2 channel mktg sod channel flows ifim

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  • Service Output Design (SOD)Range of service outputsMeasuring relative importance of service outputsSOD identifies segmentation for marketing channel designMeeting the SOD

  • Range of Service Outputs (Typical Consumer Segment) Purchase process: easy to find, select and buyPurchases delivered homeInfo on product usageFast buying processInfo on comparingAbility to see, touch and inspectPrice rangeExperience provides social interactionPlace sells desired brands

  • Range of Service Outputs (Typical B2B Segment) References and credentialsFinancial stabilityProduct demonstrations and trialsProactive advice and consultingAssistance during decision making processOne-stop solutionLowest priceInstallation and training supportAfter sales support

  • Service Output MeasurementsGet the measurement on a scale: Low, moderate, high or very highAlternatively, Get a measurement for each of the attributes on a scale of 1 to 4 or 5 or 6 or 7 or 10Higher the scale range, more the sample sizeGet the ranking of different service output types to measure their relative importance

  • Service OutputsMajor service outputs:Bulk-breakingDesired number of unitsSpatial convenienceWaiting time or delivery timeBetween ordering and receiving Breadth of assortmentProduct variety

  • Service OutputsService outputs are produced by channel members at a costMaximizing service outputs impact competitive prices due to increased channel costChannel design should optimize service outputs and channel costs

  • IDEAL CHANNEL SYSTEM FOR BUSINESS-TO-BUSINESS

    SEGMENTS BUYING A NEW HIGH-TECHNOLOGY PRODUCT Manufacturer(New High Technology Product)Full-ServiceResponsiveSupportReferences/CredentialsLowestTotalCostPre-SalesSalesPost-SalesVARsAssociations,Events,AwarenessEffortsThird-Party SupplyOut-sourceDealersTeleSales/TeleMktgInternal Support- Install, Training & Service GroupSegment

  • Trends in End-user PreferencesConsumer and HH:'Poverty' of timeIncreased knowledge about products and availability (internet access)Wide income distribution leading to demand for product varietyOverlap in consumer SOHO segments (bulk-breaking of office supplies)

  • Meeting SODKey factors determining SOD delivery:CostCost of providing services vis-a-vis end-users are willing to payCompetitivenessEase of entry with better servicesExcellence in other elements of marketing mix

  • Role of SOD AnalysisAssess segment attractivenessTarget a subset of the segment identifiedCustomize the marketing channel system solution for each targeted segment

  • THE SERVICE OUTPUT DEMANDS (SOD) TEMPLATE INSTRUCTIONS: If quantitative marketing-research data are available to enter

    numerical ratings in each cell, this should be done. If not, an intuitive

    ranking can be imposed by noting for each segment whether demand for the

    given service output is high, medium, or low.

    SERVICE OUTPUT DEMAND:SEGMENT

    NAME/

    DESCRIPTORBULK BREAKINGSPATIAL

    CONVENIENCEDELIVERY/

    WAITING TIMEASSORTMENT/

    VARIETYCUSTOMER

    SERVICEINFORMATION

    PROVISION1.2.3.4.5.

  • Channel FlowsEight generic channel flowsChannel and efficiency templateZero-based channel design

  • 8 Generic Channel FlowsProducer WholesalerRetailerConsumer

    Sheet1

    Marketing FlowCost Represented

    Physical possessionStorage & delivery

    OwnershipInventory carrying

    PromotionPersonnel selling, advtg, PR

    NegotiationTime and legal

    FinancingTerms of sale, credit terms

    RiskingGuarantees, insurance, service

    OrderingOrder processing

    PaymentCollection, bad debts

    &C&A

    &CPage &P

  • Channel Efficiency Template

    Sheet1

    Weights for flowsProportional performance of channel members

    Channel flowsCostsBenefit potentialFinal weightProducerWholesalerRetailerConsumerTotal

    Physical possession100

    Ownership100

    Promotion100

    Negotiation100

    Financing100

    Risking100

    Ordering100

    Payment100

    Total100N/A100N/AN/AN/AN/AN/A

    &C&A

    &CPage &P

  • BUILDING MATERIALS COMPANY EFFICIENCY TEMPLATE FOR

    CHANNEL SERVING END-USERS THROUGH RETAILIERS:

    UNDISGUISED DATA

    WEIGHTS FOR FLOWS:PROPORTIONAL FLOW PERFORMANCE OF

    CHANNEL MEMBER:COSTSBENEFIT POTENTIAL (High, Medium, or Low)FINAL

    WEIGHTMfgr.RetailerEnd-userTOTALPHYSICALPOSSESSION30High35303040100OWNERSHIP12Medium15304030100PROMOTION10Low820800100NEGOTIATION5Low/Medium4206020100FINANCING25Medium29303040100RISKING5Low2305020100ORDERING6Low3206020100PAYMENT7Low4206020100TOTAL100N/A100N/AN/AN/AN/ANORMATIVE PROFIT SHAREN/AN/AN/A28%39%33%100

