Distribution & Channel Management

Distribution & Channel
Management
M. Ekhlaque Ahmed
PART A
Marketing & Sales
Leadership
Excellence in Demand Generation

Process
Marketing
MarketingStrategy
Strategy
People
PeopleCapability/
Capability/
Marketing
MarketingLeadership
Leadership
Marketing
Marketing
Intelligence
Intelligence
Marketing
MarketingPlanning
Planning
Brand
BrandPositioning
Positioning
Pricing
Pricing
Product
ProductPortfolio
Portfolio
Distribution
DistributionStrategy
Strategy
Communication
Communication
Market
MarketIntroduction
Introduction
Sales
Sales&&Account
AccountManagement
Management
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[Distribution & Channel

Management]
LEADERSHIP COMPETENCY MODEL

TASK
Shows determination to
achieve excellent results
Show A drive for results..

Sets demanding and visionary
goals.
Takes active ownership/
accountability
Focuses on the market
Uses business knowledge to add

value.
Shows customer insight
Thinks strategically
Finds better way
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Manages systems and process

effectively.
Manages profitability.
4
Champions change.
Management]
LEADERSHIP COMPETENCY MODEL

PEOPLE
Demand top
performance
Leads by example
Provides direction
Tackles performance issues
Inspire commitment
Communicates and influences

effectively
Builds relationship and fosters
teamwork
Motivates others
Develops self and others Coaches and develops others

Develops oneself
Simulates learning and manages
knowledge
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Management]
Break Through Thinking

( principles)
1. Any output of a process must lead to a positive outcome,
which is discernible/recognizable to a stakeholder!!
2. Speed, simplicity and self-confidence determine to what
extend the business will be successful.
3. There is a difference between being in charge and being in
control.
4. If you want to apply quality in business, show fine-tuning.
Quantitative improvement should not be incremental, it
should be a Quantum leap.
5. Process way is to move
From: Measure the process and manage the result
To:
Manage the process and measure the result.
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Management]

( principles)
Coaching is like a master gardener who allows all flowers to
grow on its own, but knows when, where to intervene
before it is too late.
You develop market but competition takes it. You create
market for yourself.
When there are chronic problems and you solve it, then you
make a break through
When things are normal and you make improvement, it is
continuous improvement
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Management]

( principles)
Close the Performance Gap
The accumulated deficiencies in quality , cost cycle time for product
development , logistic performance, when compared to best global

competitors.
Close the Opportunity Gap

Company growth did not match the industry growth
Externalizing The Reasons For Competitive

Failure.
Unfair competition, high wage, smuggling and so on, must
be replaced with An internal determination to win in spite of
such odds.
Organization Learn By Doing.

Transformation of company cannot be accomplished by
endless discussion about what should be done but by
doing
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8
Management]

( principles)
Develop Stretch targets
Targets that appears on the surface to be unrealistic. The rationale for

stretch target is that we are unlikely to radically change the way we
manage unless we are committed to a radically different aspiration
level.
Speed is The Essence

Radical transformation cannot take place unless the changes are
Decided and Implemented fast.
How
Transformation through a large number of small wins & not by a very
big, visible, single event or project
Outcome
Market improvements in quality, customer orientation, market share,
new product introduction & profitability are the test of the breakthrough
process in the long run
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Management]
Excellent companies are, above all, Brilliant on the

basics:
Tools do not substitute for thinking
Intellect did not overpower wisdom
Analysis do not impede action
These companies work hard to keep things simple

in a complex world
They persist
They insist on top quality
They fawned on their customers
They listened to their employees & treat them like adults
They allow some chaos in return for quick action &
regular experimentations
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Good to Great
Good is the enemy of Great

Getting inside the black box
From Good to Great Companies
From Good Salesman to Great Salesman
What is inside the Black Box
Are there some timeless principles?
Are there certain immutable laws of organized
human performance
Are there some immutable laws what can create
enduring Great Organization
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Level 5 Leadership
Create superb results a clear catalyst in the transition from
good to great
Demonstrate an unwavering resolve to do whatever must
be done to produce the best long term results no matter
how difficult
Sets the standards of building on enduring great company,
will settle for nothing less
Looks in the mirror not out the window to apportion
responsibility for poor results, never blaming other people
external factors or bad luck
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New Selling Environment

