Distribution Management members’ shelves.

(Midterm)
B. Growth
1. Assure sufficient number of channel
Group 4: Product Issues in member
Channel Management inventories for adequate market
coverage.
New Product Planning 2. Monitor the effects of competitive
- What input can members provide? products on
- Assuring product acceptability channel member support.
- Special education or training
C. Maturity
Encouraging Member Input 1. Extra emphasis on motivating
- Solicit ideas for new products. channel members to mitiga competitive
- Gather feedback on product size or impact.
packaging. 2. Investigate possibility for changes in
- Solicit feedback during the test channel structure to extend maturity
marketing or commercialization things. stage & possibly foster new growth
stage.
Members Acceptance of New Products
Determining Factors: D. Decline
- How the product will sell. 1. Phase out marginal channel members.
- Whether the product is easy to stock 2. Investigate impact of product
and display. deletion on channel members.
- Whether the product will be profitable.
Strategic Product Management
Adding Products to the Assortment Successful product strategies depend
Key Considerations: on:
- Will channel members feel competent - Product quality, innovativeness, or
to handle the new products? technological sophistication.
- Will existing channel members view - Capabilities of managers overseeing
the new product as appropriate to add product line.
to their assortments? - Firm's financial capacity & willingness
to provide promotional support.
- Channel members' role in
implementing product strategies.

Product Strategies
1. Product Differentiation: Creating a
differential product involves getting
consumers to in perceive a difference.
2. Product Positioning: The
A. Introduction: manufacturer's attempt to have
1. Assure sufficient number of channel consumers perceive the product in a
members for particular way relative to competitive
adequate market coverage. products.
2. Assure adequate supply on channel 3. Product Line Expansion and
Construction: Manufacturers often
engage in both expansion and
contraction simultaneously.
4. Trading Down and Trading Up:
Adding lower-priced products or
product lines, or higher-priced products
or product lines, to a product mix.
5. Product Brand Strategy: When
manufacturers sell under both national
and private brands, direct competition
with channel member may result.
Influencing Pricing Strategy
Pricing Issues in Channel Management 1. The major challenge for the channel
The Importance of Pricing manager the
1. Pricing decisions cause top-level channel manager must analyze and
marketing executive more concern than think through the
any other strategic marketing decision channel implications of pricing decision.
area. 2. Channel manager must implement
2. Pricing is viewed as having a more pricing strategies
direct link to the firm's bottom line. that promote channel member
cooperation and minimize
Anatomy of Channel Pricing Structure conflict.
- Channel participants each want a part
of the total price sufficient cover their
costs and provide a desired level of
profit.
- Each channel participant wants a price
that provides a gross margın sufficient
to cover its expenses and provide a
contribution to profit.

