Managing Business Marketing channels

Learning objectives• The alternate paths to business market

customers.

• The critical role that industrial distributors and manufactures’ representatives assume in business market channels.

• The central components of channel design

• Requirements for successful channel strategy.

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CHANNEL

• The link between manufactures and customers .

• Accomplishes all the tasks necessary to effect a sale and deliver products to the customer.

• The tasks include making contact with potentialbuyer.negotiating,contracting, transfering the title, storage

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First, the channel structure must be designed to accomplish desired marketing objectives.

Difficulty to selecting channel– the alternatives are numerous– marketing goals differ– the variety of business market segments often

requires that separate channels must be employed concurrently.

Second, once the channel structure has been specified, the business marketer must manage the channel to achieve prescribed goals.

Channel Component Dimensions

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• The link between manufacturers and customers is the channel of distribution.

• Channel management centers on these questions: which channel tasks will be performed by the firm and which tasks, if any, will be performed by channel members?

Channel Alternatives in the Business Market

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1. The customers are large and well defined.

Direct Sales Approach is Viable When:

2. The customers insist on direct sales.

3. Sales involve extensive negotiations.

4. Control of the selling job is necessary to ensure proper implementation of the total product package and to guarantee a quick response to market conditions.

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Indirect Distributionis Generally Found Where

Markets are fragmented and widely dispersed.Low transaction amounts prevail.Buyers typically purchase a number of items.

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E-Channel Use

Level 1:

Information Platform.

Level 2:

Transactional Platform.

Level 3:

Platform for Managing Customer Relations.

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General-line distributors• They stock and extensive variety of products.

Specialists• Focus on one line or on a few related lines.

Combination House• Operates in two markets: industrial and consumer.

Three Primary Distributor Classifications

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• Channel design is the dynamic process of developing new channels where none existed and modifying existing channels.

• Channel design is an active rather than a passive task.

The Channel Design Process

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• Frequently, the manager has little flexibility in the selection of channel structures because of trade, competitive, company, and environmental factors.

• The decision on channel design may be imposed on the manager.

Factors Limiting Choice of Industrial Channel

1. Availability of Good Intermediaries2 Traditional Channel Patterns3. Product Characteristics4.Company Financial Resources5.Competitive Strategies6.Geographic Dispersion of Customers

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Channel Alternatives Issues

1. The number of levels to be included in the channel.

2. The types of intermediaries to employ.

3. The number of channel intermediaries.

4. The number of channels to employ.

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Evaluating Alternative Channels

• Takes into account all the elements of the channel design process as well as important customer requirements.

• Approach is to create an “ideal” channel system that fully addresses customer needs.

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Channel Administration

• Channel participants must be selected, and arrangements must be made to ensure that all obligations are assigned.

• Members must be motivated to perform the tasks necessary to achieve channel objectives.

• Conflict within the channel must be properly controlled.

• Performance must be controlled and evaluated.

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Motivating Channel Members

A Partnership

Dealer Advisory

Councils

Margins and Commission

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International MarketThree Distinct Channels

• Export intermediaries.• Foreign-based intermediaries.• Company-managed and company-

organized sales force.

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Measuring channel performance

Performance measures

Effectiveness Equity Efficiency

Performance Measurement

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Channel performance

Effectiveness : Providing the required service most cost effectively.

a. Delivery : A short term, goal oriented measure of on time deliverye.g – Number of times the order was serviced .

b. Stimulation of demand: What are the efforts made by the channel member to increase customer base or increase the usage of the product.

example: The cross marketing effort of Khimji & Sons, Kalamandir & Panda enterprises in Marriage season.

Selling Maruti through Nalco Co-operative by Orbit

Motors.

Performance Measurement

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a. Channel CoverageIf you’re selling wireless phones through independent retailers, you’ll want to make sure you’re covering all the places where people are buying those phones.

Companies that manage their distribution chains contractually — through independent agents, sales representatives, or other partners that help them get business done — can get clarity on prospect reach and market penetration from a dashboard metric on this issue.

It can be even more forward-looking if coverage incorporates prospective channel partners in various stages of finalizing agreements and building out facilities.

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Channel Relationship Mix

With the level of decentralization and outsourcing in business today, companies may not have full control over the players who staff their distribution channels downstream.

Major oil companies like Shell and ExxonMobil don’t manage every stop on their distribution chains anymore, but they still have to keep track of how their products are selling at the consumer level.

Monitoring the evolving mix of channel relationship types helps to keep the focus on the strategic importance of channel leverage strategies.

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Channel performance

Equity : Extent to which marketing channel serves problem riddenmarkets and market segments, such as disadvantaged or geographically isolated consumers.

Examples: Providing sales & after sales service to remote places like Malkangiri by CD distributors ( even at credit ). Higher freightPayout by the manufacturer & greater effort by distributor.

Providing After sales service to the Coke ( NCFC ) refrigeratorsrequired tremendous training effort & investment in infrastructure.

Performance Measurement

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Channel performance

Efficiency: Output / Input

1. Productivity : The efficiency with which the output is generatedfrom the resources and inputs. Operational efficiency.

a. Manpower productivity: Productive call %Sales volume per call

b. Productivity of vehicle: Number of outlets covered 2. Profitability: Essentially financial efficiency w.r.t R.O.I.

a. Stock turns & marginsb. Control on overhead costsc. Cost & use of funds

Performance Measurement

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Channel Power MeasuresThere are a number of different ways you can measure channel power, but the most compelling is how much margin you’re keeping vs. your channel partners.

If the markup to the final consumer is greater than the wholesale markup, it stands to reason that you have ceded some significant power to the channel.

Reclaiming some of that margin is a worthy pursuit for marketing and monitoring and forecasting channel power gives you some sense of how effective you are at changing bottom-line performance through brand building or product innovation.

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Measuring performance of marketing channels Normally tracked by H.O.

1. Productivity tracking of manpower ( call reports, DSR )2. Profitability tracking ( branch level contribution / prod. Mix ).3. Market Penetration tracking ( Network expansion objectives ) .4. Market share tracking ( internal reports ).5. Budget Vs actual.

'Market Penetration'For example, if there are 300 million people in a country and 65

million of those people have cell phones then the market penetration of cell phones would be approximately 22%. This would mean in theory there are still 235 million more potential customers for cell phones, which may be a good sign of growth for cell phone makers. In general, the older the offering or industry, the greater the market penetration.

Performance Measurement

•Thank you

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