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					MARKETING CHANNELS


    Channel Design
   Berman Chapter 11
      Version 3.0
                       1
              Channel Design
•   1. Channel Design and Selection
•   2. Determining Channel Objectives
•   3. Assessing Channel Length, Width
•   4. Factors that Offset Channel Length
•   5. Allocating Channel Tasks
•   6. Selection of Resellers
•   7. Revising Channel Arrangements
                                            2
         1. Design and Selection
   Goal: optimal channel arrangement
• marketing strategy      • existence or increase
  change                    of gray market activity
• geographic expansion    • new channel
• loss of major client      introductions (net)
• mergers, acquisitions   • changes in buyer
  in industry               behavior




                                                  3
            2. Channel Objectives
• integrate effects
  –   mergers and acquisitions
  –   wider distribution
  –   gray market
  –   new markets
• specific objectives
  – service output requirements
       •   lot size
       •   market decentralization
       •   waiting time
       •   product variety
                                     4
       •   service backups
• 3. Intermediary Requirements
  – Channel length
     • short - direct
     • long - indirect
  – channel width
     • determinants - investments, buyer behavior, volume
     • degrees - exclusive, intensive, selective
  – types
     •   horizontal
     •   forward vertical
     •   backward vertical
     •   intertype - multiple, dual

                                                            5
             4. Channel Length
• Aspinwall Theory
  – characteristics of goods and parallel systems
  – replacement rate, gross margin, adjustment,
    consumption time, searching time
  – goods - reed, orange, yellow
• Product factors
  – customer base, geographic dispersion, customer
    density, sales gestation period, level of
    customer, average order size
                                                    6
               Channel Length (cont)

• Product factors
  – bulk, perishability, unit value, product standardization,
    technical nature, gross margin


• Manufacturer Factors
  – size, financial capability, desire for control, managerial
    expertise, customer knowledge


• Intermediary Factors
  – availability, cost, service quality                   7
           Length Factors Summary

•   lack of independence of variables
•   need to consider multiple factors
•   relationship simplification
•   most closely related factors
    – product information, customization, quality
      assurance, lot size, assortment, availability,
      after sales service, logistics

                                                       8
         5. Channel Participant Tasks
•   Selling
•   Channel Support
•   Physical Distribution
•   Product Modification
•   After Sale Service
•   Risk Assumption
    – Criteria - reducing costs, maximizing share,
      sales revenue, profits, optimizing ROI risks,
      meeting needs for info, availability,
      etc.,information sources
                                                      9
  – Contact Bases
     •   selling intermediaries
     •   stocking intermediaries
     •   stocking / servicing intermediaries
     •   hybrid arrangements


• 6. Selection of resellers
  – availability, preliminary evaluation,
    comprehensive analysis
  – evaluations
     • screenings, interviews, checklists, analyses, final
       process
                                                             10
   7. Revising Channel Arrangements

• ideal vs actual system - gap analysis
  –   creditworthiness
  –   territorial coverage
  –   image and reputation
  –   service performance
  –   pricing strategy
  –   wholesaler requirements
  –   effects on current channel
                                          11
   7. Revising Channel Arrangements
                 (cont)
• Efficiency
• Effectiveness
  –   coverage
  –   control
  –   effectiveness
  –   efficiency
• Adaptability

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