Household Budget Templates

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					 Part 2: Channel Design
 Chapter 5: Gap Analysis




MKTG 406          Pimentel
         Channel Analysis Framework
 CHANNEL DESIGN            CHANNEL IMPLEMENTATION

    Segmentation         Channel Power   Channel Conflict


  Channel Structure          Manage/Defuse Conflict
Splitting the Workload
Degree of Commitment
     Gap Analysis             Channel Coordination


     INSIGHTS FOR SPECIFIC CHANNEL INSTITUTIONS
                Gap Analysis
• The difference between optimal and actual
  channels
   • Zero-based channel
      • Meets service output demands
      • At minimal cost
                Channel Gaps
• Not paying attention
• Bounds prevent optimization
  • Environmental channel bounds
    • From outside the channel
    • Legal restrictions
    • Inadequate infrastructure
  • Managerial channel bounds
    • From inside the channel
    • Lack of knowledge
    • Size
    • Optimization at a higher level
  • Optimize subject to the constraints
      Demand-Side Channel Gaps
• Service value gap—not meeting demand for
  service outputs
• Shortfall
   • Service output level is too low
   • SOD > SOS
• Oversupply
   • Service output level is too high
   • SOD < SOS
• They don’t necessarily balance-out
• Affects of competition
       Supply-Side Channel Gaps
• Total channel flow costs are too high
   • Inferior technology
   • For more than one service output
   • In one or more channel simultaneously
   • Not necessarily in all channels
               Combined Channel Gaps
    Demand
         Side   Shortfall  No Gap  Oversupply
Supply        (SOD>SOS) (SOD=SOS) (SOD<SOS)
Side
  No Gap                           Reduce SOs
                Increase
                                    or target a
  (efficient  SOs without
                           No Gaps     more
 total flow   making costs
                                   demanding
    cost)      inefficient
                                     segment
    Gap                        Find better     Reduce
                  Increase
 (total flow                   efficiencies   costs by
                  SOs and
 costs too                      to reduce     reducing
                reduce costs
    high)                          costs        SOs
        Postponement-Speculation
• Postponement
  • Put off incurring costs as long as possible
  • Manufacturers
    • Delaying production until orders are received
  • End-users
    • Delay buying until the last minute, then
      demand quick delivery
  • Prices increase
        Postponement-Speculation
• Speculation
  • Anticipating future needs
  • Manufacturers
    • Goods produced in anticipation of orders
    • Economies of scale
    • Inventory holding costs
  • End-users
    • Buy ahead of immediate need
    • Larger quantities to get discounts
    • Household budget tied up in inventory
      holding costs
            Postponement-Speculation and
                   Channel Costs
       35
       30                                    Total Cost
       25                                    End-User’s
                                             Holding Costs
Cost
Cost




       20
       15

       10                                    Cost of Moving
                                             Goods to End-
       5                                     User
       0
            1   4   7 10 13 16 19 22 25 28
                     Delivery Time
                     Delivery Time
       Closing Demand-Side Gaps
• Expand or retract service output levels
• Multiple, tiered service output levels
• Target different segments
        Closing Supply-Side Gaps
• Change roles of current channel members
• New distribution technologies
• Distribution function specialists
        Gaps Produced by Bounds
• Bounds may remain after other channel
  improvements are made
• Some bounds cannot be eliminated
• Some bounds can be challenged
   • Make management aware
   • Make management care
   • Get buy-in across the organization
   • Appoint a champion
   • Make the approach customer-driven
   • Establish means to stay in touch with the end-
     users
         Gap Analysis Templates
• Demand-side gap analysis template
  • For each market segment:
     • Determines major channel for the segment
     • Looks at each flow in the channel
        • Determines relative SOS and SOD for
          each
     • Identifies demand-side gaps
          Gap Analysis Templates
• Supply-side gap analysis template
  • For each channel:
     • Identifies channel members and the flows
       they perform
     • Identifies environmental and managerial
       bounds
     • Identifies supply-side gaps
     • Lists methods for closing gaps
     • Determines if actions to close gaps created
       other gaps
    Gap Analysis Is Continuing Process
•   Environmental bounds change over time
•   End-user demands for service outputs change
•   Available distribution technology changes
•   Continuous monitoring and innovating
                  Key Terms
•   Gap analysis          • Supply-side channel
•   Zero-based channel      gaps
•   Channel gaps          • Postponement
•   Environmental         • Speculation
    channel bounds        • Gap-analysis
•   Managerial channel      templates
    bounds
•   Demand-side channel
    gaps
•   Service value gaps
•   Shortfall
•   Oversupply

				
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