Motivating Channel Members PDF

Chapter 9 Motivating the Channel Members Objective 1: 9 Channel Management Channel Management: The administration of existing channels to secure the cooperation of channel members in achieving the firm’s...

Chapter 9 Motivating the Channel Members Objective 1: 9 Channel Management Channel Management: The administration of existing channels to secure the cooperation of channel members in achieving the firm’s distribution objectives  Channel Management First, channel management deals with existing channels. Channel design decisions are therefore viewed as separate from channel management decisions. Secondly, the phase secure the cooperation of channel members implies that channel members do not automatically cooperate merely because they are members of the channel. Administrative actions are necessary to secure their cooperation.  Channel Management Third, the term distribution objectives is equally relevant for channel management. Carefully delineated distribution objectives are needed to guide the management of the channel. One of the most fundamental and important aspects of channel management is motivating the channel members.  9 Motivation Management Motivation Management: The actions taken by the manufacturers to foster channel member cooperation in implementing the manufacturer’s distribution objectives Objective 2: 9 Channel Management versus Channel Design Channel Design Channel Management “Setting up” “Running” the channel the channel Objective 3: 9 Motivating Channel Members Basic Framework 1. Find out the needs and problems of channel members. 2. Offer support to the channel members that is consistent with their needs and problems. 3. Provide leadership through the effective use of power. Objective 4: 9 Channel Member Needs & Problems Approaches for learning about member needs & problems: Research studies of channel members Research studies by outside parties Marketing channel audits Distributor advisory councils  9 Research Studies of Channel Members Less than 1 percent of manufacturers’ research budgets is spent on channel member research! BUT: Manufacturer-initiated research can be useful because certain types of needs or problems may not be at all obvious.  9 Research Studies by Outside Parties Why use outside parties to conduct research? They provide a higher They provide a level assurance of objectivity. of expertise that the manufacturer may not possess.  9 Marketing Channel Audits Focus of channel manager’s approach: Gather data on how channel members perceive the manufacturer’s marketing program and its component parts. Locate the strengths and weaknesses in the relationships. Learn what is expected of manufacturers to make the channel relationship viable and optimal.  9 Marketing Channel Audits What makes marketing channel audits most effective? It should It must identify and define be conducted in detail the issues periodically so relevant to the as to capture manufacturer- trends & wholesaler Issues chosen for patterns. and/or the audit should be manufacturer- cross-referenced to retailer any relevant relationship. variables.  Distributor Advisory Councils 9 Who is involved? Top management representatives from the manufacturer and from the channel members What are the benefits? Provides recognition for the channel members Provides a vehicle for identifying and discussing mutual needs and problems Results in an overall improvement of channel communications Objective 5: 9 Supporting Channel Members 3 Types of Programs 1. Cooperative 2. Partnership or strategic alliance 3. Distribution programming  9 Cooperative Arrangements Focuses on channel member needs & problems Simple & straightforward Conveys a clear sense of mutual benefit The underlying rationale of all such cooperative programs, from the manufacturer’s point of view, is to provide incentives for getting extra effort from channel members in the promotion of the products.  Cooperative Arrangements 9 Typical types of cooperative programs provided by Manufacturers to channel members Cooperative advertising allowances Payments for interior displays Contests for buyers, salespeople, etc. Allowances for warehousing functions Payments for window display space Detail men who check inventory Demonstrators Coupon-handling allowance Free goods  9 Partnerships & Strategic Alliances Focus on a continuing and mutually supportive relationship between the manufacturer and its channel members in an effort to provide a more highly motivated team, network, or alliance of channel members  9 Partnerships & Strategic Alliances Three basic phases 1. Manufacturer should make explicit statement of policies in areas such as product availability, technical support, pricing, etc. 2. Manufacturer should assess all existing distributors as to their capabilities for fulfilling their roles 3. Manufacturer should continually appraise the appropriateness of the policies guiding his or her relationship with the channel members  9 Distribution Programming A comprehensive set of policies for the promotion of a product through the channel Developed as a joint effort between the manufacturer and the channel members to incorporate the needs of both The essence of this approach is the development of a planned, professionally managed channel. The first step in developing a comprehensive distribution program is an analysis by the manufacturer of marketing objectives and the kinds and levels of support needed from channel members to achieve these objectives.  