10292780 channel management
TRANSCRIPT
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Channel ManagementAdil Mirza
ICFAI Business School Hyedrabad
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Objective
To help you understand
the key factors that influence the channel
choice,
how a channel structure is developed
Relationship between the principle and the
intermediary Types of channels
Implications on the length of the channel
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What is a channel
Channel is a mechanism which brings theproduct to the consumer at his doorstep.
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Why Channels
When it becomes impossible for themanufacturer to directly deal with the
consumers. Minimize transportation costs, maintain
service levels, reduction of stock holding
etc. Required to distribute your products.
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Role of the Channel
To bring the product closer to the
end user and provide him with the
knowledge, information and service asdesired by the manufacturer.
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Role of the Principal
Commitment to develop the channel
Provide support by way of service,
Information, Training and Motivation tothe channel members.
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The Factors that impact thechoice
Product
Consumer
Competition
Size and value of each sale
The area of operations
Strength of efforts required Promotional Strategy
Cost of channel
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Product
Identify where your product is on thecontinuum
Lowest in the Sales Continuum require tobe distributed widely.
Linked to Maslows theory of hierarchy of
needs - Who is the customer, who will use it,
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List
Item
Brand
Concepts/ Ideas
Consultative
Systemic
Structural
THE SELLING CONTINUUM
Channel
Driven
Direct
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Basic needs
Security
Social
PersonalAesthetic
SA
Maslow's theory of Hierarchy of needs
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The customer
What kind of service level is required.
How much technical information required.
How accessible they required the productto be.
How often do they use it? In what
quantity? What are the installation needs
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Competitor Channel strategy
Opportunity to either match or better the
competition.
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Size and value of each sale
Lower the size and value per sale, theneed for higher and uncontrollable
distribution.Costs much lower
High value and size require limited /
Controlled distribution.
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Area of operation
Wider your appeal and choice ofmarketing, wider channel required.
Also need to look at the competitivestrengths and weakness and makegeographic plans.
Keep in mind the area of operation andchoose the channel.
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Strength of channel
Who needs whom
Level of dependency
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Promotional Strategy
Push Versus Pull.
More cost for push strategy,
Efforts required by the channel is requiredsignificantly for the push strategy.
Stronger channel required.
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Cost of channel
Depending upon the efforts required
Objectives you have set up
Channel cost comprises of
- People,
- Infrastructure like Warehouse etc
- Delivery costsetc.
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Local tax laws
CST and ST
Octroi
MRP
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The choice of the channel
The one that :
Gets the products at the right time,
at the right place,
in the right way
at the most cost efficient way
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TYPES OF CHANNEL
OWN
EXCLUSIVE
SHARED
COMBINATION
FRANCHISIE
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CHANNEL MEMBERS
RETAILERS/ , DIRECT SELLENIG AGENTS
WHOLESALERS STATIONERY, MOVING
LARGE RETAILER CHAINS(Foodworld,Sahakari Bhandar etc)
INSTITUTION ( CSD, INS)
DISTRIBUTORS/ STOCKISTS C&FS
SOLE SELLING AGENTS.
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Costs
Retailer - Margins, Promotions, Discounts Wholesaler Margins,Promotions,
Discounts, Distributors Margins, Promotions,Salesmen, Delivery costs
Chain stores Margins, Promotions,Discounts, Cost sharing,
Institutions Margins, Credit. C&Fs Delivery costs, service costs. Sole Selling Agents All costs +
Reasonable Returns.
