Sales & Distribution

Management
Lecture-26 & 27

Pranab S Deb
Faculty – IBS, Pune
Schedule of Lecture

• Managing marketing channels

• Economic cost of retailing

Establish new channels

1. Channel flow performance

2. Channel structure
Refine existing channels

1. Gap analysis

2. Channel flow performance

3. Channel structure
Channel Implementation

1. Identifying power sources

2. Identifying channel conflicts

3. The goal of channel coordination

Service outputs
1. Bulk breaking

2. Spatial convenience

3. Waiting or delivery time

4. Product variety
Trends in end-user
preferences
1. B2B buyer preferences
1. Outsourcing

2. Downsizing

3. Alphabet soup
Trends in end-user
preferences
1. Trends in consumer preferences
1. Poverty of time

2. Increased knowledge about products and

availability

3. Increased polarity in incomes

4. Increased number of self-employed workers

Service output demand (SODs)
is always of prime importance
for marketing channels
Marketing flows in channels
Marketing flow Costs represented
1. Physical possession 1. Storage and delivery
costs
2. Ownership 2. Inventory carrying costs
3. Personal selling,
3. Promotion advertising, sales
promotion, publicity,
public relations costs
Marketing flows in channels
Marketing flow Costs represented
4. Negotiation 4. Time and legal costs
5. Financing 5. Credit terms, terms and
conditions of sale
6. Risking 6. Price guarantees,
warranties, insurance,
repair, and after-sales
service costs
Marketing flows in channels
Marketing flow Costs represented
7. Ordering 7. Order-processing costs
8. Collections, bad debt
8. Payment costs
Zero-based channel
A zero-based channel design is one that:

 Meets the target market segment’s demands for

service outputs

 At minimum cost of performing the necessary

channel flows that produce these service outputs
Equity principle
Compensation in the channel system should
be given on the basis of the degree of
participation in the marketing flows and the
value created by this participation. That is,
compensation should mirror the normative
profit shares for each channel member
Channel conflict is a situation
of discord or disagreement
between channel members
from the same marketing
channel system
Stages of conflict
 Latent

 Perceived

 Felt

 Manifest
Reasons for channel conflict
 Goal in-compatibility
 Unclear role definition
 New channel partner
 Target fixing exercise
 Extension of credit
 Multiple distributors
 Difference in perception
 Lack of opportunity
 Clash of interest
Managing channel conflict
 Understanding the nature and impact of
conflict

 Tracing the source of conflict

 Understand the impact of conflict

 Strategy and plan of action for resolution

Industrial marketing channels
are a good example of
balanced power
Consumer marketing channels
rely on manipulating the
customer service variable to
greater or lesser degrees
In multi-level marketing systems the sales
agent sells the company’s products and
also recruits other sales agents to keep the
chain getting stronger. His income is a
combination of what he sells and what the
agents he has recruited sell. The best
example is that of Amway. Other
companies operating on this system are
Tupperware, Modicare, and Herbalife
Q&A
Thanks