Part 2: Developing the Marketing Channel

8
CHAPTER

Selecting Channel
Member and Target
Markets
 Channel Member Selection

The last phase of channel design

Selection may or may not be the result of channel design.

Firm may need additional
outlets to allow for growth

To replace channel
members that have left
Objective 2: 7

Selection & Distribution Intensity

The greater the intensity of distribution

The less the emphasis on selection

 7

The Selection Process

2. Applying
3. Securing the
selection criteria
1. Finding prospective prospective
to determine the
channel members channel members
suitability of
as actual
prospective
channel members
channel members
Objective 3: 7
Finding Members

1. Field sales
organization

7. Other sources 2. Trade sources

6. Trade shows 3. Reseller inquiries

5. Advertising 4. Customers
 7
Field Sales Organization

Salespeople are the

best positioned to
BUT:
know about potential
intermediaries

• They are often able to pick • The manufacturer must

up information about
likely intermediaries.
• They may have lined up
prospective
intermediaries.
adequately reward
salespeople for their time &
effort establishing
connections.
 7
Trade Sources

• Trade associations
• Trade publications
• Directories
• Trade shows
• Firms selling similar
products
• The “grapevine”
For Example:
• Industrial Distribution
magazine
• The Verified Directory of
Manufacturers’
Representatives
• The National Association
of Wholesaler-Distributors
• The National Retail
Federation
• The Encyclopedia of
Associations
 7
Reseller Inquiries

Many firms learn about direct

inquiries from intermediaries
interested in handling their product.

This is the main source of

information about potential new channel
members for some manufacturers.

Firms receiving the highest number

of inquiries are the more
prestigious in their industry.

Reseller
Inquiries
 7

Customers
Customers are willing to give frank opinions
about the intermediaries who call on them.

Manufacturer conducts formal or informal surveys of

customers’ views of various distributors.

=
Manufacturer obtains information about
potential intermediaries.
 7
Advertising

Trade magazine advertising

can generate a large number
of inquiries from prospective
Members.

It therefore can provide a large

pool from which to make selections.
 7
Trade Shows

Wholesale and retail trade associations

hold annual conventions.

Attending manufacturers have access to a

wide variety of potential channel members.

** Small manufacturers meet face-to-face with

wholesalers & retailers.
 7
Other Sources

1. Chambers of commerce, banks, & local real estate

dealers
2. Classified telephone directories or the yellow pages
3. Direct-mail solicitations
4. Contacts from previous applications
5. Independent consultations
6. List brokers that sell lists of names of businesses
7. Business databases
8. The Internet
Objective 4: 7

Selection Criteria

• Sales Performance
Credit & Financial Condition
• Sales StrengthSuccession
Management
• Product LinesAbility
Management
• Reputation
Attitude
• Market Coverage
Size
Objective 5: 7

Adapting Selection Criteria

Because no list of criteria is adequate

for a firm under all conditions,

the channel manager should be flexible when

using selection criteria.
Objective 6: 7

Who Selects?

Who does the selecting?

Producers & Manufacturers

Wholesale Intermediaries

Retail Intermediaries
 7
Securing Channel Members

. . . The supplier produces, the distributor

sells, and each is dependent upon the other.
Together they form a team, and teamwork
is essential if the association is to prove
mutually beneficial.

— Pegram
Objective 7: 7
Offering Inducements

Good, profitable product line

Advertising & promotional support

Management assistance

Fair dealing policies &

Friendly relationships
 7
Product Line

Product line inducements:

1. Manufacturer offers good product line with

strong sales & profit potential

2. Stress value of good product line from

channel members’ perspective
 7
Advertising & Promotion

Advertising & promotion inducements

Consumer Market:
Gain immediate credibility by using a strong program
of national advertising.

Industrial Market:
Gain recognition by using a strong program of
trade paper advertising.
 7
Management Assistance

Management assistance inducements:

Prospective members want to know whether the

Manufacturer will help with the following:

• training programs
• financial analysis & planning
• market analysis
• inventory control procedures
• promotional methods
Objective 8: 7
Fair Dealing &
Friendly Relationship

Manufacturer’s Responsibility:

To convey to prospective channel members that

he or she is genuinely interested in
establishing a good relationship based on trust
and concern for their welfare as both business
Entities and as people
Objective
Market Variables
1

The target market’s needs and

wants should drive the manner in
which the channel manager shapes
the design of the firm’s marketing
channels.
Objective
Framework for Market Analysis
2
Market geography –
efficiently and effectively Market behavior – four
reach customers. Can dimensions: when, where, how,
use census data and zip and who.
code data to identify.

Market size – must

Market density – number of
consider relative costs of
buyers in an area. Want efficient
adding additional channel
congestion.
members based on size.

Target
Markets
Market Density & Channel Strategy

Efficient congestion

Congested (high-density) markets can promote

efficiency in the performance of several basic
distribution tasks, particularly those of transportation,
storage, communication, and negotiation.

The opportunity to achieve a

Strategic high level of customer access at
Implication low cost is higher in dense markets
than in more dispersed ones.
 When the Market Buys
Variations occur:

Daily Weekly Seasonally

Implications for the channel manager:

1. Variations create peaks & valleys in the manufacturer’s
production schedule.
2. He or she should attempt to select channel members who
are in tune with these changing patterns.
 Where the Market Buys

1. Determined by the types of outlets from which final

buyers choose to make their purchases

2. Determined by the location of those outlets

Implications for the channel manager:

1. He or she should know where customers generally

buy particular types of products
2. He or she should know whether these patterns
may be changing.
 How the Market Buys
1. Large quantities 1. Small quantities
2. Self-service 2. Assistance by
salespeople
3. One-stop shopping 3. Buying from several
stores
4. Impulse buying Versus 4. Extensive decision
making prior to purchase
5. Cash 5. Credit
6. Shopping at home 6. Shopping at stores
7. Expending substantial effort 7. Expending little effort
8. Demanding extensive service 8. Demanding little service
 Who Buys
Who makes the physical purchase?

Affects the type of retailers chosen in the

consumer market.

May influence the kinds of channel members

used to serve industrial markets.
Buying centers are commonly Used in
industrial markets.
 Buying Centers
Collection of people who participate in industrial
buying decisions and who are responsible for
the consequences resulting from the decision

Users – actually use the purchase

Influencers – provide input
Deciders – have the power to buy
Approvers – authorize decision
Buyers – negotiate terms
Gatekeepers – information flows
 Changes in Market Behavior
Objective

Channel
Manager’s
Role

Must be tuned in Needs to determine

to changes that whether changes
are likely to occur are temporary or
long term
Objective
Recent Changes…
6
1. Improved service at the retail level.
2. Demand for low prices leading to minimum
service/warehouse environment.
3. Catalog and online buying for convenience.
4. Less complex buying procedures.
5. Retail level innovations in layout and
display.