distibution planning and control
TRANSCRIPT
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DISTIBUTION PLANNING ANDDISTIBUTION PLANNING AND
CONTROLCONTROL
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INDEXINDEX
CHANNEL MANAGEMENT DECISIONSCHANNEL MANAGEMENT DECISIONS
CHANNEL DYNAMICSCHANNEL DYNAMICS
CHANNEL CONFLICT ANDCHANNEL CONFLICT ANDMANAGEMENTMANAGEMENT
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CHANNEL MANAGEMENTCHANNEL MANAGEMENT
DECISIONSDECISIONS Selecting Channel MembersSelecting Channel Members
Motivating Channel MembersMotivating Channel Members
Notion of Fairness: A dental supply company, instead ofNotion of Fairness: A dental supply company, instead ofpaying a straight 35% commission to distributors, pays 20%paying a straight 35% commission to distributors, pays 20%
for carrying out the basic sales work, 5% for carrying a 60 dayfor carrying out the basic sales work, 5% for carrying a 60 dayinventory, 5% for paying bills on time and 5% for reportinginventory, 5% for paying bills on time and 5% for reportingconsumer purchase informationconsumer purchase information
Evaluating Channel MembersEvaluating Channel Members
Sales quota attainment; average inventory levels; customerSales quota attainment; average inventory levels; customerdelivery time; treatment of lost and damaged goods; co-delivery time; treatment of lost and damaged goods; co-operation in promotional & training programsoperation in promotional & training programs
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Channel managementChannel management
decisionsdecisions1.1. Selecting Channel MembersSelecting Channel Members
Producers should determine characteristics toProducers should determine characteristics to
distinguish the better intermediariesdistinguish the better intermediaries
Characteristics like number of years inCharacteristics like number of years inbusiness, other lines carried, growth and profitbusiness, other lines carried, growth and profit
record, solvency, cooperativeness, andrecord, solvency, cooperativeness, and
reputationreputation
Selection, a two-way process:Selection, a two-way process:Just asJust asproducers select their channel members, theproducers select their channel members, the
intermediaries also select their producerintermediaries also select their producer
partners.partners.
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Contd.Contd.
2.2. Training and Motivating Channel MembersTraining and Motivating Channel Members
Careful training programs, capability-building and marketCareful training programs, capability-building and market
research programs for the distributors and dealers becauseresearch programs for the distributors and dealers because
the intermediaries will be viewed as the company by endthe intermediaries will be viewed as the company by end
usersusers
Training initiatives keep employees updated on the latestTraining initiatives keep employees updated on the latest
product specifications and service requirementsproduct specifications and service requirements
Motivating the intermediaries throughMotivating the intermediaries through Channel PowerChannel Power
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Contd.Contd.
Producers can draw on following types ofProducers can draw on following types of
power to elicit cooperation:power to elicit cooperation:
Reward PowerReward Power
Coercive PowerCoercive Power
Legitimate PowerLegitimate Power
Expert PowerExpert Power
Referent PowerReferent Power
Forging long-term partnerships with theForging long-term partnerships with the
distributorsdistributors
Efficient Consumer Response (ECR) practicesEfficient Consumer Response (ECR) practices
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Contd.Contd.
3.3. Evaluating Channel MembersEvaluating Channel Members Evaluate intermediaries performanceEvaluate intermediaries performance
against standards as sales-quotaagainst standards as sales-quota
attainment, average inventory levels,attainment, average inventory levels,customer delivery time, treatment ofcustomer delivery time, treatment of
damaged and lost goods, and cooperationdamaged and lost goods, and cooperation
in promotional and training programsin promotional and training programs
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Contd.Contd.
4.4. Modifying Channel Design andModifying Channel Design and
ArrangementsArrangements
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CHANNELCHANNELDYNAMICSDYNAMICS
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Vertical marketing systemVertical marketing system
a tightly coordinated distribution channela tightly coordinated distribution channeldesigned to improve operating efficiency anddesigned to improve operating efficiency andmarketing effectivenessmarketing effectiveness
Conventional ChannelsConventional Channels
Independent producer, wholesaler and retailerIndependent producer, wholesaler and retailer Double marginalization problemsDouble marginalization problems
VMSVMS
Producer, wholesaler and retailer act as a unified systemProducer, wholesaler and retailer act as a unified system Corporate VMS: Vertical IntegrationCorporate VMS: Vertical Integration
Administered VMS: Co-ordination through power of oneAdministered VMS: Co-ordination through power of oneplayer (e.g., P&G)player (e.g., P&G)
Contractual VMS: FranchisingContractual VMS: Franchising
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Horizontal MarketingHorizontal Marketing
SystemSystem Two or more unrelated companies at one levelTwo or more unrelated companies at one level
join together to follow new market opportunitiesjoin together to follow new market opportunities
Companies might join forces with competitors orCompanies might join forces with competitors or
non-competitorsnon-competitors Temporary or permanent basis, or a separateTemporary or permanent basis, or a separate
joint venture companyjoint venture company
Also called, symbiotic marketingAlso called, symbiotic marketing
e.g.,e.g., HUL entering a strategic tie-up with PepsiCoHUL entering a strategic tie-up with PepsiCoIndia for bottling and distribution of Liptons ready-India for bottling and distribution of Liptons ready-
to-drink and other beveragesto-drink and other beverages
Eg. Airline companies: British & American; Lufthansa &Eg. Airline companies: British & American; Lufthansa &
United; KLM & NorthwestUnited; KLM & Northwest
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Multichannel MarketingMultichannel Marketing
SystemSystem A single firm uses two or more marketing channelsA single firm uses two or more marketing channels
to reach one or more customer segments.to reach one or more customer segments.