9 Distribution Programming Steps for developing a program: 1. Manufacturer develops analysis of marketing objectives & the kinds of levels of support needed from channel members Ascertains channel members’ needs & problem areas 2. Formulate specific channel policies that offer: Price concessions to channel members Financial advice Some kind of protection for channel members Objective 6: 9 Relationship Differences Cooperative Arrangements Intermittent interactions between manufacturer & channel members Partnerships & Strategic Alliances Continuing & mutually supportive relationship Distribution Programming Deals with virtually all aspects of the channel relationship Objective 7: 9 The Selective Use of Power The channel manager must exercise effective leadership on a continuing basis to attain a well-motivated team of members. Objective 8: 9 Limited Control Loosely arranged firms = few advantages from central direction Reward & penalty system not precise Interorganizational System Overall planning uncoordinated Diffused perspective necessary to maximize total system effort  Chapter 10 Product Issues in Channel Management Objective 1: 10 Marketing Mix Resources By understanding how the other marketing mix variables interface with the channel variable, and the implications of such, the channel manager could coordinate all strategic components to create the synergy needed to meet customers’ needs. Objective 1: 10 NEW PRODUCT PLANNING AND CHANNEL MANAGEMENT The development of new products is a challenge faced by virtually all producers and manufacturers. New technologies, changing customer preferences, and competitive forces all contribute to the need to introduce new products. Objective 2: 10 Product-Channel Management Interfaces New product planning & development The product life cycle Strategic product management 3 Major areas of product management Objective 3: 10 New Product Planning 1. What input, if any, can channel members provide into new product planning? 2. What has been done to assure that new products will be acceptable to the channel members? 3. Do the new products fit into the present channel members’ assortments? 4. Will any special education or training be necessary to prepare the channel members to sell the new products effectively? 5. Will the product cause the channel members any special problems?  10 Encouraging Member Input Solicit ideas for Gather feedback new products. on product size or on packaging. Solicit feedback during the test-marketing or commercialization stage.  Fostering Channel Member Acceptance of New Products For new products to be successful, it must be accepted by the final users- whether industrial customers or final consumers. But success is also equally dependent upon acceptance of the new product by the channel members through whom it passes.  10 Member Acceptance of New Products Determining Factors How the product will sell Whether the product is easy to stock & display Whether the product will be profitable  Member Acceptance of New Products Looking first at the salability of a new product, the key factor here is the perceptions of the channel members. They have to believe that they can sell the product; otherwise, they are not going to be enthusiastic about carrying it. In getting channel members to accept new products, the issue of ease of stocking and display has become more important than ever, as more and more new products compete for shelf space.  10 Adding Products to the Assortment Key Considerations: Will existing channel members view the new product as appropriate to add to their assortments? Will channel members feel competent to handle the new product? Educating Channel Members It is not unusual for channel members to need special education or training provided by the manufacturer in order to sell new products successfully. This type of training or the extent of training will of course depend upon the new product offered.  10 Educating Channel Members Manufacturer To sell new products goal: successfully Educate or train Method: channel members in the product’s use and the special features to emphasize in sales presentations  Trouble-Free New Products No channel member likes to take on a new product that will cause trouble. This applies to product problems that arise while the product is still in the channel member’s inventory as well as those that may appear soon after the product is sold to the consumer.  10 Trouble-Free New Products Care in new product planning = New product problems  Product Life Cycle A model for describing the stages through which a product passes. These stages are: introduction, growth, maturity, and decline. Not all products pass through this life cycle and all stages may not be nearly as distinct as those shown. Objective 4: 10 Product Life Cycle Sales ($) Sales curve Introduction Profit curve Time Growth Maturity Decline  Introduction 10 1. Assure sufficient number of channel members for adequate market coverage 2. Assure adequate supply on channel members’ shelves During the introductory stage, strong promotional efforts are needed to launch a product. Thus, during this stage it is imperative for the channel manager to assure that channel members can provide adequate market coverage for the product.  