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What is channel management? The process by which a producer or supplier directs marketing activity by involving and motivating parties comprising its channel of distribution. Goals. Define the specific goals you have for each channel segment. Consider your goals for the channel as a whole as well as individual accounts. And, remember to consider your goals for both acquisition and retention. Policies. Construct well-defined polices for administering the accounts within this channel. Be sure to keep the unique characteristics of each segment in mind when defining policies for account set up, order management, product fulfillment, etc. Products. Identify which products in your offering are most suited for each segment and create appropriate messaging. Also, determine where your upsell opportunities lie. Sales/Marketing Programs. Design support programs for your channel that meet THEIR needs, not what your idea of their needs are. To do this, you should start by asking your customers within this segment, how can we best support you in the selling and marketing of our products? That being said, the standard considerations are product training, co-op advertising, seasonal promotions, and merchandising. Again, this is not a one-size fits all, so be diligent about addressing this segments SPECIFIC needs in these areas. Defining a channel management strategy for each segment allows you to be more effective within each segment, while gaining efficiency at the same time. Still, maintaining brand consistency across all channel segments is critical to your long-term success. So find a good balance between customization and brand consistency and youll be on your way to successful channel management.

Channel Management Models::

There are five major methodologies that manufacturers/brands utilize when selling online ranging from complete channel destruction/disintermediation to the most robust and complete "closed-loop" solution being that offered by Reshape Commerce under our patented system and business model, all of which are discussed below. The Dead End Model - Do Nothing to Refer Consumers

The "Dead End" Model will leave consumers with nowhere to go. Although most companies recognize the need for a methodology that offers consumers sources for their products, there still remain those who have not executed such a strategy. We can cite several examples of companies with tremendous websites featuring all of their products with no store locator or online sales. It will not shock you to learn that this model is a lose-lose proposition for all. For consumers, not being able to buy online is frustrating enough. But not even being able to find a distributor or retailer or get a phone number is quite another. Retailers lose the awareness that a website could provide and the business that results from it. The manufacturer or brand owner loses sales and something far more important - brand satisfaction. The Fumble Model - Refer but Lose Consumers

The "Fumble Model" exists when a brand sends consumers to a channel partner in the hope that they will promote the brand with the same veracity as the brand does. While retailers are mostly concerned about selling "any brand," brands should only be concerned about selling "their brand". At many brand websites, consumers can search for nearby retailers by city, state, zip or name. These sites gives numerous options in an attempt to even the playing field for competitive retailers and give consumers more choice. Unfortunately, by using this model, brands may lose consumers to another brand - perhaps an online brand that

can meet consumers' needs then and there. And no matter how you look at it, brands lose control of the branded experience that they've worked so hard to achieve. The Two Faced Model - Partially serve Consumers and Damage your Channel

In this "Two Faced" model, consumers can purchase a limited selection of products from a brand website. The products may represent a segment of the brands entire line or be an entirely separate "online-only" offering. Regardless, consumers expect that the brand itself should offer its full suite of products. Consumers are rarely satisfied by being forced to choose from a limited selection and will often leave the brand website without purchasing. The result is a negative brand experience. At the same time, the distribution channel sees this type of online store as direct competition. Even if a brand sell different products online, distributors and retailers are now put in the position to compete with the brand for a finite number of consumer dollars. Brands often defend the strategy by claiming they are selling at full price, thereby not undercutting their distribution channel. The sad truth is that while this is accurate, the consumers who buy at full price from the brand would have been buying at full price from the brand's partner, making them the best type of consumer around. Furthermore, channel partners see such initiatives as a first step towards being totally circumvented by the brand, whether that is the intention or not. The result is that channel relationships worsen and focus on brand within retail establishments is diverted to other brands that appear more loyal to the distribution channel. The Broken Boomerang Model - Share but Lose Consumers

Often called "product-to-product linking, a broken boomerang exemplifies this model. Brands "toss" consumers to the website of a retailer or other channel partner with the expectation that the consumer will boomerang back to them by purchasing the brand's product. Unfortunately, the boomerang breaks mid-air and the brand has little or no visibility into what happened to the consumer and no ongoing relationship with that consumer after the sale. In this model, consumers goes to, shops for a product, and clicks on "buy online", taking them to icons of online retailers that are supposed to have the item in

question IN STOCK. Consumers chooses a retailer and is taken to the product page at the retailer's website. Now at the retailer's site, consumers may be influenced by competing brands. Because these systems rely upon the retailer providing its complete and massive product inventory detail, often by location, there are countless examples where the desired product is not in stock, forcing consumers to search for alternatives. The result is a complete loss of the brand experience the manufacturer has worked so hard to deliver, the potential for a lost sale, the ultimate loss of the relationships between the manufacturer and consumers and all of the geo-demographic, psychological and purchasing data associated with consumers. Although this model works well for large brands who sell into large retail chains and department stores like Best Buy, Home Depot and Macy's, it does not accommodate special or custom orders which represents the largest number of products any brand offers. Because of this system complexity and magnitude, small brands and specialty

