Managing Marketing Channels * Involves * Selection of right channel partner * Increasing productivity/effectiveness of channel partner * Conflict managementSelection Parameters Financial strength Sales strength + Sales/technical ability + No, of sales staff Product lines carried Competitive/ Compatible / Complementary Reputation Market coverage * Geographical coverage — outlets per area + Industry coverage . Call frequency/ intensity of coverage Managerial strength Advertising & Sales promotion programs Training programs + Self administered 9) Sales compensation methods 10) Infrastructure * Warehousing ability . Inventory . Transportation 11) Ordering & Payment procedures 12) Installation & repair services — . Workshop / ASS + Warranty work 13) Quality of demonstration programs 14) Willingness to + Commit resources to brand . Cooperative in joint programs * Share data 15) Accept quotas/targetsIncreasing Productivity of channel partners * Channel members need to be influenced to behave in a manner so that productivity of entire channel increases. * Methods — Use of channel power — Development of channel commitment & trust * Channel power is the ability of one channel member to get another channel member to do what it otherwise would not have done. * Channel power is obtained through possession & control of resources that are valued by other party. * Resources could be assets, attributes or conditions within a relationship that generate/represent each channel member’s * Dependence * Indebtedness + Allegiance to another channel member.Channel Power methods Reward Coercion Expertness Reference Legitimacy Power bases used normally in combination for increasing effectiveness Coercive power if used improperly may destroy referent/expert power built up over period of timeChannel Commitment & Trust Commitment — Propensity to maintain a relationship. Could be * Affective: maintaining a relationship because one wants to + Moral: maintaining a relationship because one feels one should do so * Calculative: maintaining a relationship because one has to Channel managers need to analyze each channel member’s commitment type and manage them accordingly Trust — Confidence about another person’s thought / behavior in specific situations Trust between channel members increased by * shared values * increased value of channel outcomes * increased communication Trust reduces through opportunistic behaviour Trust enhances commitment within distribution channel.Channel Conflict Management * Channel conflict Situation in which one channel member perceives another channel member(s) to be engaged in behaviour that prevents/ impedes it from achieving its goals. * Root cause * Inherent interdependence of channel members on each other. * Channel members pushed into interdependence due to their need for resources (Money, Specialized skills, Market access) + Functional interdependence requires coordination to achieve goal + However, firms strain to maximize their autonomy * Establishment of interdependence therefore creates conflict of interest * Conflict may not be avoidable; but they need to be managed. * Difference between Competition & Conflict * Competition: Goal/ objective centered behavior * Conflict: Opponent centered behaviorConflict Analysis & Management * Conflicts analyzed based on * Level: Intensity, Frequency, Importance of disputed issue * Source: Goal divergence, Domain dissensus, Differing perceptions of reality * Impact: Constructive , Pathological (Malignant) * Conflicts managed through * Information intensive methods * Information protecting methods + Use of channel power: * Leadership (HB SLM)Conflict Management * Conflicts managed through * Information intensive methods + Involve open exchange of information to resolve conflict * Trust / cooperation between parties involved helps in resolving issues * Eg. Joint membership in trade association / Co-optation for advertising cost sharing * Information protecting methods + Adopted when disagreement/conflict cannot be fully resolved * Zero sum orientation (if A wins, B loses); inflexible behavior (threat/promise) * Resolved through + Mediation - third party attempts to settle conflict * Arbitration — conflict settled through informal/private court * Use of channel power + Goal conflict — use reward power + Domain conflict - use legitimate power * Perception of reality —use expert power * Leadership (HB SLM)Marketing Channel Policies * Policies related to Geographic market coverage Type of customers covered Pricing Product line Selection/Termination Ownership of channel institutionMarket Coverage * Options + Intensive distribution(max * Product could be outlets) * Convenience * Selective distribution (Itd outlets/geog area) * Exclusive distribution (one outlet/geog area) * Option selected based on * Product type * Store type * Shopping * Specialty * Store could be * Convenience * Shopping * SpecialtyConvenience Shopping Specialty Convenience Shopping Specialty Convenience Shopping Specialty Convenience Convenience Convenience Shopping Shopping Shopping Specialty Specialty Specialty Intensive Intensive Selective/Exclusive Intensive Selective/Exclusive Selective/Exclusive Selective/Exclusive Selective/Exclusive Selective/Exclusive Product type Beli Biel | Distribution policy oe Toothpaste from Kirana store Clothes Prepaid Telephone Cards Medicines Clothes, Furniture Sony TV from multiple stores Cosmetics Adidas showrooms Automobiles, World of SonyCustomer Coverage * Customers categorized into Manufacturer a/c — multi-city Corporates Wholesaler a/c — bulk sales - single-city Corporates Retailer a/c — unit sales * Categorization based on Need/desire to maintain close relations with valuable a/c Need for technical assistance Efficiency associated with servicing some a/c directly Expected profits on sales Need for price concessions to win some a/c Insistence of a/c to deal directlySynopsis Distribution channel management in dairy industry. Natureview Farm = Vermont-based producer of organic yogurt + $13 million revenue + Leading US yogurt brand (24% market share) + Sold through natural foods stores Achievement due to * Special yogurt manufacturing process * Cultivating personal relationships with dairy buyers in natural foods channel Company facing financial pressure to grow revenues to $20 million by end of 2001 (i.e. next year), due to planned exit of its venture capital investors. Immediate decision point for Christine Walker (VP Mktg): + Whether to achieve revenue growth by expanding into supermarket channel.Alternatives * Option 1 * Expand into supermarket channel with 6 SKUs of the 8-oz. product line. * Partner with 20 supermarket chains in two geographic regions. (Advocated by Walter Bellini, VP sales). * Option 2 * Expand into supermarket channel with 4 SKUs of the 32- oz. product line. * National expansion, partnerships with 64 supermarket chains in all four geographic regions of the United States. (Advocated by Jack Gottlieb, VP operations). * Option 3 * Remain with the natural foods channel * Introduce new product line: 2 SKUs of a children’s multi- pack targeted to mothers. (Advocated by Kelly Riley, assistant marketing director).Nay Cor sHaRe 10 B Ss D E F 6 4 Optiont | Option2 | Option 3 ‘$000 (Boz) (32.02) __ (Multipack) ‘One Year Revenue 16,071 9,214 3,317 One Year Profit -212| 823 781 » NPV of Profit over 2 Years 1,436 1,310 1,608 Revenue after 5 Years 33,325) 19,107 5,802 NPV of Profit over 5 Years 11,013; 10,640 4,798 Fe | 12 Assumptions for Option 1 13 Broker Fees ‘Supermarket Channel - 802 4% of manufacturer's salesAnsoff’s Grid Current products New products Current Market penetration | Product development markets strategy strategy Market Diversification New markets development strategy strategy