Post on 05-Apr-2018
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Designing ChannelDesigning Channel
SystemsSystems
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IntroductionIntroduction
Factors that determine the nature of theFactors that determine the nature of the
distribution channeldistribution channel
Nature of the product or serviceNature of the product or service
Location and nature of the customersLocation and nature of the customers
Nature of competition and distributionNature of competition and distribution
systemssystems
Intensity of distribution requiredIntensity of distribution required
Nature of the markets being targetedNature of the markets being targeted
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1.1. Channel Stages in channel planningChannel Stages in channel planning
Segmentation stageSegmentation stage Pharma company segments: Doctors/Pharma company segments: Doctors/Chemists/ Hospitals and nursing homesChemists/ Hospitals and nursing homes
Positioning stagePositioning stage Service objectives at each channel element.Service objectives at each channel element.
Each segment has different expectationEach segment has different expectation
Focus stageFocus stage Doctors in all A cat townsDoctors in all A cat towns
Chemists located in the main markets of AChemists located in the main markets of A
townstowns Only big govt and private hospitalsOnly big govt and private hospitals
Developing the right channel alternativeDeveloping the right channel alternative Modifications required to make it an idealModifications required to make it an ideal
channelchannel
Channel design and planning processChannel design and planning process
M1 M2 M3
P1
P2
P3
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2.2. Defining the customer needsDefining the customer needs Lot sizeLot size
Toothpaste pack sizes, Wheat flour packs, Motor with horseToothpaste pack sizes, Wheat flour packs, Motor with horsepowerpower
Waiting timeWaiting time Difference of Desire to purchaseDifference of Desire to purchase
Choice to the consumerChoice to the consumer Variety and assortmentsVariety and assortments
Place utilityPlace utility
Service supportService support
Sales support for maintenance and repairSales support for maintenance and repair Installation and trainingInstallation and training
CreditCredit
Home deliveryHome delivery
Regular service follow upsRegular service follow ups
Channel design and planning processChannel design and planning process
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Designing channel objectivesDesigning channel objectives
Industrial products requireIndustrial products require direct-marketingdirect-marketing by theby thecompanycompany
Consumer products should be available inConsumer products should be available in large no oflarge no of
outletsoutlets
Frozen desert and ice-cream products needFrozen desert and ice-cream products need cold storagecold storagefacilitiesfacilities
Seeds selling will needSeeds selling will need ruralrural distributiondistribution
Multi level marketing will require their distributors toMulti level marketing will require their distributors to
appoint further distributorsappoint further distributors
Channel design and planning processChannel design and planning process
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Channel Alternatives studyChannel Alternatives study
Business intermediaries currently availableBusiness intermediaries currently available The no and type of intermediaries requiredThe no and type of intermediaries required
Any new member to be specially developedAny new member to be specially developed
Roles of each channel memberRoles of each channel member
Channel design and planning processChannel design and planning process
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Cost of channel systemCost of channel system Margins of the channel partnersMargins of the channel partners
Cost of transportation of goods between the co andCost of transportation of goods between the co and
the end userthe end user
Cost of order booking and executionCost of order booking and execution
Cost of stock returns/ date expired stocks taken backCost of stock returns/ date expired stocks taken back
Cost of reverse logistics required (getting emptiesCost of reverse logistics required (getting empties
back)back)
Channel design and planning processChannel design and planning process
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Current intermediariesCurrent intermediaries
Ready channel partners may be already available.Ready channel partners may be already available.These can be further utilizedThese can be further utilized Distributors or redistribution: stockiest of some otherDistributors or redistribution: stockiest of some other
companiescompanies
C&F agents: can be further utilized for collections and otherC&F agents: can be further utilized for collections and otherworkwork
Logistics service providers: will undertake distributionLogistics service providers: will undertake distribution
activities.activities.
Manufacturers agents, stockiest, guarantors provideManufacturers agents, stockiest, guarantors provide
financial supportfinancial support Financial agencies can be used to finance your customers.Financial agencies can be used to finance your customers.