Anatomy of Channel Pricing

Structure The "Golden Rule" of Channel Pricing Guidelines
Channel Pricing 1. To help those involved in pricing
- It is not enough to base pricing decisions to focus more clearly on the
decisions solely on the market, internal channel implications of their pricing
cost considerations, and competitive decisions.
factors. Rather, for those firms using 2. To provide general prescriptions on
independent channel members, explicit how to formulate
consideration of how pricing decisions pricing strategies that will help promote
affect channel member behavior is an channel member
important part of pricing strategy. cooperation and minimize conflict.
- Pricing decisions can have a
substantial impact on channel member Channel Pricing Guidelines
performance. 1. Profit Margin: Each efficient reseller
must obtain unit profit margins in
excess of unit operating costs.
2. Different Classes of Resellers: Each
class of reseller margins should vary in Group 5: Promotion Through
rough proportion to the cost of the Marketing Channel
functions the reseller performs.
3. Rival Brands: At all points in the
What is Marketing Channel?
vertical chain (channel levels), prices
- A marketing channel is the path a
charged must be in line with those
product takes from the producer to the
charged for comparable rival brands.
consumer. Includes manufacturers,
4. Special Arrangements: Special
wholesalers, retailers, and customers.
distribution arrangements-variations in
Example: Manufacturer - Wholesalers -
functions performed or departures from
Retailer - Consumer
the usual flow of merchandise should
be accompanied by corresponding
What is Promotion?
variations in financial arrangement.
- Promotion is any activity that
5. Conventional Norms in Margins
communicates a product’s value to
6. Margin Variation on Models
customer.
- Aims to increase awareness, interest,
Other Channel Pricing Issues
and sales.
1. Exercising Control in Channel Pricing:
Channel members see pricing as their
The Role of Promotion in the Channel
area of control. Avoid coercive
- Supports product flow through the
approaches to influence their pricing
channel.
policies.
- Encourages channel members (like
2. Changing Price Policies: Channel
retailers) to stock and promote the
members resist changes if accustomed
product.
to current strategies or closely tied to
- Builds consumer demand, which pulls
manufacturer's pricing.
products through the channel.
3. Passing Price increases through
Channel: Consider long term and short
Types of Promotion in Marketing
term implications before increasing
Channels
prices. If avoidable, do everything
1. Advertising: TV, Social media, online
possible to manage the impact.
ads.
4. Using Price Incentives in the Channel:
2. Sales Promotion: Discounts coupons
Manufacturers face difficulties gaining
buy-one-get-one.
strong retailer acceptance and follow
3. Personal Selling: Sales reps meeting
through on pricing promotions.
retailers pr customers.
5. Dealing with the Gray Market and
4. Public Relations: Building a positive
Free Riding
brand images.
Gray Market: Sale of brand-name
5. Direct Marketing: Emails, SMS,
products at low prices by unauthorized
catalogs to consumers.
sellers.
Free Riding: Distributors/Dealers
Push Vs. Pull Strategy
offering low prices but minimal
A. Push Strategy: Manufacturer
customer services.
promote to wholesaler/
retailer.
Example: Bonuses for retailers who sell
more.
B. Pull Strategy: Manufacturer How they work together?
promotes to consumer. Logistics + Channel Management =
Example: TV ads that make customer Efficient Distribution
ask stores for the product. - Logistics handles the physical
movement
Why Promotion Matters in the Channel - Channel management handles the
- Helps new products gain shelf space. route to market
- Increase sales for everyone in the
channel. The 7 C's of Logistics
- Creates loyal customers. 1. Connect
2. Create
Logistics and Channel Management 3. Customize
4. Coordinate
What is Logistics? 5. Consolidate
- Logistics is the process of planning, 6. Control
implementing, and controlling the 7. Contribute
efficient flow and storage of goods,
services, and related information. Group 6: Evaluation Channel
Key Activities: Member Performance
- Transportation
- Warehousing Evaluating Member Performance
- Inventory Management - The importance of channel member
- Order Fulfillment performance equals that of employee
evaluations within the firm.
What is Channel Management? Except:
- Channel management involves - The channel manager works with
managing the different paths or routes individual firms rather than with
through which a product or service individual employees.
reaches the final customer. - The setting is interorganizational
Examples of Channels: rather than intraorganizational.
- Retail Stores
- Wholesalers Scope and Frequency of Evaluations
- Online Platforms - Degree of the manufacturer's contort
- Direct Sales over channel members.
- Relative importance of channel
Importance of Logistics members.
- Ensures timely delivery of goods - Nature of the product.
- Reduces costs - Number of channel members.
- Improves customer satisfaction
- Supports supply chain efficiency Degree of Control
- Control that a producer, manufacturer,
Importance of Channel Management or franchisor has over members is
- Helps reach more customers based on strong contractual
- Increases product availability agreements.
- Improves sales performance - Channel manager can demand a great
- Builds strong business relationships deal of information on member
operations.
- Manufacturer lacks strong market Key Criteria for Performance Audit
acceptance for its products and strong - Sales performance of channel
channel control based on contractual members
commitments. - Inventory maintenance of channel
- Manufacturer can exert little control members
over channel members. - Selling capabilities of channel
members
Importance of Channel Members - Attitudes of channel members
- Evaluation of channel members is - Competition faced by channel
more comprehensive for manufacturers members
who sell all pf their output through - General growth prospects of channel
intermediaries than for manufacturers members
who rely less on intermediaries.
Why: Sales Performance
- Because the firm's success in the Criteria channel manager should use to
market is directly dependent on the evaluate sales data:
channel members performance. 1. Comparisons of the channel
members current sales to historical
Nature of the Product sales.
- The more complex the product, the 2. Comparisons of the channel
broader the scope of evaluation. member's sales with predetermined
- For products of very high unit value, quotas.
the gain or loss of a single order is 3. Cross comparisons of a member's
important to the manufacturer. sales with those of other members.

