MM 102- PROFESSIONAL SALESMANSHIP sales prospects by comparing them with this ideal
customer profile.
CHAPTER 4
STRATEGIC AND PREPARING FOR SALES DIALOGUE
THE IMPORTANCE AND CHALLENGES OF PROSPECTING
Outbound was an approach that required the
salesperson to conduct "cold" outreach in which they
called and emailed prospects who had not opted in to
speaking with them.
Inbound sales took the opposite approach,
encouraging salespeople to build relationships with
their prospects and call or email only those prospects
who had expressed interest in their product or service.
THE STRATEGIC PROSPECTING PROCESS
STRATEGIC PROSPECTING is a process designed to
identify, qualify, and prioritize sales opportunities,
whether they represent potential new customers or
opportunities to generate additional business from
existing customers.
-often viewed as a sales funnel or sales pipeline
wherein it is a representation of the trust-based sales
process and strategic sales prospecting process in the
form of a funnel
GENERATING SALES LEADS
-The first step in strategic prospecting process is to
identify sales leads.
-Sales Leads or suspects are organizations or
individuals who might possibly purchase the product
of service a salesperson offers. This represents the
realm of sales opportunities from a salesperson
DETERMINING SALES PROSPECTS
The most productive salespeople evaluate sales leads
to determine which ones are true prospects for their
product or service. This evaluation process is usually
called qualifying sales leads. It is the salesperson’s act
of searching out, collecting, and analyzing information
to determine the likelihood of the lead being a good
candidate for making a sale.
Sales prospects is typically an individual or
organization that:
-Has a need for the product or services
-Has the budget or financial resources to purchase the
product or service.
-Has the authority to make the purchase decision.
PRIORITIZING SALES PROSPECT
The most productive salespeople prioritize their sales
prospects to ensure that they spend most of their
time on the best opportunities. One approach is to
create an ideal customer profile and then analyze
Ideal Customer Profile is the characteristics of a firm’s
best customers or the perfect customer. Those that
most closely fit the profile are deemed to be the best
sales prospects.
PROSPECTING METHODS
The term ‘prospecting’ relates to locating and
qualifying new customers. It is the first step in the
sales process and it is an act of finding prospects. The
objective of prospecting is to identify qualified
potential customers.
Prospect it is a potential customer, client or purchaser
or sales lead which has been qualified as fitting certain
criteria.
PROSPECT METHODS
COLD CANVASSING
-a technique in which the salesperson meets unknown
people and breaks the “cool ice wall” so that people
will accept him/her.
Cold Calling- contacting a sales lead unannounced and
with little or no information about the lead. It is
probably one of the most popular and effective sales
prospecting methods of reaching out to your
prospects.
Referrals- a name of a company or person given to the
salesperson as a lead by a customer or even a
prospect who did not buy at this time. Referral is a
prospect recommended by an existing customer or
someone who is familiar with the product.
Introduction- a variation of a referral where, in
addition to requesting the names of prospects, the
salesperson asks the prospect or customer to prepare
a note or letter of introduction that can be sent to the
potential customer.
NETWORKING
-the exchange of information and ideas among people
with a common profession or special interest, usually
in an informal social setting. Salespeople can use
various types of networking as effective methods for
prospecting.
Centers of Influence- It is a technique in which the
salesperson meets unknown people and breaks the
“cool ice wall” so that people will accept him/her.
Noncompeting Salespeople- a salesperson selling
noncompeting products.
Electronic Networking- using web sites designed to
help salespeople identify and gather information
about prospects.
COMPANY SOURCES
Company Records means any records, information or
data, in which it is stored, related to Company
business activities. It is an information about
customers in a company database.
Advertising Inquiries are potentially a
good source of prospects. It is a sales leads generated
from company advertising efforts.
Inbound Telemarketing- a source of
locating prospects whereby the prospect calls the
company to get information.
Outbound Telemarketing- a source of locating
prospects whereby the salesperson contacts the
prospect by telephone.
Trade Shows-events where companies purchase space
and set up booths that clearly identify each company
and its offerings and that are staffed with salespeople
who demonstrate the products and answer question.
Seminars- a presentation salespeople give to generate
leads and provide information to prospective
customers who are invited to the seminar by direct
mail, word of mouth, or advertising on local television
or radio.