10 Growth 1. Assure sufficient number of channel member inventories for adequate market coverage 2. Monitor the effects of competitive products on channel member support  Growth The basic approach for dealing with the problem of availability is through monitoring the product flows as it moves through the channel. Formal and systematic reporting procedures are necessary for effective monitoring. The second problem, monitoring the channel members’ actions with respect to competitive products, is of equal importance to monitoring one’s own products.  Maturity 10 1. Extra emphasis on motivating channel members to mitigate competitive impact 2. Investigate possibility for changes in channel structure to extend maturity stage & possibly foster new growth stage  Maturity In the face of slower growth or near-saturation, the sales and turnover rate for the product will decline for many of the channel members. In order to lessen the severity of this pattern, the channel manager must take steps to make the product more attractive to channel members. Such tactics as extra trade discounts, advertising allowances, special packaging deal discounts are appropriate.  10 Decline 1. Phase out marginal channel members 2. Investigate impact of product deletion on channel members  Decline Total demise is usually imminent when a product is in the decline stage. Even when a product has reached the decline stage, a substantial number of channel members may still be carrying it. Many of them will be low-volume, often ordering in very small quantities. The high-volume members will have already dropped the product. Objective 5: 10 Strategic Product Management Successful product strategies depend on: Product quality, innovativeness, or technological sophistication Capabilities of managers overseeing product line Firm’s financial capacity & willingness to provide promotional support Channel members’ role in implementing product strategies Objective 6: 10 Product Strategies Product differentiation Product positioning Product line expansion & contraction Trading up & trading down Product brand strategy  10 Product Differentiation Creating a differential product involves getting consumers to perceive a difference. Implications for channel management: Channel managers should try to select & help develop members who fit the product image when product differentiation strategy is affected by who will be selling the product. Channel managers should provide retailers with the kind of support needed to properly present the product when this strategy is influenced by how the product is sold at retail.  10 Product Positioning The manufacturer’s attempt to have consumers perceive the product in a particular way relative to competitive products Implications for channel management: Possible interfaces between the product positioning strategy and where the product will be displayed and sold to consumers should be considered before the strategy is implemented. Elicit retailer support before attempting to implement strategy. Maintain backup supply of retailer incentives  10 Product Line Expansion & Contraction Manufacturers often engage in both expansion and contraction simultaneously. Implications for channel management: Difficult to balance channel member satisfaction & Support for reshaped product lines Channel members are making increasing demands on Manufacturers to have the right mix of products  10 Trading Down, Trading Up Adding lower-priced products or product lines, or higher-priced products or product lines, to a product mix Implications for channel management: Whether existing channel members provide adequate coverage of high-end or low-end market segments to which trade-up or trade-down product is aimed Whether the channel members have confidence in the manufacturer’s ability to successfully market the trade-up or trade-down product  10 Product Brand Strategy When manufacturers sell under both national and private brands, direct competition with channel members may result Implications for channel management: Do not sell both national & private brand versions of products to the same channel members. Sell national and private brand versions in different geographical territories. Physically vary products enough to minimize direct competition. Objective 6: 10 Product Service Strategy It is the role of the marketing channel to provide necessary service along with the product to the final user Manufacturers should provide after-sale service by offering it directly at the factory through their own network of service centers through channel members through authorized independent service centers by some combination of the above  Chapter 13 Logistics and Channel Management Objective 1: 13 Logistics Logistics Planning, implementing, and controlling the physical flows of materials and final goods from points of origin to points of use to meet customers’ needs at a profit. Objective 2: 13 Supply Chain Management Supply Chain Management Logistical systems that emphasize close cooperation and comprehensive interorganizational management to integrate the logistical operations of the different firms in the channel Objective 3: 13 The Role of Logistics Its Essence The movement of the right amount of the right products to the right place at the right time  13 Third-Party Logistics Providers Specialize in performing most or all of the logistical tasks that manufacturers or other channel members