Module 3

DISTRIBUTION MANAGEMENT

st
1 Semester SY 2021-2022
TABLE OF CONTENTS PAGE

Cover Page 1

Module Name 2

Table of contents 3

Instruction to the User 4

Introduction 5

Chapter 3 6

Discussion 8

Exercises/Activities 18

Evaluation/Post-test 19

References 20

Students Information 22

WPU Vision, Mission 23

INSTRUCTION TO THE USER

This module would provide you an educational experience while

independently accomplishing the task at your own pace or time. It aims as
well to ensure that learning is unhampered by health and other challenges. It
covers the topic about Distribution Management.

Reminders in using this module:

1. Keep this material neat and intact.

2. Answer the pretest first to measure what you know and what to be learned
about the topic discussed in this module.
3. Accomplish the activities and exercises as aids and reinforcement for better
understanding of the lessons.
4. Answer the post-test to evaluate your learning.
5. Do not take pictures in any parts of this module nor post it to social media
platforms.
6. Value this module for your own learning by heartily and honestly answering
and doing the exercises and activities. Time and effort were spent in the
preparation in order that learning will still continue amidst this Covid-
19pandemic.
7. Observe health protocols: wear mask, sanitize and maintain physical
distancing.
 INTRODUCTION

Distribution management is all about reaching the product as near to the customer as

possible and making the product and service available to the customer. The products must be

available to the customer at the right place and at the right time and with an assortment which gives

a lot of choice to the customers. Distribution systems can help the company in differentiating

themselves from the competitors. The distribution understands the end-customers very well and

thus guides the company in offering the best product mix to the consumers. It is not be treated as a

combination of some marketing tactics, but a significant and important part of the company's

strategic intent and goals.

This module discusses the importance of the following:

• Managing Marketing Channels

• Motivating The Channel Members
• Product Issues in Channel Management
• Pricing Issues in Channel Management
• Promotion in Marketing Channels
• Logistics and Supply Chain Management in Marketing Channel
• Evaluating Channel Member Performance
 CHAPTER 3

MANAGING MARKETING CHANNELS

Managing marketing channels is widely used in sales marketing parlance. It is a

process where the company develops various marketing techniques and sales strategies to
reach the widest possible customer base. The channels are nothing but ways or outlets to
market and sell products. The ultimate aim of any organization is to develop a better
relationship between the customer and the product.

Managing marketing channels helps in developing a program for selling and

servicing customers within a specific channel. The aim is to streamline communication
between a business and the customer. To do this, you need to segment your channels
according to the characteristics of your customers: their needs, buying patterns, success
factors, etc. and then customize a program that includes goals, policies, products, sales, and
marketing program.

The goal of managing marketing channels is to establish direct communication with

customers in each channel. If the company is able to effectively achieve this goal, the
management will have a better idea which marketing channel best suits that particular
customer base. The techniques used in each channel could be different, but the overall
strategy must always brand the business consistently throughout the communication.
A. LEARNING OUTCOME

MANAGING MARKETING CHANNELS

1. Understand the managing marketing channels
2. Discuss the motivating the channel members
3. Learned the product issues in channel management
4. Discuss the pricing issues in channel management
5. Discuss the promotion in marketing channels
6. Understand the logistics and Supply Chain Management in Marketing Channel 7.
Learned the evaluation of Channel Member Performance

B. TIME ALLOTMENT

C. PRE-TES

3hrs
 D. DISCUSSION
MANAGING MARKETING CHANNELS

Give 2 examples of the following statement.

Channel Issues 1 2

1. Product

2. Pricing

3. Promotion

4. Place

Channel management involves the marketing and sales strategies of company uses to reach
and satisfy consumers. When establishing channel management solutions, it must set clear goals for
each channel. The channel is how you intend to sell goods or services to your target audience.

Clear goals for each channel are the following:

• Define the policies and procedures to manage your channels

• Identify which products you offer that are suitable for a particular channel, and
• Develop sales and marketing programs for each channel to meet the actual needs of your
target customer, not what you think their needs are

Types of channel management includes:

• Channel architecture: Channel architecture is the basic framework for your channel. It
encompasses how the product is provided by the producer to the consumer.
• Channel strategy: This aspect involves your sales and distribution blueprint, such as how you
plan to expand your market and what specific action plans you will put in place to improve
your e-commerce channel.

