Question

How does the impact of the environment on channel strategy differ from other major strategy areas of the marketing mix? Please explain in more detail.

Answer 1

Marketing Mix
The marketing mix is also called the Four P's, consisting of product, price, place and promotion. Product and price refer to the item offered for sale and the selling price. Place refers to the venues through which the product will be offered and might include online, retail or distribution channels. Promotion refers to the selling and advertising efforts undertaken to inform your target customers about the product and persuade them to buy.

Marketing Strategy
Strategy is a military term that refers to the objective of a force and the plans and tactics employed in reaching the objective. In addition, strategy takes into account the surrounding conditions and the competition, rather than focusing solely on the company's own products. Strategy provides the overall direction of marketing efforts toward a specific goal that can be expressed simply and clearly. A company with a marketing strategy might have a goal of capturing 70 percent of a given market share and have definite plans on how to accomplish that goal. A company without a solid marketing strategy might intend to expand sales by growing several market sectors, but not really have a specific focus or a plan to achieve its goals. A good marketing strategy will include all elements of the marketing mix as part of its tactical plan.

Characteristics of a Channel
Certain characteristics are implied in every channel.

First, although you can eliminate or substitute channel institutions, the functions that these institutions perform cannot be eliminated. Typically, if a wholesaler or a retailer is removed from the channel, its function will either shift forward to a retailer or the consumer, or shift backward to a wholesaler or the manufacturer.

For example, a producer of custom hunting knives might decide to sell through direct mail instead of retail outlets. The producer absorbs the sorting, storage, and risk functions; the post office absorbs the transportation function; and the consumer assumes more risk in not being able to touch or try the product before purchase.

Second, all channel institutional members are part of many channel transactions at any given point in time. As a result, the complexity of all transactions may be quite overwhelming. Consider how many different products you purchase in a single year and the vast number of channel mechanisms you use.

Third, the fact that you are able to complete all these transactions to your satisfaction, as well as to the satisfaction of the other channel members, is due to the routinization benefits provided through the channel.

Routinization means that the right products are most always found in places where the consumer expects to find them (such as catalogues or stores), comparisons among products are possible, prices are marked, and methods of payment are available. Routinization aids the producer as well as the consumer, because it tells the producer what to make, when to make it, and how many units to make.

Fourth, there are instances when the best channel arrangement is direct, from the producer to the ultimate user. This is particularly true when available middlemen are incompetent or unavailable, or the producer feels he or she can perform the tasks better. Similarly, it may be important for the producer to maintain direct contact with customers so quick and accurate adjustments can be made.

Direct-to-user channels are common in industrial settings, as are door-to-door selling and catalogue sales. Indirect channels are more typical and result, for the most part, because producers are not able to perform the tasks provided by middlemen.