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Distribution Channel Design Management.ppt

  1. Distribution Channel Design and Management
  2. Distribution’s Function • The major purpose of marketing is to satisfy human needs by delivering products of various types to buyers when and where they want them and at a reasonable cost. • The “when and where” is the function of Distribution
  3. What is a Distribution Channel? • A set of interdependent organizations (intermediaries) involved in the process of making a product or service available for use or consumption by the consumer or business user. • Marketing Channel decisions are among the most important decisions that management faces and will directly affect every other marketing decision.
  4. Why are Marketing Intermediaries Used? • The use of intermediaries results from their greater efficiency in making goods available to target markets. • Offer the firm more than it can achieve on it’s own through the intermediaries: – Contacts, – Experience, – Specialization, – Scale of operation. • Purpose: match supply from producers to demand from consumers.
  5. Distribution P R O D U C E R C O N S U M E R DISTRIBUTION
  6. Channel Strategy
  7. Integrated View of Channel Strategy
  8. The Three Disciplines of Channel Stewardship
  9. Mapping the Four Forces Affecting Channel Strategy
  10. Channel Evolution in the Personal Computer Industry
  11. Framework for Building and Updating a Channel Value Chain
  12. Channel Structure
  13. Aligning Channel Intermediaries
  14. Four-Step Channel System Alignment Process
  15. Exhibit 1: Key Concepts and Ideas: Margins and Channel Activities
  16. Exhibit 2: Mapping the Forces Affecting Channel Strategy
  17. Distribution Channel Functions Ordering Payments Communication Transfer Negotiation Financing Risk Taking Physical Distribution Information
  19. Business-to-Business Channels Direct Wholesaler Agent
  20. Business-to-Business Channel Trends Infomediaries & Vertical Exchange
  21. Conventional Distribution Channel vs. Vertical Marketing Systems Vertical marketing channel Manufacturer Retailer Conventional marketing channel Consumer Manufacturer Consumer Retailer Wholesaler Wholesaler
  22. Types of Vertical Marketing Systems Corporate Common Ownership at Different Levels of the Channel Contractual Contractual Agreement Among Channel Members Administered Leadership is Assumed by One or a Few Dominant Members
  23. Vertical Marketing Systems • Corporate systems - total ownership • Administered - strong leadership • Contractual - legal relationships
  24. Planning the Channel of Distribution • Determining the structure – Marketing mix strategy – Organizational resources – External environmental factors – Market characteristics – Consumer preferences and behavior – The nature and availability of Intermediaries – Other environmental factors
  25. Customers’ Desired Service Levels • Lot size • Waiting time • Spatial convenience • Product variety • Service backup
  26. Steps in Distribution Planning
  27. Intensive Distribution Exclusive Distribution Selective Distribution Distribution Intensity Choosing a Distribution System
  28. Intensive Distribution Seeks to obtain maximum product exposure at the retail level Producer Retailer Retailer Retailer Retailer Retailer Retailer Retailer Retailer Retailer Retailer Retailer Retailer Retailer Retailer Retailer
  29. Selective Distribution Product is sold in a limited number of outlets Producer Retailer Retailer Retailer Retailer Retailer Retailer
  30. Product is sold in only one outlet in a given area Producer Retailer Exclusive Distribution
  31. Developing Distribution Tactics Selecting Channel Partners Reward or Coercive Power Legitimate Power Economic Power Managing the Channel of Distribution Channel Leader Power Distribution Channels & the Marketing Mix
  32. Channel Relationships • Cooperation • Conflict • Power – Coercive – Expert – Legitimate
  33. Decision Making Framework Prospects of Destructive Conflict Importance of threatened channel in terms of current or potential volume or profitability High Low High (FIRE) Act to avert or address conflict Allow threatened channel to decline Low (Smoke) Look for opportunities to reassure threatened channel and leverage your power Do nothing
  34. Channel Conflict: Identifying Threats • First, are the channels really attempting to serve the same end users? • Second, do channels mistakenly believe they are competing when in fact they are benefiting from each other's actions? • Third, is the deteriorating profitability of a griping player genuinely the result of another channel's encroachment? • Fourth, will a channel's decline necessarily harm a manufacturer's profits?
  35. Managing Channel Conflict WHEN TWO OR MORE CHANNELS TARGET THE SAME CUSTOMER SEGMENT • Differentiate the Channel offer • Define Exclusive Territories • Enhance or Change the Channels Value
  36. Managing Channel Conflict CHANNEL ECONOMICS DETERIORATE • Change the channels economic formula: (Grant rebates if an intermediary fulfill certain requirements; Adjust margins between products to support different channel economics; and Treat channels fairly to create level playing field) • Create Segment Specific Programs (certain services not available via direct channels) • Complement value proposition of the existing channel by introducing a new channel • Foster consolidation among intermediaries in a declining channel
  37. Managing Channel Conflict THREATENED CHANNEL STOP PERFORMING OR RETALIATE AGAINST THE SUPPLIER • Leverage Power (eg. Strong Brand) against the channel to prevent retaliation • Migrate volume to winning channel • Back off
  38. Other Distribution Management Issues • Reverse distribution One Coca Cola Distributor One thousand retailers OK Difficult • Ethical, Political, & Legal
  39. Sales Management
  40. Nature of Personal Selling • Most salespeople are well-educated, well- trained professionals who work to build and maintain long-term relationships with customers. • The term salesperson covers a wide spectrum of positions from: – Order taker (department store salesperson) – Order getter (someone engaged in creative selling) – Missionary salesperson (building goodwill or educating buyers)
  41. What is Personal Selling? Involves Two-Way, Personal Communication Between Salespeople and Individual Customers Whether: face to face, by telephone, through video conferencing, or by other means.