• Channel design: How will you implement new channels? For instance, you may create an
affiliate program to encourage certain types of people and companies to help sell and
promote your product.

• Sales management: This aspect involves how you will manage sales and other partners. This
could include things such as what incentives you will offer to drive sales.

• Channel conflict: How do you plan to address conflict between channels that are unfair to
one party or counterproductive? For instance, if you are using an e-commerce solution that
undercuts your affiliates, you must address this conflict. When designing channels, you must
pay careful attention so one channel does not create a conflict for another channel.

• Relationship management: This aspect involves establishing and managing relationships

with vendors, affiliates, etc., over time.

• Brand experience: How do you plan to develop a brand experience that is consistent across
all channels, including if you sell online, through social media, etc., as well as physical
locations such as stores, boutiques, and more? For instance, if your brand voice emphasizes
making customers feel loved and appreciated, this should happen no matter where your
customers go.

• Pricing: This method involves using channel-based pricing strategies. For instance, a luxury
bakery that only sells certain products in upscale areas is an example of pricing as channel
management.

• Sales and operations planning: This method involves taking the time to match the goods or
services you are producing with the general demand. For instance, if you have a product or
service that is more popular during certain times of year (i.e., Christmas), you want to
increase production in the spring or summer.

• Revenue management: How will you optimize revenue for your available inventory? For
instance, a retail store may sell swimsuits at full price until near the end of the summer, at
which time it would likely discount the inventory to make more room for fall and winter
products.

• Distribution: This aspect is focused on how you will deliver on your obligations to both
channel partners and customers. For example, this could include properly managing
logistics, such as product exchanges and returns.
The channel management process contains five steps:

1. Analyze the Consumer

We begin the process of channel management by answering two questions. First, to whom shall we
sell this merchandise immediately? Second, who are our ultimate users and buyers? The immediate
and ultimate customers may be identical or they may be quite separate. In both cases, certain basic
questions apply: There is a need to know what the customer needs, where they buy, when they buy,
why they buy from certain outlets, and how they buy.

It is best that we first identify the traits of the ultimate user, since the results of that evaluation
might determine the other channel institutions we would use to meet those needs.

• purchased only from a well-established, reputable dealer

• purchased only after considerable research to compare prices and merchandise characteristics

• purchase may be postponed

• purchased only from a dealer equipped to provide prompt and reasonable product service

2. Establish the Channel Objectives

Once customer needs are specified, the marketer can decide what the channel must achieve, which
can be captured in the channel objectives. Channel objectives are based on customer requirements,
the marketing strategy, and the company strategy and objectives. However, in cases where a
company is just getting started, or an older company is trying to carve out a new market niche, the
channel objectives may be the dominant objectives. For example, a small manufacturer wants to
expand outside the local market. An immediate obstacle is the limited shelf space available to this
manufacturer. The addition of a new product to the shelves generally means that space previously
assigned to competitive products must be obtained. Without this exposure, the product is doomed.

• Growth in sales by reaching new markets and/or increasing sales in existing markets.

• Maintenance or improvement of market share

• Achieve a pattern of distribution by a certain time, place, and form

• Reduce costs or increase profits by creating an efficient channel

3. Specify Distribution Tasks

After the distribution objectives are set, it is appropriate to determine the specific distribution tasks
(functions) to be performed in that channel system. The channel manager must be very specific in
describing the tasks and also detail how these tasks will change depending upon the situation. For
example, a manufacturer might delineate the following tasks as necessary to profitably reach the
target market:

• Provide delivery within 48 hours after order placement

• Offer adequate storage space

• Provide credit to other intermediaries

• Facilitate a product return network

• Provide readily available inventory (quantity and type)

4. Evaluate and Select Among Channel Alternatives

Determining the specific channel tasks is a prerequisite of the evaluation and selection process.
There are four considerations for channel alternatives: number of levels, intensity at the various
levels, types of intermediaries at each level, and application of selection criteria to channel
alternatives. In addition, it is important to decide who will be in charge of the selected channels.

Number of Levels- Channels can range in levels from two to several (five is typical). The two-level
channel (producer to consumer) is a direct channel. The number of levels in a particular industry
might be the same for all the companies simply because of tradition. In other industries, this
dimension is more flexible and subject to rapid change.
Intensity at Each Level- Once the number of levels has been decided, the channel manager needs to
determine the actual number of channel components involved at each level. How many retailers in a
particular market should be included in the distribution network? How many wholesalers? The
intensity decision is extremely critical, because it is an important part of the firm’s overall marketing
strategy. Companies such as Starbucks and Hershey’s have achieved high levels of success through
their intensive distribution strategy.