PUBLISHED SOURCES
-Directories offer an inexpensive, convenient means of
identifying leads. Electronic or print sources that
provide contact and other information about many
different companies or individuals.
Commercial Lead- lists designed to focus on virtually
any type of business or individual they range from
simple listings of names, addresses and phone
numbers to more detailed listings with a full profile of
the different entries included in the list.
DEVELOPING A STRATEGIC PROSPECTING PLAN
STRATEGIC PROSPECTING PLAN- A salesperson’s plan
for gathering qualified prospects.
TRACKING SYSTEM- part of the strategic prospecting
plan that records comprehensive information about
the prospect, traces the prospecting methods used,
and chronologically archives outcomes from any
contacts with the prospects.
GATHERING PROSPECT INFORMATION TO PREPARE
FOR SALES DIALOGUE
CHAPTER 6
PLANNING SALES DIALOGUES AND PRESENTATION
CUSTOMER-FOCUSED SALES DIALOGUE PLANNING
SALES CALL- is an in-person meeting between
salesperson or sales team and one or more buyers to
discuss business. This typically takes place in the
customer's place of business, but it may take place
elsewhere, such as in the seller's place of business or
at a trade show.
SALES DIALOGUE- are business conversations
between buyers and sellers that occur as salespeople
attempt to initiate, develop, and enhance customer
relationships. Sales dialogue should be customer
customer-focused and have clear focus. The term sales
conversation is used interchangeably with sales
dialogue.
SALES PRESENTATIONS- is a comprehensive
communication that convey multiple points designed
to persuade the customer to make a purchase. Ideally,
sales presentations focus on customer value and only
take place after the salesperson has completed the
ADAPT process.
SALES COMMUNICATIONS FORMATS
TYPES OF SALES COMMUNICATION
CANNED SALES PRESENTATION- Sales presentations
that include scripted sales calls, memorized
presentations, and automated presentations.
Canned sales presentations include scripted
presentations to customers at industry trade shows.
WRITTEN SALES PROPOSALS- A complete self-
contained sales presentation on paper, often
accompanied by other verbal sales presentations
before or after the proposal is delivered.
ORGANIZED SALES DIALOGUE- Also known as the
organized sales presentation. Unlike a canned sales
presentation, an organized sales dialogue has a high
level of customer involvement.
-Organized sales presentation is a sales presentation
that allows a sales person to implement appropriate
sales strategies and tactics based on customer
research or information gathered during previous
sales calls. organized sales presentations feature a
high-level two-way dialogue with a customer
EVALUATING SALES PROPOSALS
-It is a best practice to evaluate sales proposals before
they are submitted to the customer. Five important
dimensions for evaluating for proposals are reliability,
assurance, tangibles, empathy, and responsiveness.
FIVE IMPORTANT DIMENTIONS FOR EVALUATING
PROPOSALS
RELIABILITY- Reflects your (the seller’s) ability to
identify creative, dependable and realistic solutions
and strategies and match them to the buyer’s needs
and wants.
ASSURANCE- Builds the buyer’s trust and confidence
in your ability to deliver, implement produce, and/or
provide the benefits.
TANGIBLES- Enhance and support the communication
of your message and invite readership by its overall
appearance, content, and organization.
EMPATHY- Confirms your thorough understanding of
the buyer’s business and his or her specific needs and
wants.
RESPONSIVENESS- Developed in a timely manner and
demonstrates a willingness to provide solutions for
the buyer’s needs and wants and to help measure
results.
SALES DIALOGUE TEMPLATE
Are not scripted in advance, however salespeople
should always think ahead of what questions and
statements to include in the conversation and be
prepared to up their conversation with an appropriate
amount of detail.
It is a flexible planning tool that assist the salesperson
in assembling pertinent information to be covered
with the prospect.
SECTION 1: PROSPECT INFORMATION
- Used to record specific information on the prospect
such as the company name, key decision maker's
name and job title, and the type of business.
- Salesperson should make sure that all of the key
players are receiving the appropriate information and
getting the proper attention they deserve.
SECTION 2: CUSTOMER VALUE PROPOSITION
- Customer Value Proposition is a statement of how
the sales offering will add value to the prospect’s
business by meeting a need or providing an
opportunity.
SECTION 3: SALES CALL OBJECTIVE
-Sales Call Objective states what salespeople want
customers to do as a result of the sales call. The
objects should be specific enough to know whether or
not they have been accomplished at the conclusion of
the call, and they should require customer actions
such as placing an order, agreeing to participate in a
test market, or supplying specific information useful to
the salesperson.
