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Anderson and Narus PPT - Chapter 9
Citation preview
Business Business Market Market
ManagementManagement
33rdrd edition edition
Sustaining Reseller Sustaining Reseller PartnershipsPartnerships
Chapter 9
Copyright © 2009 Pearson Education Publishing as Prentice Hall
Business Market Management, 3rd edition Chapter 9-2
Section IV: Section IV: Delivering ValueDelivering Value
Copyright © 2009 Pearson Education Publishing as Prentice Hall
Business Market Management, 3rd edition Chapter 9-3
Chapter 9: Sustaining Reseller Chapter 9: Sustaining Reseller PartnershipsPartnerships
OverviewOverview
I. Aligning Mutual Self-Interests and Complementary
Resources
II. Strengthening Partnerships in a Stable Marketplace
III. Responding Adaptively to Incremental Marketplace
Changes
IV. Transforming Channels in the Face of Disruptive
Forces
V. Summary
Copyright © 2009 Pearson Education Publishing as Prentice Hall
Business Market Management, 3rd edition Chapter 9-4
OverviewOverview
ResellerReseller partnership:partnership: mutual recognition
and understanding that the success of each
firm depends on the other firm
SustainingSustaining resellerreseller partnerships: partnerships:
continuing process of aligning mutual self-
interests with complementary resources of
partner firms in stable marketplaces
Copyright © 2009 Pearson Education Publishing as Prentice Hall
Business Market Management, 3rd edition Chapter 9-5
Strengthening Partnerships in Stable Marketplaces
Ensuring that Value is Delivered
Enhancing Interfirm
Coordination
Fulfilling Supplier Commitments
Fulfilling Reseller
Commitments
Responding Adaptively to Incremental Changes
Creating
AdaptiveChannels
Adjusting Commitments
Transforming Channels in the Face of Disruptive Forces
Establishing Integrated Multi-Channels
Skillfully Handling Relationship Transfers
Terminating Existing Partnerships
DeliveringDeliveringSuperior ValueSuperior Value
to Targetedto TargetedMarketMarket
SegmentsSegments andandCustomerCustomer FirmsFirms
Sustaining Reseller PartnershipsSustaining Reseller Partnerships
Copyright © 2009 Pearson Education Publishing as Prentice Hall
Business Market Management, 3rd edition Chapter 9-6
I. Aligning Mutual I. Aligning Mutual Self-Interests and Self-Interests and
Complementary ResourcesComplementary Resources
Copyright © 2009 Pearson Education Publishing as Prentice Hall
Mutual Self-Interests andMutual Self-Interests andComplementary ResourcesComplementary Resources
Business Marketing ChannelsShared goalsShared goalsDistinct individual goalsDistinct individual goals
Supplier firm and reseller firmSharing complementary resources and Sharing complementary resources and
capabilities increases likelihood that both capabilities increases likelihood that both achieve respective goalsachieve respective goals
Business Market Management, 3rd edition Chapter 9-7
Copyright © 2009 Pearson Education Publishing as Prentice Hall
Mutual Self-Interests andMutual Self-Interests andComplementary ResourcesComplementary Resources
Alignment: Alignment: Goal congruence exists among partner firms’ Goal congruence exists among partner firms’
self-interestsself-interests
Degree to which complementary resources and
capabilities enable partner firms to capitalize on
marketplace opportunities
Business Market Management, 3rd edition Chapter 9-8
Copyright © 2009 Pearson Education Publishing as Prentice Hall
Alignment DifficultiesAlignment Difficulties Law of Legitimate Law of Legitimate
Cross-Purposes: Cross-Purposes: supplier firms and reseller firms rely upon different profit models that are sometimes at odds Supplier: economies of Supplier: economies of
scalescaleResellers: economies Resellers: economies
of scopeof scope
Law of Perpetual Law of Perpetual Change: Change: evolving marketplaces may dramatically and unexpectedly alter the goals and resources of channel partners
Business Market Management, 3rd edition Chapter 9-9
Copyright © 2009 Pearson Education Publishing as Prentice Hall
Threat of OpportunismThreat of Opportunism
OpportunismOpportunism: : “self-interest seeking with guile”
1.1. Careful selection of honest and trustworthy partner Careful selection of honest and trustworthy partner
firmsfirms
2.2. Provision of incentives designed to thwart Provision of incentives designed to thwart
counterproductive behaviorscounterproductive behaviors
3.3. Diligent monitoring of partner firms’ activitiesDiligent monitoring of partner firms’ activities
4.4. Socialization of partner firm managers to the norms and Socialization of partner firm managers to the norms and
values associated with the pursuit of shared goalsvalues associated with the pursuit of shared goals
Business Market Management, 3rd edition Chapter 9-10
