10292780 Channel Management[1]

8/9/2019 10292780 Channel Management[1]

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Channel ManagementChannel ManagementAdil Mirza

ICFAI Business School Hyedrabad


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ObjectiveObjective

To help you understand the key factors that influence the channel

choice, how a channel structure is developedRelationship between the principle and the

intermediaryTypes of channelsImplications on the length of the channel


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What is a channelWhat is a channel

Channel is a mechanism which brings theproduct to the consumer at his doorstep.


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Why ChannelsWhy Channels

When it becomes impossible for themanufacturer to directly deal with the

consumers.Minimize transportation costs, maintain

service levels, reduction of stock holding

etc.Required to distribute your products.


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Role of the ChannelRole of the Channel

To bring the product closer to the

end user and provide him with the

knowledge, information and service asdesired by the manufacturer.


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Role of the PrincipalRole of the Principal

Commitment to develop the channelProvide support by way of service,

Information, Training and Motivation tothe channel members.


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The Factors that impact theThe Factors that impact the

choicechoice

ProductConsumerCompetitionSize and value of each saleThe area of operations

Strength of efforts requiredPromotional StrategyCost of channel


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ProductProduct

Identify where your product is on thecontinuum

Lowest in the Sales Continuum require tobe distributed widely.

Linked to Maslows theory of hierarchy of

needs - Who is the customer, who will use it,


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List

Item

Brand

Concepts/ Ideas

Consultative

Systemic

Structural

THE SELLING CONTINUUM

Channel

Driven

Direct


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Basic needs

Security

Social

PersonalAesthetic

SA

Maslow's theory of Hierarchy ofneeds


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The customerThe customer

What kind of service level is required.How much technical information required.How accessible they required the product

to be.How often do they use it? In what

quantity?What are the installation needs


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Competitor Channel strategyCompetitor Channel strategy

Opportunity to either match or better the

competition.


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Size and value of each saleSize and value of each sale

Lower the size and value per sale, theneed for higher and uncontrollable

distribution.Costs much lowerHigh value and size require limited /

Controlled distribution.


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Area of operationArea of operation

Wider your appeal and choice ofmarketing, wider channel required.Also need to look at the competitive

strengths and weakness and makegeographic plans.

Keep in mind the area of operation andchoose the channel.


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Strength of channelStrength of channel

Who needs whomLevel of dependency


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Promotional StrategyPromotional Strategy

Push Versus Pull.

More cost for push strategy,Efforts required by the channel is required

significantly for the push strategy.

Stronger channel required.


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Cost of channelCost of channel

Depending upon the efforts requiredObjectives you have set upChannel cost comprises of

- People,

- Infrastructure like Warehouse etc

- Delivery costsetc.


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Local tax lawsLocal tax laws

CST and STOctroiMRP


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The choice of the channelThe choice of the channel

The one that :

Gets the products at the right time,

at the right place,

in the right way

at the most cost efficient way


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TYPES OF CHANNELTYPES OF CHANNEL

OWNEXCLUSIVESHAREDCOMBINATIONFRANCHISIE


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CHANNEL MEMBERSCHANNEL MEMBERS

RETAILERS/ , DIRECT SELLENIG AGENTSWHOLESALERS STATIONERY, MOVINGLARGE RETAILER CHAINS(Foodworld,

Sahakari Bhandar etc)INSTITUTION ( CSD, INS)

DISTRIBUTORS/ STOCKISTSC&FSSOLE SELLING AGENTS.


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CostsCosts

Retailer - Margins, Promotions, DiscountsWholesaler Margins,Promotions,

Discounts,Distributors Margins, Promotions,Salesmen, Delivery costsChain stores Margins, Promotions,

Discounts, Cost sharing,Institutions Margins, Credit.C&Fs Delivery costs, service costs.Sole Selling Agents All costs +

Reasonable Returns.


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Servicing the ChannelServicing the ChannelMembersMembers

Frequency of visit Retailer Weekly/ Fortnightly/ Monthly

Wholesaler Multiple visitsDistributors Daily MonthlyInstitutions Weekly or Up to the time of

credit.