SECTION 4: LINKING BUYING MOTIVES, BENEFITS,
SUPPORT INFORMATION, AND OTHER
REINFORCEMENT METHODS
-Section 4 of the planning template, the prospect’s
buying motives is linked to specific benefits offered.
For each benefit identified, the sales person will also
assemble the information needed to support the
claims to be made in the upcoming dialogue or
presentation. In some cases, verbal claims must be
reinforced with audio-visual portrayal, illustrations,
printed collateral material, or testimonials from
satisfied customers, as appropriate to the situation.
BUYING MOTIVES- A need-activated drive to search for
and acquire a solution to resolve a need or problem;
the most important factors from the customer’s
perspective in making a purchase decision.
RATIONAL BUYING MOTIVES- Typically relate to the
economics of the situation, including cost, profitability,
quality, and services offered, and the total value of the
seller’s offering as perceived by the customer.
EMOTIONAL BUYING MOTIVES- Included motives
such as security, status, and need to be liked;
sometimes difficult for salespeople to uncover these
motives.
FEATURES- A quality or characteristics of a product or
service that is designed to provide value to a buyer.
BENEFITS- The added value or favorable outcome
derived from features of the product or service the
seller offers.
SECTION 5: COMPETITIVE SITUATION
- Understanding the competitive situation is essential
in planning sales dialogues and presentations. Because
buyers make competitive comparisons in their
decision processes, salespeople should be prepared
for it. This section of the planning template asks the
salesperson to identify key competitors and to specify
their strengths and weaknesses, by knowing their own
product's strengths and weaknesses as well as those
of their competitors, salespeople are better equipped
to articulate customer value relative to their
competitors.
SECTION 6: BEGINNING THE SALES DIALOGUE
- Section 6 addresses the critical first few minutes of
the sales call. During this period, salespeople will
greet the prospect and introduce themselves, if
necessary. There is typically some brief polite
conversation between the salesperson and buyer as
the salesperson is welcomed to the buyer's office,
then both parties are usually eager to get down to
business as quickly as possible.
SECTION 7: ANTICIPATE QUESTIONS AND OBJECTIONS
- For reasons to be explained fully in Chapter 8,
prospects will almost always have questions and
objections that salespeople must be prepared to
answer. In the planning stages, salespeople can
prepare by asking themselves, "If 1 were the buyer,
what would I want to be certain about before I make a
purchase?" By anticipating these issues and preparing
responses, salespeople can increase their chances of
ultimate success.
SECTION 8: EARN PROSPECT COMMITMENT
-As sales dialogues and presentations progress, there
eventually comes a critical time to ask for a customer's
purchase decision. In many cases, this is an obvious
point in the sales conversation, but at other times the
salesperson may feel the need to probe to see if the
timing is right. Earning a commitment from a
customer as discussed in Chapter 8 should be a
natural step in the conversation, not a forced or high-
pressure attempt by the salesperson. Although
circumstances will dictate exactly when and how
commitment will be sought, a preliminary action plan
for seeking customer commitment should be part of
the overall planning process.
SECTION 9: BUILD VALUE THROUGH FOLLOW-UP
ACTION
- Finally, the salesperson must always be looking
for ways to enhance the relationship and move it in a
positive direction. The salesperson should always
make a note of any promises that he or she has made
during the sales calls and especially during the
proposal presentation. The buyer may ask for
information that the salesperson is not prepared to
give during the presentation. By taking notes, the
salesperson ensures that the appropriate follow- up
activities will happen.
CHAPTER 7
SALES DIALOGUE: CREATING AND COMMUNICATING
VALUE
EFFECTIVE SALES DIALOGUE- Preparing and
completing the phase of the sales process successfully
has been compared to doing surgery in that it is
complex and requires preparation, knowledge and
skill.
ENCOURAGING BUYER FEEDBACK- In a productive
sales dialogue, the salesperson continually assesses
and evaluates the reactions and responses of
prospective buyers. The SPIN or ADAPT questioning
processes are designed to get the buyer to provide
feedback to specific questions the salesperson asks
CREATING CUSTOMER VALUE- After the introductory
part of a sales call, the salesperson must try to
determine what the buyer considers to be of value. A
salesperson can use the SPIN or ADAPT questioning
strategies to understand the buyer’s situation and to
identify needs, problems, or opportunities important
to the buyer.
