Channel Management LAP 2 Channel Management Chart Your Channels.
Channel Management
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Transcript of Channel Management
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Channel ManagementChannel ManagementAdil Mirza
ICFAI Business School Hyedrabad
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ObjectiveObjective
To help you understand the key factors that influence the channel
choice, how a channel structure is developedRelationship between the principle and
the intermediaryTypes of channelsImplications on the length of the channel
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What is a channelWhat is a channel
Channel is a mechanism which brings the product to the consumer at his doorstep.
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Why ChannelsWhy Channels
When it becomes impossible for the manufacturer to directly deal with the consumers.
Minimize transportation costs, maintain service levels, reduction of stock holding etc.
Required to distribute your products.
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Role of the ChannelRole of the Channel
To bring the product closer to the end user and provide him with the
knowledge, information and service as desired by the manufacturer.
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Role of the PrincipalRole of the Principal
Commitment to develop the channelProvide support by way of service, Information, Training and Motivation to
the channel members.
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The Factors that impact the The Factors that impact the choicechoice
ProductConsumerCompetitionSize and value of each saleThe area of operationsStrength of efforts requiredPromotional StrategyCost of channel
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ProductProduct
Identify where your product is on the continuum
Lowest in the Sales Continuum require to be distributed widely.
Linked to Maslow’s theory of hierarchy of needs –
- Who is the customer, who will use it,
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List
Item
Brand
Concepts/ Ideas
Consultative
Systemic
Structural
THE SELLING CONTINUUM
ChannelDriven
Direct
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Basic needs
Security
SocialPersonal
Aesthetic
SA
Maslow's theory of Hierarchy of needs
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The customerThe customer
What kind of service level is required.How much technical information required.How accessible they required the product
to be.How often do they use it? In what
quantity?What are the installation needs
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Competitor Channel strategyCompetitor Channel strategy
Opportunity to either match or better the competition.
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Size and value of each saleSize and value of each sale
Lower the size and value per sale, the need for higher and uncontrollable distribution.
Costs much lowerHigh value and size require limited /
Controlled distribution.
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Area of operationArea of operation
Wider your appeal and choice of marketing, wider channel required.
Also need to look at the competitive strengths and weakness and make geographic plans.
Keep in mind the area of operation and choose the channel.
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Strength of channelStrength of channel
Who needs whomLevel of dependency
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Promotional StrategyPromotional Strategy
Push Versus Pull.
More cost for push strategy,Efforts required by the channel is required
significantly for the push strategy.Stronger channel required.
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Cost of channelCost of channel
Depending upon the efforts requiredObjectives you have set upChannel cost comprises of - People, - Infrastructure like Warehouse etc - Delivery costs etc.
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Local tax lawsLocal tax laws
CST and STOctroiMRP
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The choice of the channelThe choice of the channel
The one that :Gets the products at the right time, at the right place, in the right way at the most cost efficient way
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TYPES OF CHANNELTYPES OF CHANNEL
OWNEXCLUSIVESHAREDCOMBINATIONFRANCHISIE
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CHANNEL MEMBERSCHANNEL MEMBERS
RETAILERS/ , DIRECT SELLENIG AGENTSWHOLESALERS – STATIONERY, MOVINGLARGE RETAILER CHAINS(Foodworld,
Sahakari Bhandar etc)INSTITUTION ( CSD, INS)DISTRIBUTORS/ STOCKISTSC&FSSOLE SELLING AGENTS.
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CostsCosts
Retailer - Margins, Promotions, DiscountsWholesaler – Margins,Promotions,
Discounts, Distributors – Margins, Promotions,
Salesmen, Delivery costsChain stores – Margins, Promotions,
Discounts, Cost sharing, Institutions – Margins, Credit.C&Fs – Delivery costs, service costs.Sole Selling Agents – All costs +
Reasonable Returns.