Copyright © 2009 Pearson Education Publishing as Prentice Hall
Ensuring AlignmentEnsuring Alignment
1. Understanding channel partners’ business models
2. Joint annual planning and periodic surveys
3. Continuously monitor the amount of conflict within
their marketing channels
4. Identify and pay attention to changes in the
marketplace that stand to misalign
the mutual self-interests of partner firms
Business Market Management, 3rd edition Chapter 9-11
Copyright © 2009 Pearson Education Publishing as Prentice Hall
Causes of Channel ConflictCauses of Channel Conflict Differences in goals Misunderstanding in relation to the
allocation of partnership responsibilities Differences in perceptions of the
marketplace
Business Market Management, 3rd edition Chapter 9-12
Conflict often masks misalignment and the Conflict often masks misalignment and the tendency of both supplier and reseller to avoid or tendency of both supplier and reseller to avoid or
““gloss over” conflicts. gloss over” conflicts. However, addressing disputes early and decisively is inHowever, addressing disputes early and decisively is in
the best interests of both parties.the best interests of both parties.
Copyright © 2009 Pearson Education Publishing as Prentice Hall
Ensuring Alignment Ensuring Alignment
Different scenarios:
Strengthening partnerships in a stable Strengthening partnerships in a stable
marketplacemarketplace
Responding adaptively to incremental Responding adaptively to incremental
marketplace changesmarketplace changes
Transforming channels in the face of disruptive Transforming channels in the face of disruptive
forcesforces Business Market Management, 3rd edition Chapter 9-13
Copyright © 2009 Pearson Education Publishing as Prentice Hall
Business Market Management, 3rd edition Chapter 9-14
II. Strengthening II. Strengthening Partnerships in a Stable Partnerships in a Stable
MarketplaceMarketplace
Copyright © 2009 Pearson Education Publishing as Prentice Hall
Strengthening Partnerships Strengthening Partnerships in a Stable Marketplacein a Stable Marketplace
Commitment: Commitment: captures the perceived continuity or growth in the relationship between two firmsDesire to develop stable relationsDesire to develop stable relationsWillingness to make short-term sacrifices to Willingness to make short-term sacrifices to
maintain the relationshipmaintain the relationshipConfidence in the stability of the relationshipConfidence in the stability of the relationship
Business Market Management, 3rd edition Chapter 9-15
Copyright © 2009 Pearson Education Publishing as Prentice Hall
Fulfilling Supplier Commitments to Fulfilling Supplier Commitments to Deliver ValueDeliver Value
Supplier Training:Supplier Training:Product knowledgeProduct knowledgeSelling skillsSelling skillsTechnical competenceTechnical competence
Reseller Courses:Reseller Courses:Customer applicationsCustomer applicationsChanging customer Changing customer
needsneedsOperational Operational
proceduresprocedures
Business Market Management, 3rd edition Chapter 9-16
Copyright © 2009 Pearson Education Publishing as Prentice Hall
Fulfilling Supplier Commitments to Fulfilling Supplier Commitments to Deliver ValueDeliver Value
Train and Coach Partner firmsCertification programsCertification programs
• Series of technical courses• Demonstrate competence (examinations)
Skills trainingSkills training• Courses on focused topics
CoachingCoaching• Improvement and reinforcement of
desired skills, behaviors, and performance • Strategic coaching• Skills coaching
Business Market Management, 3rd edition Chapter 9-17
Copyright © 2009 Pearson Education Publishing as Prentice Hall
Provide Responsive Sales and Provide Responsive Sales and Marketing ProgramsMarketing Programs
Product-Market Sales Analysis (PMSA)Analyzes the distributor’s product line by:Analyzes the distributor’s product line by:
• Geographic region• Market segment• Customer firm
Strategy includes:Strategy includes:• How to customize offerings for local customers• How to cross-sell the full line of products• Distributors given option for analyzing the data and
generating marketing development strategies Business Market Management, 3rd edition Chapter 9-18
Copyright © 2009 Pearson Education Publishing as Prentice Hall
Back Up Resellers with Back Up Resellers with Pricing SupportPricing Support
To keep reseller focused on delivering value, leading supplier firms promise pricing supportFinding cost reduction in customer’s plants Finding cost reduction in customer’s plants Large-order price discountsLarge-order price discountsInitial-use discountsInitial-use discountsDefeaturing pricingDefeaturing pricing
Business Market Management, 3rd edition Chapter 9-19
Copyright © 2009 Pearson Education Publishing as Prentice Hall
