OUTLINE Sources of Gaps Types of Gaps Combined Channel Gaps Closing Demand-Side Gaps Closing Supply-Side Gaps Gap Analysis Template
Sources of Gaps Key questions: 1.What non-valued functions can be eliminated without damaging customer or channel satisfaction? 2.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? 3.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? 4.Are there opportunities to modify information systems to reduce the costs of prospecting, order entry, or quote generation activities?
Sources of Gaps Most common Gaps due to: poor thought about target end-users’ demands for service outputs and the most cost effective manner of delivering them. Environmental Bounds –Local legal constraints –Sophistication of local physical and retailing infrastructure –E.g.? Managerial Bounds –Lack of knowledge about channel –Corporate wide channel savings may create gaps in specific channels (E.g.: inventory for Europe)
Types of Gaps DEMAND SIDE: Service–Value Gap –SOSSOD too much service output Surfeit of service not valued by customer ( Byerly’s ) and thus profits too low or price too high Check Service Output by Service Output Check Segment by Segment
Types of Gaps SUPPLY SIDE: when total cost of all channel flows jointly is too high. –Signs: Inventory found everywhere in channel Too little investment results in inefficient outdated approaches Not enough of one channel flow (bottlenecks) –NOTE: It is possible to have one channel flow priced too high if it enables the other channels to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.
Combined 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
Closing Demand-Side Gaps 1.Offer multiple, tiered service output levels to appeal to different segments 2.Expand or retract amount of service level output to the target market 3.Altering the list of segments targeted (re- segmentation by channel flow efficiencies)
Closing Supply-Side Gaps 1.Changing roles of current channel members 2.Investing in new distribution technologies to reduce total channel flow costs 3.Introducing new distribution function specialists to improve the function of the channel
Gap Analysis Template See Table 6.3, P. 154 –Demand Gaps (first line) –Supply Gaps (second line) –Target-Segment Specific –Like a SWOT…but rather: environmental and managerial constraints, Desired Outcomes, Tactics to close, and predicted channel behavior changes