INTERESTING AND UNDERSTANDABLE SALES
DIALOGUE- Once confirmed benefits have been
identified, the salesperson needs to present key
selling points in a manner that is interesting and
understandable to the buyers.
Verbal Support- The use of voice characteristics,
examples and anecdotes, and comparisons and
analogies to make sales dialogue interesting and
understandable.
VERBAL SUPPORT ELEMENTS
Voice Characteristics- the pitch and speed of speech,
which salespeople should vary to emphasize key
points.
Anecdote- a type of example that is provided in the
form of a story describing a specific incident or
occurrence.
Comparison- a statement that points out and
illustrates the similarities between two points.
Analogy- is a special and useful form of comparison
that explains one thing in terms of another
ENGAGING AND INVOLVING THE BUYER- Simply
informing the prospect about the benefits and their
value to the buyer is seldom sufficient to generate the
level of interest and desire required to result in a
purchase decision. To maximize the effectiveness of
the sales dialogue, salespeople utilize various sales
aids to engage and involve the buyer throughout the
sales interaction.
Sales Aids – the use of printed materials, electronic
materials, and product demonstrations to engage and
involve buyers.
TYPES OF SALES AIDS
VISUAL MATERIALS- Represent a variety of sales aids
intended to engage and involve buyers visually.
ELECTRONIC MATERIALS- Electronic materials include
all sales aids in electronic format. These span
individual slides and videos to complete multimedia
presentations. As technology continues to develop,
more options to use electronic materials become
available to salespeople. Two examples are
customized electronic presentations and online sales
aid libraries.
Electronic Media- -Sales aids in electronic format such
as slides, videos, or multimedia presentations.
Multimedia Sales Aids- are being used more in sales
dialogue.
PRODUCT DEMONSTRATIONS- The product itself is
often the most effective sales tool because it provides
the prospective buyer with an opportunity for hands-
on experience. When the actual product does not lend
itself to being demonstrated, models can be used to
represent and illustrate key features and benefits of
the larger product. The value of an actual product
demonstration is applicable to all types of products
and services.
USING SALES AIDS IN THE PRESENTATION
Using the SPES sequence can facilitate the
effectiveness of presentation tools and sales aids:
S=state the selling point and introduce the sales aid;
P= present the sales aid;
E=explain the sales aid;
S= summarize

SUPPORTING PRODUCT CLAIMS- Claims the benefits

and value produced and provided to the buyer need
to be backed up with evidence to highlight their
believability.
Proof providers- the use of statistics, testimonials, or
case histories to support product claims.
STATISTICS-- Facts that lend believability to product
claims and are used as proof providers. Salespeople
can use testimonials to support their product claims.
TESTIMONIALS- Supportive statements from current
users are excellent methods to build trust and
confidence. They predispose the prospective buyer to
accept what the salesperson says about the benefits
and value a recommended solution offers, and they
reduce the prospect’s perceived risk in making a
purchase decision.
CASE HISTORIES- are basically a testimonial in story or
anecdotal form. Their added length allows more detail
to be presented in order to further clarify an issue or
better itemize the proof for a given statement. Case
histories can also break the monotony of a long
presentation.
 MM 103 – DISTRIBUTION MANAGEMENT
CHAPTER 5
STRATEGY IN MARKETING CHANNELS
CHANNEL STRATEGY- a special case of the more
general marketing strategy. The broad principles by
which the firm expects to achieve its distribution
objectives for its target market(s).
MARKETING CHANNEL STRATEGY AND THE ROLE OF
DISTRIBUTION IN CORPORATE OBJECTIVES AND
STRATEGY- The most fundamental distribution
decision for any firm or organization to consider is the
role that distribution is expected to play in a
company’s long-term overall objectives and strategies.
More specifically, it has to decide whether the
achievement of specific distribution objectives is
crucial to the long-run success of the firm.
MARKETING CHANNEL STRATEGY AND THE
MARKETING MIX- Whether or not the firm views
distribution as worthy of top management concern
when developing overall objectives and strategies, it
must still deal with the issue of the role of distribution
in the marketing mix.
Distribution Relevance to Target Market Demand
-Target market demand is, of course, the basis for
developing an appropriate marketing mix. Hence, if
customers in the firm's target market have demands
that can be satisfied best through distribution strategy,
this should be stressed in the firm's marketing In
short, distribution becomes relevant because the
target market wants it that way.