5. Evaluating Channel Member Performance

The need to evaluate the performance level of the channel members is just as important as the
evaluation of the other marketing functions. Clearly, the marketing mix is quite interdependent, and
the failure of one component can cause the failure of the whole. There is one important difference,
though: the channel member is dealing with independent business firms, rather than employees and
activities under its control, these firms may be reluctant to change their practices.

Sales is the most popular performance criterion used in channel evaluation. Other possible
performance criteria are maintenance of adequate inventory, selling capabilities, attitudes of
channel intermediaries toward the product, competition from other intermediaries and from other
product lines carried by the manufacturer’s own channel members.

Search, Read and Understand: https://www.slideshare.net/rithikloveboy4u/managingmarketing-

channel
 MOTIVATING THE CHANNEL MEMBERS

google.com

1. Understand the Relationship. You are using a channel because you want the channel to
carry the cost of sales, while the channel wants you to minimize their sales costs by getting
you perform services for them. Because your agendas are different, you must craft a
relationship that makes sense and works for both firms

2. Limit the numbers. It's a big mistake to recruit too many channel partners. It's not true
that the more channel partners you have, the more they will sell. When you have too many
partners, you can't support them adequately and they'll start competing with each other and
may even create a price war for your product.

3. Create joint ventures. Create a relationship that takes into account the resources that
both companies can bring to bear in order to make the relationship successful. You will need
to invest resources in training, marketing and sales support, while the channel must commit
resources to training and actively promote the solution within its target market.

4. Get team consensus. If you sell your products both through direct sales and channels,
you'll need to keep the two groups from treading on each other's toes. If the direct sales team
sees the channel as competition, you can end up fighting a price war with your own product
as each group tries to undercut the other.

5. Target your markets. Figure out exactly where your product is most likely to sell and what
kind of person or organization can sell it most successfully. The more you understand your
customer base, the easier it will be to ensure that the channel focuses on the customers who
are most likely to generate revenue and profit for both you and your partner.
 6. Recruit a top manager. Most firms assign a low-level drone to work with the channel.
Wrong. Channel managers need to be heavy hitters so that they can influence and direct
channel strategy and behavior. Be sure you treat channel managers well, or they could end up
working the partner's issues inside your firm, rather than the other way around.

7. Train, train, train. Channel sales training must go beyond the sales training that you
would normally supply to a direct sales force. Your channel partners' sales reps will need top
quality selling tools, such as competitive data sheets, sales scripts, selling videos, testimonials
as well as the usual brochures and specification sheets.

8. Support, support, support. If the channel partners are using your product in new ways,
such as customizing it for a particular industry, they'll need MORE support than your direct
sales force. Frequent and ongoing communication is vitally important to the health of a
channel relationship.

9. Provide cool incentives. While your partner's sales staff may already be well
compensated, they'll be far more likely to sell your product is they feel that there's
"something in it for them." For example, you might give a channel sales rep credit towards a
personal purchase for attending a regional training session.

10. Spend some money. A good way to ensure channel loyalty is to help with the channel's
marketing efforts, such as through joint funding of advertisements. However, don't just
throw money at them. Be sure that there's some way to measure the impact of the money,
through higher sales of your product.

Search, Read and Understand: https://faculty.ksu.edu.sa/sites/default/files/chapter_09_2.pdf

PRODUCT ISSUES IN CHANNEL MANAGEMENT

 Google.com

Channel management involves more than just motivation management; the channel
manager must also be skilled at using the element of the marketing mix to facilitate the
administration of the channel. The channel manager needs to use the firm’s product, pricing,
promotion, and logistics variables to their maximum effect in securing cooperation from channel
members. These marketing mix variables may be viewed as resources: how these resources are used
will affect the performance of the channel members. The channel manager needs to understand how
the other marketing mix variables interface with the channel variable, and what the implications of
these interfaces are for channel management.
1. New Product Planning and Channel Management
• Encouraging Channel Member Input into New Product Planning
• Fostering Channel Member Acceptance of New Products
• Fitting the New Product into Channel Member Assortments
• Educating Channel Members about New Products
• Making Sure New Products Are Trouble Free
2. The Product Life Cycle and Channel Management
3. Strategic Product Management and Channel Management
4. Trading Down, Trading Up, and Channel Management
Search, Read and Understand:
https://faculty.ksu.edu.sa/sites/default/files/chapter_10_7.pdf https://www.slideserve.com/fox/product-issues-in-
channel-management

