Channel management

Channel refers to ways in which product reaches end user.

Channel Arrangement:
Manufacturer Wholesaler Distributor Retailer Consumer
Sales Management: Management of sales force across direct and indirect distribution.
Components/Choices
Functions of channel:
1. Demand generation or selling
2. Carrying of inventory
3. Physical distributions
4. After-sales service
5. Extending credit to customers
6. Product modification and maintenance
Components
1. Direct Sales force takes care of building ladder of relationships with user accounts,
keeping contact, training , inventory support and implementing promotions at
distributor level
2. Distributor take title to goods and sell to customers/resellers, provide economies
of scope to suppliers. Sells products from many suppliers
3. Captive distributor functions as independent distributor but owned by supplier.
4. Agent Sells products from many suppliers, do not take title to goods , commission
based selling
5. Brokers Do not assume title , customrs approach brokers mainly in crisis scenarios
(excess supply for lowest prices, shortage of supply)
Choices
1. Channel structure Balance of direct and indirect
2. Reseller type distributor or captive or agent or broker
3. Market coverage exclusive vs selective vs intensive franchising policies
4. Terms and conditions discount structure , support
Factors affecting channel relations
Tug of war Struggle to retain maximum share of profits, conflict of interests
Entangling alliances Alliances of multiple suppliers at distributor level
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Channel controls vs resources required: inverse relationship to increase control of
channel fewer channels increased financial resources from supplier side to sustain

Low High


Will the real channel manager stand-up
Channels create 3 kinds of utilities
1. Time utility : Makes products available whenever customers want
2. Place utility : Makes products available wherever customers want
3. Possession utility : Facilitates purchase or lease feasible as per convenience of
user
Critical activities channel manager performs
1. Formulating marketing channel strategy long run planning in order to create
sustained competitive advantage. Eg : Office Depot
2. Designing channels Dimensions of channels
a. Number of levels
b. Intensity no. of intermediaries
c. Type of intermediaries
d. Number of channels
3. Selecting channel members select based on credentials, market coverage,
number of product lines, strategic fit
4. Motivating members higher trade discounts, higher slotting allowances,
training members, promotional support
5. Co-ordinating strategy with members
6. Evaluating performance
7. Managing conflicts
Sales Manager is the channel manager
Financial resources are
limiting factor in design of
channel
Control as determining factor
Direct distribution
Controls are subordinate
factor in design
Multi-tier distribution
Financial efficiency as
determining factor
Business Unit Financial Resources
High
Low

Distribution its stupid!
Effective international distribution is achieved by following:
1. Set minimal and ideal criteria
a. Developed economy : size, resources, risk propensity, coverage,
penetrations control, information feedback
b. Emerging markets : distribution outreach, functionality, cultural context,
interaction, past performance
2. Focus on potential complementers: go for distributor whose products
complement suppliers.
3. Spell out responsibilities : well documented detailed contract
4. Build relationships : flexibility of dealings, active information exchange, solidarity
5. Monitor the relationships :
6. Manage communication
7. Incentive the relationship