would normally perform themselves Provide service at lower cost than the firms who hire third-party providers Currently growing rapidly into a major industry Objective 4: 13 Systems Concept Transportatio n Warehousi Materials ng Handling Interrelated component s of a Inventory system Order Control Processing Packaging  13 Total Cost Approach Systems Concept Total Cost Approach Addresses all the costs of logistics together; seeks to minimize the total cost Objective 5: 13 Logistics System Components Transportation Materials Handling Order Processing Inventory Control Warehousing Packaging  13 Transportation Most fundamental and necessary component Accounts for the highest percentage of the total cost of logistics Overriding issue facing the firm: Choosing the optimum mode of transportation to meet customer service demands  Materials Handling 13 encompasses the range of activities & equipment involved in the placement & movement of products in storage areas Issues: 1. Minimizing the distances products are moved within the warehouse during the course of receiving, storage, & shipping 2. Choosing the kinds of mechanical equipment that should be used 3. Making the best use of labor when receiving, shipping, & handling products  13 Order Processing - the task of filling customer orders may at first appear to be a minor part of logistics and rather routine activity that does not require a great deal of thought to do well. Its importance in logistics lies in its relationship with order cycle time—the time between when an order is placed & when it is received by the customer. Issue: Developing an efficient order processing system  13 Inventory Control The firm’s attempt to hold the lowest level of inventory that will still enable it to meet customer demand Issue: Keeping inventory at the lowest possible level while concurrently placing orders for goods in large quantities  13 Warehousing The holding of products until they are ready to be sold Warehousing can actually be one of the more complex components of a logistics system because, quite often, warehousing options entail several key decision, each of which can be difficult and complex to deal with. Issues: 1. The location of warehouse facilities 2. The number of warehousing units 3. The size of the units 4. The design of the units 5. The question of ownership  13 Packaging packaging and the cost associated with packing of products are relevant as a component of the logistics system because packaging can affect the other components system, and vice versa. Issue: Using packaging to make a significant difference in the effectiveness & efficiency of the logistics system Objective 6: 13 The Output of a Logistics System Customer service is the collection of activities performed in filling orders and keeping customers happy or creating in the customer’s mind the perception of an organization that is easy to do business with.  Logistics Service Standards 13 Heskett, Galskowsky and Ivie, for example, stress the following nine categories of logistics service standards: 1. Time from order receipt to order shipment 2. Order size & assortment constraints 3. Percentage of items out of stock 4. Percentage of orders filled accurately 5. Percentage of orders filled within a given number of days from receipt of the order 6. Percentage of orders filled 7. Percentage of customer orders that arrive in good condition 8. Order cycle time 9. Ease & flexibility of order placement  13 Key Elements of Customer Service LaLonde describes customer service in terms of the six key elements: Product availability Order cycle time Distribution system flexibility Distribution system information Distribution system malfunction Postsale product support Objective 7: 13 Logistics Management Logistics Channel Management Management Concerned The specifically administration with product flow of all the major channel flows Objective 8: 13 Key Interface Areas between Logistics & Channel Management Interface 1 Defining of logistics service standards Interface 2 Making sure the logistics program meets channel members’ service standards Interface 3 Selling the logistics program Interface 4 Monitoring the results of the logistics program  13 Defining Logistics Service Standards The higher the service standards, the higher the costs. Key issue for Channel Manager: Determining precisely the types and levels of logistics service desired by channel members  13 Evaluating the Logistics Program If included as a major component of the manufacturer’s overall approach for supporting channel member needs, the logistics program may be the key feature of a strategic alliance. Key issue for Channel Manager: Ensuring that the program the experts prepare is what the channel members want.  13 Selling the Logistics Program 1. Minimize out-of-stock occurrences. 2. Reduce channel member inventory requirements. 3. Strengthen the manufacturer-channel member relationship. Key issue for Manufacturers: Extending superior logistics capabilities to help channel members improve their logistics and marketing capabilities.  13 Monitoring the Logistics System Logistics systems must be continually monitored, both in terms of how successfully they are performing for the manufacturer and how well they are meeting changing channel member needs. Key issue for Channel Manager: Continually monitoring the channel members’ reactions to logistics programs.