DISTRIBUTION AND SYNERGY FOR THE CHANNEL
Synergy- When two or more people are working
together, and the result is greater than the sum of
their individual capabilities
CHANNEL DESIGN- the decisions about the
development of new marketing channels or the
modification of existing channels.
5 Elements of a Marketing Channel Design
1. Channel Flow - Is the path that products and
services take from the producer to the customer.
• Direct Channel Flow – When products and
services are delivered to customers without
going through any intermediaries.
• Indirect Channel Flow – When products and
services are delivered to customers through
intermediaries such as retailers or distributors.
2. Channel Members – Are the businesses or
individuals who are involved in the distribution of
products and services.
2 Category
• Upstream Channel Members – Are businesses
or individuals who are involved in the
production of goods and services.
• Downstream Channel Members - Are
business or individuals who are involved in the
marketing and sale of goods and services.
3. Channel Objectives – Are the goals that a
company wants to achieve through its marketing
channels.
4. Channel Alternatives – Are the different ways
that a company can distribute its products and
services.
5. Channel Strategy – Is the overall plan that a
company uses to determine which marketing
channels to use.
Channel Strategy - should guide Channel Design to
help the firm attain a differential advantage.
Differential Advantage and Channel Design- also
called Sustainable Competitive Advantage in more
recent years, refers to a firm’s attainment of an
advantageous position in the market relative to
competitors – a place that enables it to use its
particular strengths to satisfy customer demands
better than its competitors on a long-term
(sustainable) basis.
Positioning the Channel to Gain Differential
Advantage
-Channel Positioning is what the firm does with its
channel planning and decision making to attain the
channel position.
Channel Strategy and the Selection of Channel
Members
Selection of Channel Members- the final phase of
channel design. It is the most important factor to find
strong channel members.
CHANNEL STRATEGY AND MANAGING THE
MARKETING CHANNEL
-Channel strategy is a marketing plan. The plan’s
details vary business to business, but the goal is the
same: to deliver marketing messages to existing and
potential customers where they are, to get them to
buy, and to give them the experience that results in a
positive perception of the brand.
-Channel management from the manufacturer’s
perspective involves all of the plans and action taken
by the manufacturer aimed at securing the
cooperation of the channel members in achieving the
manufacturer’s distribution objectives.
As a rough strategic guide for dealing with the
closeness question, the channel manager can relate it
to the degree of distribution intensity that presumably
would have been decided on while designing the
channel. The adjectives intensive, selective and
exclusive- used to describe the points on the
continuum- are the traditional terms used in the
marketing literature to indicate the number of channel
members (at either the wholesale or the retail levels)
used by the manufacturer.
• Intensive distribution strategy - involves
selling a product in as many outlets as
possible.
• Selective distribution - involves selling a
product at select outlets in specific locations.
• Exclusive distribution - involves selling a
product through one or very few outlets.
CHANNEL STRATEGY AND THE EVALUATION OF
CHANNEL MEMBER PERFORMANCE
-Channel manager’s involvement in evaluating
member performance is integral to developing &
managing channel
CHAPTER 6
DESIGNING MARKETING CHANNELS
Channel Design- Refers to decision associated with
developing new marketing channels where none had
existed before, or to modifying existing channels.
Who Engages in Channel Design?
-Producers, manufacturers, wholesalers (consumer
and industrial), and retailers all face channel design
decisions. For retailers, however, channel design is
viewed from a perspective opposite that of producers
and manufacturers. Retailers look "up the channel” in
an attempt to secure suppliers, rather than "down the
channel" toward the market (as is the case for
producers and manufacturers). Wholesale
intermediaries face channel design decisions from
both perspectives.
A PARADIGM OF THE CHANNEL DESIGN DECISION
The channel design decision can be broken down into
seven phases steps:
PHASE 1: RECOGNIZING THE NEED FOR A CHANNEL
DESIGN
PHASE 2: SETTING AND COORDINATING
DISTRIBUTION OBJECTIVES
PHASE 3: SPECIFYING THE DISTRIBUTION TASK
PHASE 4: DEVELOPING POSSIBLE ALTERNATIVE
CHANNEL STRUCTURE
Intensity at the Various Levels
Intensity refers to the number of intermediaries at
each level of the marketing channel.
