Basic Marketing: A Global Managerial Approach

Perreault−McCarthy: Basic
Marketing: A
Global−Managerial
Approach, 14/e

11. Place and Development
    of Channel Systems

Text © The McGraw−Hill

Companies, 2002

Place and Development of Channel Systems 315

For example, when Harley-Davidson saw an opportunity to expand sales of its

popular fashion accessories, it was difficult for motorcycle dealers to devote enough

space to all of the different styles and sizes. Harley considered selling the items

directly from its own website, but that would take sales away from dealers who were

working hard to help Harley sell both cycles and fashions. So Harley’s president

asked a group of dealers and Harley managers to work together to come up with a

plan they all liked. The result was a website that sells Harley products through the

dealer that is closest to the customer.^13

The concept of a single channel captain is logical. But some channels, includ-

ing most traditional ones, don’t have a recognized captain. The various firms don’t

act as a system. The reason may be lack of leadership or the fact that members of

the system don’t understand their interrelationship. Many managers—more con-

cerned with individual firms immediately above and below them—seem unaware

that they are part of a channel.

But like it or not, firms are interrelated, even if poorly, by their policies. So it

makes sense to try to avoid channel conflicts by planning for channel relations. The

channel captain arranges for the necessary functions to be performed in the most

effective way.

The situation faced by Goodyear is a good

example. The Goodyear brand was sold almost

exclusively through its own stores and its 2,500

independent tire dealers. But sales were falling.

There were many reasons. France’s Michelin and

Japan’s Bridgestone had aggressively expanded dis-

tribution in North America. The 850 Sears

autocenters were selling one-tenth of all replace-

ment tires. Moreover, many consumers were

shopping at discount outlets and warehouse clubs.

Goodyear decided it had no choice but to expand

distribution beyond its independent dealer net-

work. One of the first changes was to sell Goodyear tires to Sears, Kmart’s Penske

autocenters, and other big retail chains. To better reach the discount shoppers,

Goodyear converted many of its company-owned autocenters to no-frills, quick-

serve stores operated under the Just Tires name. However, to reduce the conflict

that these changes caused with its independent dealers, Goodyear introduced new

lines of premium tires—like the innovative Aquatred line and specialized lines for

sports cars and 4-wheel drive vehicles. These were tires that appealed to the deal-

ers’ target market. Goodyear also increased advertising and promotion support to

pull more customers into the dealers’ stores, and offered training on how to build

sales of related services. Goodyear also created the Gemini brand name to help pro-

mote service by Goodyear dealers. Because of this channel leadership, Goodyear’s

sales increased and so did the sales of its dealers.^14

As the Goodyear case suggests, in the U.S. producers frequently take the lead in

channel relations. Middlemen often wait to see what the producer intends to do

and wants them to do. After marketing managers for Goodyear set Price, Promo-

tion, and Place policies, wholesalers and retailers decide whether their roles will be

profitable and whether they want to join in the channel effort.

Exhibit 11-2A shows this type of producer-led channel system. Here the producer

has selected the target market and developed the Product, set the Price structure,

done some consumer and channel Promotion, and developed the Place setup. Mid-

dlemen are then expected to finish the Promotion job in their respective places. Of

course, in a retailer-dominated channel system, the marketing jobs would be han-

dled in a different way.

Some producers lead

their channels