Channel design and planning processChannel design and planning process
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Number of intermediariesNumber of intermediaries
Should be adequate for expected coverage ofShould be adequate for expected coverage of
the target markets at the same time shouldthe target markets at the same time should
not be too much to dilute the effort and addnot be too much to dilute the effort and add
to the costs.to the costs. Its not easy to get rid of channel membersIts not easy to get rid of channel members
Channel design and planning processChannel design and planning process
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Evaluation of Major alternativesEvaluation of Major alternatives Cost:Cost:
Every channel will have different costs associated withEvery channel will have different costs associated with
Ability to manage and controlAbility to manage and control
Considering coverage, frequency, productivity, inventory, credit,Considering coverage, frequency, productivity, inventory, credit,
merchandising, distribution, promotions, after-sales-service, pre-merchandising, distribution, promotions, after-sales-service, pre-
sales-sales, channel salespeople, stock pointssales-sales, channel salespeople, stock points
AdaptabilityAdaptability Sensitivity of channel to addition, elimination of products,Sensitivity of channel to addition, elimination of products,
additional service, new territory coverage, generating leads,additional service, new territory coverage, generating leads,
handling price change, stock rationinghandling price change, stock rationing
Range and volume to be handledRange and volume to be handled
Ability to handle large range of products and volumes.Ability to handle large range of products and volumes.
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Selecting channel partnersSelecting channel partners Selecting Carrying and Forwarding agentelecting Carrying and Forwarding agent Location of the partyLocation of the party
In or close to main market of the companyIn or close to main market of the company
Location of the warehouseLocation of the warehouse Close to a major marketClose to a major market Outside octroi limitsOutside octroi limits Should have proper road/ transport accessShould have proper road/ transport access Labor availabilityLabor availability Utilities supportUtilities support Connected by phoneConnected by phone
Past experiencePast experience As a C&FA for a similar companyAs a C&FA for a similar company As a transporter should have access to a good warehouseAs a transporter should have access to a good warehouse
History of past businessHistory of past business Should have handled similar but non-competing companiesShould have handled similar but non-competing companies Ability to maintain confidentiality of transactionsAbility to maintain confidentiality of transactions
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Selecting channel partnersSelecting channel partners Selecting Carrying and Forwarding agentelecting Carrying and Forwarding agent Financial strengthFinancial strength
To handle all operating expenses till re-imbursementTo handle all operating expenses till re-imbursement InsuranceInsurance
IT capabilityIT capability Adequate own hardwareAdequate own hardware
Trained staff to handle simple programmes and repairingTrained staff to handle simple programmes and repairingformatsformats
FlexibilityFlexibility In operating hours dailyIn operating hours daily To handle peak loadsTo handle peak loads
Transportation facilitiesTransportation facilities Reliability, consistency in source of vehiclesReliability, consistency in source of vehicles Additional volumes to be handled at short noticeAdditional volumes to be handled at short notice
Attitude, commitmentAttitude, commitment To be of the highest order/ positiveTo be of the highest order/ positive Willing to expand the businessWilling to expand the business DisciplinedDisciplined
..conti
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Selecting channel partnersSelecting channel partners Selecting Distributorelecting Distributor Size of the channel partnerSize of the channel partner
Current business portfolioCurrent business portfolio
Financial strength/ asset ownership including personal assets of partnersFinancial strength/ asset ownership including personal assets of partners Own salesforceOwn salesforce
No of sales peopleNo of sales people Qualifications, background, experienceQualifications, background, experience
Current businessCurrent business
Products handled, volume handledProducts handled, volume handled Should be of similar products but non-competitiveShould be of similar products but non-competitive Product quality, compatibility and complimentaryProduct quality, compatibility and complimentary
ReputationReputation Leadership in the marketLeadership in the market Integrity, fairness in dealingsIntegrity, fairness in dealings
Market coverageMarket coverage Territory/ intensityTerritory/ intensity Regularity, reliabilityRegularity, reliability Relationship, productivityRelationship, productivity Beat plan adherenceBeat plan adherence Value of institutional business handled if anyValue of institutional business handled if any
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Selecting channel partnersSelecting channel partners Selecting Distributorelecting Distributor Credit extended in the marketCredit extended in the market
% of outlets% of outlets
& of current business& of current business Bad debts, if anyBad debts, if any
Stock distributionStock distribution Ready stocks or order bookingReady stocks or order booking
Infrastructure availabilityInfrastructure availability WarehouseWarehouse
Distribution vansDistribution vans Hardware/ personal computers/ connectivityHardware/ personal computers/ connectivity
Sales performanceSales performance On current businessOn current business Awards, prizes, certificates won on performanceAwards, prizes, certificates won on performance
Management of businessManagement of business Educational backgroun, qualification of partmenrsEducational backgroun, qualification of partmenrs
Market workingMarket working Efforts on merchandising, displaysEfforts on merchandising, displays
Handling sales promotionsHandling sales promotions Past experiencePast experience
Inventory managementInventory management Adherence to stock norms recommended by the companyAdherence to stock norms recommended by the company
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Change of channel membersChange of channel members
Why to change channel members?Why to change channel members?