(1) intensive- means that as many outlets as possible
are used at each level of the channel.
(2) selective- means that not all possible
intermediaries at a particular level are used, but
rather that those included in the channel are carefully
chosen
(3) exclusive- is actually referring to a very highly-
selective pattern of distribution
PHASE 5: EVALUATING THE VARIABLES AFFECTING
CHANNEL STRUCTURE
The channel manager should even evaluate a number
of variables to determine how they are likely to
influence various channel structures. Although there is
a myriad of such variables, six basic categories are the
most important:
1. Market variables
2. Product variables
3. Company variables
4. Intermediary variables
5. Environmental variables
6. Behavioral variables
Market Variables
-Marketing management, including channel
management, is based on the underlying philosophy
pf the classic marketing concept, which stresses
customer (market) orientation.
(1) market geography- refers to the geographical size
of the markets and their physical location and distance
from the producer or manufacturer.
(2) market size- the number of customers making up a
market (consumer or industrial) determines the
market size.
(3) market density- the number of buying units
(consumers or industrial firms) per unit of land area
determines the density of the market.
(4) market behavior- refers to the following four types
of buying behaviors: (1) how customer buy, (2) when
customers buy, (3) where customer buy, and (4) who
does the buying
Product Variables
Another important category to consider in evaluating
alternative channel structures. Some of the most
important product variables are bulk and weight,
perishability, unit value, degree of standardization
(custom-made versus standardized), technical versus
nontechnical, newness and prestige.
Bulk and Weight
Heavy and bulky products have very high handling and
shipping costs relative to their value. The producers of
such products should therefore attempt to minimize
these costs by shipping only in large lots to the fewest
possible points.
Perishability Products
Subject to rapid physical deterioration (such as fresh
foods) and those that experience rapid fashion
obsolescence are considered to be highly perishable.
The sine aqua non of channel design in this case is
rapid movement of the product from production to its
final user to minimize the risks attendant to high
perishability.
Unit Value
In general, the lower the unit value of a product, the
longer the channels should be. This is because the low
unit value leaves a small margin for distribution costs.
Such products as convenience goods in the consumer
market and operating supplies in the industrial market
typically use one or more intermediaries so that the
costs of distribution can be shared by many other
products that the intermediaries handle, thus creating
economies of scale and scope.
Degree of Standardization
In general, the influence of this product variable on
channel structure is characterized by the relationship
shown in Figure 6.4 Degree of Standardization is
shown on the horizontal axis as continuum ranging
from custom-made products to those that are
identical. Channel length, on the vertical axis, is
represented by the number of intermediaries, from
none or several.
Technical versus Nontechnical
In the industrial market, a highly technical product will
generally be distributed through a direct channel.
Newness
Many new products in both consumer and industrial
markets require extensive and aggressive promotion
in the introductory stage to build demand. Usually, the
longer the channel, the more difficult it is to achieve
this kind of promotional effort from all of the channel
members.
Product Prestige
Prestigious products often associated with famous
luxury brands such as Gucci, Rolex, Louis Vuitton,
Mercedes- Benz, and many others need to maintain
an aura of exclusivity and rareness that would be
incompatible with mass market distribution channels.
Company Variables
The most important company variables affecting
channel design are:
1. Size
2. Financial Capacity
3. Managerial Expertise
4. Objectives and Strategies
Intermediary Variables
The key intermediary variables related to channel
structure are
1. Availability
2. Costs
3. The Services Offered
Environmental Variables
Environmental Variables may affect all aspects of
channel development and management. Economic,
Sociocultural, Competitive, technological, and legal
environmental forces can have a significant impact on
channel stunting and structure.
Behavioral Variables
Giving more attention to the influence of behavioral
problems that can distort communications fosters a
channel structure with a more effective
communication flow
PHASE 6: CHOOSING THE BEST CHANNEL STRUCTURE
1. Replacement rate- the rate at which a good is
purchased and consumed by users in order to
provide the satisfaction a consumer expects from
the product.
2. Gross Margin- the difference between the laid-in
cost and the final realized sales price.
3. Adjustment- services applied to goods in order to
meet the exact needs of the consumer
4. Time of consumption- the measured time of
consumption during which the product gives up
the utility desired.
