DESIGNING PRODUCT AND

CHANNEL STRATEGIES

ROUTES TO MARKET

BUSINESS-TO-BUSINESS MARKETING
Senior Assist. Prof. Vanya Kraleva
Learning Outcomes
 Understand the connection between supply chain
management, logistics and routes to market.
 Understand the intermediary role in reconciling supplier
and customer interests.
 Know about types of intermediaries and the tasks they
perform.
 Be able to explain the conditions under which
companies will choose to use different types of
intermediaries.
 Understand channel structures and reasons for using
multiple routes to market.
 Be able to describe the challenges of channel
coordination and relationship management.
Supply Chain Management and Logistics

Supply chain management

• the planning and coordination of all activities of parties within a
specific supply chain to provide the end customer with a product
which adds value.
• The goal of supply chain management is supply chain optimization
for the sake of competitive advantage, as in the most efficient and
cost-effective methods for those working within the supply chain.

Logistics
• The coordination of activities that contribute to the forward and
reverse flow of information, goods, and services between the
point of origin and point of consumption to satisfy customer
needs.
• The purpose of logistics is to provide just-in-time delivery for
the primary sake of customer satisfaction.
Main Processes Involved
Logistics
• Inbound and Outbound
Transportation
• Warehousing
• Reverse Logistics (Returns)
• Protective Packaging
• Fulfillment of orders
Supply Chain Management
• Procurement
• Supply Planning
• Demand Planning
• Enterprise Resource
Planning
• Inventory Management
• Manufacturing
• Logistics
• Optimization
Key points in SCM and Logistics
Waste Keeping duplication to a minimum
reduction Aligning operational processes and information systems
Reducing inventory levels

Time Improving information flow between supply chain members

compression
Reducing cycle times to improve cash flow and financial performance

Flexible Faster adjustment to changing market for meeting customer needs more
effectively and gain competitive advantage
response
Real-time tracking and managing of the inventory

Unit cost Eliminating activities that do not add value for the consumer
reduction
Achieving freight economy through freight consolidation, transport mode
selection, route planning, load unitizing and long distance shipments
Technology Used in Logistics

Transportation • a logistics platform enabling users

to manage and optimize daily
Management operations of their transportation
System (TMS) fleets

Warehouse • software enabling organizations to

control and administer warehouse
Management operations from the time goods or
System (WMS) materials enter until they move out
Technology Used in Supply Management

Enterprise Resource • functions similar to a central nervous system, for a business, by

collecting information about the activity and state of various divisions
Planning (ERP) of the body corporate, and making this available to other parts,
software where it can be used productively and added, in real-time, by users

• the use of radio waves to read and capture information stored on a

Radio Frequency tag attached to an object, which can be read from up to several feet
Identification away, and doesn't need to be within direct line-of-sight of the reader
to be tracked

Customer Relationship • a category of software covering a broad set of applications,

designed to help businesses manage many of the following processes:
Management (CRM) customer data, customer interaction, information access, and sales
Software automation

• extremely large data sets that may be analyzed computationally to

“Big Data” reveal patterns, trends and associations, especially relating to human
behavior and interactions
Objectives of SCM and Logistics

Increased Improved
efficiency customer
service

Increased Improved
sales relationships
Reaching and Satisfying Customers
Direct distribution
• Customers are large & well-
defined groups who require:
• direct dealing
• large amount of information on
product use/features
• limited logistics services
• Sales process involves extensive
negotiations & senior management
function needs to be controlled to
ensure:
• correct supply of total package
• quick response to market
conditions
• A direct engagement with the client
is regarded as beneficial
Indirect distribution
• Fragmented & widely dispersed
markets
• Low risk/uncertainty
• Uniform product offering
• Multiple item & brand purchases
in single transaction
• Low-value transactions
• Product is part of a solution and
needs to be combined with other
products/services
Routes to Business Markets

industrial
producer
customer

franchisee industrial
producer
customer

industrial
producer agent
customer

producer distributor industrial

customer

industrial
producer agent distributor
customer
Functions of Channel Members

Reconciling needs

Improving efficiency

Improving accessibility

Providing specialist services

Main Types of Intermediaries

Distributors Agents Franchisee

• Takes title of • Does not take title • Obtains right from

goods and resells to goods principal company
them in a • Avoids personal to conduct business
specified region selling costs for in specified
• Cannot work with manner
principal
competing • Earns commission • Pays royalties to
businesses principal and uses
simultaneously for orders received its trademark,
by principal operational or
marketing
methods
Distributors
Advantages
• Distributors know the
market very well
• Distributors take the
credit risk
• The profit of distributors
depend on sells
• Several distributors can
be used
Disadvantages
• Distributors don't accept
easily new products as
they take the risk of
failure
• High barriers to contract
termination
Activities Performed by Distributors
Communication
• Advertising
• Sales promotion
• Sales teams
Modification and assembly
• Adaptation to customer’s needs
• Assembling elements from a variety of sources
Product supply
• Ensure local product availability
• Advice giving of product specifications
• Commercial and logistical support
Service and repair
• Maintaining products at customer locations
Agents
Advantages
• The principal takes advantage of the experience and
market knowledge of the agent
• The agent provides information on the market and
newest research
• The agent provides the basis for necessary contacts
and relationship building
• The expenses are low and corresponding to results
obtained

