8/9/2019 DISTIBUTION PLANNING AND CONTROL

1/21

DISTIBUTION PLANNING ANDDISTIBUTION PLANNING AND

CONTROLCONTROL

8/9/2019 DISTIBUTION PLANNING AND CONTROL

2/21

INDEXINDEX

CHANNEL MANAGEMENT DECISIONSCHANNEL MANAGEMENT DECISIONS

CHANNEL DYNAMICSCHANNEL DYNAMICS

CHANNEL CONFLICT ANDCHANNEL CONFLICT ANDMANAGEMENTMANAGEMENT

8/9/2019 DISTIBUTION PLANNING AND CONTROL

3/21

CHANNEL MANAGEMENTCHANNEL MANAGEMENT

DECISIONSDECISIONS Selecting Channel MembersSelecting Channel Members

Motivating Channel MembersMotivating Channel Members

Notion of Fairness: A dental supply company, instead ofNotion of Fairness: A dental supply company, instead ofpaying a straight 35% commission to distributors, pays 20%paying a straight 35% commission to distributors, pays 20%

for carrying out the basic sales work, 5% for carrying a 60 dayfor carrying out the basic sales work, 5% for carrying a 60 dayinventory, 5% for paying bills on time and 5% for reportinginventory, 5% for paying bills on time and 5% for reportingconsumer purchase informationconsumer purchase information

Evaluating Channel MembersEvaluating Channel Members

Sales quota attainment; average inventory levels; customerSales quota attainment; average inventory levels; customerdelivery time; treatment of lost and damaged goods; co-delivery time; treatment of lost and damaged goods; co-operation in promotional & training programsoperation in promotional & training programs

8/9/2019 DISTIBUTION PLANNING AND CONTROL

4/21

Channel managementChannel management

decisionsdecisions1.1. Selecting Channel MembersSelecting Channel Members

Producers should determine characteristics toProducers should determine characteristics to

distinguish the better intermediariesdistinguish the better intermediaries

Characteristics like number of years inCharacteristics like number of years inbusiness, other lines carried, growth and profitbusiness, other lines carried, growth and profit

record, solvency, cooperativeness, andrecord, solvency, cooperativeness, and

reputationreputation

Selection, a two-way process:Selection, a two-way process:Just asJust asproducers select their channel members, theproducers select their channel members, the

intermediaries also select their producerintermediaries also select their producer

partners.partners.

8/9/2019 DISTIBUTION PLANNING AND CONTROL

5/21

Contd.Contd.

2.2. Training and Motivating Channel MembersTraining and Motivating Channel Members

Careful training programs, capability-building and marketCareful training programs, capability-building and market

research programs for the distributors and dealers becauseresearch programs for the distributors and dealers because

the intermediaries will be viewed as the company by endthe intermediaries will be viewed as the company by end

usersusers

Training initiatives keep employees updated on the latestTraining initiatives keep employees updated on the latest

product specifications and service requirementsproduct specifications and service requirements

Motivating the intermediaries throughMotivating the intermediaries through Channel PowerChannel Power

8/9/2019 DISTIBUTION PLANNING AND CONTROL

6/21

Contd.Contd.

Producers can draw on following types ofProducers can draw on following types of

power to elicit cooperation:power to elicit cooperation:

Reward PowerReward Power

Coercive PowerCoercive Power

Legitimate PowerLegitimate Power

Expert PowerExpert Power

Referent PowerReferent Power

Forging long-term partnerships with theForging long-term partnerships with the

distributorsdistributors

Efficient Consumer Response (ECR) practicesEfficient Consumer Response (ECR) practices

8/9/2019 DISTIBUTION PLANNING AND CONTROL

7/21

Contd.Contd.

3.3. Evaluating Channel MembersEvaluating Channel Members Evaluate intermediaries performanceEvaluate intermediaries performance

against standards as sales-quotaagainst standards as sales-quota

attainment, average inventory levels,attainment, average inventory levels,customer delivery time, treatment ofcustomer delivery time, treatment of

damaged and lost goods, and cooperationdamaged and lost goods, and cooperation

in promotional and training programsin promotional and training programs

8/9/2019 DISTIBUTION PLANNING AND CONTROL

8/21

Contd.Contd.