5. Searching time- a measure of average time and
distance from the retail store
CHAPTER 7
SELECTING THE CHANNEL MEMBER
CHANNEL MEMBER SELECTION and CHANNEL DESIGN
-Channel selection decisions are frequently necessary
even when channel structure changes have not been
made. Firms may need additional outlets to allow for
growth or to replace channel members that have left
the channel. Channel design is presented as a decision
faced by the marketer.
-Channel design is a plan for the distribution and
movement of products and services from the
producer to the customer. A channel is defined as “a
chain of linked businesses or individuals through
which a product or service passes from one person or
firm to another.”
THE SELECTION PROCESS
• Finding prospective channel members.
• Applying criteria to determine the sustainability
of prospective channel members.
• Securing the prospective channel members as
actual channel members.
FINDING PROSPECTIVE CHANNEL MEMBERS
1. Field sales organization
2. Trade sources
3. Reseller inquiries
4. Customers
5. Advertising
6. Trade shows
7. Other sources
FIELD SALES ORGANIZATION
-These are the outside salespeople that represents an
excellent resource for finding new channel members.
These salespeople are the ones that are making calls
and are often able to pick up information about
intermediaries who are likely to be available.
TRADE SOURCES
-It is the source that holds an information relevant to a
particular field or industry. Trade sources such as trade
associations, trade publications, directories, firms
selling related or similar products, trade shows and
the "grapevine" all are valuable sources of information
about prospective intermediaries.
RESELLER INQUIRIES
-Many firms learn about potential channel members
through direct inquiries from intermediaries
interested in handling their product line. For some
manufacturers, this provides the main source of
information about potential new channel members.
Firms receiving the highest numbers of inquiries from
prospective channel members are the more
prestigious ones in their respective industries.
CUSTOMERS
-Customers can also be a source of information. Some
firms look to the customers of prospective
intermediaries as a source of information.
Manufacturers report that many customers are willing
to give frank opinions about the intermediaries who
call on them.
ADVERTISING
-Advertisements in trade magazines whether in hard
copy or online, offer yet another approach to finding
potential channel members. Advertising can generate
a large number of inquiries from prospective channel
members, thus providing a large pool from which to
make selections.
TRADE SHOWS
-Trade shows or conventions can be a very fruitful
source for finding potential channel members. Many
trade associations at both the wholesale and the retail
levels hold annual conventions at which numerous
wholesale or retail organizations in the particular
trades are represented. By attending the convention, a
manufacturer has access to a wide variety 14 of
potential channel members together in one place and
time.
APPLYING SELECTION CRITERIA
-Having developed a list of prospective channel
members, the next step is to appraise these prospects
in light of selection criteria. If a firm has not developed
a set of criteria for selecting channel members, it
should develop one. Several channel analysts have
developed generalized list of criteria. However, no list
of criteria, no matter how carefully developed is
adequate for a firm under all conditions. Changing
circumstances may require the firm to alter its
emphasis; so, the channel manager should be flexible
in the use of selection criteria to allow for such
conditions.
GENERALIZED LISTS OF CRITERIA
-Brendel developed a list of 20 key questions for
industrial firms to ask their prospective channel
members. Many of these questions are relevant for
consumer product firms as well. Brendel's list of
selection criteria, which has become a classic in
marketing channels literature, is as relevant today as it
ever was.
-Another set of criteria, proposed by Hlavacek and
McCuistion, augments Brendel's list. They argue that
for technical products sold in the industrial market,
manufacturers should select distributors who carry a
small rather than large array of products.
-Another set of selection criteria is provided by
Shipley based on a study of manufacturers in the
United States and United Kingdom.
There are 12 criteria under 3 basic categories:
1.) Sales and Market Factors
2.) Product and service factors
3.) Risk and uncertainty factors
- Based on a careful review of the international
marketing literature relevant to selecting foreign
distributors, Yeoh and Calantone identify six major
categories of selection criteria:
1.) Commitment level
2.) Financial strength
3.) Marketing skills
4.) Product- related factors
5.) Planning abilities
6.) Facilitating factors
-The most comprehensive and definitive list of
channel member selection criteria, however, is still
offered over four decades ago by Pegram. Like
Shipley's list, Pegram's list is empirically based; but
Pegram used a larger number and broader range of
firms. He divided the criteria into a number of
categories.