Furnish Operational and Furnish Operational and Technical SupportTechnical Support
Supplier firms can reduce the cost-to-serve customers by maintaining and providing operational and technical support in the form of:Inventory controlInventory controlLogisticsLogisticsCustomer service systems Customer service systems
Eliminating redundancies enablesreseller partners to offering a broader array of services at far lower costs
Business Market Management, 3rd edition Chapter 9-20
Copyright © 2009 Pearson Education Publishing as Prentice Hall
Fulfilling Reseller Commitments to Fulfilling Reseller Commitments to Deliver ValueDeliver Value
Reseller firms can boost their own reseller equity and enhance supplier firm’s brand equity by:Providing consistently superior service to customer firmsProviding consistently superior service to customer firms
Innovating in the local marketplaceInnovating in the local marketplace
Enhancing the supplier’s brand equityEnhancing the supplier’s brand equity• Offer new product ideas• Participate in quality improvement efforts
Business Market Management, 3rd edition Chapter 9-21
Copyright © 2009 Pearson Education Publishing as Prentice Hall
Strengthening Interfirm Strengthening Interfirm CoordinationCoordination
Coordination: Coordination: Customer and supplier firms synchronize their activities, resources, and capabilities to accomplish a collective set of tasksPeriodic joint annual planningPeriodic joint annual planningClarifying roles and responsibilities Clarifying roles and responsibilities
through written agreementsthrough written agreementsImproving communication through bridgingImproving communication through bridgingSynchronizing effort with Partner relationship Synchronizing effort with Partner relationship
management (PRM)management (PRM) Business Market Management, 3rd edition Chapter 9-22
Copyright © 2009 Pearson Education Publishing as Prentice Hall
Participate in Periodic Joint Participate in Periodic Joint Annual PlanningAnnual Planning
Supplier and Reseller firms participate in planning processBoth more likely to view plan as theirs and work Both more likely to view plan as theirs and work
hard to implement ithard to implement it• What do we know?• What do we want to accomplish?• How will we do it?
Reseller Marketing PlanReseller Marketing Plan• Situational analysis (SWOT)• Mutual objectives• Basic requirements• Implementation and control
Business Market Management, 3rd edition Chapter 9-23
Copyright © 2009 Pearson Education Publishing as Prentice Hall
Written AgreementsWritten Agreements
Equitable sales agreementsSharpen expectations and Sharpen expectations and
direct the actions of both firmsdirect the actions of both firms
Policy manualsDetailed descriptions of tasks Detailed descriptions of tasks
each member should performeach member should perform
Policy statementsDetailed statement of changes and Detailed statement of changes and
modifications in a specific policymodifications in a specific policy
Business Market Management, 3rd edition Chapter 9-24
Copyright © 2009 Pearson Education Publishing as Prentice Hall
Improve Communications Improve Communications Through BridgingThrough Bridging
Communication: Communication: formal and informal sharing of meaningful and timely information between firms
Bridging: Bridging: establishing and sustaining communication between partner firms across functions and management levelsOccasional phone callsOccasional phone callsLettersLettersOcassionally holidaying Ocassionally holidaying
togethertogether
Business Market Management, 3rd edition Chapter 9-25
Copyright © 2009 Pearson Education Publishing as Prentice Hall
Synchronize Efforts with aSynchronize Efforts with aPartner Relationship Management SystemPartner Relationship Management System Partner Relationship Management (PRM): Partner Relationship Management (PRM):
business regimen that enhances the ability of the supplier firm, reseller, and third-party service provider to seamlessly integrate and synchronize their:OperationsOperationsSellingSellingMarketingMarketingServicing effortsServicing efforts
Internet or Extranet Based Software Business Market Management,
3rd editionChapter 9-26
Copyright © 2009 Pearson Education Publishing as Prentice Hall
Ensuring that Value is DeliveredEnsuring that Value is Delivered
Conduct Market ResearchWas Total customer experience (TCE) Was Total customer experience (TCE)
promised to customer firm provided?promised to customer firm provided?Customer Satisfaction StudiesCustomer Satisfaction StudiesCustomer Value Assessment StudiesCustomer Value Assessment Studies
Get Equitable Return on Delivered ValueHave they received an equitable return on the Have they received an equitable return on the
value they delivered?value they delivered?
