Channel management

Channel refers to ways in which product reaches end user.

Channel Arrangement:
Manufacturer Wholesaler Distributor Retailer Consumer Sales Management: Management of sales force across direct and indirect distribution.

Components/Choices
Functions of channel: 1. 2. 3. 4. 5. 6. Demand generation or selling Carrying of inventory Physical distributions After-sales service Extending credit to customers Product modification and maintenance

Components 1. Direct Sales force takes care of building ladder of relationships with user accounts, keeping contact, training , inventory support and implementing promotions at distributor level 2. Distributor take title to goods and sell to customers/resellers, provide economies of scope to suppliers. Sells products from many suppliers 3. Captive distributor functions as independent distributor but owned by supplier. 4. Agent Sells products from many suppliers, do not take title to goods , commission based selling 5. Brokers Do not assume title , customrs approach brokers mainly in crisis scenarios (excess supply for lowest prices, shortage of supply) Choices 1. 2. 3. 4. Channel structure Balance of direct and indirect Reseller type distributor or captive or agent or broker Market coverage exclusive vs selective vs intensive franchising policies Terms and conditions discount structure , support

Factors affecting channel relations

Tug of war Struggle to retain maximum share of profits, conflict of interests Entangling alliances Alliances of multiple suppliers at distributor level

Channel controls vs resources required: inverse relationship to increase control of channel fewer channels increased financial resources from supplier side to sustain Financial resources are limiting factor in design of channel Controls are subordinate factor in design Multi-tier distribution Low Business Unit Financial Resources Control as determining factor Direct distribution Financial efficiency as determining factor Low High Business unit Need for control High

Will the real channel manager stand-up

Channels create 3 kinds of utilities
1. Time utility : Makes products available whenever customers want 2. Place utility : Makes products available wherever customers want 3. Possession utility : Facilitates purchase or lease feasible as per convenience of user

Critical activities channel manager performs

1. Formulating marketing channel strategy long run planning in order to create sustained competitive advantage. Eg : Office Depot 2. Designing channels Dimensions of channels a. Number of levels b. Intensity no. of intermediaries c. Type of intermediaries d. Number of channels 3. Selecting channel members select based on credentials, market coverage, number of product lines, strategic fit 4. Motivating members higher trade discounts, higher slotting allowances, training members, promotional support 5. Co-ordinating strategy with members 6. Evaluating performance 7. Managing conflicts Sales Manager is the channel manager

Distribution its stupid!

Effective international distribution is achieved by following:
1. Set minimal and ideal criteria a. Developed economy : size, resources, risk propensity, coverage, penetrations control, information feedback b. Emerging markets : distribution outreach, functionality, cultural context, interaction, past performance 2. Focus on potential complementers: go for distributor whose products complement suppliers. 3. Spell out responsibilities : well documented detailed contract 4. Build relationships : flexibility of dealings, active information exchange, solidarity 5. Monitor the relationships : 6. Manage communication 7. Incentive the relationship