B2B Marketing

CHANNEL MANAGEMENT

Channel Management “Set of interdependent organisations involved in the process of

making a product or service available for use or consumption”

(Coughlin et al., 2006)

The central question

Which channel task will be performed by the firm, and which, if any,

will be performed by channel members?

Tasks

Reducing complexity

Increasing value

Transaction efficiency

Quality of service

Marketing Channels

Manufacturer

Direct ChannelsIndirect

Channels

Agents

Distributors

TelemarketingOnline

MarketingDirect Sales

Customer Segments

Direct Channels

Feasible when

Customers are large, well-defined

Customers insist on direct sales

Sales involve extensive negotiations with customer

senior management

Control on sales to ensure complete package is

properly implemented

Requirements

Highly customized solutions - complex

Selling skill, professional account management, in-

depth product knowledge

Indirect Channels

Used when

Markets fragmented and dispersed

Transaction amounts low

Buyers typically purchase number of items in one

transaction, often of various brands

Distributors

Key organisational customers of manufacturers –

purchase and hold stock

Absorb financial, credit, selling and logistic risks

Source of market information and demand

knowledge

Suitable for firms having multi-locational

manufacturing

Service focus

Automatic replenishment

Product assembly

In-plant stores

Help in designing and operating supply networks

Classification General line

Broad array of industrial products

Specialists

One product category or industry

Combination house

Operates in business and consumer markets

Agents Do not take title and/or inventory of goods

Work independently, represent several non-

competing companies

On commission basis

Augment / replace the field sales force

Expert product knowledge coupled with

understanding of market and customer needs

When to use:

Small firms, and large

Limited market potential

Servicing distributors

Offerings-based Channels

Bespoke/complex

Direct channel

Agents – for entering new unfamiliar geographies

Uniform

Lower inclination to control all exchanges with end-customer

More fragmented and geographically dispersed

customer base

Distributors – for products

Franchisees – for services

Channel Design Driven by customers

Dynamic process – depending on customer and

competitor behaviour changes

Customer

Service Financing

Guarantee

Size

Customisation

Information

AssortmentInstallation

Channel Partner

Channel Partner

Manufacturer

Structure Issues

Length

Optimum number of levels to serve the customer

Established vs. new

Breadth

Intensity – intensive / selective / exclusive

Multiple channels

Inter-firm conflict

Inter-channel conflict

Cannibalisation

Channel Administration

Recruitment

Motivation

Support to the channel

Conflict management

Recruitment Criteria

Financial & Company strengths

•Ability to fund

•sales start-up

•communications activities

•Maintain inventory

•Standing amongst customers

•Management team quality

Product

•Familiarity

•Product lines

•Complimentarity

•Sophistication

•Physical facilities

Marketing skills

• Market share

• Geographic coverage

• Experience with target customers

• Salesforce

• Delivery performance

• Customer service

• Trade-show participation

• Trade association membership

Commitment

•Product mix volatility

•% business with single supplier

•Commitment to targets

•Willingness to

•maintain stock

•invest in communication

•invest in sales training

•drop competing product lines

Facilitators

•Contacts with key industry players

•Experience and performance with other suppliers

Channel Performance

Delayed differentiation

VARs

Outsourcing of non-value adding activities

MRO

3PL

Evaluation of Performance

Criterion Factors to consider

Contribution Supplier profitability

Sales growth

Competence Experience

Product knowledge

Administrative and supervisory skillsStrategic thinking of senior management

Loyalty Commitment & motivation towards supplier

Compliance Acceptance of channel policies &

programmes

Adaptability Innovation in handling supplier products

Customer

satisfactionLevel of services

Service quality

Support to Channel

Incentives

Financial – commission, discounts

Bonuses

Territorial exclusivity

Providing resources

Involvement of sales team in dealing with clients

Sharing of MR information

Marketing communications

Training of staff

Working relationship approach in dealing

Joint strategic planning

Signalling of long-term commitment

Channel Conflicts

Conflict – one channel member perceives

another’s actions to be impeding the achievement

of its goals (Gaski, 1984)

Types

Goal

Means

Fear of being bypassed

Conflicting perceptions

Conflict Management

Informal mechanisms

Exit

Voice

Loyalty

Aggression

Neglect

Formal mechanisms

Distributor council

Third-party referee

Trade association interaction

Personnel exchange

E-commerce

Types Inter-organisational: management of

Suppliers

Inventory

Distribution

Channel

Payment

Intra-organisational

Workgroup communications

Electronic publishing

Sales force productivity

B2M: Companies linking to machines via

Internet

B2C

Channel Considerations

Channel efficiencies

Automation of back-office sales functions

Personnel and accuracy enhancements

Current marketing intermediaries

Disintermediation

Re-intermediation

Channel advantages for potential buyers

Customise contact as per buyer’s needs

Wide range of referral sources

Always open

Effect of Internet on Marketing

Variables Pricing

Buyer’s bargaining power

Geographical advantages

Commodification – service-enrichment / branding

Sales force

Complimentarity – focus on problem-solving &

relationship-building

Customise product presentations

Incentivise online initiatives

Promotion

Search-engine marketing

Thank You!!