Business Market Management, 3rd edition Chapter 9-27
Copyright © 2009 Pearson Education Publishing as Prentice Hall
Market ResearchMarket Research
How research findings are used:1.1. Reseller and suppliers reexamine what each Reseller and suppliers reexamine what each
contributes to the delivery of TCEcontributes to the delivery of TCE
2.2. Supplier adapts its channel offering to better Supplier adapts its channel offering to better motivate and enable resellers to service motivate and enable resellers to service customerscustomers
3.3. Findings might point to needed improvement Findings might point to needed improvement in supplier and reseller coordinationin supplier and reseller coordination
Business Market Management, 3rd edition Chapter 9-28
Copyright © 2009 Pearson Education Publishing as Prentice Hall
Equitable Return on Delivered ValueEquitable Return on Delivered Value
Evaluate channel financial performance to determine:Have supplier and its reseller firms realized Have supplier and its reseller firms realized
the financial returns expected?the financial returns expected?New ways to achieve their cost-to-serve goalsNew ways to achieve their cost-to-serve goals
Business Market Management, 3rd edition Chapter 9-29
Copyright © 2009 Pearson Education Publishing as Prentice Hall
Diagnostic Measure and Diagnostic Measure and Profitability AnalysesProfitability Analyses
1. Calculate specific profitability and other performance
ratios for the firm’s channels
2. Compare each ratio to industry averages
3. Ratios are used to track performance over time, to
compare relative performance of two firms, and to
make cross-industry comparisons
Business Market Management, 3rd edition Chapter 9-30
Note: Suppliers and reseller rely on Note: Suppliers and reseller rely on different sets of performance ratiosdifferent sets of performance ratios
Copyright © 2009 Pearson Education Publishing as Prentice Hall
Business Market Management, 3rd edition Chapter 9-31
Diagnostic MeasuresDiagnostic Measures
PARsPARs
Performance Activity Reports. Performance Activity Reports. Trade associations and consulting firms commonly compile and publish industry averages.
If firm’s ratio is close to the industry average, then it is doing acceptably well on that dimension.
E/R RatiosE/R RatiosExpense-to-Revenue RatiosExpense-to-Revenue Ratios. Suppliers evaluate: 1) customer communication, 2) paperwork flows, 3) physical distribution, and 4) financial risk assumptions
Turns X Turns X earnsearns
GMROIGMROI
GMRORGMROR
Annual Inventory Turnover
X AverageGross Margin
AverageGross Margin
÷ AverageInventory
AverageGross Margin ÷
AverageAccounts
Receivables
Copyright © 2009 Pearson Education Publishing as Prentice Hall
Strategic Cost Management (SCM): Strategic Cost Management (SCM): 4-Step Approach4-Step Approach
1. Divide organization’s cost into Activity costs (order processing; selling costs)Activity costs (order processing; selling costs) Non-activity costs (advertising, trade shows)Non-activity costs (advertising, trade shows)
2. Subdivide and classify these costs as: Channel-related or Channel-related or Specific reseller-related costsSpecific reseller-related costs
3. Trace each cost back to individual channels or resellers
4. Estimate revenues channels or resellers generate and then construct direct costing income statements
These analyses enable managers to examine the profitability of channels or resellers.