SELECTING CHANNEL MEMBER
CREDIT AND FINANCIAL CONDITION
-Nearly all of the manufacturers included in Pegram’s
study mentioned the investigation of credit and
financial position of prospective intermediaries as
vital. This was by far the most frequently used
criterion or judging the acceptability of a prospective
channel member.
SALES STRENGTH
-Some of most commonly used measure of sales
strength, particularly for wholesale intermediaries, are
the quality of salespeople employed. Manufacturers
of more technical products are also concerned with
the technical competence of the intermediary’s
salespeople
PRODUCT LINES
-Manufacturers were generally found to consider four
aspects of the intermediary’s product line:
(1) competitive products
(2) compatible product
(3) complementary products
(4) quality of line carried
-Manufacturers try to avoid, whenever possible,
intermediaries who carried direct competitive product
lines. Many of the intermediaries also share this view,
particularly for those who feel a sense of loyalty to
their present suppliers. There are of course, numerous
exceptions to this “no directly competitive products”
criterion.
REPUTATION
-From a channel strategy perspective, the reputation
of distributors and retailers selling the manufacturer’s
products is one of the key strategic issues for the
manufacturer to consider. The decision may require
input from the highest level in the organization,
including the chairman of the board in certain cases.
MARKET COVERAGE
-The adequacy of the intermediary in covering the
geographical territory that the manufacturers would
like to reach is known as market coverage.
SALES PERFORMANCE
The main consideration here is whether the
prospective intermediaries can capture as much
market share as the manufacturer expects.
MANAGEMENT SUCCESSION
-Many intermediaries are managed by the firm owner
and founder, many of whom, especially at the
wholesale level, are independent, small business.
Consequently, if the firm’s principal dies, the
continuity of management is left in doubt. The
succession criterion is so important to Caterpillar Inc.,
that the company has offered special seminars for
many years to help persuade children of its existing
distributors to carry on the business when their
parents retire or pass away.
MANAGEMENT ABILITY
Many manufacturers feel that a prospective channel
member is not even worth considering if the quality of
its management is poor. Therefore, this factor is of
critical importance in choosing channel members.
ATTITUDE
-This criterion applies mainly to a prospective
intermediary’s aggressiveness, enthusiasm and
initiative. These qualities are believed to be closely
related to long term success in handling the
manufacture’s product. An evaluation of whether the
prospective channel member has the “proper”
attitude is generally a matter of managerial judgement
because attitude do not show up in black and white
on financial statements.
SIZE
-The belief is that the larger the organization and sales
volume, the larger the sales of manufacturer’s
products. There are other reasons for considering
large size as an important, positive criterion beyond
this general belief. It is usually a safe assumption that
large intermediaries are more successful, more
profitable, better established and handle better
product lines.
SECURING CHANNEL MEMBER
USING LIST OF SELECTION CRITERIA
While checklist such as those discussed above are not
applicable to all firms under all conditions, they still
valuable because they help point to many of the key
areas of consideration for selecting channel members.
ADVERTISING PROMOTION
Advertising and Promotion Prospective.
intermediaries also look to manufacturers for
promotional support.? In the consumer market, a
strong program of national advertising is one of the
most effective inducements to secure retail
intermediaries. The eves of prospective intermediaries
in regards to the sales potential of the product line.
MANAGEMENT ASSISTANCE
-Prospective channel members want to know whether
the manufacturer is committed to helping them not
only in the form of providing advertising and
promotional support for selling the particular
manufacturer's products, but also in going beyond this
to help them do a better job of managing their
businesses.
-Management assistance is good evidence of such a
commitment. Management assistance can cover a
wide range of areas, including training programs,
financial analysis and planning, market analysis,
inventory control procedures and promotional
methods. The extent of such assistance varies widely
depending on the type of channel relationship
involved.
FAIR DEALING AND FRIENDLY RELATIONSHIP
-Channel members may like or dislike, respect or
disdain, suspect or fear each other. They may be
cooperative or antagonistic, loyal or disloyal toward
each other. In short, a marketing channel relationship
is not only a business relationship but a human
relationship as well. Though the relationship may be
couched in elaborate or formal agreements or even in
legal contracts, the human, people-to-people element
is never fully removed.' This fact should not be
forgotten when attempting to secure channel
members. Specifically, the manufacturer should
convey to prospective channel members that he or
she is genuinely interested in establishing a good
relationship with prospective channel members built
on the basis of trust and concern for their welfare, not
only as business entities but as people as well.