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Channel Management inIndustrial Markets
Vinod Puri
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Marketing Channels:
Interdependent OrganisationsOrchestrated Networks
Making Offerings for use
Primarily used to satisfy
and also to stimulate
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Economic Utility
Form
Time
Place
Possession
The quantity/mode of the productmost preferred by the customer
The availability of the product whenthe customer needs it.
The availability of the product where
it is needed. In B2B, it involvesrapid/frequent product delivery.
The process by which the customer
obtains ownership or the right to use
a product/service.
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Marketing Flows
Physical
Possessions
Ownership
Promotions
Negotiations
Financing
Risking
Ordering
Payment
Physical
Possessions
Ownership
Promotions
Negotiations
Financing
Risking
Ordering
Payment
Physical
Possessions
Ownership
Promotions
Negotiations
Financing
Risking
Ordering
Payment
Produc
er
Retaile
r
Wholesa
ler
Consum
er
Commercial Subsystem
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Functions have to be performed
These can be interchanged or changed
among channel members, dependingupon the specialisation & division oflabour
Interdependence of the participants isthe core
Marketing Flows
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Marketing Channel Flows from Customerto Supplier
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Channel Roles
Improve Efficiency: Reducing Transactions
Sorting: Accumulation, Allocation, Break-bulk
Assorting
Routinisation: to reduce bargaining and speedingup
Facilitator Search
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Why Do SomeEnd Users
PreferDistributors?
Distributors
Can
Provide fast delivery
Provide segment-base
product assortment
Provide local credit
Provide product information
Assist in buying decisions
Anticipate needs
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Why Do SomeSuppliers
PreferDistributors?
Distributors
Can
Buy and hold inventory
Combine manufacturers outputs
Share credit risk
Share selling risk
Forecast market needs
Provide market information
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Channel Participants Participants participate in the performance of
the flows
Assistance has to improve the performancefor the end user
Intermediaries include those who may not beobvious
End user can also be opted in as aparticipants
Channels in a state of constant flux
New members can always move in
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Fluidity in the Channels Channels always evolving
Fluidity a function ofChanging demands of customers
Availability of TechnologyEntry of the new participants
Shifting power within the channels
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Channel Design
What kind of services
Who is in the best positionWhat kind of Functions
To deliver superiorcustomer value
OperationalExcellence
CustomerIntimacy
Critical Issues in Channel Design
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Channel Design Decisions
Throughmarketing
intermediaries
or a direct
channel?
Intensity of
distribution issues:
1) Kinds ofchannel partners
2) Structure of
channel flows
3) How competitive
advantage
can be built
One channel,
dual distribution
or
multidistribution?
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Channel Control (contd)To Overcome Divergence
Communication
Cooperation across the channel
Inducements for suitable behaviour
Clearly defined authority system
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Control in the Channel
segments Power: Rewards, coercion, expert,
identification, legitimate
Channel Power: Current sources ofleverage would combine various components
Channel Conflicts: Arising out of GoalDivergence
Domain Issues: which customerwhich areahow to satisfy
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UnderstandingDependence
Dependence a function ofUtility
Value, benefit and satisfactionAlternatives available
Imbalance can lead to
Feeling of exploitation
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1. The customers are large and well defined.
Direct Sales Approach is Viable When:
2. The customers insist on direct sales.
3. Sales involve extensive negotiations.
4. Control of the selling job is necessary to ensure
proper implementation of the total product
package and to guarantee a quick response to
market conditions.
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General-line distributors They stock and extensive variety of products.
Specialists
Focus on one line or on a few related lines.Combination House
Operates in two markets: industrial and consumer.
Three PrimaryDistributor Classifications
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Frequently, the manager has little flexibility in the selection of
channel structures because of trade, competitive, company, and
environmental factors.
The decision on channel design may be imposed on the manager.
Factors Limiting Choice of Industrial Channel
1. Availability of Good Intermediaries
Traditional Channel Patterns
3. Product Characteristics
1. Company Financial Resources
2. Competitive Strategies3. Geographic Dispersion of Customers
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1. The number of levels to be included in thechannel.
2. The types of intermediaries to employ.
3. The number of channel intermediaries.4. The number of channels to employ.
Channel Alternatives Issues