Commoditization
Selling functions Standard Of Performance
Must be to improve customer ability to realize their objectives
Sales function must Report to your customer
It must move profits not just products & services to your
customer
Customers & their suppliers are no longer separate & distinct.
Traditional selling strategy- A closed fist to wage ware fare
against competition
Modern concept An open hand to extend partnership to
customer.
Must sell with him & for him to achieve shared objectives
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Functional Convergence
Marketing
Sales
Customer
Relationship
Management
R&D
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Operations

Management]
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PART B
What Makes A Good
Salesman
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What Makes A Good Salesman

Two essentials
Empathy
Ego drive
Ability to feel
Powerful feedback from his client thru empathy
Antiaircraft weapon (Salesman with poor empathy. He aims at the
target as best he can and proceeds along his sales track but his
target- the customer fails to perform a predicted, the sale is missed)
Heat- attracted missiles: (the salesman with god empathy. He senses
the reactions of the customer and is able to adjust to these reactions.
Not simply bound by a prepared sales track but functions in terms of
the real interaction between himself and the customer
Sensing what the customer is feeling , he is able to change pace ,
double back on his track
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Need To Conquer
Ego drive, which makes him want need to make the sale in
a personal or ego way, not merely for the money to be
gained.
His feeling must be that he has to make the sale; the
customer is there to help him fulfill his personal need
Sale provides a powerful mean of enhancing his ego
His self-picture improves dramatically by virtue of conquest
and diminishes with failure
Failure must act as a trigger, as a motivation toward greater
efforts
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Need for Balance

1-High degree of both empathy and drive ( top of the sales
force)
2-Fine empathy but too little drive ( will not be able to close
his deals effectively, nice guy but poor closing ability)
3-Much drive but too little empathy ( will bulldoze his way
through to some sales but will miss a great many & hurt his
employer thru his lack of understanding of people)
4-A salesman without much empathy or drive (should not
be a salesman)
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PART C
Distribution Channels
Key Concepts
Distribution Definitions
Distribution Channels:
A Definition (Fact)
A Channel of distribution is the group of organizations

(channel members) involved in performing the tasks
which move a product from the point of manufacture to
the point of sale
Distribution Channel Management:

A Definition (Challenge)
Channel Management involves the processes of leading,
planning, coordinating & motivating channel members in
an environment of partnership/relationship
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Marketing Channel Defined

The external contractual organization that management operates to
achieve its distribution objectives
External
Channel exist outside the firm

Inter organization management
Contractual Organization
Refers to those firms or parties who are involved in negotiators

functions I.E, Buying, Selling & transferring title of goods
Operates
1.
2.
3.
Involvement of management in the affairs of channel

From initial channel structure to Day to Day Management
Control on channel to what extent
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Advantages of Using Distributors
Selling Skills
Market
Segmentation
Customer
Contacts
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Effective
Delivery
Added Value
Market Knowledge
& Coverage
Management]
Lower
Cost
Specialization
Customer &
Manufacturer
Services
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(Perceived) Disadvantages of Using

Distributors
Competitors
Products
Poor
Management
Inadequate
Communications
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Middlemans
Profit
Channel
Problems
Conflicting
Objective
Management]
Less
Control
Lack Technical
Expertise
Less
Customer
Contact
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Dimensions of Channel Management

Evaluate
& Control
Support & Motivate
Advise &
Train
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Long Term
Partnership
Channel
Management
Reinforce
Relationships
Management]
Identify
& Select
Agree Fair
Objectives
Form
Equitable
Contracts
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STRATEGIES FOR WINNING

DISTRIBUTOR PREFERENCE
Low
Low
Distributor
Relation
Building
Market Power Building
Suicide
Strategy
Pull
Strategy
Push
Strategy
Win- Win
Strategy
High
High
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Market Power Drivers
Long-Term share
Effectiveness orientation
Superior image
Market leadership
Product superiority
Service superiority
Other valued uniqueness
Fast speed of action
Ongoing innovation
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Distributor Relations Drivers