Business Market Management, 3rd edition Chapter 9-32
Copyright © 2009 Pearson Education Publishing as Prentice Hall
Business Market Management, 3rd edition Chapter 9-33
Profitable AnalysesProfitable Analyses
SCMSCMStrategic Cost Management: Strategic Cost Management: Recasts the direct costing income statement around distribution-related activities
ContributionContribution
MarginMarginSales – Variables Costs
Net Net Marketing Marketing
ContributionContribution
ContributionMargin
_ Controllable Marketing Fixed Costs
Copyright © 2009 Pearson Education Publishing as Prentice Hall
Business Market Management, 3rd edition Chapter 9-34
III. Responding Adaptively to III. Responding Adaptively to Incremental Marketplace Incremental Marketplace
ChangesChanges
Copyright © 2009 Pearson Education Publishing as Prentice Hall
Adjusting CommitmentsAdjusting Commitments
Establish a Reseller Advisory CouncilReseller Advisory Council Reformulate channel partners’ “Gives & Gets”“Gives & Gets” Make responsive adjustments to the Joint Joint
Annual PlanAnnual Plan Seek influence among channel partner firms Establish a process and procedures for conflict conflict
resolutionresolution
Business Market Management, 3rd edition Chapter 9-35
Copyright © 2009 Pearson Education Publishing as Prentice Hall
Reseller Advisory CouncilReseller Advisory Council Consultative forum composed of key managers from
supplier and 10-15 reseller firms Advisory group offers counsel to supplier Functions as a means of incremental channel
improvement Council improves:
Market responseMarket response New product and service marketingNew product and service marketing Channel management Channel management
(domestic & international)(domestic & international)
Business Market Management, 3rd edition Chapter 9-36
Copyright © 2009 Pearson Education Publishing as Prentice Hall
Gives & GetsGives & Gets GivesGives: : specific
investments and resources a firm contributesKnowledgeKnowledgePersonnelPersonnelFixed assetsFixed assetsCashCash
Gets: Gets: specific gains a firm receivesGreater expertiseGreater expertiseEnhanced capabilitiesEnhanced capabilitiesAdditional profitsAdditional profits
Business Market Management, 3rd edition Chapter 9-37
Disconnects between partner firms can occur here;Disconnects between partner firms can occur here;what one channel member thinks it is what one channel member thinks it is givinggiving can be can be significantly different from what the other partner significantly different from what the other partner perceives it is perceives it is gettinggetting..
Copyright © 2009 Pearson Education Publishing as Prentice Hall
Business Market Management, 3rd edition Chapter 9-38
Traditional Reseller Discounts and AllowancesTraditional Reseller Discounts and Allowances
Trade or Functional
Discount
Percentage reduction from a suggested resale priceHistorical industry discountsIndustry gross margin averagesTurns x earns ratios
Quantity or Volume
Discount
Designed to motivate reseller to buy in large quantities and store local inventory (box loads, truckloads, and rail carloads)
Payment Discount
Encouragement to pay for goods immediately2/10/net 30 (2% reduction of invoice price paid within 10 days)
AllowanceExtra payment designed to gain reseller participation in special programs (cooperative advertising, merchandising, etc.)
Copyright © 2009 Pearson Education Publishing as Prentice Hall
Eliminating InequitiesEliminating Inequities Evaluate both partners’ “gives & gets”
Functional AllowanceSupplier pays reseller set percent off the reseller buy Supplier pays reseller set percent off the reseller buy
priceprice
Fee-for-ServiceSupplier pays its reseller partners a prespecified Supplier pays its reseller partners a prespecified
amountamount
On RetainerAmount of technical service days/hours expected Amount of technical service days/hours expected
from distributor partner for customer service from distributor partner for customer service (paid (paid whether service is provided or not)whether service is provided or not)
Business Market Management, 3rd edition Chapter 9-39
Copyright © 2009 Pearson Education Publishing as Prentice Hall
Responsive Adjustment to Joint Annual PlanResponsive Adjustment to Joint Annual Plan
Reseller market plans provide a coordinated course of actionMust respond to incremental Must respond to incremental
market changes quicklymarket changes quicklyMarket conditions change Market conditions change Suppliers and resellers learn Suppliers and resellers learn
through implementing the initial through implementing the initial planplan
Progressive suppliers and Progressive suppliers and resellers adjust existing plans resellers adjust existing plans when necessarywhen necessary
Business Market Management, 3rd edition Chapter 9-40
Copyright © 2009 Pearson Education Publishing as Prentice Hall
Seek Influence Among Channel Seek Influence Among Channel Partner FirmsPartner Firms
Six influence strategies for gaining and using power:Information exchangeInformation exchangeRecommendationsRecommendationsPromisesPromisesThreatsThreatsLegalistic pleasLegalistic pleasRequestsRequests
Business Market Management, 3rd edition Chapter 9-41
Copyright © 2009 Pearson Education Publishing as Prentice Hall
Seek Influence among Channels Seek Influence among Channels Partner FirmsPartner Firms
How can the weaker firm ensure that its more powerful partner will treat it fairly?