Training channel membersTraining channel members On the job trainingOn the job training
Class room trainingClass room training Special meetings to launch new productsSpecial meetings to launch new products
Training on submitting reportsTraining on submitting reports
Statutory requirementsStatutory requirements
Product related responsibilities of channel membersProduct related responsibilities of channel members Training on technicalitiesTraining on technicalities
Training on specifications, installments, repair and maintenanceTraining on specifications, installments, repair and maintenance
Training on after sales serviceTraining on after sales service
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Motivating channel partnersMotivating channel partners
Efforts in designing capacity buildingEfforts in designing capacity building
programmesprogrammes
TrainingTraining
Promotional supportPromotional support
Marketing researchMarketing research
Working along with company peopleWorking along with company people
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Channel powerChannel power
Referent power:Referent power: Power out of eminent position of thePower out of eminent position of thecompanycompany
Expert power:Expert power: Power out of special knowledge of thePower out of special knowledge of thecompanycompany
Legitimate power:Legitimate power: Power of legal agreement withPower of legal agreement withcompanycompany
Support power:Support power: Support in the form of promotions,Support in the form of promotions,subsidies, additional helpsubsidies, additional help
Competition power:Competition power: Comparison with other channelComparison with other channelmembersmembers
Reward power:Reward power: Incentives, special incentivesIncentives, special incentives
Coercive power:Coercive power:Power of threatPower of threat
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Channel design comparison factorsChannel design comparison factors
While comparing two channels,While comparing two channels,
EfficiencyEfficiency:: Input versus outputInput versus output
Effectiveness:Effectiveness:How well channel meets its objectivesHow well channel meets its objectives
CapacityCapacity:: How effectively channel can handle changes inHow effectively channel can handle changes involumevolume
Agility:Agility: How well can channel handle changing demandHow well can channel handle changing demandpatternpattern
Consistency:Consistency: of performanceof performance
Reliability:Reliability: Commitment on performanceCommitment on performance
Integrity:Integrity: Is the channel fairIs the channel fair
Channel design implementationC anne design imp ementation
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Channel design implementationC anne design imp ementation
Document channel objectives for sales people and channel partners
Define the profile of the customers to be services
List down all the customer service levels in detail
List the tasks in sequence which will drive these service levels
Get benchmark of good practices from knowledge of competition
Define channel structure and channel partners who constitute it
Allocate the tasks among the channel partners
Work out cost of delivering CS levels and prepare a budget
Advice the channel partners on the tasks and their benefits
Define channel partner performance appraisal system and share it
Define criteria for appointment of channel partners
List down reports, records and frequency from each channel partner
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Vertical integration- Owing the channelVertical integration- Owing the channel
Own the channel or outsource?Own the channel or outsource?
How much of vertical integration?How much of vertical integration? Why vertical integrationWhy vertical integration
Outsourcing distributionOutsourcing distribution
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Channel Information SystemChannel Information System