Partnership Focus
Relationships building
Conflict containment
Product and service fit
Dealer cost driving
Help in crisis
Information & technology linking
Order handling effectiveness
Dealer promotions & Merchandising
Customer Promotions
Forward linkage creation
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How to Win Dealer Preference
World
Class
Product
Excellent
support
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Product fit
and service
Long strong
relationships
Excel
Above
Rivals
Effective
information
sharing

Management]
Drive their
profits
Most suppliers
28
do badly!
PART D
Marketing Channel
Significance
Marketing Channel Importance

1.
Greater Difficulty of Gaining a Sustainable Competitive

Advantage
CA is a competitive Edge that cannot be easily copied
CA thru product ,Price & Promotion becoming difficult
Rapid technology transfer marking it easier to achieve
parity in product strategy
Gaining CA VIA Pricing strategy is even less feasible
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Three Reasons:
1. Long Term
2. Requires Structure
3. Relationship and People
Long Term
Incentives
Barrier of entry for competition
Requires Structure
Of Organization And People
Dealers, Distributors, Agents, Retailers
Coverage, Shelf Share
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Relations & People

The success of channel strategy & the
structure that supports it are dependent on
how effectively people in various Organization
relate to each other in Performing their jobs
2. Growing Power Of Distributors
Shift from producers of goods to distribution of

goods
Specially on retail level where giant mass
Merchandisers have become Dominant Players
They control access to market place
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For manufactures they are gatekeepers into

consumer markets
As gatekeeper they act as buying agent for their
consumers rather than selling agents for marketers
Operate on low margin/ low price sophisticated
marketers / fierce competitors that make tough
demands on manufactures
3. Need to Reduce Distribution costs

Massive effort to squeeze out cost is now being
extended to marketing channels
In order to reduce the costs of distribution, firms will
need to focus much more attention on channel
structure / management.
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4. New stress on Growth

Limits reached in cost cutting / downsizing as the
basis for enhancing the bottom line
Growth / faster revenue need to augment the cost
cutting efforts
Taking competition share
5. Increasing Role of Technology

Keeping an eye on electronic marketing channels.
Using it as a tool to improve channel management.
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Formula For increasing Market Share

Market share =
Your Sales
Market (total) sales
Market share= outlet coverage * Shelf Share

Increasing market share should focus on improving
outlet coverage or shelf share or both at a certain
level of brand Franchise
Brand Franchise can be measured from Shelf
Share (A quantitative Measure of brand managers
marketing efforts)
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Good Flow Chart

Company
3rd Party
distributors
Direct
Distributor
Sales channel
Retail
Channel
Super Markets/
Convenience
Sub
Distributor
Handling
Agent
Food Service
Khokha
Panshop
Sundry Outlets
Sales channel
categorization
ATCS
Wholesale
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General Store
Karyana Store
Medical Store
Bakery

Management]
Key Accounts
Office / Factories
3rd Party Canteen /
Operator
Vendors
Hotels / Restaurant
Transport Business
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Direct Distributor
A third party
Distributes companys products within a defined
geographical territory
Buys directly from the company on cash / credit basis
and uses his infrastructural and work force to sell them
out in the market
Provides separate set up for the company
Does not distribute competitors brands
Sells to retail outlets as per route structure, required
frequency
Methods: spot selling / order booking, collection and
supply method
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Handling Agents
A third party
Financial and logistics catalysts
Supply products to sub distributors appointed in small
cities and towns & not to retail outlets
Purchase products from the Company on company invoice
price on cash and sell to sub distributors on the same price
Maintains his work force and vehicles to carry out company
business in the field
Company pays a fixed percentage commission for
rendering distribution services
Company as per a well defined freight and transportation
policy reimburses the cost of operating the vehicles
Are allotted a specified geographical territory covering
sufficient number of small towns to achieve a minimum
turnover ensuring viable operation
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Sub Distributors
A third party
Appointed for distributing the products within a small
town & sometimes nearby surrounding areas
Purchase the products from handling agents on
company price on cash basis and sell to the retail /
wholesale outlets
May have combined operations for two or more
companies but does not distribute competitors brands
Handling agents appoint / terminate the sub-distributors
with consultation of the company
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Functions of Distributor
Availability of product range in each and every listed
outlet in his allocated area of distribution
Merchandising
Warehousing and maintain adequate number of vehicles
for efficient distribution
Stock cover (back up stock) 6-12 working days
Keep territories clean of any expired products, open
damages etc Fixed market return (FMR) or actual
marketing return
Route wise / van wise division of targets and compiling
data to compare actual targets and taking CAP to
monitor deviations
Deployment of adequate no of salesperson, educated,
good communication skills, punctual, good attitude and
clean appearance
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Functions of Distributor
Maintain sales data and stock report
Ensure funds to maintain stock norms, market credit
requirements and meet companys present and future
expansion needs
Progressive and willing to invest in company future
projects / expansion programs
Regular market visit to understand the market and
retailers
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Building Distribution Infra-Structure
Number of retail outlets in one day

