11/3/2015

Marketing Management-II

Prof. Ravi Shekhar Kumar

XLRI - Xavier School of Business, Jamshedpur
ravishekhar@xlri.ac.in

What are factors that affect Channel Structure

Market Considerations
Product Considerations
Company Considerations
Intermediary Considerations
Environmental Considerations
Behavioral consideration

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Factors affecting Channel Structure

Market Considerations

Market Geography
Market Size
Market Density
Market Behavior

Factors affecting Channel Structure

Product Considerations

Bulk & Weight

Perishability
Unit Value
Degree of Standardization
Technical vs Nontechnical

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Factors affecting Channel Structure

Company Considerations

Size
Financial Capacity
Managerial Expertise
Objective & Strategies

Factors affecting Channel Structure

Intermediary Considerations
Availability
Cost
Services

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Factors affecting Channel Structure

Environmental Considerations

Economic forces
Sociocultural forces
Competitive forces
Technological forces
Legal forces

Factors affecting Channel Structure

Behavioral Considerations
Power
Conflict
Cooperation etc.

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Choosing Channel: Steps in summary

1. Feel the pain & then develop your channel
Start where the customers are - or where customers want to be
Customers will buy more if you meet them where they want to
do business (Golden rule of distribution)

2. Is there a strategic fit

Analyze if channel makes sense given your corporate & marketing
strategy

3. Is there a product fit

Analyze/map along high touch- low touch continuum

4. Does it make financial sense

Perform Profitability analysis

Does it make sense to economic /financial sense to use channel?

Complexity in Channel Choice

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Channel Management Decision

Channel = Company for customers
Selecting Channel Members
Identify characteristics
that distinguish the best
channel members

Evaluating Channel Members

Performance should be
checked against standards
Channel members should
be rewarded or replaced as
dictated by performance

Managing & Motivating

Channel Members
Partner relationship
management (PRM) is key

Selection of Channel Members

Important..
Because customers perceive channel members as an
extension of the manufacturers own organization,
members should:

Reflect channel strategies the firm has developed to

achieve its distribution objectives
Be consistent with the firms broader marketing
objectives & strategies
Reflect the objectives & strategies of the
organization as a whole

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Example: New channel member selection

Criteria for Distributor:
Credit & Financial Conditions- should have capacity to pay. No
specific figure is used as criterion.
Market Coverage - It should have significant penetration and reach
through its existing distribution of complementary product
preferably other consumer durable product.
It should not / can not deal with any other competing brand.
It should have warehouse of at least 2000sqft (dedicated for firm)
It should have proper transportation facility
It should have well trained Manpower
It should have TIN No and PAN card

Example: New channel member selection

Criteria for Dealer:

Capacity to pay
Store location as per brand requirement
Should be ready to give at least 60% counter share
Five Blank Post Dated Cheque of any bank
Should have TIN no and PAN card
Can not wholesale the product, cannot resale the brand
Has to follow MOP (market operating price decided by company)

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Behavioral Aspects in Channel

Conflict

Power

Cooperation
Communication

How Conflict Emerges

Cause

When a channel member perceives

that another members actions impede
the attainment of his or her goals

Behavioral trademarks

Direct, personal, and

opponent-centered behavior

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Causes of Channel Conflict

Types of Conflict
Horizontal, Vertical & multichannel conflict

Causes

Goal Incompatibilities
Communication Difficulties
Role Incongruities,
Resource Scarcities
Perceptual Differences,
Expectation Differences
Decision Domain Disagreements,

Bases of Power for Channel Control

Reward Power

High Sales & profits

Ability to punish

Coercive Power
Legitimate Power

By virtue of size /
position, alignment

Goal Congruency

Referent Power
Expert Power

Technical
/Knowledge

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Channel Evolution: PC Industry (US)

