1 MARKETING CHANNELS Evaluation of Channels Berman Chapter 15 Version 3.0

2 Channel Assessment and Control 1. Introduction 2. Overall Measures of Performance 3. Financial Performance Measures 4. Distribution Cost Analysis 5. The Channel Audit 6. Improving Channel Productivity

3 1. Introduction to Channel Assessment and Control three different levels –product category for a given channel reseller relative profitability of a private label brand vs a national brand contribution to overall profits of specific products –profitability of a channel unit –profitability of specific channels relativity of direct vs indirect channels

4 2. Overall Measures of Channel Performance A. Measures used by Dealers –outcomes based measures volume, profit, margins, turnover, market share –behavior based measures service, warranty/claims, buildings, facilities, office systems, incentive plans –five measures outcome sales, outcome profit, behavior sales, customer service, market share

5 2. Overall Measures of Channel Performance B. Measures used by Suppliers 7 components –sales contribution, profit contribution, reseller competence, reseller compliance, reseller adaptation, growth contribution, customer satisfaction 2 measures –financial - sales, profits, margins, turnover –behavioral - service, warranty/claims, competence, adaptation

6 3. Financial Performance Measures A. data envelopment analysis efficiency and profit expectations and performance –high/low - – stars - high E, High P – effectives - high P, low E – underperforming - high E, low P –underperformers - low E, low P

7 3. Financial Performance Measures B. financial ratios solvency quick ratio, current ratio, liabilities to net worth efficiency ratios collection periods, inventory turnover, assets to sales profitability ratios net profit margin, return on assets, return on net worth

8 4. Distribution Cost Analysis Configuration cost and profitability –direct vs indirect, private vs national brands, customer types - discounters,upscales, etc Full and Direct cost analysis –natural expenses vs function expenses –non traceable common costs Activity based costing –vs non-activity - product, channel, customers

9 5. The Channel Audit Process vertical and horizontal audits channel structure relationship marketing customer service physical distribution marketing research management information systems product pricing promotion technology service channels international channels

10 6. Improving Channel Productivity partnerships and customer response Channel Partnership Benefits –reduced channel inventory –electronic data interface among partners –reassigned tasks - i.e.. preticketing –eliminate redundancies –supplier managed replenishments –cross docking and direct store delivery

11 6. Improving Channel Productivity partnerships and customer response Efficient Customer Response –electronic data interchange –point-of-sale registers –bar codes –cross docking –scanning equipment –store replenishment software –invoicing and packaging standards