Frequency weekly
Total no of outlets in a week
To cover 100K outlets no of vans
Operational cost per van
Total cost of serve 100K outlets
Turnover Calculation Example

Cost of Running Van/Other expenses
Distributors Margin
Break-Even (Turnover)
Distributors Profit
Turnover with 5% Profit Coverage
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Management]
40
240
416
20,000
Rs.8.3M
Rs.20,000 p.m
5%
Rs.400K
5%
Rs.800K
42
Trade Margin
Profit margin of the total trade chain involving
distributors, wholesalers, retailer is termed as trade
margin
Stated trade margin vs. Actual trade margin, must be
monitored by the company otherwise there will be issue
of profit to trade becoming a reason for conflict
Depends upon speed of turnover and companys brand
franchise
Gathering of market information
Monitor Distributors ROI to ensure profit to trade
High margin to wholesales are not recommended as
they start under-cutting
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Total ROI to Distributors

Example of a A Class Customer:
Rs.30M
Average T/O per year
Investments
Yearly Profit
ROI
Credit to the Market
Rs.2.0M
Stocks
Rs.1.0M
Total Investment
=
Rs.30M * 3.5%
=
1.05M
3.0M
Rs.3.0M
Rs.1.05M
35%
Ensure Optimum Return to Customers

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Sharing of Operational Cost
1.
2.
3.
4.
No Compensation
100% Compensation
Percent of Sales
Percent of Sales plus fixed amount
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Reasons for Price Under-Cutting

1.
2.
3.
4.
5.
6.
Mismatch of Demand & Supply

Conversion of long term credit into Cash & Investing the
fund in some more profitable items
Sales Promotion Scheme Large Wholesalers buying in
Bulk at lower price then distributing the market at later
stage
Overpowering companys distribution network by
large/investor type of wholesaler/dealer
Not keeping track of their profitability Rolling of money by
traders
Low cost operation selling at lower cost
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Reasons for Price Under-Cutting

7.
Year-end incentive selling at lower price in anticipation

of target incentives
8.
Selling the main product at cost or below cost to be

competitive in the market & earning through accessories
9.
Selling at cost or below cost in the trade & earning by

selling in institutions
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Role & Responsibilities of a Salesman

Complete knowledge, command and control of his
allocated route and must ensure continuous service and
development of relationship, trust and credibility within
the trade
FIFO Control for all stock keeping units in the shop
Merchandising
Proper product positioning on shelves, attempting to
acquire shelf space as much as possible
Reminding retailer about hygiene being the key to
attractive displays and increased sales
Additional care about extra back up stocks to avoid stock
outs
Ensure constant promotion of products
Identify products with 4-6 months expiry shift
Ensuring delivery of products to the outlet
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Role & Responsibilities of a Salesman

Business development is a prime responsibilities of
Company sales staff
Company sales staff must always be on the look out of
the opening of new accounts, increase area coverage,
carry out display drives
Focusing on coverage and shelf share in an organized
manner and monitoring thereof by implementation of
data base management can increase Company market
share as well distribution thrust
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Sales Territory
Accountability Unit
Focused Approach
Professional & Personal ambition for Sales
Manager
Test of Managerial Skills of a Salesman
Depends upon Nature of Product & Sales
Objectives (coverage & shelf share)
Ultimate Unit should be number of Retail Outlets
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Sales Organization
Director Sales
National Sales
Manager
Zonal Sales
Manager
Regional
Manager
Area
Manager
Territory
In charge
Distributors
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Order
Takers
Distribution
Sales Force
Retail
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Outlets
Retail Monitoring / Servicing A Mammoth Project

