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Rahul Pratap Singh Kaurav
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The process by which a producer or supplierdirects marketing activity by involving and motivating parties comprising its channel of distribution.
MEANING AND DEFINITION
3
ROLE OF DISTRIBUTION CHANNELS
To adjust the discrepancy of assortment through the process of
sorting, accumulation, allocation, and assorting
To minimize the distribution costs through routinising and
standardizing transactions to make exchange more efficient
and effective
To facilitate the searching process of both buyers and sellers
by structuring the information essential to both the parties
To provide a place for both parties to meet each other and
reducing uncertainty
HOW DO DISTRIBUTION CHANNELS CONTRIBUTE
Intermediaries can improve the efficiency of the
exchange process
Channel intermediaries adjust the discrepancy of
assortment through the performance of the sorting
process
Marketing intermediaries hang together in channel
arrangements to provide for the routinisation of
transactions
Channels facilitate the searching process
DISCREPANCIES IN THE PROCESS OF EXCHANGE
Need to break the bulk
Need to provide assortment
THE COST AND CONTROL ASPECTS OF INTERMEDIATION
Direct Distribution Indirect distribution
Control Cost
efficiency
DISTRIBUTION CHANNEL STRATEGY
Setting distribution objectives in terms of the customer
requirements
Finalizing the set of activities that are required to be
performed to achieve the channel objectives
Organizing the activities so that the responsibility of
performing the activities is shared among the entities
who are meant to perform these activities
Developing policy guidelines for the smooth functioning
of the channel on a day to day basis
DISTRIBUTION CHANNEL MANAGEMENT (CONTD.)
Distribution channel management encompasses all activities
dealing with the distribution function of the firm
The distribution strategy provides guidelines for decision
making
The distribution management function can be viewed as
happening in two phases: the ex ante phase and the ex poste
phase
DISTRIBUTION CHANNEL MANAGEMENT (CONTD.)
The ex ante phase involves all the activities that are
associated with the design and establishment of the
distribution channel. These activities actually take place
before the distribution channel actually starts functioning.
The exposte phase involves managing the day to day
activities of the channel wherein the behavior of the
individual channel members are coordinated
CHANNEL MANAGEMENT TASKS
Distribution Channel Strategy
Channel Objective
Activity Finalization
Organizing the activities
Developing Policy Guidelines
Design of the
channel
structure
Establishing
the channel
Motivating
Channel
Members
Resolving
Conflicts among
channel
members
Ex ante
Phase
Ex Poste
Phase
The channel design is normally meant to give a clear idea about: The number of channel entities in the channel network,
The way in which they are linked,
The roles and responsibilities of the entities in the network
The rewards for participating in the activities and also
Clear cut guidelines for the major activities to be performed during the normal functioning of the channel.
Channel Design
WHAT ARE THE SERVICE OUTPUTS
Waiting time
Breaking the bulk
Spatial convenience
Assortment
DISTRIBUTION CHANNEL DESIGN
To consume
a product
Service outputs
have to be delivered
Channels
Participates in
channel flows
Activities have
to be performed Thus performs activities
EXAMPLE: OF A SERVICE OUTPUT DELIVERED TEMPLATE
Sl.No. Service dimension Service output delivered
1. Bulk-Breaking Units are delivered in ones
2. Spatial convenience There is at least one outlet for almost every
3 km radius excluding of course thinly
populated areas
3. Waiting time Not more than 2 days for any model
4. Assortment Other consumer goods items including that
of other competitors are available at all the
outlets where the products are otherwise
Available
5. Installation support Available
6. After sales support Free for first two years, but available on
payment afterwards. Also available at every
city from where the product was bought.
7. Consumer financing Available
PARAMETERS FOR COMPARING CHANNEL DESIGNS
Efficiency
Effectiveness
Equity
Scalability
Flexibility
THE CHANNEL ESTABLISHMENT PLAN (CONTD.)
The main purpose of the channel to be set-up
The profile of the customers who are the target market
for the channel
The needs and requirements of the target market with
regard to the identified service outputs provided by the
proposed/ existing channel:
Analysis of the operations of the existing channels that
deal in similar product/service lines
Detailed activity chart for achieving the service output
objectives
PLAN…..CONTD.