Offers three important benefits:Offers three important benefits:
Increased market coverageIncreased market coverage
Lower channel costLower channel cost
More customized sellingMore customized selling
e.g.,e.g., Disney sells its DVDs through 5 main channels: movie rentalDisney sells its DVDs through 5 main channels: movie rentalstores; Disney Stores; retail stores; online retailers and Disneysstores; Disney Stores; retail stores; online retailers and Disneys
own online stores; and the Disney catalog and other catalogown online stores; and the Disney catalog and other catalogsellers.sellers.
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Multichannel Marketing SystemsMultichannel Marketing Systems
Nat. A/C Mgt
Direct Sales
Telemarketing
Direct Mail
Retail Stores
Distributors
VARs
VENDO
R
BIG CUSTOMERS
MIDSIZE CUSTOMERS
SMALL CUSTOMERS
CUS
TO
MER
Demand Generation Tasks
Marketin
g
Channels&
Methods
When a single firm uses two or more marketing channels to reach one or
more customer segments.Gain increased market coverage; lower channel cost and more
customized selling
Downside - conflict and control problems
Generate a hybrid grid to design channel architecture. Use marketing
tasks as basis
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Example of MultichannelExample of Multichannel
Marketing: IBMMarketing: IBM
Cost of Using only Direct
Salesforce
Cost of Using Different
Channels
AGENT
DEALER
TELEMARKETING
SALESFORCE
Small, Rural Small, Urban Medium Large Very Large
Conflict
Conflict
COST
($)
CUSTOMER SIZE
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Boutiques
MassMerchandisers
Off-PriceStores
Better DepartmentStore
High Low
Value added by channel
Market
Growth
Rate
Channel Dynamics: Designer Apparel
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CHANNELCHANNEL
CONFLICT ANDCONFLICT ANDMANAGEMENTMANAGEMENT
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Channel conflictsChannel conflicts
Channel conflict is a situation in which channelChannel conflict is a situation in which channelpartners have to compete against one another orpartners have to compete against one another orthe vendor's internal sales department. Channelthe vendor's internal sales department. Channelconflict can cost a company and its partnersconflict can cost a company and its partnersmoney as partners try to undercut one another. Itmoney as partners try to undercut one another. It
can also lower morale within the channel andcan also lower morale within the channel andcause some partners to consider other vendors.cause some partners to consider other vendors.
To prevent channel conflict, partners sometimesTo prevent channel conflict, partners sometimesenact agreements such asenact agreements such as deal registrationdeal registration..Channel conflict may also occur among variousChannel conflict may also occur among various
segments of corporate departments, such as thesegments of corporate departments, such as thesales channel. For example, the direct contactsales channel. For example, the direct contactcomponent of the sales department may have tocomponent of the sales department may have tocompete with other sales channels, such ascompete with other sales channels, such astelephone, online and mail campaignstelephone, online and mail campaigns
http://searchitchannel.techtarget.com/sDefinition/0,,sid96_gci1285800,00.htmlhttp://searchitchannel.techtarget.com/sDefinition/0,,sid96_gci1285800,00.htmlhttp://searchitchannel.techtarget.com/sDefinition/0,,sid96_gci1285800,00.html -
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Causes of Channel ConflictCauses of Channel Conflict
Goal incompatibility :Goal incompatibility :Manufacturer wantsManufacturer wantsto achieve rapid market growth via lower prices;to achieve rapid market growth via lower prices;
retailer interested in large marginsretailer interested in large margins
Domain Dissensus:Domain Dissensus:Territory boundaries,Territory boundaries,
who gets credit for salewho gets credit for sale Differing perceptions ofDiffering perceptions of
reality:reality:Optimistic manufacturer, pessimisticOptimistic manufacturer, pessimisticretailerretailer
Intermediaries dependence on theIntermediaries dependence on the
manufacture:manufacture:Of retailer on manufacturer orOf retailer on manufacturer orvice-versavice-versa
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Channel conflictsChannel conflicts
Channel conflict is generated when oneChannel conflict is generated when one
channel members actions preventchannel members actions prevent
another channel from achieving its goalanother channel from achieving its goal
Types of channel conflictsTypes of channel conflicts VerticalVertical
Coca-Cola and bottlers wanting to bottle Dr. PepperCoca-Cola and bottlers wanting to bottle Dr. Pepper
HorizontalHorizontal
Some Ford dealers coplaining about other dealers being tooSome Ford dealers coplaining about other dealers being tooaggressive in their pricingaggressive in their pricing
MultichannelMultichannel
Anne Klein opening own stores while distributing through largeAnne Klein opening own stores while distributing through large
department storesdepartment stores
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Managing Channel ConflictManaging Channel Conflict
Superordinate GoalsSuperordinate Goals Exchange of personsExchange of persons Co-optationCo-optation
Include membersInclude members
of otherof otherorganization onorganization onadvisory councils,advisory councils,boards, etc.boards, etc.
Joint membership inJoint membership intrade associationstrade associations
Diplomacy, mediation,Diplomacy, mediation,arbitration for chronicarbitration for chronicor acute conflictor acute conflict
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THANKYOUTHANKYOU