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Channels of Distribution Dr. Dawne Martin Business Marketing November 1, 2011.
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Transcript of Channels of Distribution Dr. Dawne Martin Business Marketing November 1, 2011.
Administrative Things
Assignments
Presentation Dates Assigned Thursday
Part III of Paper: Due November 18, 2011
Part IV of Paper: Due November 29, 2011
For Next Time Read Chapter 11 Aget case for markets and
channels discussion
Learning Objectives
To explore the importance and marketing of business services
To assess channel options and channel management approaches.
Identify potential problems and issues
Part III and Part IV of Paper
Part III: Competitive & Customer AnalysisAnalysis of 3 CompetitorsCustomer Segment Analysis
Definition with segmentation variables Size and growth of market Needs Value issues
Part IV: Marketing Program – Executive Interview
Channels of Distribution Unique combination of distribution and sales
effort that creates a way to reach the target customer with customer’s desired point of purchase service level sought producing effective sales opportunities for
business in a cost effective manner Strategic Benefits
Sales growth Customer value Competitive advantage
KEY OBJECTIVES OFMARKETING CHANNELS
DELIVER THE NEEDED GOOD/SERVICE
PLACE THE GOOD/SERVICE WHERE IT IS WANTED
HAVE THE GOOD/SERVICE
WHEN IT IS WANTED
9-5
Steel Service Center (Case 9.1)
Traditional approach - small distributors to supply small metalworking shops
Today – Metal service centers – cut, stamp and transform plate steel, coiled metal, bars and other semi-finished metal
Why has this change in distribution taken place?
MARKETING CHANNEL DIFFICULTIES
CHANNELS AREEXPENSIVE TO ESTABLISH
CHANNELS ARECOSTLY TO COORDINATE
CHANNELS ARESLOW TO ADAPT TO ENVIRONMENTAL CHANGES
9-7
WHAT DISTRIBUTORS DO
CONTRIBUTIONTO MANUFACTURERS
MARKET COVERAGE
SALES CONTACTS
INVENTORY AVAILABILITY
ORDER PROCESSING
MARKET INTELLIGENCE
CUSTOMER SUPPORT
CONTRIBUTIONTO CUSTOMERS
PRODUCT AVAILABILITY
PRODUCT ASSORTMENT
FITTING ORDER QUANTITY
CREDIT
SERVICE
TECHNICAL SUPPORT
9-8
Types of Channels Merchant Wholesalers
(Distributors/Value-Added Resellers)- own goods Full-function Limited-function
Single Line Specialty Cash & Carry Drop Shippers/Desk
Jobber Truck Jobber
Agents Intermediaries Agents – represent buyer
Industry or technical expertise
Established relationships with buyers
Brokers – bring buyers & sellers together
Manufacturer’s sales branches or offices
Alternative Channel Structures
Identifying Alternatives
Number of Levels Intensity of
Distribution Types of
Intermediaries
Variables Affecting Design
Market Product Company Intermediary Environmental Behavioral
Rockwell Automation Inc.
Direct distribution
Indirect distribution
BMW
(car image courtesy of BMW USA)
(continued)
Grainger’s advantage is one-stop shopping, which means convenience for the customer.
• Grainger is the nation's leading business-to-business distributor of maintenance, repair, and operating (MRO) supplies and related information. Its customers have access to over 560,000 products available to them through on-line ordering, phone ordering, and stopping by branch locations. One stop shopping with one invoice and one delivery.
• Rockwell Automation Inc. may agree that Grainger will be its exclusive distributor in the state of South Carolina.
• That is, of course, except for BMW’s South Carolina assembly plant, which Rockwell will supply directly (as house account).
• www.grainger.com
A MODEL FOR CHANNEL DESIGN
Identify andforecast
user serviceneeds
Identify andforecast
user serviceneeds
Evaluatecurrent channels
and otheroptions
Evaluatecurrent channels
and otheroptions
Createa vision ofthe idealchannel
Createa vision ofthe idealchannel
Implementthe best option
and managethe system
Implementthe best option
and managethe system
GapAnalysis
GapAnalysis
Exhibit 9-5
9-13
Choosing a Channel Structure Performance
Transaction CostsMarket CoverageTask PerformanceCompetitive Advantage
Flexibility Control
Selection Criteria For Channel Members
Credit & Financial Conditions
Sales Strength Product Lines
Competitive Compatible Complementary Quality
Market Coverage
Reputation Customers Other Manufacturers
Sales Performance Management
Succession Management Ability Attitude Size
Potential Problems and Issues
Tough CompetitorsDisruption of channel tasks in carrying out
marketing plans Saboteurs
Resistance and aggression when changes are required
Speed and RedundancyFast changes & realignment of tasks
HOW CHANNEL MEMBERS CANRESPOND TO CONFLICT
EXIT—Can leave the relationship
VOICE—Can find a means to articulate dissatisfaction
LOYALTY—Can continue to persevere in face of
conflict
AGGRESSION—Can openly or covertly take actions
to injure the conflict party
NEGLECT—Can leave the conflict untreated and fade
away
9-18
SOURCES OF CHANNEL POWER
1. REWARD POWER — Ability to provide days off for specific outcome/behavior
2. COERCIVE POWER — Ability to punish for failure to perform
3. INFORMATION POWER — Ability to obtain information others do not have
4. EXPERT POWER — Ability to gain an advantage by what you know
5. REFERENT POWER — Ability to influence by serving as the model of best practices
6. LEGITIMATE POWER — Explicit authority granted by tradition or contract
9-19
How are e-Channels Used?
Information Platforms Product specifications, features, availability
Transactional Platform Streamline sales process Provide contact with smaller customers
Customer Relationship Management Platform Creates on-going dialog with the customer Supports traditional channels
Internet Channel Issues Tasks performed electronically
Information & frequently asked questions Ordering and order tracking Customer support Transaction processing
Shift in channel role Customer education Customer sales Consultation Customer relationships On-site service
Trends - B2B Distribution
Consolidation of channel options Production outsourcings - often offshore Managing multi-channel marketing Globalization of purchasing Increasing customer emphasis on total value Distributor offerings becoming more sophisticated Distributors expecting more services from supplier
manufacturers Peer to peer networking -- Twitter
Questions
Why did Federal Express buy Kinko’s? Why would a new technology company opt to
using manufacturers’ representatives for distribution rather than developing their own sales force?
Why did pharmaceutical companies decide to use missionary sales people to supplement their distributor’s selling effort?