BUSINESS MARKETING

UNIT 4

4-1

Factors Making BM Channel

Different? (from those of consumer marketing)
Geographical concentration of
intermediaries
Short channels
Different characteristics and types of
intermediaries
Multi-channel or mixed system used
often

KKH 4-2

Channels Used in BM
Broad classification: Direct and
Indirect
Direct channels consist of:
Direct sales or personal selling
Direct marketing: Direct mail, Internet, and
telemarketing

Indirect channels include:

Distributors, manufacturers reps., brokers,
KKH
commission merchants, jobbers, VARs 3

4-

Participants in BM Channels
Manufacturers branch and regional sales
offices
Distributors or dealers
Manufacturers representatives or agents
Brokers
Commission merchants
Value added resellers (VARs)

KKH 4-4

Channel Design:
Framework Used
Channel
Objectives
Channel
Constraints

Channel
Tasks

Channel
Alternatives
Evaluation of
Alternatives
Selection of
Channel
Structure

KKH 45

Channel Design

Developing Channel Objectives - Based on

following factors:
Marketing objectives
Customer needs
Product characteristics

Analysing Channel Constraints - Factors

constraining selection of ideal channel structure
are:

External environment (legal issues)

Competitive tactics
Companys constraints
Product characteristics
Customers geographic locations

Analysing Channel Tasks

Which tasks the company can perform effectively and
efficiently, and which by intermediaries
KKH 4-

Channel Design
Identifying Channel Alternatives Involves four major issues:
(1)-Types of Intermediaries

Distributors or dealers
Manufacturers representatives (reps) or agents
Brokers
Commission merchants
Jobbers

KKH 4-7

Channel Design
Identifying Channel Alternatives - Involves four
major issues:
(2)-Number of Intermediaries - Three alternative
strategies available:

Intensive distribution
Selective distribution
Exclusive distribution
Manufacturer should consider following three
factors for selecting one of the three strategies:
End users willingness to search
Do the intermediaries make enough money ?
Price competition among intermediaries
Judgment to be used for exact number of
intermediaries
KKH 4-8

Channel Design

Identifying Channel Alternatives Involves four major issues:

(3)-Number of Channels
Depending on needs of market segments,
Multi-channel system is used often
(4)-Terms and Responsibilities of Channel
Members
Agreements between marketer and channel
members to include:

Objectives
Responsibilities / tasks of both parties
Sales policy
Territory or market segment to be covered

KKH 49

Channel Design

Evaluation of Channel Alternatives

Criteria used:

Economic performance
Degree of control
Adaptability to changing market situations
Superior value to target customer

Selection of Channel Structure

Based on satisfying needs of target
segments
KKH 410

Managing or Administering
Channel Members
It includes:
Selecting intermediaries / channel
members
Motivating channel members
Controlling or managing channel
conflicts
Evaluating performance of channel
members

KKH 411

Selecting Channel Members

Selection process consists of :
1.
2.
3.
4.

Generating a list of intermediaries through ads.,

database firms, trade associations
Visiting prospective channel members
Negotiating with short-listed intermediaries
Finalising agreements

Selection criteria generally used:

. Location
. Relevant experience
. Financial standing
. Infrastructure

Specific criteria may differ for different types of

intermediaries and product market situations of
companies.
KKH 4-

Motivating Intermediaries
First understand intermediaries
needs
Then use appropriate techniques:
Partner relationship management (PRM)
system
Vendor managed inventory (VMI) system
Reasonable discount / margins
Distributor council meetings
Training and coaching
Developing channel positioning
Quick response system
KKH 413

Controlling Channel Conflicts

Undertake surveys of intermediaries to

assess sources of conflicts, such as:

Differences in objectives, interests, perceptions

Dealings with customers
Compensation
Unclear territory boundaries

Methods for managing / controlling

conflicts

Effective communication network

Joint goal setting
Diplomacy, mediation, or arbitration
Vertical marketing system (VMS)

KKH 4-14

Evaluating Channel Members

Performance

Purpose

Know good / bad performing channel members

Reward / counsel, retrain, re-motivate, or
terminate

Evaluation Criteria / factors

Sales achieved vs quota
Customer service / satisfaction
New customers generated
Market feedback
Assign weights to above factor
Use weighted factor method for evaluation
KKH 4-15

B2B Hubs
Hubs or Portals are new intermediaries that bring
buyers & sellers together to make transactions easy.
Several types of Hubs:
(1) Catalog Hubs: These Hubs collect & combine
products from several
vendors/sellers catalogs in a
searchable database.
(2) Auction Hubs : These are online auctions similar to
offline/real-world auctions between buyers & sellers.
(3) Exchange Hubs : These are clearing centers, where
commodity-like products are offered by sellers to buyers.
(4) Barter Hubs act like exchanges, except that a
bartered service/product plus some money is involved
Hub marketers offer superior value to buyers & vendors.
BM KKH 416