1975-1980
Market
Leader

Apple

1980-1985
IBM

1985-1990

1990-2005

2005-2010

IBM & Compaq Dell

Hewlett-Packard

Direct
(telephone,
internet)
Dominant
Channel

Boutique

Direct Sales
Force
Specialty
Computer
Stores

Retailer

Value-added
Reseller

Electronic Stores

Value-added
Reseller

Direct (telephone,
internet)

Computer Super
Computer Super
Stores
Computer Super
Stores
Stores
Electronic Stores

Business
Customer
Segment

Consumer
(hobbyists)

Professionals

Professionals Consumer
(education)

Business

Business

Consumers

Consumers

Consumers

Business

SMEs

SMEs

SMEs

SOHOs

SOHOs

Kasturi
Rangan, 2014
SOHOs

Channel Modification
In response to

Addition of Customer Segment

Change in Product Life Cycle

Consumer-buying pattern changes

New Competition arises

Innovative/New Distribution emerges

Change in Legal Structure

Distribution not working as planned

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Why sales force is required?

Linkage between Company & channel members or
customers
Act as a source of market information (eyes & ears of
the company)
Drives the top line of the company

Steps in Effective Selling

Prospecting &
qualifying

Identify qualified
potential customers

Preapproach

Learn as much as
possible about
customer

Handling
objections

Overcome customer
objections

Approach

Make a relationship

Closing

Follow-up

Presentation &
demonstration

Tell the product story &

focus on customer benefits

To insure customer
satisfaction & repeat
business

Ask for an
order

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Principles of Personal Selling

Situation questions
Problem questions
Implication questions
Need-payoff questions

Types of Sales Representatives

Deliverer
Order taker
Missionary
Technician
Demand creator
Solution vendor

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I Designing the Sales Force

Steps in Designing the Sales Force
A.Sales force objectives
B.Sales force strategy
C.Sales force structure
D.Sales force size
E. Sales force compensation

A. Sales Force Objectives

1. Prospecting
2. Targeting
3. Communicating
4. Selling
5. Servicing
6. Information gathering
7. Allocating

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B. Sales force strategies

1. Sales rep to buyer
2. Sales rep to buyer group
3. Sales team to buyer group

C. Sales force structures

1. Territorial structured
2. Product structured
3. Market structured
4. Complex sales force structures

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D. Steps in assessing the Sales force size

S1. Determine no. of customers (diff. classes exist)
S2. Determine call frequencies for each class / year
S3. Multiply S1 by S2
S4. Determine average no. of calls by a SR in an year.
S5. Sales force size = S3/S4

E. Sales force compensation

1. Fixed amount: (basic pay)
2. Variable amount: (commissions, bonus, profit sharing)
3. Expenses allowances: (travel, lodging, dining, entertaining)
4. Benefits: (paid vacations, sickness or accident-benefits, pension, life
insurance, etc)

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II Managing the Sales Force

1. Recruiting & selecting sales reps.
2. Training sales representatives
3. Supervising sales representatives
4. Motivating sales representatives
5. Evaluating sales representatives

Evaluating Sales Reps..

1. Current to past-sales comparisons
2. Customer satisfaction evaluation
3. Qualitative evaluation of the sales reps.
knowledge about the company, products, customers, territory,
competitors, and responsibilities; their appearance, speech, manners,
temperament etc.

4. Combinatorial approach

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III. Improving Sales Force Effectiveness

1. Training in selling techniques
2. Negotiation skills
3. Relationship building skills

Horizontal Retailer/ Manufacturer Relationship

bow tie

Buyer

Sales Rep

Comm. Limited to the Sales

Rep & Store Buyer
Focus ST buying & selling
Transactions, little emphasis
on coordination

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Customer Business Development

Reverse bow-tie

Team Approach to work

coop with customers
Lower costs & produce
profits for both

P & G Team:
May include Sales, Customer
Service, Finance , Management
Systems

Customer Team:
May include Sales, Customer
Service, Finance , Management
Systems

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