4.4. Modifying Channel Design andModifying Channel Design and

ArrangementsArrangements

8/9/2019 DISTIBUTION PLANNING AND CONTROL

9/21

CHANNELCHANNELDYNAMICSDYNAMICS

8/9/2019 DISTIBUTION PLANNING AND CONTROL

10/21

Vertical marketing systemVertical marketing system

a tightly coordinated distribution channela tightly coordinated distribution channeldesigned to improve operating efficiency anddesigned to improve operating efficiency andmarketing effectivenessmarketing effectiveness

Conventional ChannelsConventional Channels

Independent producer, wholesaler and retailerIndependent producer, wholesaler and retailer Double marginalization problemsDouble marginalization problems

VMSVMS

Producer, wholesaler and retailer act as a unified systemProducer, wholesaler and retailer act as a unified system Corporate VMS: Vertical IntegrationCorporate VMS: Vertical Integration

Administered VMS: Co-ordination through power of oneAdministered VMS: Co-ordination through power of oneplayer (e.g., P&G)player (e.g., P&G)

Contractual VMS: FranchisingContractual VMS: Franchising

8/9/2019 DISTIBUTION PLANNING AND CONTROL

11/21

Horizontal MarketingHorizontal Marketing

SystemSystem Two or more unrelated companies at one levelTwo or more unrelated companies at one level

join together to follow new market opportunitiesjoin together to follow new market opportunities

Companies might join forces with competitors orCompanies might join forces with competitors or

non-competitorsnon-competitors Temporary or permanent basis, or a separateTemporary or permanent basis, or a separate

joint venture companyjoint venture company

Also called, symbiotic marketingAlso called, symbiotic marketing

e.g.,e.g., HUL entering a strategic tie-up with PepsiCoHUL entering a strategic tie-up with PepsiCoIndia for bottling and distribution of Liptons ready-India for bottling and distribution of Liptons ready-

to-drink and other beveragesto-drink and other beverages

Eg. Airline companies: British & American; Lufthansa &Eg. Airline companies: British & American; Lufthansa &

United; KLM & NorthwestUnited; KLM & Northwest

8/9/2019 DISTIBUTION PLANNING AND CONTROL

12/21

Multichannel MarketingMultichannel Marketing

SystemSystem A single firm uses two or more marketing channelsA single firm uses two or more marketing channels

to reach one or more customer segments.to reach one or more customer segments.

Offers three important benefits:Offers three important benefits:

Increased market coverageIncreased market coverage

Lower channel costLower channel cost

More customized sellingMore customized selling

e.g.,e.g., Disney sells its DVDs through 5 main channels: movie rentalDisney sells its DVDs through 5 main channels: movie rentalstores; Disney Stores; retail stores; online retailers and Disneysstores; Disney Stores; retail stores; online retailers and Disneys

own online stores; and the Disney catalog and other catalogown online stores; and the Disney catalog and other catalogsellers.sellers.

8/9/2019 DISTIBUTION PLANNING AND CONTROL

13/21

Multichannel Marketing SystemsMultichannel Marketing Systems

Nat. A/C Mgt

Direct Sales

Telemarketing

Direct Mail

Retail Stores

Distributors

VARs

VENDO

R

BIG CUSTOMERS

MIDSIZE CUSTOMERS

SMALL CUSTOMERS

CUS

TO

MER

Demand Generation Tasks

Marketin

g

Channels&

Methods

When a single firm uses two or more marketing channels to reach one or

more customer segments.Gain increased market coverage; lower channel cost and more

customized selling

Downside - conflict and control problems

Generate a hybrid grid to design channel architecture. Use marketing

tasks as basis

8/9/2019 DISTIBUTION PLANNING AND CONTROL

14/21

Example of MultichannelExample of Multichannel

Marketing: IBMMarketing: IBM

Cost of Using only Direct

Salesforce

Cost of Using Different

Channels

AGENT

DEALER

TELEMARKETING

SALESFORCE

Small, Rural Small, Urban Medium Large Very Large

Conflict

Conflict

COST

($)

