• Deregulation of trucking industry• Smaller truck loads• Smaller lot sizes for M• Shorter lead times• Competitive freight rates to
distributors
Change in distribution structure – forces
stronger and better management and coordination in distribution channel.
Channel management
= managing an existing distribution channels/ running with what has been set up already
CHANNEL MANAGEMENT
Is not channel designSecuring the cooperation of
channel members
Distribution objectivesaligned with organisation's
overall marketing objectives
Interorganisational evaluation of channel member
performance
The process of designing, selecting and managing distribution systems and
strategiesAnalyse consumer needs for service outputs
Establish channel objectives in terms of delivering service outputs
Evaluate distribution environment
Identify alternative distribution systems and select appropriate membersfrom available alternatives
Determine channel leadership and control
Ensure cooperation of channel members
Evaluate and modify channel
1. CHANNEL LEADERSHIP AND CONTROL
• Channel leader = that marketing channel institution that formulates marketing policies for other channel members and thus controls their marketing decisions
• Channel performance (overall & individual) = determined by level of control that some organisations have over other
Channel management by manufacturers or producers
Pages 235 - 236
Channel management by wholesalersPages 238-239
Channel management by retailersPages 239-240
Channel management by logistical organisations
Pages 241
Channel management by logistical organisations
Why would it be interesting for logistical organisatios to assume channel management?
Neutral relative to many of channel policies and activities
Channel management by logistical organisations
• Reduction in rates
•Special transport schedules
•Minimum weight requirements
•Specialised equipment
•Consulting services
•Providing information
WHO SHOULD LEAD THE DISTRIBUTION CHANNEL?
Corporate vertical systems
Jewellery
Administered vertical systems
Central Selling Organisation of De Beers
Vertical contractual systems
•Retail-sponsored systems
•Wholesale-sponsored systems
•Franchising
Manufacturerfranchise
M-to-Wholesalerfranchise
Service-sponsorfranchise
Forward vertical integration – M ♥ R
Reasons:• Greater effectiveness and efficiency • Gaining control over distribution
activities• Allowing suppliers to access to other
marketing channels
Backward vertical integration – R ♥ M
Reasons:• Assure self of continuous supply of
consistent quality-merchandise• Effective & efficient flows of physical
goods, information and transactions• Resellers often acquire their sources
of supply as a competitive move
= when intermediaries on same level of distribution channel are part of same group or form part of same management
Why do you think it could work so well?
Why do you think it could work so well?
Complementary skills and resources …
Could take form of strategic alliances Could take form of strategic alliances and joint ventures evenand joint ventures even
Who will be the leader?
Institution/ agency within the system using its power bases to aid in overcoming the natural variability of individual channel member behaviour and adding resources within this system to enhance the system’s viability.
Conflict will inevitably arise when …
Performance in the channel is weak.
How could one ensure strong channel performance then?
Strong channel performance …
• Specify roles and responsibilities clearly• Ensure cross-member evaluation and
regulation• Leadership to:
- correct use of power base & resources- recognition of dependency on system - actual USE of power (not just talky talky)- exercising of tolerance for control among channel members- desire on part of channel member to influence others- effective cooperation
Strong channel performance …
• Specify roles and responsibilities clearly• Ensure cross-member evaluation and
regulation• Leadership to:
- correct use of power base & resources- recognition of dependency on system - actual USE of power (not just talky talky)- exercising of tolerance for control among channel members- desire on part of channel member to influence others- effective cooperation
COORDINATION IN THE DISTRIBUTION PROCESS
Long-run objective of channel Long-run objective of channel management management = to, AT A REASONABLE COST, achieve greatest possible IMPACT at end-user level so that individual channel members can get a satisfactory RETURN.
