Channel Management

Optimize the company’s objective after

maximizing the channel goals and
maximizing the customer satisfaction.
Channel Members
Title of goods Title of goods
transferred not transferred

Resellers Distributors C & F agent

Stockists

Sell to end Retailers Broker

customers DSA
 STOCKIST
• Invoiced directly from company
• Normally do not keep competing lines
• Has geographical exclusivity
• Provides redistribution services
HOW DO STCOKISTS PROVIDE COMPLETE
MARKET SERVICES?
• Stockists operate their business on return of
investment (ROI)
• Stockists are sometimes assured 30-36% p.a.
return on their investment
• Subsidies are provided if return of 30% not
earned.
• Stockist investment consists of investment in
stocks and credit to retailers (Average 10-15
days)
• Stockists earn margins less expenses on
coverages (through stockist salesmen),
Delivery of stocks to retailers, establishment
costs etc.
• Stockists spread their overheads (rent,
manpower etc.) as stockists of their
companies non-competing.
 WHOLESALER
Carry competing lines
Provides reach of company products to
outlets not covered by stockist
infrastructure
Does not have Geographical exclusivity
Unlike stockist does not provide re-
distribution services: sells from his
counter
Works on low and variable margins
Big source of price cuts
W/s Provides reach
What is the control over the channel
members?
Channel transaction
We are dealing mainly with Individuals.
So, monetary gain may not be the only
gain the channel is looking for.
Secondly, Market is a social hierarchy.
Individual’s want to grow in the social
hierarchy
Social Hierarchy
 HIERARCHY WITHIN STOCKISTS
Exclusive Stockist Multi Company Stockist
1. Supportive to Co. 1. More than 5 Companies
2. Individual Attention 2. Not yet systems oriented
3. System driven 3. But has developed a good
4. Retail Oriented hold on the retail base

Gulf-Returned Stockist
Wholesaler Stockist
1. Novice
1. Becomes stockist of one company
2. Co. runs his business
2. No loyalties
3. Has max. potential for conflict with
3. Deliberately avoids systems
Company at a later date
4. Mainly counter driven
4. Tends to diversify into greener
pastures
Channel - Company
Relationship
What is the main objective of this
relationship?
DOMINATE THE OTHER.
Try to retain the POWER
So, the overall objective of Channel
Management is to be the dominant
player in the channel.
As we would be taking the side of the
company, the course would focus on
maintaining the Power equation in
favour of the company.
Pharma Marketing in India

• Over 100 brands for a single molecule.

• 19,000 companies
Pharma Market Environment
• Margins controlled by DPCO.
• Shop versus shop competition high.
• Stocking pattern has changed. Earlier 95%
were ethical drugs. Now the proportion has
fallen to 45%. The balance accounted by OTC
drugs (25%), cosmetics (20%) and Surgicals
(10%). Due to this they are less dependent
on the pharma companies.
• Partnership with doctors increasing.
Dilution of power
• Trade incentives are growing.
• Retailers resorting to brand substitution for
prescribed drugs also. Therefore companies
are forced to give higher margins. Apart from
the prescribed margin of 20% for
decontrolled drugs and 16% for controlled
drugs, manufacturers are giving 20-25%
bonus offers to push the products.
Power equation in mid
nineties
• A company cannot add a distributor or
stockist without the permission of the
Association.
• Companies cannot remove a non-
performing stockist without the
permission of the association.
• Retailers resort to blanket boycott of
company’s products if retailers’
association demands are not met.
• A new product cannot be launched
without the permission of the retailers’
association.
• Even if the companies obtain
permission from the government they
cannot launch the product without the
permission of the retailers’ association.
Competitor
s
Channel Internet as an
Retail objectives alternate
environment channel
Channel Physical
design distribution:
Company
customer service

Consumer
Interface between Selection
buying
Channel, and
behaviour
salesforce and appointment
advertising Channel
commitment

Appraisal

Channel
evaluation Termination