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Servicing the Channel Servicing the Channel MembersMembers
Frequency of visit Retailer – Weekly/ Fortnightly/ MonthlyWholesaler – Multiple visitsDistributors – Daily – MonthlyInstitutions – Weekly or Up to the time of
credit. C & Fs – One a month or multiple visitsSole Selling Agents - Continuous
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RemunerationRemuneration
Commission/ MarginsIncentivesSalarySalary + IncentivesReimbursement of costsSalary + Incentives+ Reimbursement of
costs
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Quality of ServiceQuality of Service
Retailer - Whole sellerDistributorChain storesInstitutionsC&FsSole Selling Agents
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Other servicesOther services
TrainingMotivationInstallationSubsidies
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MotivationMotivation
Basic Needs : Profit, VolumeSecurity : Stability, Growth, New business
developments.Social : Recognition in the community, Personal : Biggest Business Man, Best, etcAesthetic : Stylish Office,Modern Gadgets,
Computerization etc. Self Actualization : ?
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CommodityCommodity
RetailWholesalersSub brokersBrokersAgentsLow margins/ High turnoverGoods move direct to w/s or large retailers
from point of manufacturer.
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FMCGFMCG
Service Quality
Remuneration
Others
Retailer
Weekly/Monthly
UnderGrads
5 to 20%
Discounts
Proms.
W/S Daily/Month
Undergrad
s
2 to 3%
Discounts
Promss
DistributorStocki
sts
Daily/Monthly
Grads
5-8% TrainingMotivtn
C&Fs Monthly Grads+
Fixed+Cost
s
Training
Sole Selling agents
Continuos
Grads+
10 %+
Recruiting/
Training/Motivtn
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Consumer DurablesConsumer Durables
Service Quality Renumeration Others
Own Retail Grads Salary Motivation.Training
Exclusive Ret(Franchisee
Weekly/ Grads 5-9% Training/Proms
Retail Show room
Daily/Monthly
Grads 5-8% TrainingMotivtn
C & Fs Monthly Grads+ Fixed+Costs
Training
Exclusive Continuos Grads+ 10 %+ Recruitng/Training/Motivtn
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Non Physical Non Physical Products( InsuranceProducts( Insurance))
Quality Remuneration Others
Advisors Grads Salary +incentive Motivation.Training
ExclusiveDSAs
Grads Salary+incentive
Training/Proms
Co owned network
Grads+ Salary+incentive
TrainingMotivtn
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OEMsOEMs
Original Equipment Manufacturers
Manufacturer hands over the product to channel.
Channel then adds its own value and markets the products.
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Vertical IntegrationVertical Integration
Downline – When manufacturer moves into the channel and sets up own outlets/
Upline – When a member of the channel gets into the manufacturing and starts distributing through channel.
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Length of ChannelLength of Channel
Seller - Buyer Direct – Zero lengthSeller – One in between- Buyer–length of 1Seller- Two in between– Buyer–length of 2Seller-Three in between-Buyer-length of 3And so on.Higher the length, lesser the direct
control.Likely to be expensive.Requires the support of the entire
marketing mix.
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Direct MarketingDirect Marketing
Personal SellingNetDirect MailersTelephonic
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ROIROI
RETURN ON INVESTMENT Return X 100 Investment
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Risk
Return
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Business men invest :Time,Efforts,
In return they expect commensurate Return that they not only takes for todayBut also needs to fuel future growth.
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Today’s opportunity :
Savings ac - 5 %FDs - 8-9%Mutual funds- 12 – 15 % Distribution line – 20 – 30 %At least twice bank rates
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Other factors worth Other factors worth consideringconsidering
Absolute amountOther than money, that takes care of
basic needs, need for status, ability to attract other business.
Other businesses where costs are shared and there is synergy.
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InvestmentStocksCreditDeposits ClaimsEtc.
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Return( Income)Return( Income)
Sales in units * margin per unitInterest on DepositNett of discounts
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Expenses :Expenses :Direct Salesmen Driver Delivery boys Deliver costs Depreciation of vehicles Bills/ Stationery, Warehouse rentIndirect Office rent, electricity, telephone, other staff, accountant
etc, audit fees, license fees etc. ( consider appropriate contribution)
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ROIROI
= Gross income – Expenses X 100 Total Investment
ROI is a percentage.Multiply it by 12( if data is monthly) to get
annualized ROI.
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Selecting the right partnerSelecting the right partner
The one who can add valueProvide his unique local contributionMutually dependantLong termMatching with the culture and values of
the principle.Mutually beneficial