  42. The Role of the Sales Force • Personal selling is effective because salespeople can: – probe customers to learn more about their problems, – adjust the marketing offer to fit the special needs of each customer, – negotiate terms of sale, and – build long-term personal relationships with key decision makers.
  43. The Role of the Sales Force Sales Force Serves as a Critical Link Between a Company and its Customers Since They: Represent Customers to the Company to Produce Customer Satisfaction Represent the Company to Customers to Produce Company Profit
  44. Characteristics of Personal Selling Flexibility • Identify best prospects • Adapt to situations • Engage in dialogue Builds Relationships • Long term • Assure buyers receive appropriate services • Solves customer’s problems
  45. Personal Selling Limitations • Can not reach mass audience • Expensive per contact • Numerous calls needed to generate sale • Labor intensive
  46. Personal Selling Tasks Order taking • Routine – writing up orders – checking invoices – assuring prompt order processing • Suggestive selling
  47. Personal Selling Tasks Order getting • Seeking out customers • Creative selling • Pioneering • Account management
  48. Personal Selling Tasks • Missionary – Detailer – Goodwill – “Closers” • Cross-functional • Account service rep
  49. Aligning Strategy and Sales
  50. Sizing a Sales Force
  51. Selling as a Boundary Role
  52. Factors Affecting Job Attitudes
  53. Effective Sales Compensation Systems
  54. Some Traits of Good Salespeople
  55. Step 1. Prospecting and Qualifying Identifying and Screening For Qualified Potential Customers. Steps in the Selling Process Learning As Much As Possible About a Prospective Customer Before Making a Sales Call. Step 2. Pre-approach Step 3. Approach Knowing How to Meet the Buyer to Get the Relationship Off to a Good Start. Step 4. Presentation/ Demonstration Telling the Product “Story” to the Buyer, and Showing the Product Benefits.
  56. Steps in the Selling Process Step 5. Handling Objections Step 6. Closing Step 7. Follow-Up Seeking Out, Clarifying, and Overcoming Customer Objections to Buying. Asking the Customer for the Order. Following Up After the Sale to Ensure Customer Satisfaction and Repeat Business.
  57. Alternative Steps: Find ’em Grab ‘em Show ‘em Answer ‘em Sell ‘em Keep ‘em
  58. Identify and Qualifying Prospects • Prospecting: Identifying likely new customers – Leads • Qualifying: Evaluating a prospect’s potential Creative Selling Process
  59. Approaching the Prospect • Contact • Rapport • “Only one chance to make a first impression” Creative Selling Process
  60. Sales Presentation • Persuasive communication • Attention • Interest • Desire • “Tell the product’s story” Creative Selling Process
  61. Handling Objections – Questions – Reservations • Understand Concern • Counterarguments • Acknowledge concern • Clues to process Creative Selling Process
  62. Closing the Sale • Closing signals • Trial close • Ask for the sale Creative Selling Process
  63. Following Up • Commitments met – Shipment – Performance • Reinforce relationship • Satisfied customers rebuy & recommend Creative Selling Process
  64. Planning Organizing Directing Controlling Setting objectives Organizing activities Recruit, select, train, develop, manage, & motivate Motivate, evaluate, & control Sales Management
  65. Organizing Sales Activities Sales Territory: • Geographic divisions • Customer types • Product lines • Selling task
  66. Geographic Division Sales Rep California Sales Rep Pacific NW Sales Rep Southeast Sales Rep Northeast District Sales Manager District Sales Manager District Sales Manager District Sales Manager Regional Sales Manager Regional Sales Manager Vice-President Marketing
  67. Customer Type New Account #1 New Account #2 Existing Account #1 Existing Account #2 New Accounts Manager Existing Accounts Manager Vice-President Sales
  68. Product Line Sales Rep Eastern Region Sales Rep West’n Region Sales rep Eastern Region Sales Rep West’n Region Snack Foods Sales Manager Beverages Sales Manager Vice-President Sales
  69. Directing the Sales Force • Recruiting and selecting • Training & develop • Compensating • Motivating
  70. Compensation Methods Straight salary or wage Salary plus commission Straight commission Commission with draw Quota-bonus plan
  71. Evaluation and Control • Required reports • Measurement against plan or sales standards • Expense control • Productivity • New account development
  72. Ethical Issues • Kickbacks, bribes and “gifts” • Price discrimination • Cheating on expense accounts • Misrepresentation