Evaluation Vs. Monitoring Selling Capabilities

Performance Evaluation: Overall Manufacturer who obtains sales records
performance reviews that give for channel members sales people
management a complete & objective should examine the following factors.
analysis of each distributor's operations. 1. Number of salespeople the channel
Day to Day Monitoring: Appraisals that member assigns to manufacturers
assist management in maintaining product line.
current operating control of distributors 2. Salesperson interest in
efforts. manufacturer's product.
3. Technical knowledge and
Performance Audit competence of channel member
Three Phases salespeople.
- Developing criteria for measuring
channel member performance. Attitudes of Channel Members
- Periodically evaluating the channel Attitudes:
members performance against the - Not usually evaluated unless sales
criteria. performances is unsatisfactory.
- Recommending corrective actions to - Negative ones often addressed after
reduce the number of inadequate they have contributed to poor
performances. performance.
- Should be evaluated independently of
sales data.
 products and services available so that
Competition the target market with access to
Channel manager should consider two computers or other enabling
types of competition: technologies can shop and complete
- Competition from other the transaction for purchase via
intermediaries. interactive electronic means.
- Competition from other product lines
carried by the manufacturer's own Structure of Electronic Marketing
channel members. Channels
Three Key Phenomena
Applying Performance Criteria - Disintermediation versus
Three Approaches Reintermediation
- Separate performance evaluations on - Information flow versus product flow
one more criteria. - Virtual channel structure versus
- Multiple criteria combined informally Physical channel structure
to evaluate overall performance
qualitatively. Disintermediation and
- Multiple criteria combined formally to Reintermediation
arrive at a quantitative index of overall Disintermediation
performances. - Intermediaries become superfluous
because producers gain exposure to
Multiple Criteria Combined Formally vast numbers of customers in
- Operational performance measures cyberspace
obtained Reintermediation
- Managerial Judgement used to - Shifting, and changing, or adding
combine performance measure middleman to the channel
- Qualitative Judgement made about
overall channel member performance Disintermediation versus
Reintermediation
Recommending Corrective Actions - No matter how technologically
Channel manager should attempt to sophisticated the internet becomes or
find out why members have performed how much it is hyped, the laws of
poorly economics as they relate to channel
1. Develop concrete and practical structure do not change.
approaches to actively seek information - Efficiency in the performance of
on members needs and problems. distribution tasks is what ultimately
2. Programs of member support must determines what form channel
be congruent with member needs and structure will take.
problems. Equal:
3. Constraints imposed by - The Internet has not eliminated
interorganizational setting of marketing middlemen, or caused total
channel must be understood. disintermediation.

Electronic Marketing Channel Internet Limits

Product Flow
Electronic Marketing Channel - Cannot be digitized
- The use of the internet to make - Processed slowly, often by people
- Is basis for all other flows-negotiation, about the priority given to distribution.
ownership information, and promotion
The Marketing Mix
Advantages and Disadvantages - The Internet arms large number of
A. Advantages of Electronic Marketing customers with more information about
Channels products & services to level the playing
1. Global scope and reach field.
2. Conventional Rapid transaction - The fourth P, place (distribution), may
processing assume a larger role relative to the
3. Information processing efficiency and other three variables for more & more
flexibility firms.
4. Data-based management &
relationship capabilities Channel Design
5. Lower sales and distribution costs - The channel manager of retailers,
B. Disadvantages of Electronic industrial, and 628 markets should
Marketing Channels provide "channel-surfing" consumers
1. Back of contact with actual products with whatever channels or
and delayed possession combinations of channels they desire.
2. Fulfillment logistics not at internet - A facet of the development of an
speed of efficiency effective multichannel marketing
3. Clutter, confusion, and strategy.
cumbersomeness of internet
4. Nonpurchase motives for shopping Channel Member Selection
not addressed - Complexity grows as channel member
5. Security concerns of customers selection may include the need to avoid
conflict with conventional channel
Implications members.
- Objectives and strategies of the firm & - The need to select members carefully.
electronic marketing channels
- Role of electronic marketing channels Channel Management
in the marketing mix - Multichannel challenge of
- Channel design and electronic conventional and electronic channels.
marketing channels - The fundamental issues of motivating
- Channel member selection and channel members, building cooperation,
electronic marketing channels managing conflict and coordinating
- Channel management and electronic elements of the marketing mix requires
marketing channel manager's full attention.
- Evaluation and electronic marketing
channels Evaluation
- Likely to change - Specific criteria for
Objectives and Strategies of the Firm performing & technological means for
- Role of distribution more complex doing so
because of electronic marketing - Unlikely to change - Performance
channels expectations, criteria, and
- Channel manager must consider measurement of how well they are
whether Internet-based channels being met by channel members.
fundamentally affect the firm's decision