Dependence-Balancing Dependence-Balancing Operations:Operations:Courses of action weaker Courses of action weaker
firms pursue to equalize the firms pursue to equalize the importance of the partnershipimportance of the partnership
1) Make greater investments in partnership until resources committed by both firms is roughly equal
2) Seek out other partners
3) Change non-redeployable assets into redeployable assets
Business Market Management, 3rd edition Chapter 9-42
Copyright © 2009 Pearson Education Publishing as Prentice Hall
Creating Adaptive ChannelsCreating Adaptive Channels Adaptive Channels: Adaptive Channels: Flexible and responsive
to changing marketplace requirementsWebs of capabilities embedded in an Webs of capabilities embedded in an
extended enterpriseextended enterpriseIdentify infrequent, yet critical customer Identify infrequent, yet critical customer
requirements that they cannot routinely fulfill requirements that they cannot routinely fulfill on their ownon their own
Business Market Management, 3rd edition Chapter 9-43
Copyright © 2009 Pearson Education Publishing as Prentice Hall
Adaptive Channel InitiativesAdaptive Channel Initiatives1. Design arrangements that ensure they are routinely
able to cope with unpredictable or unusual
demands for products or services.
2. Focus on meeting customers’ growing demands for
broader market offerings.
3. Objective is to improve the quality of service
throughout the distribution channel.
Business Market Management, 3rd edition Chapter 9-44
Copyright © 2009 Pearson Education Publishing as Prentice Hall
Provide Support in Extraordinary SituationsProvide Support in Extraordinary Situations
Auxiliary Support SystemsAuxiliary Support SystemsDistribution channel members cope withDistribution channel members cope with
• Unexpected or unusual demands for products/services by sharing inventory and support services
Information technology monitors the availability of:– offerings– processes – orders– integrated logistics systems
Business Market Management, 3rd edition Chapter 9-45
Copyright © 2009 Pearson Education Publishing as Prentice Hall
Business Market Management, 3rd edition Chapter 9-46
Resolving Reseller-Supplier ConflictResolving Reseller-Supplier ConflictBoundary-Boundary-Spanning Spanning PersonnelPersonnel
Individuals who are in contact with the partner firm regularly; sensitive to inherent trouble spots
Employee Employee Exchange Exchange
ProgramProgram
Firms assign personnel for periods time to channel partner operations
Trade Trade Association Association MembershipMembership
Both the supplier firm and channel partners can learn how the other operates and what problems they must routinely address
OmbudsmanOmbudsmanTypically a retired reseller manager or principal employed by the supplier who has credibility with both parties
MediationMediation A third party is brought in to help resolve a dispute by either refocusing discussion on key issues or suggesting viable solutions
ArbitrationArbitrationFirms legally agree to have a third party settle the disagreement. Decision is final and binding.