The Auction Shill Model - Auction the Consumer off to the highest bidder

The most insidious "channel management" method involves a brand offering product for sale at its website and allowing retailers to enter into a virtual battle for the consumer unrelated to their retailing skill, reputation, or customer service. Moreover, in this model, the unsuspecting consumer is forced to deal with a retailer not of their choosing. In this model, consumers go to, shops for a product and adds it to the shopping cart. Once the sale is complete, an email or other electronic notification goes to the closest "x" number of "participating" "stocking" retailers. Participation means the retailer must be engaged in the system; stocking means the retailer must have current inventory in the product(s) being purchased by the consumer. Whichever "participating" "stocking" retailer first sees and claims the sale in this system wins the consumer and is expected to fulfill the order. Retailers carry but a fraction of the product catalog any single brand offers. The "closest" "participating" "stocking" retailer may be tens or hundreds of miles away from the consumer. The model disenfranchises the best retailers who provide a high degree of customer service by disallowing the consumer to choose that retailer. Nefarious retailers can cheat the system by ordering products they don't have in inventory to fulfill the order offers as they see them. The brand must assume responsibility for fulfillment in all products that no

retailers carry or cancel the order altogether. Significantly, large retail chains and department stores like Best Buy, Home Depot and Macy's cannot partake in this system because it demands that fulfillment be done at the store level. The inefficiencies of such a model eliminate the desire of any of these large entities to invest in the substantial technology, personnel and logistics infrastructure on a store-by-store basis that would enable the use of such a system. Lastly, no retailer of any size should hyperlink their website to a brand utilizing this methodology as there is almost an infinite impossibility that such a retailer would receive the order being placed by a re-directed consumer at the brand website.

Starbucks Corporation

Starbucks Corporation is a Seattle, Washington-based coffee company. It roasts and sells whole bean coffees and coffee drinks through a national chain of retail outlets/restaurants. Originally only a seller of packaged, premium, roasted coffees, the bulk of the company's revenues now comes from its coffee bars, where people can purchase beverages and pastries in addition to coffee by the pound. Starbucks is credited with changing the way Americans view coffee, and its success has attracted the attention of investors nationwide. Starbucks has consistently been one of the fastest growing companies in the United States with over 1,006 retail outlets in 1996. Over a five-year period starting in 1991, net revenues increased at a compounded annual growth rate of 61 percent. In fiscal 1996, net revenues increased 50 percent to $696 million from $465 million for the same period the previous year. Net earnings rose 61 percent to $42 million from the previous years $26 million. Sales for Starbucks have been continuing to grow steadily, and the company is still a darling of investors with a PE ratio of 58. To continue to grow at a rapid pace, the firms senior executives have been considering international expansion. Specifically, they are interested in Japan and other Asian countries, where Starbucks had little or no presence. Japan, the worlds third largest coffee consumer after the United States and Germany, represented both a challenge and a huge opportunity to the firm. To explore what changes in Starbucks strategy were required, and the questions that might arise during expansion, this case looks at the firms entry strategy into Japan and the nature of issues facing the firm during early 1997.

The Company Background In 1971, three Seattle entrepreneursJerry Baldwin, Zev Siegl, and Gordon Bowkerstarted selling whole-bean coffee in Seattle's Pike Place Market. They named their store Starbucks,

after the first mate in Moby Dick. By 1982, the business had grown to five stores, a small roasting facility, and a wholesale business selling coffee to local restaurants. At the same time, Howard Schultz had been working as VP of U.S. operations for Hammarplast, a Swedish house wares company in New York, marketing coffee makers to a number of retailers, including Starbucks. Through selling to Starbucks, Schultz was introduced to the three founders, who then recruited him to bring marketing savvy to the company. Schultz, 29 and recently married, was eager to leave New York. He joined Starbucks as manager of retail sales and marketing. This case was prepared by Melissa Schilling and Assistant Professor Suresh Kotha, both from the University of Washington, Business School of Administration, as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. . A year later, Schultz visited Verona, Italy for the first time on a buying trip. As he strolled through the pizzas of Milan one evening, he was inspired by a vision. He noticed that coffee was an integral part of the romantic culture in Italy; Italians start their day at an espresso bar, and later in the day return with their friends. (For a history of the coffeehouse, see Exhibit 2.) There are 200,000 coffee bars in Italy, and about 1500 in Milan alone. Schultz believed that given the chance, Americans would pay good money for a premium cup of coffee and a stylish, romantic place to enjoy it. Enthusiastic about his idea, Schultz returned to tell Starbucks owners of his plan for a national chain of cafes stylized on the Italian coffee bar. The owners, however, were less enthusiastic and did not want to be in the restaurant business. Undaunted, Schultz wrote a business plan, videotaped dozens of Italian coffee bars and began looking for investors. By April 1985 he had opened his first coffee bar, Il Giornale (named after the Italian newspaper), where he served Starbucks coffee. Following Il Giornale's immediate success, Schultz opened a second coffee bar in Seattle, and then a third in Vancouver. In 1987, the owners of Starbucks agreed to sell to Schultz for $4 million. The Il Giornale coffee bars took on the name of Starbucks. Convinced that Starbucks would one day be in every neighborhood in America, Schultz focused on expansion. In 1987 he entered Chicago, four years later he opened in Los Angeles and in 1993 he entered the District of Columbia. Additionally, he hired executives away from corporations such as PepsiCo. At first, the company's losses almost doubled, to $1.2 million from fiscal 1989 to 1990 as overhead and operating expenses ballooned with the expansion. Starbucks lost money for three years running, and the stress was hard on Schultz, but he stuck to his conviction not to "sacrifice long-term integrity and values for short-term profit." 1 In

