1. Marketing Chart Your Channel
3.07 Channel Management
Marketing
Chart Your Channel

2. CHANNEL MANAGEMENT
The strategies and processes by which marketers ensure that products are distributed to customers efficiently and effectively.

3. Who benefits?
As consumers, we benefit when we are able to purchase certain products, in certain quantities, when and where we want to.
Businesses benefit both when they buy products and when they sell them
As buyers, they can get the products they need when they need them
As sellers, businesses can get their products to final consumers more effectively and efficiently

4. Tasks of channel mgmt. Providing marketing information
Every producer is trying to reach and sell to a specific target market for each of its products
Companies rely on market research to determine their target markets’ needs and wants
Intermediaries are often closer to final consumers than producers themselves

5. Tasks of channel mgmt.
Example: You have a small business producing handmade greeting cards that you sell through a few small local retail stores. One of the store owners informs you that several customers have commented on your birthday cards and have asked if you could create anniversary cards as well. This marketing information is valuable to you, information you wouldn’t have learned if not for your fellow channel member.

6. Tasks of channel mgmt.
Promoting products – promoting a product, especially a new one, can be expensive
When a producer sells its products through intermediaries the costs and responsibilities associated with product promotion can be shared.
Retailers assume a large portion of promotion responsibilities
Shared promotion can lower channel members’ individual costs while producing the same results

7. Tasks of channel mgmt. Negotiating with customers
Producers often don’t have the time or ability to negotiate with final consumers on issues such as price, delivery, installation, etc.
Producer sells 10,000 flat screen TVs to a wholesaler; wholesaler sells 1,000 to 10 retailers; retailer sells to individual consumers
Retailer may offer delivery
All the channel members are profitable and the final consumer receives the product in an efficient, effective manner.

8. Tasks of channel mgmt. Reducing discrepancies
Discrepancies = quantity and assortment issues that middlemen can solve
Wholesalers and retailers can break down large quantities into reasonable amounts for final consumers

9. Tasks of channel mgmt. Financing and risk-taking
Moving products through a channel costs money
It takes money to manufacture, to transport and to store them, to promote them, to gather information about target market needs, to extend credit to consumers, etc.
When channel members work together, channels will be more effective

10. Add Value
Every channel member should add value to the product as it moves through the channel. If a member doesn’t add value then channel managers need to reevaluate whether or not that member belongs in the channel.
Retailers are point-of-sale advertising specialists and may create exciting visual displays in their stores to promote a manufacturer’s product which should lead to higher sales volume which is a benefit to every channel member

11. Effective channels are important
The channel must be properly manager
Channel members should share a commitment to the quality of the product and satisfying the target market’s needs and wants
Channel members must share tasks appropriately which makes it easier to cooperate and work toward their common goal

12. Channel Management Decisions
Setting channel objectives
Meet the needs and wants of their target markets efficiently
Give their products a competitive edge in the marketplace
Indirect distribution (the use of middlemen)
Direct distribution (eliminating middlemen in the channel and dealing with final consumers directly)

13. Channel Management Decisions
Determine distribution patterns
Ideal market exposure – make product available to each and every customer who might buy it, but they don’t want to over-distribute the product and waste money
This is known as distribution intensity

14. Distribution Intensity
Intensive – selling a product through every available wholesaler and retailer in a geographic area where consumers might look for it
Reaches greatest number of consumers possible
Convenience products us this intensity
Name 3 examples
Pack of gum

15. Distribution Intensity
Selective – selling a product through a limited number of wholesalers and retailers in a geographic area
Use middlemen who will do the best job of promoting and selling their product
May make higher profits by creating greater sales volume through a smaller number of successful outlets
Consumer shopping goods
Name 3 examples
Nautica clothing

16. Distribution Intensity
Exclusive – selling a product through just one middleman in a geographic area
Used when there is a need to maintain tight control over a product
Used for specialty products that are technical in nature or require specialized services such as installation or repair
Name 3 examples
Airplanes, large machinery

17. Selecting channel members
Determine the types of channel members (wholesalers, retailers, etc.)
Channel length (total number of channel members)
Channel member types are based on the nature of the product
Long channel may spread financial risk and allow a product to receive more specialized attention
Short channel may allow a product to reach consumers more quickly

18. Selecting channel members
Each middleman should:
Create product value that the producer or other middlemen cannot or are not willing to provide (shipping, promotion, etc.)
Channel the product to its desired target market(s)
Have a pricing and promotion strategy compatible with the product’s needs
Offer customer service compatible with the product’s needs
Be willing and able to work cooperatively with other members within the product’s channel

19. Determining channel responsibilities
Some activities must take place within the channel
Products must be shipped, promoted, and sold to final consumers before any profits can be made
Members must work together appropriately and perform tasks they are best suited for

20. Determining channel responsibilities
Examples
Middlemen reduce discrepancies by breaking down large quantities and storing products until consumers are ready to buy them
Wholesalers work with a retailer to ensure that the retailer always has enough of a product in stock
The wholesaler and retailer work together to determine who is responsible for keeping track of product inventory

21. Managing, motivating and monitoring channel members
Constant evaluation of the channel members should be done to assess what is working, what isn’t, and what can be improved
Should members be added or deleted?
Should certain responsibilities be reassigned?

22. Motivation – which is more effective?
Negative
Impose sanctions (punishment) on middlemen who do not perform well
Chargebacks, financial penalties assessed for a variety of problems such as late shipments or damaged merchandise
Positive
Incentives (usually financial) for reaching certain performance goals (sales)
Provide product training, sending out product update letters, cooperative advertising, etc.

23. Handling conflict Horizontal conflict Vertical conflict
Occurs between channel members on the same level. Good, old-fashioned business competition.
Vertical conflict
Occurs between channel members on different levels within the same channel
Usually between producers and wholesalers OR producers and retailers

24. Vertical conflict
E-commerce options and opening a factory-direct retail store conflicts with traditional middlemen
Multiple or dual-distribution – using more than one distribution channel
Conflict will happen. The goal is to recognize conflict early (anticipate) and address the conflict when and where it occurs, so the channel can continue to flow smoothly

25. The Gray Zone
Write your answer in your notebook for the following situation:
Manufacturers may impose sanctions on intermediaries who do not perform well. If an intermediary does not meet the sales quota in its contract because of economic downturn and less spending by consumers, the manufacturer may have the right to reduce the intermediary’s wholesale discount.
Should the intermediary be punished because of an economic trend? Is this ethical? Why or why not?