A Continuous Loop
Zone Dist.
Data
Primary Cities
Data
Attached
Town Data
Distributor
Data
Retail
Mapping
GAP
Improvement Plan
Redesign Route
-Additions of vans
-Frequency redesign
Surprise Scanning of
Distribution coverage
by Sales Team during monthly
meeting
Sales Organization
New Philosophy
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Management]
Weekly sales
tracking
Analysis of
Outlet Sales
data
Visit plan by
Sales Officer
Distributors
Action /
improvement
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Sales & Marketing Integration

Total Trade Spend comprises of all price reductions,
allowances and expenses in cash or kind granted, under
Sales Management and Trade Marketing responsibility to
shopkeepers and third parties for their efforts to sell
product to the consumers (e.g. receive, store, display,
sell, cash, refund). The various types of trade spend
used are
Non Performance Trade Expenses
Wholesale Discount
Discount given to the wholesalers against the purchase
of products in bulk. This is an ongoing relationship
expense in the form of price off e.g. 1% off the purchase
value.
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Management]
Key Accounts Discount

Discount to key accounts (Shell stores etc) Key
accounts normally buy products in big quantities
regularly and therefore expect some discount.
The discount is in the form of price off or
percentage off.
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Product Sampling
Expenses against free sampling to the consumers during
the launch of new product / item or otherwise. The free
sampling made by giving the product free (dry) or tasting
(wet), is aimed at product trial
Trade Development
Van Subsidy, Distributor Sales Force Sharing, Small
Market Development Van Subsidy, any other subsidy
given to Distributor / Sub distributor / Handling agent for
the purpose of trade development for a certain period of
time or for achieving a certain minimum turnover
objective to make the operations viable
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Other kinds of non-performance trade expenses are:

Shop signs + Expenses
Trade compensation for damaged packs
Price lists
Eid Gifts, Calendars, etc
Performance Trade Expenses:
Product Quantity Discount
Discount given to sub distributors on the purchase of
products in big quantity. This discount is more of target
related e.g. 3 packs free on purchase of 5 cartons or 1%
off on purchase of 5 cartons.
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Coupon Scheme for Consumers

Scheme via trade whereby the consumers are
offered coupons against the purchase of
products (number of products at one time or of
certain value). The redemption can be Price Off,
free products or items e.g. jars, mugs, etc
Shelf Space Fee
Allowances given to the trade for providing
space within the store for the purpose of sales of
Nestle products on regular basis as well as
special during promotions
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Distributors Sales Staff Incentives

Incentives given to distributors sales staff with a view to
achieve specific volume / turnover objectives for a
product or range of products. The incentive may be in
cash or kind
Distributors Incentives
Incentives given to distributors / sub-distributors to
achieve specific volume/turnover objectives. The
incentive is given on monthly, quarterly or any other
period. The incentive may be in cash or kind
Liquidation of Short Shelf-Life Products
Expenses/Discount offered to retailers for liquidating
products with remaining short shelf life. (Activities to
move products being close to Best Before or Use by
dates, product still on the shelf)
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Exclusivity Discounts
Discounts given to some retailers for being exclusive
with a product or range of products in the store. The
discount is in the form of Price-Off
Trade Offer Product Launches
Discount given to retailers during the launch of new
product/item. The discount is for a certain period/quantity
fixed by brand/sales
Product Listing Fee
Allowance given to the retailers for subscripting /
placement of new product / item in the store
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Joint Promotion
Company product coupled with another
company product aimed for trade or
company
Trade Letter
Letter printed for specific consumer and
trade promotion
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Parameters For Monitoring Distributors
No of Outlets per distributors

No of A Category outlets
Optimum distance for van coverage per day
Ideal location of distributors warehouse
Optimum No of outlets per van per day
Ideal productivity per van
Optimum van visit frequency
Optimum monthly turnover of distributors or the basis of per
outlet purchase per visit
Optimum distributors investment
No of vans required to cover outlets
Ideal credit extension in market on the basis of monthly
turnover
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Parameters For Monitoring Distributors

