1. Channel Management LAP 2
Chart Your Channels
Channel Management
Channel Management LAP 2

2. Objectives Explain key functions of channels of distribution.
Discuss decisions involved in channel management.

3. Explain key functions of channels of distribution.
Objective
Explain key functions of channels of distribution.

4. In business, channels work well when:
Channel management—the strategies and processes by which marketers ensure that products are distributed to customers efficiently and effectively
Group project for government class:
Isabella—reads and creates outline
Ben—creates PowerPoint presentation
Alicia—proofs for spelling and grammar
Erik—makes presentation and leads discussion
Similar to channels used in business to get products to customers
They are properly managed
Members strive together to reach a common goal
Members add value to the product along the way
Their “product”—knowledge
Their “customers”—other students and teacher

5. Channels of Distribution
Channels of distribution—paths businesses use to get their products to consumers
Consumers benefit by getting:
Certain products
In certain quantities
When and where they want them

6. Channels of Distribution
Businesses benefit by:
Getting the products they need (just like consumers)
Moving their own products to consumers efficiently and effectively

7. Important Channel Activities
Must be completed no matter how many intermediaries are involved
Providing marketing information

8. Important Channel Activities
Promoting products
Can be quite expensive
Costs and responsibilities are often shared.

9. Important Channel Activities
Negotiating with customers on issues such as
Price
Delivery
Installation

10. Important Channel Activities
Reducing discrepancies of:
Quantity
Assortment
Financing and risk-taking

11. Adding Value Every channel member should add value to the product by:
Performing necessary channel tasks
Providing expertise at channel tasks
Example—retailers are often “specialists” at point-of-sale advertising.

12. Discuss decisions involved in channel management.
Objective
Discuss decisions involved in channel management.

13. Channel Effectiveness
Channels are effective when:
They are properly managed. Their managers:
Recognize the importance of their task
Make informed decisions regarding:
Distribution patterns
Selection of channel members
Assignment of channel responsibilities

14. Channel Effectiveness
Channels are effective when:
Channel members share common goal(s)—a commitment to:
The quality of the product
Satisfying the target market’s needs and wants
Channel members share tasks appropriately.

15. Channel-Management Decisions
Setting channel objectives
Marketers must determine what they’re trying to achieve.
General channel objectives:
Efficiently meet needs and wants of target market
Give product competitive edge in the marketplace

16. Channel-Management Decisions
Setting channel objectives
May set more specific goals as well
May choose direct distribution over indirect distribution

17. Channel-Management Decisions
Determining distribution patterns
Goal—achieve ideal market exposure—making product available to each and every customer who might want to buy it without over-exposing it and wasting money
Ideal
Market
Exposure

18. Channel-Management Decisions
Determining distribution patterns
Patterns may be:
Intensive
Selling a product through every available wholesaler and retailer in a geographic area where consumers might look for it
Used to reach the greatest number of consumers possible
Often used for convenience products, such as gum

19. Channel-Management Decisions
Determining distribution patterns
Patterns may be:
Selective
Selling a product through a limited number of wholesalers and retailers in a geographic area
Used when marketers want to deal only with middlemen they feel will do an excellent job promoting and selling a product
Companies may make more money distributing products through a smaller number of highly successful outlets.
Often used for consumer shopping goods, such as high-end clothes

20. Channel-Management Decisions
Determining distribution patterns
Patterns may be:
Exclusive
Selling a product through just one middleman in a geographic area
Used when marketers want to maintain tight control over a product
Often used for specialty products, such as airplanes

21. Channel-Management Decisions
Selecting channel members
Marketers must first determine:
Types of channel members (retailers, wholesalers, etc.)
Channel length—total number of channel members

22. Channel-Management Decisions
Selecting channel members
Wholesaler
Retailer
Agent
Industrial
Distributor
Factors to consider when choosing specific channel members—each should:
Create product value that the producer or other middlemen cannot or are not willing to provide (shipping, promoting, etc.)
Channel the product to its desired target market(s)
Have a pricing and promotion strategy compatible with the product’s needs
Offer customer service compatible with the product’s needs
Be willing and able to work cooperatively with other members within the product’s channel

23. Channel-Management Decisions
Determining channel responsibilities
Channel activities must be performed for the product to reach the consumer.
Each channel member should perform the activity or activities it does best.

24. Channel-Management Decisions?
Managing, motivating, and monitoring channel members
Marketers should constantly evaluate the channel:
What’s working?
What isn’t?
What can be improved?
Should members be added or deleted?
Should certain responsibilities be reassigned?

25. Channel-Management Decisions
Managing, motivating, and monitoring channel members
Shipment due: April 10th
Shipment delivered: April 12th
Marketers sometimes use negative motivation:
Sanctions for middlemen who do not perform well
Chargebacks for producers for late shipments, etc.
CHARGEBACK

26. Channel-Management Decisions
Performance Goal
Managing, motivating, and monitoring channel members
Marketers sometimes use positive motivation (usually more effective than negative):
Incentives for reaching performance goals
Product training
Product update letters
Cooperative advertising

27. Channel-Management Decisions
Managing, motivating, and monitoring channel members
Marketers must handle channel conflict:
Horizontal conflict—occurs between channel members at the same level
Vertical conflict
Occurs between channel members at different levels in the same channel
Usually occurs between producers and wholesalers or producers and retailers
Can also occur when marketers use e-commerce or multiple distribution

28. Choose one good or service you’ve consumed today.
Consider the channel activities that occurred before this product reached you.
How do you think channel members added value to this product?
What pattern of distribution do you think was used?

29. Manufacturers may impose sanctions on intermediaries who do not perform well.
If an intermediary does not meet the sales quota in its contract because of an economic downturn, the manufacturer may have the right to reduce the intermediary’s wholesale discount.
But, do you think this is ethical?
Should the intermediary be punished because of an economic trend?
What do you think?

30. MBAResearch Acknowledgments Original Developers
Christopher C. Burke, Sarah Bartlett Borich, MBAResearch
Version 1.0
Copyright © 2010
MBA Research and Curriculum Center

31. Digital-based photography sources:
ADOBE IMAGE LIBRARY;
Education & Teens
Obj. A: #ETE_050
Photos copyright Eyewire Inc.
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