Channel Management LAP 2 Channel Management Chart Your Channels

Channel Channel ManagementManagement

LAP 2LAP 2

ChannelChannelManagementManagement

ChartChartYour Your

ChannelsChannels

ObjectivesObjectives

Explain key functions of channels Explain key functions of channels of distribution.of distribution.

Discuss decisions involved in channel Discuss decisions involved in channel management.management.

Explain key functions ofExplain key functions ofchannels of distribution.channels of distribution.

ObjectiveObjective

• Group project for government Group project for government class:class:

Isabella—reads and creates Isabella—reads and creates outlineoutline

Ben—creates PowerPoint Ben—creates PowerPoint presentationpresentation

Alicia—proofs for spelling and Alicia—proofs for spelling and grammargrammar

Erik—makes presentation and Erik—makes presentation and leads discussionleads discussion

• Similar to channels used in Similar to channels used in business to get products to business to get products to customerscustomers

Their Their “pr“product”—knowledgeoduct”—knowledge

Their Their “cu“customers”—other stomers”—other students and teacherstudents and teacher

• In business, channels work well In business, channels work well when:when:

They are properly managedThey are properly managed

Members strive together to Members strive together to reach a common goalreach a common goal

Members add value to the Members add value to the product along the wayproduct along the way

• Channel management—the Channel management—the strategies and processes by strategies and processes by which marketers ensure that which marketers ensure that products are distributed to products are distributed to customers efficiently and customers efficiently and effectivelyeffectively

• Channels of distribution—paths Channels of distribution—paths businesses use to get their businesses use to get their products to consumersproducts to consumers

• Consumers benefit by getting:Consumers benefit by getting:

Certain productsCertain products

In certain quantitiesIn certain quantities

When and where they want When and where they want themthem

Channels of DistributionChannels of Distribution

• Businesses benefit by:Businesses benefit by:

Channels of DistributionChannels of Distribution

Getting the products they Getting the products they need (just like consumers)need (just like consumers)

Moving their own products Moving their own products to consumers efficiently and to consumers efficiently and effectivelyeffectively

Important Channel ActivitiesImportant Channel Activities

• Must be completed no matter Must be completed no matter how many intermediaries are how many intermediaries are involvedinvolved

• Providing marketing Providing marketing informationinformation


• Promoting productsPromoting products Can be quite expensiveCan be quite expensive

Costs and responsibilities Costs and responsibilities are often shared.are often shared.


• Negotiating with customers Negotiating with customers on issues such ason issues such as

PricePrice

DeliveryDelivery

InstallationInstallation


• Reducing discrepancies of:Reducing discrepancies of: QuantityQuantity

AssortmentAssortment

• Financing and risk-takingFinancing and risk-taking

Adding ValueAdding Value

• Every channel member should Every channel member should add value to the product by:add value to the product by:

Performing necessary Performing necessary channel taskschannel tasks

Providing expertise at Providing expertise at channel taskschannel tasks

• Example—retailers are often Example—retailers are often “sp“specialists” at point-of-sale ecialists” at point-of-sale advertising.advertising.

Discuss decisions involved in Discuss decisions involved in channel management.channel management.

ObjectiveObjective

Channel EffectivenessChannel Effectiveness

• Channels are effective when:Channels are effective when:

They are properly managed. They are properly managed. Their managers:Their managers:

Recognize the importance of Recognize the importance of their tasktheir task

Make informed decisions Make informed decisions regarding:regarding:

Distribution patternsDistribution patterns

Selection of channel membersSelection of channel members

Assignment of channel Assignment of channel responsibilitiesresponsibilities

Channel EffectivenessChannel Effectiveness

• Channels are effective when:Channels are effective when: Channel members share common Channel members share common

goal(s)—a commitment to:goal(s)—a commitment to:

The quality of the productThe quality of the product

Satisfying the target market’s Satisfying the target market’s needs and wantsneeds and wants

Channel members share tasks Channel members share tasks appropriately.appropriately.

Channel-Management DecisionsChannel-Management Decisions

• Setting channel objectivesSetting channel objectives Marketers must determine Marketers must determine

what they’re trying to what they’re trying to achieve.achieve.

General channel objectives:General channel objectives: Efficiently meet needs and Efficiently meet needs and

wants of target marketwants of target market

Give product competitive Give product competitive edge in the marketplaceedge in the marketplace


• Setting channel objectivesSetting channel objectives May set more specific goals as wellMay set more specific goals as well

May choose direct distribution over May choose direct distribution over indirect distributionindirect distribution


• Determining distribution patterns

Goal—achieve ideal market exposure—making product available to each and every customer who might want to buy it without over-exposing it and wasting money


• Determining distribution patterns

Patterns may be: Intensive

Selling a product through every available wholesaler and retailer in a geographic area where consumers might look for it

Used to reach the greatest number of consumers possible

Often used for convenience products, such as gum


• Determining distribution Determining distribution patternspatterns

Patterns may be:Patterns may be: SelectiveSelective

Selling a product through a Selling a product through a limited number of limited number of wholesalers and retailers in wholesalers and retailers in a geographic areaa geographic area

Used when marketers want Used when marketers want to deal only with middlemen to deal only with middlemen they feel will do an excellent they feel will do an excellent job promoting and selling a job promoting and selling a productproduct

Companies may make more Companies may make more money distributing products money distributing products through a smaller number of through a smaller number of highly successful outlets.highly successful outlets.