Ideal stock cover with distributor on the basis of monthly
turnover
Ideal distributors monthly profit including annual incentive/
Cash Discount etc (if any)
Distributors ideal ROI
Ideal sales per outlet per visit
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PART E
Channel Conflict
Conflict
1.
Conflict exists when a member of marketing channel

perceives another members actions to be impeding of
his goal
Object of each others frustration
Examples
Pushing the inventory during lean period
Extra discount (underhand) policy to push the sales
Price Under-cutting
Causes of Channel Conflict
Role Incongruities
A Role is a set of prescriptions defining what the
behavior of position members should be
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Conflict
2.
Each member of channel is expected to fulfill certain

role
Manufacturers Demand generation, distributors
Coverage / Shelf Share
If any one of them deviates from the given role a
conflict situation may result.
Resource Scarcities
Disagreement over allocation of some valuable
resources to achieve goals
E.G. Allocation of retailers
Direct Selling to institutions
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Conflict
3.
4.
Perceptual Differences
Different perception of the same stimuli & attaching
different interpretations
E.G. Pop Materials
Expectation Difference
Expectations about the behavior of other channel
member
Predictions/forecasts concerning the future behavior of
other channel
These forecasts may turn to be inaccurate
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Conflict
5.
6.
Decision domain disagreements

Channel members explicitly or implicitly carve out for
themselves an area of decision making that they feel is
exclusively theirs
E.G. Pricing Decisions (Manufacturers Control VS
Wholesalers domain)
Goal Incompatibilities
Each members has his own goals
Incompatibility leads to conflict
Conflicting Goals on shelf share in a particular shops
Conflicting Goals on Coverage
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Conflict
7.
Communications Difficulties
A foul-up or breakdown in communications can quickly
turn a co-operative relationship into a conflicting one
Feedback on market development program
Channel Conflict & Efficiency
Mostly - Negative Impact
No Effect
Higher level of dependency / commitment
Positive Effect
Conflict might serve as an impetus to reappraise their respective policies
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Conflict
Managing Channel Conflict
1. Detect
After the fact approach Negative Effect
Early warning system
Surveys/Visit/Actions
2. M.C. Audit
A periodic/regular evaluation of key areas of relationship
Customer focus group meetings

3. Distributors advisory councils/committees
Regular meeting to detect conflicts
Make conscious efforts to detect & solve conflict

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Conflict
Channel Conflict
1.
2.
3.
4.
Pushing stock during lean period

Extra discount (underhand) policy to push the sales
Price under-cutting/cross flows
Lack of consumer pull-demand generation activity by
the manufacturers
5. Lack of optimization of coverage/shelf share
6. Allocation of retailers
7. Allocation of towns/cities Re-organization of
distribution set-up
8. New Products Distribution
9. Direct selling to institutions
10. Effective use of P.O.S materials
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Conflict
11 Predictions / Forecasts of Sales
12 Pricing decisions (Manufacturers Control VS
Distributors/Wholesalers Domain)
13 Conflicting goals on shelf share/coverage
14 Communication difficulties
15 Feedback on business/market development program
16 Expectation on year-end profitability
17 Profits to the trade
18 Relations with top management
19 Range availability
20 Selling of competition products to increase profits
21 Payment on time VS delivery of stores
22 Priority of stock allocation at time of shortage
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PART F
Power in Marketing
Channel
Power in the Marketing Channel

The capacity of a particular channel member
to control the behavior of another channel
Member
1. Reward Power
Capacity of one channel member to reward another

i.e. perceived or actual financial gains
Promotions schemes etc

2. Coercive Power
Punishment over failure to conform to the formers

influence attempt
Full Range display or cancellation of dealership
e.g. Konica
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Referent Power
When one channel member perceives his goals to be
closely allied to those of another, a referent power base is
likely to exist.
They may see each other as being in the same reference
group & influence others behavior in their own benefits
E.G. retailers selling high quality products
E.G. G-6 in consumer electronics
Expert Power
Knowledge (or perception of knowledge) which one channel
member attributes to another in some given area
Superior Expertise
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Using Power in the Marketing Channel
Use power bases to influence the behavior of the

channel members to achieve distribution objectives
Tow basic channel management issues:

