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4.01 Manage channel activities to minimize costs and to determine distribution strategies Explain the importance of coordinating channel management with other marketing activities. Channel Management Channels are the paths products follow from the producers to the consumers (think distribution) Add value to the product Managing channels Coordinating with each member of the channel (producers, wholesalers and retailers) to ensure the efficient flow of the products Selecting the channel members Motivating and monitoring performance Coordinating Cont. Coordinating the channels with other marketing activities: Channel members add value to the products Members can offer specific services to customers Ease of placing an order Faster delivery Repair or installation services Etc. These functions offered by the members can and should be part of the product marketing plan Coordinating Cont. Channel members provide many of the marketing functions. As a result, the focus is less on the product. Wholesalers focus on distribution planning. Retailers focus on pricing decisions and promotional activities. Channel members must work cooperatively within the channel to respond to the needs and wants of the consumer. It saves time so that the consumer does not have to directly contact the producer. Identify ways that computers are helping to coordinate channel management with other marketing activities. Computers allow tracking of specific details Order date Shipping information and date Delivery date Changes to orders Supply chain management software (SCM) Used to collect and manage the information needed by each channel member. Data collected by the company can be processed and analyzed to improve channel performance Competitive advantages can be exploited (Wal-Mart) Describe aspects of channel management that should be coordinated with other marketing activities. Provide Marketing information Talking with the customer Promote the products Negotiate with customers Provide sales people Handle sales process Reduce discrepancies and waste Handle products quickly, safely and efficiently Financial risk taking Loans to the customers Explain procedures for coordinating channel management with other marketing activities. The dominant member(s) of the channel often control the channel e.g. Wal-Mart determines product design, shipping dates and pricing Selecting what and how items will be promoted falls on the most powerful members It is all about the communication between the members and with the customers Common goals Required performance Demonstrate procedures for coordinating channel management with other marketing activities. Set goals for the channel members Ensure the goals support the common objective of selling the products at a profit for all members Monitor performance Offer incentives Positive Negative Set up communication policies and procedures Define the terms horizontal conflict and vertical conflict. Horizontal Conflict Problems that occur between channel members at the same level of the channel (wholesalers) Can cause a disruption in the flow of products Can cause customer dissatisfaction Vertical Conflict Problems that occur between channel members at the different level of the channel (wholesalers and retailers) Same kinds of problems as horizontal Describe the bases of power within a distribution channel Channel power, which refers to the influence one party within a channel has over other channel members. When power is exerted by a channel member they are often in the position to make demands of others. For instance, they may demand better financial terms (e.g., will only buy if prices are lowered, will only sell if price is higher) or demand other members perform certain tasks (e.g., do more marketing to customers, perform more product services). Channel power can be seen in several ways: Describe the bases of power within a distribution channel. Producer Controls the manufacturing and the supply of the products Wholesalers Controls the mid-level distribution of products Between the producer and retailers Retailers Controls the selling to the customer Agents Puts buyers and sellers together but don’t own the product Describe the bases of power within a distribution channel Channel power can be seen in several ways: Backend or Product Power – Occurs when a product manufacturer or service provider markets a brand that has a high level of customer demand. The marketer of the brand is often in a power position since other channel members have little choice but to carry the brand or risk losing customers Middle or Wholesale Power – Occurs when an intermediary, such as a wholesaler, services a large number of smaller retailers with products obtained from a large number of manufacturers. In this situation the wholesaler can exert power since the small retailers are often not in the position to purchase products cost-effectively and in as much variety as what is offered by the wholesaler. Front or Retailer Power – As the name suggests, the power in this situation rests with the retailer who can command major concessions from their suppliers. This type of power is most prevalent when the retailer commands a significant percentage of sales in the market they serve and others in the channel are dependent on the sales generated by the retailer. http://www.knowthis.com/principles-of-marketing-tutorials/distribution-decisions/relationship-issuesin-channels/ Describe the bases of power within a distribution channel Sources of power Reward power involves a channel member being able to positively reinforce another’s performance—Coca Cola may be able to give a price break or pay a fee for additional shelf space. A retailer that meets a certain goal— the sale of 50,000 cases per month—may receive a bonus. Coercive power involves the threat of a punishment. A large retailer, for example, may tell a small manufacturer that no further orders will be processed unless a price discount is offered. Expert power includes knowledge. Wal-Mart, for example, because of its heavy investment in information technology, can persuasively argue about likely sales volumes at different price levels. Legitimate power involves government or other regulations—e.g., auto dealers have a great deal of power over auto makers because only they are allowed to sell to end customers in the continental U.S. under most circumstances. Referent power involves the desire of the other side to be associated—most manufacturers of upscale merchandise want to ensure that their merchandise is available at Nordstrom’s. http://www.consumerpsychologist.com/distribution.html Explain channel leadership. Who controls the channel? Sets the goals Monitors performance Offers incentives Decides on what will be promoted and when Often the biggest economic power in the channel Some marketing channels are determined by consensus; whereas, some are organized and controlled by a dominant member, or channel captain (also called a channel leader), which may be a producer, wholesaler, or retailer. Explain types of channel conflict. Horizontal and vertical Missing deadlines Lack of performance in meeting assigned goals Priorities Severe or prolonged conflict, however, can disrupt channel effectiveness and cause lasting harm to channel relationships. http://ww2.nscc.edu/gerth_d/MKT2220000/Lecture_Notes/unit13.htm Describe ways to achieve channel cooperation. Careful selection of channel partners Goals set by consensus of the members Clear and achievable performance goals Agreed upon measurements Clear communication channels and procedures for addressing issues Describe ways to achieve channel cooperation If the channel does not appear to compete against other channel members, the members will be more proactive. Channel members collectively focus their efforts on the goals of all involved rather than individual goals. Define the roles/responsibilities of each channel member. http://www.csustan.edu/market/williams/Chapter%2015.htm