Steps in the coordination process
Achieve successful channel performanceAchieve successful channel performance
Deal with channel conflictDeal with channel conflict
Enhance channel cooperationEnhance channel cooperation
Use power or leadership to ensure that the services are properly delivered
Use power or leadership to ensure that the services are properly delivered
Identify the necessary tasks and institutions needed to perform those tasks
Identify the necessary tasks and institutions needed to perform those tasks
Determine channel service leadsDetermine channel service leads
Step 1
Looking at SERVICE OUTPUTS demanded by end-users of commercial channel i.e.LOT SIZE
DELIVERY/ WAITING TIMEMARKET DECENTRALISATION (convenient locations)
BREATH/ DEPTH OF P/S ASSORTMENT (product variety)SERVICE BACKUP
Looking at SERVICE OUTPUTS demanded by end-users of commercial channel i.e.LOT SIZE
DELIVERY/ WAITING TIMEMARKET DECENTRALISATION (convenient locations)
BREATH/ DEPTH OF P/S ASSORTMENT (product variety)SERVICE BACKUP
Step 2
Which marketing task undertaken to generate requisite service outputs &Which channel members employed to form a delivery system with tasks like:
PHYSICAL PROCESSIONOWNERSHIPPROMOTIONFINANCING
RISKINGORDERINGPAYMENT
Which marketing task undertaken to generate requisite service outputs &Which channel members employed to form a delivery system with tasks like:
PHYSICAL PROCESSIONOWNERSHIPPROMOTIONFINANCING
RISKINGORDERINGPAYMENT
Step 3
Determine exactly which influence strategies used to accomplish hoped-for resultsPower to be used in marketing channel to specify tasks – tasks which are:
COMPLEMENTARYGAIN COOPERATION
ACHIEVE SATISFACTORY DELIVERY OF CHANNEL SERVICES DESIRED BY TM
Determine exactly which influence strategies used to accomplish hoped-for resultsPower to be used in marketing channel to specify tasks – tasks which are:
COMPLEMENTARYGAIN COOPERATION
ACHIEVE SATISFACTORY DELIVERY OF CHANNEL SERVICES DESIRED BY TM
Step 3
Determine exactly which influence strategies used to accomplish hoped-for resultsPower to be used in marketing channel to specify tasks – tasks which are:
COMPLEMENTARYGAIN COOPERATION
ACHIEVE SATISFACTORY DELIVERY OF CHANNEL SERVICES DESIRED BY TM
Determine exactly which influence strategies used to accomplish hoped-for resultsPower to be used in marketing channel to specify tasks – tasks which are:
COMPLEMENTARYGAIN COOPERATION
ACHIEVE SATISFACTORY DELIVERY OF CHANNEL SERVICES DESIRED BY TM
Step 3
RewardsPunishments
ExpertiseIdentification
LegitimacyInformation
RewardsPunishments
ExpertiseIdentification
LegitimacyInformation
Step 4
Channel cooperation = joint striving of channel members towards individual and mutual goals i.e.
JOINT PROMOTIONAL PROGRAMMESJOINT INVENTORY MANAGEMENT ASSISTANCE
EXCLUSIVE PRODUCTS INFORMATION SHARING
Channel cooperation = joint striving of channel members towards individual and mutual goals i.e.
JOINT PROMOTIONAL PROGRAMMESJOINT INVENTORY MANAGEMENT ASSISTANCE
EXCLUSIVE PRODUCTS INFORMATION SHARING
If play nicely together, lead to CHANNEL SATISFACTION
-Social interaction (between intermediary and M)- Product dimensions (demand for and quality of M’s product)
- Financial dimensions (intermediary margins & ROI)- Co-op advertising initiatives and allowances
- Assistance from M to intermediary re consumer promotions, promotional support and POP displays
-Social interaction (between intermediary and M)- Product dimensions (demand for and quality of M’s product)
- Financial dimensions (intermediary margins & ROI)- Co-op advertising initiatives and allowances
- Assistance from M to intermediary re consumer promotions, promotional support and POP displays
Step 5
Setting up mechanisms to deal with conflict issues which WILL arise NB that continues to provide desired service outputs …
CONFLICT DUE TO DISPARITY IN GOALS:Sellers = M & PRODUCERS – HIGHEST PRICE
Buyers = R – PAY LOWEST PRICE TO MAX THEIR PROFITS
Setting up mechanisms to deal with conflict issues which WILL arise NB that continues to provide desired service outputs …
CONFLICT DUE TO DISPARITY IN GOALS:Sellers = M & PRODUCERS – HIGHEST PRICE
Buyers = R – PAY LOWEST PRICE TO MAX THEIR PROFITS