Details about the various channel constituents who will
be performing these tasks
The cost of performing the activities
The designated roles and responsibilities of the channel
constituents
The proposed remuneration for performing these roles
and responsibilities
Standards for measuring the performance
Procedures for reporting and information sharing
Monitoring mechanisms
Criteria for appointing the channel members
LOGISTICS STRATEGY
Cost reduction
Capital reduction
Service improvement
Retailer
Stockist
Supplier
Retailer Retailer Retailer Retailer
Stockist
echelon
lead time
Stockist
echelon
Inventory
Echelon inventory
CHANNEL RELATIONSHIPS/ BEHAVIOUR
Perceptions of organisational power
Dependence
Control
Trust
Commitment
Co-operation
CHANNEL CONTROL
Pay–Off
Function
Tolerance
Function
Supplier authority
Distributor’s
profit earned
Zone of acceptance
ROLE OF PERSUASION, AUTHORITY, AND COERCION IN CHANNEL CONTROL
Authority persuasion
Coercion
Pay –off
function
AB
C
Channel members
profit
Tolerance
function
control
COMPONENTS OF CHANNEL OFFERING
Financial returnsQuality
productsCompetitive priceReliable delivery
National
reputation
Promotional
supportTraining
Market
researchCompany
policies
Technical
assistance
Responsiveness
systems
Manufacturer sales
force incentives
Distributor
sales force
incentives
Distributor firm
incentivesCapability
building
programmesChannel core
elements
Incentive
programme
Influence
Strategy
group
Types of Influence strategy Explanation
Indirect
influence
strategies
Information exchange
Information control
Modeling
Where information on general business
issues and the channel program is
merely exchanged with channel
member personnel.
Direct
Unmediated
Strategies
Recommendation
Warning
Positive normative
Negative normative.
In this type of strategy the
consequences of the acceptance or
rejection of the channel programme or
its implementation are stressed, but
these consequences are based on a
response from the market environment,
not on the mediation of the channel
Principal.
INFLUENCE STRATEGY TYPES (CONTD.)
(CONTD.) INFLUENCE STRATEGY TYPES
Reward and
Punishment
Strategies
Economic reward
Non-economic reward
Economic punishment
Non-economic punishment
In this type of strategy rewards
and punishments are directly
given to channel members
Direct
unweighted
strategy
Direct request This strategy involves making a
direct request to the channel
member where the Principal
mainly communicates desires or
wishes concerning the channel
member’s acceptance of the
channel program.
Direct
Mediated
strategies
Personal plea
Promise
Threat and
Legalistic reference.
In this type of strategy specific
action is requested;
consequences of acceptance or
rejection are stressed and are
based on the mediation of the
channel principal.
INFLUENCE SITUATIONS IN CHANNEL RELATIONSHIP
Reinforcement
process
Behavioural
reinforcement
Moderate
rationalization
Attitude change
Radical
rationalization
Attitude change
Inducement process
Behavioural change
Moderate
confrontation
Behavioural and
attitudinal change
Radical
confrontation
Behavioural and
attitudinal change
Positive NegativeNeutral
+ ve
- ve
Attitude towards the channel progranmme
Behaviour
towards the
channel
programme
STAGES IN CHANNEL CONFLICT
Attitudinal
sources
of conflict
Structural
sources of
conflict
Conflict
resolution
Cognitive/
Affective
conflict
Manifest
conflict
Conflict
outcomes
CAUSES OF CONFLICTS
Attitudinal Causes
Structural causes
CONFLICT MANAGEMENT METHODS AT DIFFERENT STAGES OF CONFLICT
Latent conflict
Felt conflict
Manifest conflict
Institutional approaches
Joint membership of associations
Exchange of executives
Cooptation
Dealer councils
Third party mechanisms
Mediation
arbitration
Negotiation
NEGOTIATION STRATEGIES
Accommodative Collaborative/problem
solving
Compromise
Avoidance Competitive
/aggressive
Concern
for the
others
interest
HIGH
LOW
LOW HIGHConcern for
own interest
Refer to Unit I and II.
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