1991 sales shot up 84 percent, and the company turned profitable. In 1992 Schultz took the firm public at $17 a share. Always, believing that market share and name recognition are critical to the companys success, Schultz continued to expand the business rather aggressively. There is no secret sauce here. Anyone can do it. To stop potential copycats, he opened 100 new stores in 1993, and another 145 in 1994. Additionally, he acquired the Coffee Connection, a 25-store Boston chain in 1994. Everywhere Starbucks has opened, customers have flocked to pay upwards of $1.85 for a cup of coffee(latte). Currently, the firm operates stores in most of the major metropolitan areas in the U.S. and Canada, including Seattle, New York, Chicago, Boston, Los Angeles, San Francisco, San Diego, Austin, Dallas, Houston, San Antonio, Las Vegas, Philadelphia, Pittsburgh, Cincinnati, Minneapolis, Portland, Atlanta, Baltimore, Washington D.C., Denver, Toronto, and Vancouver B.C. Its mail-order business serves customers throughout the United States. Enthusiastic financial analysts predict that Starbucks could top $1 billion by the end of the decade.

In 1996, Starbucks employed approximately 16,600 individuals, including approximately 15,000 in retail stores and regional offices, and the remainder in the firms administrative, sales, real estate, direct response, roasting, and warehousing operations. Only five of the firms stores (located in Vancouver, British Columbia) out of a total of 929 companyoperated stores in North America were unionized. Starbucks has never experienced a strike or work stoppage. Management was confident that its relationship with its employees were excellent. Currently the firm is organized as a matrix between functional and product divisions. The firms functional divisions include: Marketing; Supply Chain Operations (Manufacturing, Distribution, Purchasing); Human Resources; Accounting; International; Planning and Finance; Administration (facilities, mail); Communications and Public Affairs; and Merchandising (the group that focuses on product extensions for food and beverages) The firms product-based divisions include: Retail North America (this division accounts for the bulk of the companys business and is split into regional offices spread throughout the United States); Specialty Sales and Wholesale Group (handles large accounts such as restaurants); Direct Response; Because of the overlap in these divisions (e.g., Marketing and Retail North America), many employees report to two division heads. Notes Troy Alstead, the companys Director of International Planning and Finance, We have avoided a hierarchical organization structure, and therefore we have no formal organization chart. Exhibit 3 provides a partial list of Starbucks top management.

Starbucks with new Distribution Model Posted by Turgut Ziyal on Sunday, March 13, 2011 Under: beverages Starbucks and Green Mountain Coffee Roasters (GMCR) last week announced a strategic relationship for the manufacturing, marketing, distribution and sale of Starbucks and Tazo tea branded K-Cup portion packs for use in GMCRs Keurig Single-Cup brewing system. The new relationship will provide owners of Keurig Single-Cup brewing machines with the additional choice afforded by having Starbucks branded coffees available for their brewers, and furthers Starbucks stated goals of expanding its presence in single-cup coffee, making its coffees widely available. Starbucks is the exclusive, licensed premium coffee brand produced by GMCR for the Keurig Single-Cup brewing system. Starbucks and GMCR plan to make Starbucks K-Cup portion packs available through food, drug, mass, club, specialty and department store retailers throughout the U.S. and Canada beginning in the fall of 2011. The companies expect to expand Starbucks K-Cup portion pack and Keurig Single-Cup Brewing system distribution to Starbucks stores and to make Starbucks K-Cup portion packs available through their websites beginning of 2012. Todays announcement is a win for Starbucks, a win for GMCR and most importantly a win for consumers who want to enjoy Starbucks coffee with the Keurig Single-Cup Brewing system, said Howard Schultz, Starbucks CEO. Our research shows that more than 80 percent of current Starbucks customers in the U.S. do not yet own a single-cup brewer and our relationship will enable Starbucks customers to enjoy perfectly brewed Starbucks coffee at home, one quality cup at a time. Overall coffee category growth in the U.S. last year was driven primarily by single-cup coffee sales of nearly $2 billion*. Starbucks expanded its presence in the category last year through the introduction of Starbucks Via ready brew. The introduction of Starbucks coffee and Tazo tea K-Cup portion packs reflects Starbucks strategy of continuing to grow its presence in single-cup coffee. Starbucks deal comes less than two weeks after the company ended its distribution arrangement with Kraft which sold Starbucks coffee through grocery stores and in single-

serve discs for its Tassimo brewing system.Until today the Swiss are reluctant selling their cups outside of their fully controlled own distribution channels.