1. Identifying the Available Power Bases
Could be readily identified
A function of the size of the producer or manufacturer

relative to channel members, the Organization of the
channel or a particular set of circumstances
surrounding the channel relationship
A large producer dealing with relatively small channel

members has high reward / coercive power bases
Giant retailers E.G, Wal-Mart etc are larger than most

of the manufacturers supplying them
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2.
Such retailers have high levels of rewards & coercive

power relative to mostly smaller manufacturers
Such power bases do not give automatic advantages
rather it merely indicates potential for doing so exists.
Selecting & Using Appropriate Power Bases
A more difficult & complex issue
In conventional channels where channel members have a
degree of countervailing power E.G. expert & referent
power bases may be more effective than direct monetary
incentives (rewards or threats / coercive power)
Accepting controls as a result of an exchange process
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For relatively small local dealers, power employed by

manufacturers based on economic rewards or coercion
provides a high degree of control rather than power
based on expertise or reference
Non-coercive power bases are likely to lead to higher
level of satisfaction for the weaker channel member
Non-coercive power tends to reduce channel conflict
General Interference
Some form of power must be exercised in order to
influence channel member behavior
The effectiveness of various power bases is situation
specific
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The exercise of power as well as how it is used can affect

the degree of co-operation & conflict
The use of coercive power appears to foster conflict &
promote dissatisfaction
The use of coercive power specially in contractually linked
channels can reduce the stability & viability of the channel
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PART G
Pricing Issues in
Channel
Channel Pricing
Channel Pricing Structure
Manufacturer-Distributor-Wholesaler-Retailer-Consumer
Manufacturer-Dealer-Wholesaler-Retailer-Consumer
Method
Absolute Pricing
Pricing Structure with deferred profits
Pricing Structure when Distribution Cost Compensated
Fully
Pricing Structure when Distribution Cost Compensated
Partially
Dealer Pricing & Wholesaler Margin
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Guidelines for developing effective

Channel Pricing Strategies
1.
2.
Profit Margin
Margin to cover costs
Even brands with strong consumer franchise who can
virtually dictate to channel members will eventually lose
their support if they dont provide margins
Manufacturers buy distribution services thru margins they
offer
Continuously review channel margins
Different classes of resellers
Margins are set in direct proportion to functions performed
Various Functions could be:
Holding Inventories
Making purchases in large or small quantity
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Credit to customers
Delivery
Technical Services / Back-ups
Storage
3. Rival Brands
Differentials in the margins to channel carrying
competitive brands be kept within tolerable limits.
More interests in promoting brands with better
margin Absolute / High Quantity
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6.
Margin Variation on models

Variations in margins on models / styles
Promotional products door openers / building traffic
low price/low margin (profit with value)
Increased traffic helps to build customer bases for highpriced high margin products
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7.
Price Points
Price points are specific prices to which customers have
become accustomed E.G, Tikky Pack
8. Product Variations
Price difference to various model should be related with
differences in product features
E.G, Tennis Rackets
Other Issues in Channel Pricing
1. Exercising Control
Channel regards pricing as its own area free to do whatever
they think is right Control on pricing by manufacturer for
reasons of:
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Image
Stability
How to do it
No Coercive approaches
Straight Pricing
Friendly persuasion
2. Changing Price Policies
Price increase / decrease
Do effect channel
Normally tough re-action
3. Passing Price Increase thru Channel
If price increase can not be totally passed, absorption
by the channel by cutting their margin
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Under such situation various alternatives:
Hold price increase for long term benefits
Price increase by mitigating the negative effects of the

increase E.G, Rebates, Schemes etc
4.
Using Price Incentives

Pricing as promotional tools in the channel E.G, Seasonal
Discounts, Rebates, Coupons etc
Gaining retailer acceptance / follow-thru could be a problem
Make such Promo simple / straight forward
Cater for interest of both retailers & consumers
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PART H
Product Issues In
Channel
Product Issues in Channel Management