Copyright © 2009 Pearson Education Publishing as Prentice Hall
Responsively Broaden the Responsively Broaden the Market OfferingMarket Offering
Companies outsource supply management function
Reseller AlliancesMembers agree to pool resources and capabilities Members agree to pool resources and capabilities
and broaden one another's market offeringand broaden one another's market offering
Consortium: resellers of complementary lines Consortium: resellers of complementary lines contribute equity and create a separate corporationcontribute equity and create a separate corporation
Business Market Management, 3rd edition Chapter 9-47
Copyright © 2009 Pearson Education Publishing as Prentice Hall
Share Capabilities with Other Share Capabilities with Other Channel MembersChannel Members
Companies tend to do an outstanding job with some services and a mediocre job with others
To overcome discrepancies, suppliers and resellers adopt:
Capabilities-Sharing AgreementsCapabilities-Sharing Agreements• Superior service of one channel member substitutes for the
sub par service of another• Channel members receive appropriate compensation for
sharing their superior service capabilities
Business Market Management, 3rd edition Chapter 9-48
Copyright © 2009 Pearson Education Publishing as Prentice Hall
Business Market Management, 3rd edition Chapter 9-49
IV. Transforming Channels IV. Transforming Channels in the Face of Disruptive in the Face of Disruptive
ForcesForces
Copyright © 2009 Pearson Education Publishing as Prentice Hall
Transforming Channels in the Transforming Channels in the Face of Disruptive ForcesFace of Disruptive Forces
Major structural changes within the marketplace Growth of the internet and mobile telephonesGrowth of the internet and mobile telephonesShift in power from supplier firm to customer and Shift in power from supplier firm to customer and
reseller firmreseller firmCommodization or technological obsolescence of Commodization or technological obsolescence of
many productsmany productsGrowing importance of service as Growing importance of service as
the primary source of customer valuethe primary source of customer value
Business Market Management, 3rd edition Chapter 9-50
Copyright © 2009 Pearson Education Publishing as Prentice Hall
Creating Integrated Multi-ChannelsCreating Integrated Multi-Channels
Customer firms routinely search and patronize multiple channelsWhose customer is it?Whose customer is it?
• Both supplier and reseller managers should integrate and synchronize their efforts at serving their mutual customers
• Channel StewardChannel Steward– coordinates activities for mutual benefit
Business Market Management, 3rd edition Chapter 9-51
Copyright © 2009 Pearson Education Publishing as Prentice Hall
Integrated Multi-ChannelsIntegrated Multi-Channels
Routine arrangements that address all sales and fulfillment tasks
Provide business market managers with numerous alternative channel configurationsAble to quickly respond to changing customer Able to quickly respond to changing customer
requirementsrequirements
Business Market Management, 3rd edition Chapter 9-52
Copyright © 2009 Pearson Education Publishing as Prentice Hall
Handling Relationship TransfersHandling Relationship Transfers Delineate Relationship Transfer Criteria
Economies of scaleEconomies of scaleKey for both channel partners is to identify the Key for both channel partners is to identify the
relevant sales breakpoint, at which relevant sales breakpoint, at which relationship transfers from one to the other (to relationship transfers from one to the other (to supplier if sales per time period is above the supplier if sales per time period is above the breakpoint and to reseller if below)breakpoint and to reseller if below)
Changes in customer TCE requirements may Changes in customer TCE requirements may also indicate the need to transfer relationshipsalso indicate the need to transfer relationships
Establish Equitable Compensation for Relationship Transfers
Business Market Management, 3rd edition Chapter 9-53
Copyright © 2009 Pearson Education Publishing as Prentice Hall
Terminating PartnershipsTerminating Partnerships Suppliers, reseller, and third-party service provider
managers should enter into the relationship with the sober realization that arrangements are not likely to last foreverContract renewal clauseContract renewal clauseConditions under which partnership termination are likely Conditions under which partnership termination are likely
should be addressed in the agreementshould be addressed in the agreementProcedures for termination should be delineatedProcedures for termination should be delineatedTermination should be civil Termination should be civil
and courteousand courteous
Business Market Management, 3rd edition Chapter 9-54
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Business Market Management, 3rd edition Chapter 9-55
V. SummaryV. Summary
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Business Market Management, 3rd edition Chapter 9-56
SummarySummary To sustain reseller partnerships, supplier and reseller managers
must continuously align their mutual self-interests and
complementary resources Strengthen partnerships in stable marketplaces
Respond adaptively to incremental marketplace changes
Transform channels in the face of disruptive forces
The nature and extent of realignment efforts varies as a function of
marketplace conditions
The principle managerial tasks are: Fulfilling commitment to one another
Ensuring customer value is delivered
Enhancing interfirm coordination
When marketplace changes are disruptive, the channel steward
must act to transform the channel network
Copyright © 2009 Pearson Education Publishing as Prentice Hall
Business Market Management, 3rd edition Chapter 9-57
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any
means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the
United States of America.
Copyright © 2009 Pearson Education, Inc. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice HallPublishing as Prentice Hall