  • BUILDING MATERIALS COMPANY EFFICIENCY TEMPLATE FOR

    CHANNEL SERVING END-USERS THROUGH RETAILERS: RANK-

    ORDER DATA

    `WEIGHTS FOR FLOWS:PROPORTIONAL FLOW PERFORMANCE OF

    CHANNEL MEMBER:COSTSBENEFIT POTENTIAL (High, Medium, or Low)FINAL WEIGHTMfgr.RetailerEnd-userTOTALPHYSICAL POSSESSION30High35222100OWNERSHIP12Medium15222100PROMOTION10Low8130100NEGOTIATION5Low/Medium4121100FINANCING25Medium29222100RISKING5Low2221100ORDERING6Low3121100PAYMENT7Low4121100TOTAL100N/A100N/AN/AN/AN/ANORMATIVE PROFIT SHAREN/AN/AN/A???100

  • BUILDING MATERIALS COMPANY EFFICIENCY TEMPLATE FOR

    CHANNEL SERVING END-USERS THROUGH RETAILERS :

    TRANSFORMED RANK-ORDER DATA

    WEIGHTS FOR FLOWS:PROPORTIONAL FLOW PERFORMANCE OFCHANNEL MEMBER:COSTSBENEFIT POTENTIAL (High, Medium, or Low)FINAL WEIGHTMfgr.RetailerEnd-userTOTALPHYSICAL POSSESSION30High35333333100OWNERSHIP12Medium15333333100PROMOTION10Low825750100NEGOTIATION5Low/Medium4255025100FINANCING25Medium29333333100RISKING5Low2404020100ORDERING6Low3255025100PAYMENT7Low4255025100TOTAL100N/A100N/AN/AN/AN/ANORMATIVE PROFIT SHAREN/AN/AN/A32%38%29%100

  • Zero Based Channel DesignChannel design from scratch without a pre-existing channel structureZero Based Channel Design:Meets the target market segments SODAt minimum cost of performing the necessary channel flows that produce those service outputs

  • Bullwhip EffectA phenomenon that occurs in distribution supply chain when the customer's order and one's own inventory form the basis for estimating the demandThe Bullwhip effect can be controlled by better communication and forecasting methods

  • THE BULLWHIP EFFECT

  • Equity Principle The compensation in the channel system is to be given on the basis of values created by channel membersThis creates right incentives among channel members to sustain value generation in future

  • Channel StructuresNumber of distinct channels that co-exist in the marketTypes of channel members that are in the channelThe intensity or number of members of each type that co-exist in market

  • Intermediary Choices

    Sheet1

    Marketing FlowIntermediaries who can perform

    Physical possessionContract warehouse, Shipping company, Distributor, Retailers (bricks, catalog and on-line)

    OwnershipContract warehouse, Distributor, Retailers (bricks, catalog and on-line)

    PromotionDistributor, Retailers (bricks, catalog and on-line), Broker , Franchisees, Independent sales reps

    NegotiationDistributor,Independent sales reps,Export Marketing companies

    FinancingDistributor, Retailers (bricks, catalog and on-line), Broker , Franchisees, Banks, Credit card companies

    RiskingDistributor, Retailers (bricks, catalog and on-line), Franchisees, Credit card companies

    OrderingDistributor, Retailers (bricks, catalog and on-line), Franchisees, Independent sales reps

    PaymentDistributor, Retailers (bricks, catalog and on-line), Franchisees, Shipping companies

    &C&A

    &CPage &P

  • Intensity of DistributionExclusive One outlet per marketSelectiveFew outlets in each marketIntensive Available as widely as possible in market

  • How Many Channel Members?Type of productCustomer segment targetedGeographical spreadBusiness expectation by the channel membersService level, the company wants to provide

  • FIGURE 4- 2: : SELECTIVE COVERAGE--THE MANUFACTURERS CONSIDERATIONS

  • FIGURE 4- 3: CATEGORY SELECTIVITY: THE DOWNSTREAM CHANNEL MEMBERS CONSIDERATIONS

  • Managing Channel ConflictsMost common occurrence is the 'domain conflict'Conflict with the companyConflict with other channel membersDomain:Activity responsibilityGeographic domainSpecific customer domain

  • Managing Channel ConflictsManaging conflicts:Establish exclusive domainsReimburse distributorsHandover new accountsApply equity principle