CUSTOMER SIZE

8/9/2019 DISTIBUTION PLANNING AND CONTROL

15/21

Boutiques

MassMerchandisers

Off-PriceStores

Better DepartmentStore

High Low

Value added by channel

Market

Growth

Rate

Channel Dynamics: Designer Apparel

8/9/2019 DISTIBUTION PLANNING AND CONTROL

16/21

CHANNELCHANNEL

CONFLICT ANDCONFLICT ANDMANAGEMENTMANAGEMENT

8/9/2019 DISTIBUTION PLANNING AND CONTROL

17/21

Channel conflictsChannel conflicts

Channel conflict is a situation in which channelChannel conflict is a situation in which channelpartners have to compete against one another orpartners have to compete against one another orthe vendor's internal sales department. Channelthe vendor's internal sales department. Channelconflict can cost a company and its partnersconflict can cost a company and its partnersmoney as partners try to undercut one another. Itmoney as partners try to undercut one another. It

can also lower morale within the channel andcan also lower morale within the channel andcause some partners to consider other vendors.cause some partners to consider other vendors.

To prevent channel conflict, partners sometimesTo prevent channel conflict, partners sometimesenact agreements such asenact agreements such as deal registrationdeal registration..Channel conflict may also occur among variousChannel conflict may also occur among various

segments of corporate departments, such as thesegments of corporate departments, such as thesales channel. For example, the direct contactsales channel. For example, the direct contactcomponent of the sales department may have tocomponent of the sales department may have tocompete with other sales channels, such ascompete with other sales channels, such astelephone, online and mail campaignstelephone, online and mail campaigns

http://searchitchannel.techtarget.com/sDefinition/0,,sid96_gci1285800,00.htmlhttp://searchitchannel.techtarget.com/sDefinition/0,,sid96_gci1285800,00.htmlhttp://searchitchannel.techtarget.com/sDefinition/0,,sid96_gci1285800,00.html

8/9/2019 DISTIBUTION PLANNING AND CONTROL

18/21

Causes of Channel ConflictCauses of Channel Conflict

Goal incompatibility :Goal incompatibility :Manufacturer wantsManufacturer wantsto achieve rapid market growth via lower prices;to achieve rapid market growth via lower prices;

retailer interested in large marginsretailer interested in large margins

Domain Dissensus:Domain Dissensus:Territory boundaries,Territory boundaries,

who gets credit for salewho gets credit for sale Differing perceptions ofDiffering perceptions of

reality:reality:Optimistic manufacturer, pessimisticOptimistic manufacturer, pessimisticretailerretailer

Intermediaries dependence on theIntermediaries dependence on the

manufacture:manufacture:Of retailer on manufacturer orOf retailer on manufacturer orvice-versavice-versa

8/9/2019 DISTIBUTION PLANNING AND CONTROL

19/21

Channel conflictsChannel conflicts

Channel conflict is generated when oneChannel conflict is generated when one

channel members actions preventchannel members actions prevent

another channel from achieving its goalanother channel from achieving its goal

Types of channel conflictsTypes of channel conflicts VerticalVertical

Coca-Cola and bottlers wanting to bottle Dr. PepperCoca-Cola and bottlers wanting to bottle Dr. Pepper

HorizontalHorizontal

Some Ford dealers coplaining about other dealers being tooSome Ford dealers coplaining about other dealers being tooaggressive in their pricingaggressive in their pricing

MultichannelMultichannel

Anne Klein opening own stores while distributing through largeAnne Klein opening own stores while distributing through large

department storesdepartment stores

8/9/2019 DISTIBUTION PLANNING AND CONTROL

20/21

Managing Channel ConflictManaging Channel Conflict

Superordinate GoalsSuperordinate Goals Exchange of personsExchange of persons Co-optationCo-optation

Include membersInclude members

of otherof otherorganization onorganization onadvisory councils,advisory councils,boards, etc.boards, etc.

Joint membership inJoint membership intrade associationstrade associations

Diplomacy, mediation,Diplomacy, mediation,arbitration for chronicarbitration for chronicor acute conflictor acute conflict

8/9/2019 DISTIBUTION PLANNING AND CONTROL

21/21

THANKYOUTHANKYOU