PRICING ISSUES IN CHANNEL MANAGMENET

Anatomy of Channel Pricing Strategy Participants at the various levels in the channel each
want a part of the total price (the price paid by the final buyer) sufficient to cover their costs and
provide a desired level of profit. The “golden rule” of channel pricing when developing a pricing
strategy is stated as follows: “It is not enough to base pricing decisions solely on the market, internal
cost considerations, and competitive factors. Rather, for those firms using independent channel
members, explicit considerations of how pricing decisions affect channel member behavior is an
important part of pricing strategy.” Pricing decisions can have a substantial impact on channel
member performance. If channel members perceive the manufacturer’s pricing strategy as
congruent with their own interests, then a higher level of cooperation can be expected. Therefore,
the major challenge facing the channel manager in the area of pricing is to help foster pricing
strategies that promote channel member cooperation and minimize conflict. An evaluation of how
the manufacturer’s existing or proposed pricing strategies influence channel member behavior
would normally be included as part of the general evaluation of channel member needs and
problems. Whenever possible, the channel manager should attempt to have channel members’
viewpoints on pricing issues included as an integral part of the manufacturer’s price making process.

Search, Read and Understand:

https://faculty.ksu.edu.sa/sites/default/files/chapter_11_1.pdf

PROMOTION IN MARKETING CHANNELS

The promotion has increasingly been used as shorthand for referring to all of the persuasive
communications employed by businesses and other organizations. These include advertising,
personal selling, publicity, sales promotion, sponsorship, and point-of-purchase communications.
Some marketing texts use the term “integrated marketing communications” to refer to the
systematic use of several or all of these tools in a coordinated effort to achieve maximum
promotional impact. Because most products and services are not sold directly to the final consumer,
the promotion programs undertaken by producers, manufacturers, franchisors, and service creators
need the assistance and support of channel members to be successful. Thus the effectiveness of the
manufacturer’s overall promotional strategy depends on how skillful the manufacturer is in securing
cooperation from independent channel members in implementing the promotional strategy. Some
manufacturers rely on promotion in the form of advertising to their target markets to “pull” their
products through the channel and hence indirectly secure channel cooperation. The belief
underlying this so-called pull strategy is that by building strong consumer demands, the
manufacturer will force channel members to automatically promote the manufacturer’s product
because it is in their obvious self-interest to do so.
This strategy is often insufficient by itself to secure strong channel member promotional
support. An approach referred to as push strategy, requires more direct involvement by the
manufacturer with channel members in the use of promotional strategies. The real concept
underlying the push strategy should be one of mutual effort and cooperation between the
manufacturer and channel members in the development and implementation of promotional
strategies. The overall trend in promotional emphasis has been toward push promotion rather than
pull, given the increasing size and power of retailers and wholesalers. About 50 percent of every
dollar spent on promotion goes for push type promotions.
Promotional Strategies in Marketing Channels Promotional strategies emphasizing the push
approach initiated by the manufacturer but requiring channel member support and follow-through
can take many forms. Most can be placed in the following seven categories:
1. cooperative advertising,
2. promotional allowances,
3. slotting fees,
4. displays and selling aids,
5. in-store promotions,
 6. contests and incentives, and
7. special deals and merchandising campaigns.

Search, Read and Understand: https://faculty.ksu.edu.sa/sites/default/files/chapter_12.pdf

LOGISTICS AND SUPPLY CHAIN MANAGEMENT IN MARKETING CHANNEL

Describe the roles that marketing channels and logistics play in marketing strategy. Describe
the various types of distribution channels available to marketers. Outline the major channel strategy
decisions. Describe the concepts of management, conflict, and cooperation within the marketing
channel. Identify and compare the major components of a physical distribution system. Compare the
major transportation alternatives on the basis of speed, dependability, cost, frequency of shipments,
availability in different locations, and flexibility in handling products. Discuss how transportation
intermediaries and combined transportation modes can improve physical distribution.

