2OUTLINE Sources of Gaps Types of Gaps Combined Channel Gaps Closing Demand-Side GapsClosing Supply-Side GapsGap Analysis Template
3Sources of Gaps Key questions: What non-valued functions can be eliminated without damaging customer or channel satisfaction?Are there to be any redundant activates? Which of them could be eliminated to result in the lowest cost for the entire system? Is there a way to eliminate, redefine, or combine certain tasks in order to minimize steps in a sale or reduce its cycle time?Is it possible to automate certain activities in a way that reduces the unit cost of getting products to market, even though it will lead to increased fixed costs?Are there opportunities to modify information systems to reduce the costs of prospecting, order entry, or quote generation activities?
4Sources of GapsMost common Gaps due to: poor thought about target end-users’ demands for service outputs and the most cost effective manner of delivering them.Environmental BoundsLocal legal constraintsSophistication of local physical and retailing infrastructureE.g.?Managerial BoundsLack of knowledge about channelCorporate wide channel savings may create gaps in specific channels (E.g.: inventory for Europe)
5Types of Gaps DEMAND SIDE: Service–Value Gap SOS<SOD too low service output(Tupperware) - demand(National semi-conductor…price still to high for low service output) - supplySOS>SOD too much service outputSurfeit of service not valued by customer (Byerly’s) and thus profits too low or price too highCheck Service Output by Service OutputCheck Segment by Segment
6Types of GapsSUPPLY SIDE: when total cost of all channel flows jointly is too high.Signs:Inventory found everywhere in channelToo little investment results in inefficient outdated approachesNot enough of one channel flow (bottlenecks)NOTE: It is possible to have one channel flow priced too high if it enables the other channels to perform more cost effectively such that the entire flow is lower-priced.
7Combined Channel Gaps See Table 6.2 p. 147 If gap is cost-side with right amount of service outputs then: do not reduce or increase service output whilst reducing costs.If there is a demand-side gap with too low a service output level combined with high cost supply-side gap, do not cut service provision to reduce costs.Imperative to have proper identification of the source of the gap…do not just use the first obvious problem. Understand the segment well.See Figure 6.3, p. 149
8Closing Demand-Side Gaps Offer multiple, tiered service output levels to appeal to different segmentsExpand or retract amount of service level output to the target marketAltering the list of segments targeted (re-segmentation by channel flow efficiencies)
9Closing Supply-Side Gaps Changing roles of current channel membersInvesting in new distribution technologies to reduce total channel flow costsIntroducing new distribution function specialists to improve the function of the channel
10Gap Analysis Template See Table 6.3, P. 154 Demand Gaps (first line) Supply Gaps (second line)Target-Segment SpecificLike a SWOT…but rather: environmental and managerial constraints, Desired Outcomes, Tactics to close, and predicted channel behavior changes