1.
2.
3.
New Product Planning & Development

Product Life Cycle
Strategic Product Management
New Product
One of the crucial factors Degree of support received
from channel
Encourage channel input into new product planning
From idea generating stage of new product planning
up to Test Marketing Stage helps to Secure their
Cooperation
Fostering channel acceptance of new products
channel interest how the product will sell, whether it
will be easy to stock and display
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Channels perception of products success patching up

never works
Retailers profitability No complicated way to calculate his
cost & profits
Educating channel member about new products
Making sure new products are trouble free they do not
like to deal in new products that add to their trouble
PLC
Introduction Stage
Adequate market coverage
Adequate supply on shelves
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Growth
Adequacy of channel inventories not to inhibit growth
Carefully monitor channel action W.R.T competitive
products handled by them
Maturity
Extra emphasis to make it more attractive (better profit
potential)
Possible changes in channel structure, specially, selection
of intermediaries to create a new growth stage e.g. change
from departmental stores to food stores
Decline
Eliminate marginal outlets to avoid further profit erosion
Will dropping the product cause an adverse re-action from
the existing channel (marketing inter dependence)
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Strategic Product Management & Channel

Product Differentiation
Channel help to create the perception of a differentiated
product: the kind of stores the product is sold, they way it is
displayed & the services provided can be critical. Retailers
Training on differentiation
Product Positioning
Products positioning in the consumers mind besides
other factors type of stores, its display E.G. Mineral
Water positioned as an alternative to soft drinks display in
the same Aisle as the soft drink
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Product expansion Some channel member may complain

about increase in inventory cost & complicating selling job.
When you drop they complain about losing customers.
Trading up Trading down
Trading up-Adding subsequently high value products
Trading down-Adding low-Priced products
Could create problems of new market, new competition &
new existing channels
Check Existing channel can provide adequate coverage
Channel members confidence in the manufacturers ability
to successfully market trade-up & trade-down products,
e.g., change of competitive segment
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PART I
Promotional Program
to Channel
Typical types of cooperative program provided by

manufacturers to channel members
1.
Payments for interior displays including shelf extender, A

locations, Aisle displays, etc
2. Contacts for buyers, salespeople etc
3. Allowances for a variety of warehousing functions
4. Payments for window display space, plus installation costs
5. Detail men who check inventory, put up stock, set up
complete promotion etc
6. Demonstrators
7. Coupon handling allowance
8. Free goods
9. Guaranteed Sales
10. In-store & window display material
11. Local Research Work
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12. Automatic reorder systems

13. Delivery costs to individual stores of retailers or
wholesalers
14. Liberal return privileges
15. Contributions to special anniversaries
16. Prizes, etc, to buyers when visiting showrooms plus
entertainment
17. Training salespeople
18. Payments for store fixtures
19. Payments for new store cost of improvements
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20. Special payments for exclusive franchise

21. Payments of part of salary of salespeople Time spent in
actual selling on retail floor or with distributors field sales
force by manufacturers salespeople
22. Store or distributor name mention in manufacturers
advertising
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Distribution Decisions
Cycle of Strategic Planning

Ad Hoc or Cross the Bridge when you come to it basis
or fire fighting
A thorough approach is required to dealing with
distribution decision
To bring distribution decisions into the forefront of
Marketing Strategy Development on Pro-active rather
than Reactive basis
Role of Distribution in Corporate Objectives &
Strategy
Decide the role that distribution is expected to play in the
companys long term overall objectives & strategies
Distribution decision at the top
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The higher the priority given to distribution the higher the

level at which it should be considered in formulating
organizations overall objectives & strategies
The firms placing highest priority to distribution would
address it in cycle 1 of strategic planning process E.G.
while developing alternative long range definitions &
missions
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Distribution & Channel Management

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Distribution & Channel Management

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Distribution & Channel

Excellence in Demand Generation

[Distribution & Channel

LEADERSHIP COMPETENCY MODEL

Show A drive for results..

Focuses on the market

Uses business knowledge to add

Finds better way

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Develops self and others Coaches and develops others

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Break Through Thinking

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Organization Learn By Doing.

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Targets that appears on the surface to be unrealistic. The rationale for

Speed is The Essence

Decided and Implemented fast.

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These companies work hard to keep things simple

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Good is the enemy of Great

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New Selling Environment

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Marketing Channel Defined

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