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Servicing the ChannelMembers
Frequency of visit Retailer Weekly/ Fortnightly/ Monthly
Wholesaler Multiple visits Distributors Daily Monthly Institutions Weekly or Up to the time of
credit. C & Fs One a month or multiple visits Sole Selling Agents - Continuous
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Remuneration
Commission/ Margins
Incentives
Salary
Salary + Incentives
Reimbursement of costs
Salary + Incentives+ Reimbursement ofcosts
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Quality of Service
Retailer -
Whole seller
Distributor
Chain stores
Institutions
C&Fs Sole Selling Agents
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Other services
Training
Motivation
Installation
Subsidies
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Motivation
Basic Needs : Profit, Volume
Security : Stability, Growth, New
business developments. Social : Recognition in the community,
Personal : Biggest Business Man, Best,etc
Aesthetic : Stylish Office,Modern Gadgets,Computerization etc.
Self Actualization : ?
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Commodity
Retail
Wholesalers
Sub brokers
Brokers
Agents
Low margins/ High turnover Goods move direct to w/s or large
retailers from point of manufacturer.
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FMCG
Service Quality
Remuneration
Others
Retailer Weekly/Monthly
Under
Grads5 to 20% Discounts
Proms.
W/S Daily/
Month
Under
grads2 to3%
Discounts
Promss
DistributorStockists
Daily/
Monthly
Grads 5-8% TrainingMotivtn
C&FsMonthly Grads
+ Fixed+Costs
Training
SoleSellingagents
Continuos
Grads+
10 %
+
Recruiting/Training/
Motivtn
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Consumer Durables
Service Quality Renumeration Others
Own Retail Grads Salary Motivation.Training
Exclusive
Ret(Franchisee
Weekly/ Grads 5-9% Training/Proms
Retail Showroom
Daily/Monthly Grads 5-8% TrainingMotivtn
C & Fs Monthly Grads+ Fixed+
Costs
Training
Exclusive Continuos Grads+ 10 %+ Recruitng/Training/Motivtn
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Non Physical Products(
Insurance)Quality Remuneration Others
Advisors Grads Salary +incentive Motivation.Training
Exclusive
DSAs
Grads Salary
+incentive
Training/
Proms
Co ownednetwork
Grads+ Salary
+incentive
Training
Motivtn
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OEMs
Original Equipment Manufacturers
Manufacturer hands over the product tochannel.
Channel then adds its own value and
markets the products.
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Vertical Integration
Downline When manufacturer movesinto the channel and sets up own outlets/
Upline When a member of the channelgets into the manufacturing and startsdistributing through channel.
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Length of Channel
Seller - Buyer Direct Zero length Seller One in between- Buyerlength of
1 Seller- Two in between Buyerlength of 2 Seller-Three in between-Buyer-length of 3 And so on. Higher the length, lesser the direct
control. Likely to be expensive. Requires the support of the entire
marketing mix.
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Direct Marketing
Personal Selling
Net
Direct Mailers Telephonic
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ROI
RETURN ON INVESTMENT
Return X 100Investment
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Risk
Return
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Business men invest :
Time,
Efforts,
In return they expect commensurate
Return that they not only takes for todayBut also needs to fuel future growth.
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Todays opportunity :
Savings ac - 5 % FDs - 8-9%
Mutual funds- 12 15 %
Distribution line 20 30 % At least twice bank rates
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Other factors worthconsidering
Absolute amount
Other than money, that takes care of
basic needs, need for status, ability toattract other business.
Other businesses where costs are sharedand there is synergy.
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Investment
Stocks
Credit Deposits
Claims
Etc.
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Return( Income)
Sales in units * margin per unit
Interest on Deposit
Nett of discounts
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Expenses : DirectSalesmenDriver
Delivery boysDeliver costsDepreciation of vehiclesBills/ Stationery,Warehouse rent
IndirectOffice rent, electricity, telephone, other staff, accountantetc, audit fees, license fees etc.( consider appropriate contribution)
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ROI
= Gross income Expenses X 100
Total Investment
ROI is a percentage.
Multiply it by 12( if data is monthly) to getannualized ROI.
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Selecting the right partner
The one who can add value
Provide his unique local contribution
Mutually dependant Long term
Matching with the culture and values of
the principle. Mutually beneficial