Disadvantages
• The agent works with many other business and pays
little attention to principal’s specifics
• Week marketing skills
• Agents risk nothing but their time, so their motivation is
low
• Agents don’t take the credit risk
Activities Performed by Agents

Advice giving

Bringing regional market knowledge

Providing contacts

Relationship building
Licensing/Franchising
Advantages

Low introductory costs Limited market control

Opportunity to Missed opportunities for
overcome tariff, quotas profit
or other barrier to The licensee/franchisee
export can turn into a
Attractive ROI competitor

Disadvantages
Appropriate for service The licensee/franchisee
based offerings may exploit principal’s
resources
Other Types of Intermediaries
 Value-added resellers (VARs)
 Offer additional services to help businesses such as logistics,
warehousing, stocking, credit checks, integration, advisory
services and extended offerings
 Managed service providers (MSPs)
 Service providers for business and IT departments offering
several offsite or cloud-based services
 Systems integrators (SI)
 Resellers that integrate technologies into systems
 Consultants
 Online resellers
Improving Channel Performance
Satisfying customer expectations for customization
• Modular Approach - a range of product parts that can be used
worldwide
• Core-Product Approach - attachments are added to the core-
product
• Outsourcing customization to a network of partners
Keeping costs down
• Rethinking of chain activities
• Outsourcing low value/low importance activities
• Networking to add value and flexibility
• Reduction of coordination costs through building long-term
relationships and digitalization of business systems
Handling Channel Partners
Selection of
channel
members

Dealing with Support

channel conflict provided to
channel partners

Means of
controlling
channel
behaviour
Selection of Channel Members
 Searching for suitable intermediaries
 Government bodies and trade unions
 Trade fairs and exhibitions

 Factors affecting channel structure

 availability of intermediaries
 established channel patterns
 product characteristics
 company financial resources
 competitor strategies
 customer geographic locations
Criteria for Evaluating Distributors

Financial and Product factors Marketing skills Commitment Facilitating

company • Product familiarity • Market share • Product mix factors
strengths • Product lines • Geographic volatility • Contacts with key
• Ability to fund complementarity coverage • % of business with industry players
sales start-up and • Product lines • Experience with single supplier • Experience and
growth & quality and target customers • Commitment to performance with
communications sophistication • Sales force targets other suppliers
activities • Condition of • Delivery • Willingness to:
• Ability to maintain physical facilities performance • Keep adequate
inventory • Patent security • Customer service stock
• Product and • Trade show • Invest in
market expertise participation communication
• Company • Association • Invest in sales
standing among membership training
customers • Drop competing
• Marketing product lines
planning
capability
• Quality of
management team
Channel Support
 Evaluation of:
 Intermediary contribution & competence
 Loyalty & compliance with channel policies
 Adaptability and customer satisfaction
 Training
 Motivating channel members
 Financial incentives – attractive commission rates & bonuses
 Territorial exclusivity
 Provision of supplier resources – sales team support,
information, market communication support
 Long-term relationship building – joint planning, information
exchange, etc.
Marketing to Channel Partners

Communicate Provide content Provide tools Train Create marketing

effectively and assets community
• Digital selection • Product • Product • What • Marketing
• E-mail; E-shots; comparison • Positioning tools • Products advisory
E-newsletters; • Demo assets • Marketing • Product councils
Webinars, • Campaign campaign positioning • Marketing to
social media assets creation tools • How marketing
• Offline • Budget • Online forums
• Events; • Offline • Online
Meetings; communities
Phone; • Train the • Ad hoc chatter
brochures trainer
 Channel Partner Life-Cycle

Acquisition On- Enabling Demand Grow and Retain and

boarding creation expand integrate

• A channel • The role of the • Provision of • Enabling the • The channel • Marketing
partner is vendor tools, systems, demand partner works forums and co-
identified, marketing is to training, creation as an extension partner
targeted and support the roadmaps, through to the vendor communications
then added to new channel demo units, etc. marketing business and intended to full
the list of partner in resources, must have integration of
resellers becoming advertising, access to the partner
familiar with additional budget and
the products marketing additional
trough budget resources
introductory
training, value
propositions
and product
positioning
information
Channel Control

Power control

Trust-based Contractual
control control
Sources of Conflict and Resolution
Potential sources of conflict
• differences in objectives
• differences in acceptable
costs and rewards
• differences in desired
product lines
• use of multiple
distribution channels
• inadequate performance
Handling and resolution
• develop partnership
approach
• training in conflict
handling
• market partitioning
• improve performance
• channel ownership
• coercion through the use
of power
Channel Partner Strategy

https://www.youtube.com/watch?v=7dRykoQIRBQ&f
eature=youtu.be
Questions for discussion
 How might supply chain management affect
the business marketer’s design and operation
of routes to market?
 Compare and contrast the tasks performed
by distributors and agents.
 Are franchise operations a suitable route to
accessing business customers?
 How might a company go about recruiting
intermediaries?
Literature Key

• Brennan, R. Canning, L. &

McDowell, R. Business-to-Business
Pages
289-315 Marketing. 4th ed. Sage. 2017.

• Hall, S. Innovative B2B Marketing:

Pages
New Models, Processes and
181-200
212-222
Theory. 1st ed. Kogan Page, 2017.