Channel Management LAP 2 Chart Your Channels Channel Management Channel Management LAP 2

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

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

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

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

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

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

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

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

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

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.

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

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

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.

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

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

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

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

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

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

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

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

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.

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?

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

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

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

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?

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?

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

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