target consumer backward (Kolter &
Keller, 2016). By implementing demand chain planning, the corporation can pinpoint where
issues develop and correct them swiftly. The corporation may also “go online with their business
partners to speed communications, transactions, and payments, reduce costs; and increase
accuracy” (Kolter & Keller, 2016).
There are many moving parts and levels to the distribution channel. Suppliers utilize
transporters and warehouses to distribute products to manufacturers. Manufactures also utilize
transporters and warehouses to get their products to dealers. The corporation must determine
how many channel levels are appropriate for their product. Direct marketing channels are a direct
channel from manufacturer to consumer. Website purchases, mailers, and television are
examples of direct marketing channels. The corporation may also move their product through a
wholesaler, then a retailer to the consumer. Ford Motor Company utilizes a two channel and
three channel distribution system. The channel can also be a reverse-flow channel system for
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Running head: DESIGNING DISTRIBUTION CHANNELS
recycling, refurbishing products, disposing of products, or reusing the products (Kolter & Keller,
2016).
The corporation must analyze the desires of the consumer. Consumers purchasing
automobiles enjoy a large selection. A large dealership will have the space to accommodate more
automobiles, therefore will need more products. The manufacturer will employ a distribution
channel to accommodate both the dealership and the end consumer. Technology has made it
possible to deliver products faster than ever before and distribution channels can be altered to
increase profit.
The complications in distribution, if not addressed, could be costly. If products are large
and bulky, one would “minimize the shipping distance and the amount of handling” (Kolter &
Keller, 2016). Depending on the type of product, the distribution channel may change to move
the product to the destination quickly and cost effectively. The corporation should be aware of
economic conditions as they correspondingly have a direct effect on the choice of distribution
channels. It is also important for corporations to observe the actions of other firms when
entering unfamiliar markets to reduce the possibility of fiscal loss (Kolter & Keller, 2016).
Channels have intermediaries and these intermediaries are chosen by management. If a
preferred channel does not perform at its peak, the corporation must look at alternative channels.
For example, if the corporation does not employ enough salesforce for their products, they may
need to hire more. What is the most profitable method of distribution? Selling a product on the
internet, in a third-party store, and the corporations stores has higher market penetration than just
using one channel. When one chooses to exclusively distribute a product, it “severely limits the
number of intermediaries” (Kolter & Keller, 2016). This distribution channel is utilized by high
end brand names with historical success. Selective distribution “relies on only some of the
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Running head: DESIGNING DISTRIBUTION CHANNELS
intermediaries willing to carry a particular product” (Kolter & Keller, 2016). Intensive
distribution saturates the market with the product. Each method can be highly effective if
executed correctly.
The channel members must be able to profit from the products. Kolter and Keller (2016)
state, “the main elements in the ‘trade relations mix’ are price policies, conditions of sale,
territorial rights, and specific services to be performed by each party”. By establishing these
guidelines for channel members, cohesivity can be achieved. Marketing and distribution
channels are intertwined for the success of the product. If each channels performance is superior,
the products success will be higher. By ensuring each channel is profitable, value is added to the
corporation.
Practical application
For this purpose, I will examine the Ford Motor Company. There are many channels
branching from Ford Motor Company. Ford must purchase parts to construct and repair
automobiles from suppliers. Ford recently changed suppliers to improve parts distribution
channels. PRWeb Newswire (2018) explains “OEConnection (OEC) is the leading automotive
technology provider for OEM distribution networks, enabling automakers and dealerships
around the world to deliver parts and service information quickly and accurately into the hands
of repairers”. By choosing an alternative channel, Ford increases customer satisfaction and
profits as evidenced. “With the Ford and Motorcraft Stars (FAMS) Pricing Program, Ford
Certified Parts Wholesale Dealers are able to offer competitive pricing to their mechanical repair
shop customers on program parts utilizing the RepairLink platform” (PRWeb Newswire, 2018).
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Running head: DESIGNING DISTRIBUTION CHANNELS
Once the automobiles are manufactured, they are distributed to automobile dealerships
for sale to the general public. Semi-tractor trailer trucks and railways are the transportation
channel of distribution as stated by Ford (2014) “Ford ships vehicles from its assembly plants to
dealerships using a mix of railcars and trucks”. Ford has recently manufactured automobiles
with a height difference from its other automobiles. The current transportation would not
accommodate the height of these vans so “Ford engineers worked with railroads and railcar
manufacturers to design an innovative railcar that accommodates all the roof-height variations of
the new Transit” (Ford, 2014). By working with intermediaries in their transportation channel,
Ford is able to distribute their innovative Transit cargo van.
Ford Motor Company has several marketing channels. One turns on the television to
watch their favorite show and a sees a Ford commercial. You may watch your favorite soccer
tournament and see a promotion of Ford automobiles as well. “It [Ford] has been seen as a
sponsor of UEFA Champions league and this really soared its brand name and image high in the
eyes of fans and customers alike” (Bhasin, 2019). Ford Motor Company also utilizes radio,
billboards, and the internet for marketing purposes. “This marketing mix also involves sales
promotion, usually through special offers, discounts, and trade-ins” (Ferguson, 2017).
Once the automobile is at the dealership, the salespeople are in the next distribution
channel. “Ford licenses independent business people to sell its cars who agree to meet specified
conditions of sales and services” (Kolter & Keller, 2016). By providing training to salespeople,
Ford Motor Company designs a high functioning distribution channel in which the intermediary
and Ford Motor Company will profit.
Ford Motor Company utilizes a vertical marketing system. This marketing system has a
channel captain or channel steward who either “owns or franchises the others or has so much
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Running head: DESIGNING DISTRIBUTION CHANNELS
power that they all cooperate” (Kolter & Keller, 2016). As a channel steward, Ford Motor
Company generates value for all of its customers. The market is expanded via the channels as
Ford Motor Company is an established brand name. The channel steward “creates a more tightly
woven and yet adaptable channel in which valuable members are rewarded and the less valuable
are weeded out” (Kolter & Keller, 2016). Proverbs 28:2 (English Standard Version) states,
“When a land transgresses, it has many rulers, but with a man of understanding and
knowledge, its stability will long continue”. Ford Motor Company has utilized this vertical
marketing system, integrating intermediaries, making it one of the most powerful corporations in
the world.
Peer Question
What are the three distribution channels a manufacturer selling a physical product will utilize?
Explain the purpose of each channel.
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Running head: DESIGNING DISTRIBUTION CHANNELS
References
Bhasin, H. (2019, May 4). Marketing mix of Ford Motor Company-Ford marketing mix.
Marketing91. Retrieved February 20, 2020, from
https://www.marketing91.com/marketing-mix-of-ford-motor-company-ford-marketing-
mix/
Ferguson, E. (2017). Ford Motor Company marketing mix (4P's) analysis. Paramore Institute.
Retrieved February 20, 2020, from http://panmore.com/ford-motor-company-marketing-
mix-4ps-analysis
Ford. (2014, June 23). How Ford, Railroad industry created innovative way to ship the new
transit van to North American customers. Retrieved February 27, 2020, from
https://media.ford.com/content/fordmedia/fna/us/en/news/2014/06/23/innovative-way-to-
ship-new-transit-van.html
Kolter, P., & Keller, K. L. (2016). Marketing Management. United States of America: Pearson
Education, Inc.
PRWeb Newswire. (2018, February 26). Ford Motor Company selects OEC for mechanical parts
marketing program. Business Insights: Global. Retrieved February 27, 2020, from
https://bi-gale-com.ezproxy.liberty.edu/global/article/GALE|A528939888?
u=vic_liberty&sid=summon
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