Often used for consumer Often used for consumer shopping goods, such as shopping goods, such as high-end clotheshigh-end clothes


• Determining distribution Determining distribution patternspatterns

Patterns may be:Patterns may be: ExclusiveExclusive

Selling a product through Selling a product through just one middleman in a just one middleman in a geographic areageographic area

Used when marketers Used when marketers want to maintain tight want to maintain tight control over a productcontrol over a product

Often used for specialty Often used for specialty products, such as products, such as airplanesairplanes


• Selecting channel members Marketers must first determine:

Types of channel members (retailers, wholesalers, etc.)

Channel length—total number of channel members


• Selecting channel membersSelecting channel members Factors to consider when Factors to consider when

choosing specific channel choosing specific channel members—each should:members—each should: Create product value that Create product value that

the producer or other the producer or other middlemen cannot or are middlemen cannot or are not willing to provide not willing to provide (shipping, promoting, etc.)(shipping, promoting, etc.)

Channel the product to its Channel the product to its desired target market(s)desired target market(s)

Have a pricing and promotion Have a pricing and promotion strategy compatible with the strategy compatible with the product’s needsproduct’s needs

Offer customer service Offer customer service compatible with the compatible with the product’s needsproduct’s needs

Be willing and able to work Be willing and able to work cooperatively with other cooperatively with other members within the members within the product’s channelproduct’s channel


• Determining channel responsibilities

Channel activities must be performed for the product to reach the consumer.

Each channel member should perform the activity or activities it does best.


• Managing, motivating, and monitoring channel members

Marketers should constantly evaluate the channel: What’s working?

What isn’t?

What can be improved?

Should members be added or deleted?

Should certain responsibilities be reassigned?


• Managing, motivating, and monitoring channel members

Shipment due: April 10th

Shipment delivered: April 12th

CHARGEBACK

CHARGEBACK Marketers sometimes use

negative motivation: Sanctions for middlemen

who do not perform well

Chargebacks for producers for late shipments, etc.


• Managing, motivating, and Managing, motivating, and monitoring channel membersmonitoring channel members

Marketers sometimes use Marketers sometimes use positive motivation (usually positive motivation (usually more effective than negative):more effective than negative): Incentives for reaching Incentives for reaching

performance goalsperformance goals

Product trainingProduct training

Product update lettersProduct update letters

Cooperative advertisingCooperative advertising


• Managing, motivating, and Managing, motivating, and monitoring channel membersmonitoring channel members

Marketers must handle channel conflictconflict: Horizontal conflict—occurs Horizontal conflict—occurs

between channel members at between channel members at the same levelthe same level

Vertical conflictVertical conflict Occurs between channel Occurs between channel

members at different levels members at different levels in the same channelin the same channel

Usually occurs between Usually occurs between producers and wholesalers producers and wholesalers or producers and retailersor producers and retailers

Can also occur when Can also occur when marketers use e-commerce marketers use e-commerce or multiple distributionor multiple distribution

• Choose one good or service you’ve consumed today.

• Consider the channel activities that occurred before this product reached you.

• How do you think channel members added value to this product?

• What pattern of distribution do you think was used?

• Manufacturers may impose sanctions on intermediaries who do not perform well.

• If an intermediary does not meet the sales quota in its contract because of an economic downturn, the manufacturer may have the right to reduce the intermediary’s wholesale discount.

• But, do you think this is ethical?

• Should the intermediary be punished because of an economic trend?

• What do you think?

MBAResearchAcknowledgments

Original DevelopersChristopher C. Burke,

Sarah Bartlett Borich, MBAResearch

Version 1.0

Copyright © 2010MBA Research and Curriculum Center

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ADOBE IMAGE LIBRARY;Education & TeensObj. A: #ETE_050

Photos copyright Eyewire Inc.833 Fourth Ave. SW, Suite 800 Calgary, AB, Canada

Copyright:

All photographic digital images on this CD are owned by the aforementioned photographic resources or their licensors and are protected by the United States copyright laws, international treaty provisions, and applicable laws. No title to or intellectual property rights to the images on this CD are transferred to you. These sources retain all rights and are not to be used, digitally copied, transferred, or manipulated in any way. To do so is a violation of federal copyright laws.

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Channel Management LAP 2 Channel Management Chart Your Channels