Search, Read and Understand: https://slideplayer.com/slide/4191903/

EVALUATING CHANNEL MEMBER PERFORMANCE

Google.com
Google.com

Producers must periodically evaluate intermediaries’ performance against such standards as

sales-quota attainment, average inventory levels, customer delivery time, treatment of damaged and
lost goods, and cooperation in promotional and training programs. Producers should set up
functional discounts in which they pay specified amounts for the trade channel’s performance of
each agreed-upon service. Underperformers need to be counseled, retrained, motivated, or
terminated. Sales is the most popular performance criteria used in channel evaluation. Sales might
further be subdivided into current sales compared with historical sales, comparisons of sales with
other channel members, and comparisons of the channel member's sales with predetermined
quotas. Other possible performance criteria are: maintenance of adequate inventory, selling
capabilities, attitudes of channel intermediaries toward the product, competition from other
intermediaries and from other product line carried by the manufacturers own channel members.

Search, Read and Understand: https://slideplayer.com/slide/14257904/

https://cupdf.com/document/chapter-14-evaluating-channel-member-performance.html
E. EXERCISES/ACTIVITIES

I. Essay: Answer the following questions precisely.

1. What is importance of managing channels?

2. What is common issues in channel management?

3. What is the difference between supply chains and distribution channels?

Rubric:
5 4 3 2 1
F. EVALUATION/POST-TEST
Comprehensive Well written Well written but Weak essay Poor written
Analytical nEssay Includes some lack of balance Lack organization Barely address
analysis Lack of analysis No analysis questions

Give 2 examples of the following statement.

Channel Issues 1 2

5. Product

6. Pricing

7. Promotion

8. Place

II. Essay
G. REFERENCES
1. How are you going to motivate your channel member?

2. Why we need to evaluate channel members?

Rubric:
5 4 3 2 1
Comprehensive Well written Well written but Weak essay Poor written
Analytical Essay Includes some lack of balance Lack organization Barely address
analysis Lack of analysis No analysis questions

Basic of Distribution channels. Core principles of international marketing

https://opentext.wsu.edu/cpim/chapter/10-1-basics-of-distribution-channels/

Directive (n.d.) Marketing channel

https://directiveconsulting.com/resources/glossary/marketing-channel/

Directive web page. What is marketing channel?

https://directiveconsulting.com/resources/glossary/marketing-channel/\

Civil Service India. Designing and managing marketing

channelshttps://www.civilserviceindia.com/subject/Management/notes/designing-and-
managingmarketing-channels.html

Compass web page. How to develop an channel mix plan.

https://www.thecompassforsbc.org/howto-guides/how-develop-channel-mix-plan

Importance of choosing the right channel partner.

https://www.comparethecloud.net/articles/theimportance-of-choosing-the-right-channel-partner/
https://faculty.ksu.edu.sa/sites/default/files/chapter_07_2.pdf

Google image:
https://www.google.com/search?q=Channel+Selection+&tbm=isch&ved=2ahUKEwjF7_iMi5DzAh
VG0ZQKHbm6BhMQ2-
Marketing channel Relationship. Lumen Boundless Marketing page.
https://courses.lumenlearning.com/boundless-marketing/chapter/marketing-
channelrelationships/

Perrin, J. (2013) 10 tips for successful channel partner selection. Customer think websites.
https://customerthink.com/10_tips_for_successful_channel_partner_selection/

Rivera, Maricel (January 24, 2021) Marketing channels your small business should utilize
https://www.fool.com/the-blueprint/marketing-channels/

Tamanna R. (n.d) Marketing channel: Definition, Need, types, structure, importance and function.
Business Management Ideas.
https://www.businessmanagementideas.com/marketing/marketing channel-definition-need-types-
structure-importance-and-functions/19940

The Environment of Marketing channels

http://www.swlearning.com/pdfs/chapter/0324186932_3.PDF

Marketing channel https://slideplayer.com/slide/10081412/

http://www.swlearning.com/pdfs/chapter/0324186932_2.PDF
What is marketing channel strategy? Channel surfing for the digital era.
https://fabrikbrands.com/what-is-marketing-channel-strategy/

The economic Times (November 17, 2021) Marketing channel,

https://economictimes.indiatimes.com/definition/channel-management

Managing Distribution Channels (2014) Lumen Principle of Marketing

https://courses.lumenlearning.com/wmopen-principlesofmarketing/chapter/
optimizingchannels-2/

Sanfilippo M. (2020) What is channel Management

https://www.business.com/articles/channel-management/
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