C & Fs One a month or multiple visitsSole Selling Agents - Continuous


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RemunerationRemuneration

Commission/ MarginsIncentivesSalarySalary + IncentivesReimbursement of costs

Salary + Incentives+ Reimbursement ofcosts


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Quality of ServiceQuality of Service

Retailer -Whole sellerDistributorChain storesInstitutions

C&FsSole Selling Agents


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Other servicesOther services

TrainingMotivationInstallationSubsidies


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MotivationMotivation

Basic Needs : Profit, VolumeSecurity : Stability, Growth, New

business developments.Social : Recognition in the community,Personal : Biggest Business Man, Best,

etc

Aesthetic : Stylish Office,Modern Gadgets,Computerization etc.

Self Actualization : ?


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CommodityCommodity

RetailWholesalersSub brokersBrokersAgents

Low margins/ High turnoverGoods move direct to w/s or large

retailers from point of manufacturer.


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FMCGFMCG

Service Qualit

y

Remuneration

Others

Retailer

Weekly/

Monthly

Under

Grads5 to20%

Discounts

Proms.W/S Daily/

Month

Unde

rgrads

2 to3%

Discount

sPromss

DistributorStocki

sts

Daily/

Monthly

Grads

5-8% TrainingMotivtn

C&FsMonthly Grad

s+ Fixed+Costs

Training

SoleSellingagents

Continuos

Grads+

10 %

+

Recruiting/Training/Motivt

n


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Consumer DurablesConsumer Durables

Service Quality Renumeration Others

Own Retail Grads Salary Motivation.Training

Exclusive

Ret(Franchisee

Weekly/ Grads 5-9% Training/Proms

Retail Showroom

Daily/Monthly

Grads 5-8% TrainingMotivtn

C & Fs Monthly Grads+ Fixed+

Costs

Training

Exclusive Continuos Grads+ 10 %+ Recruitng/Training/Moti

vtn


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Non Physical Products(Non Physical Products(

InsuranceInsurance))Quality Remuneration Others

Advisors Grads Salary +incentive Motivation.Training

Exclusive

DSAs

Grads Salary

+incentive

Training/

Proms

Co ownednetwork

Grads+ Salary

+incentive

Training

Motivtn


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OEMsOEMs

Original Equipment Manufacturers

Manufacturer hands over the product tochannel.Channel then adds its own value and

markets the products.


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Vertical IntegrationVertical Integration

Downline When manufacturer movesinto the channel and sets up own outlets/

Upline When a member of the channelgets into the manufacturing and startsdistributing through channel.


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Length of ChannelLength of Channel

Seller - Buyer Direct Zero lengthSeller One in between- Buyerlength of

1Seller- Two in between Buyerlength of2Seller-Three in between-Buyer-length of 3And so on.Higher the length, lesser the direct

control.Likely to be expensive.Requires the support of the entire

marketing mix.


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Direct MarketingDirect Marketing

Personal SellingNetDirect MailersTelephonic


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ROIROI

RETURN ON INVESTMENT

Return X 100Investment


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Risk

Return


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Business men invest :

Time,

Efforts,

In return they expect commensurate

Return that they not only takes for todayBut also needs to fuel future growth.


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Todays opportunity :

Savings ac - 5 %FDs - 8-9%Mutual funds- 12 15 %

Distribution line 20 30 %At least twice bank rates


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Other factors worthOther factors worth

consideringconsidering

Absolute amountOther than money, that takes care of

basic needs, need for status, ability toattract other business.Other businesses where costs are shared

and there is synergy.


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InvestmentStocks

CreditDepositsClaims

Etc.


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Return( Income)Return( Income)

Sales in units * margin per unitInterest on Deposit

Nett of discounts


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Expenses :Expenses :Direct Salesmen

DriverDelivery boysDeliver costsDepreciation of vehiclesBills/ Stationery,Warehouse rent

IndirectOffice rent, electricity, telephone, other staff,

accountant etc, audit fees, license fees etc.( consider appropriate contribution)


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ROIROI

= Gross income Expenses X 100

Total Investment

ROI is a percentage.

Multiply it by 12( if data is monthly) to getannualized ROI.


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Selecting the right partnerSelecting the right partner

The one who can add valueProvide his unique local contribution

Mutually dependantLong termMatching with the culture and values of

the principle.Mutually beneficial

10292780 Channel Management[1]

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