2 channel mktg ifim

8/6/2019 2 Channel Mktg IFIM

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Service Output Design (SOD) Range of service outputs

Measuring relative importance of serviceoutputs

SOD identifies segmentation formarketing channel design

Meeting the SOD


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Range of Service Outputs(Typical Consumer Segment)

Purchase process: easy to find, select and buy

Purchases delivered home

Info on product usage

Fast buying process

Info on comparing

Ability to see, touch and inspect

Price range

Experience provides social interaction

Place sells desired brands


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Range of Service Outputs(Typical B2B Segment)

References and credentials

Financial stability

Product demonstrations and trials

Proactive advice and consulting

Assistance during decision making process

One-stop solution

Lowest price

Installation and training support

After sales support


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Service Output Measurements Get the measurement on a scale: Low, moderate,

high or very high

Alternatively, Get a measurement for each of theattributes on a scale of 1 to 4 or 5 or 6 or 7 or 10

Higher the scale range, more the sample size

Get the ranking of different service output typesto measure their relative importance


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Service Outputs Major service outputs:

Bulk-breaking

Desired number of units

Spatial convenience

Waiting time or delivery time

Between ordering and receiving Breadth of assortment

Product variety


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Service Outputs Service outputs are produced by channel

members at a cost

Maximizing service outputs impact competitiveprices due to increased channel cost

Channel design should optimize service outputs

and channel costs


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IDEAL CHANNEL SYSTEM FOR BUSINESS-TO-BUSINESS

SEGMENTS BUYING A NEW HIGH-TECHNOLOGY PRODUCT

Manufacturer

(New High Technology Product)

Full-ServiceResponsive

Support

References/

Credentials

Lowest

Total

Cost

Pre-Sales

Sales

Post-Sales

VARs

Associations,

Events,

Awareness

Efforts

Third-Party

Supply

Out-

source

DealersTeleSales/

TeleMktg

Internal Support

- Install, Training &

Service Group

Segment


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Trends in End-user Preferences Consumer and HH:

'Poverty' of time

Increased knowledge about products andavailability (internet access)

Wide income distribution leading to demand for

product variety Overlap in consumer SOHO segments (bulk-

breaking of office supplies)


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Meeting SOD Key factors determining SOD delivery:

Cost

Cost of providing services vis-a-vis end-usersare willing to pay

Competitiveness

Ease of entry with better services Excellence in other elements of marketing mix


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Role of SOD AnalysisAssess segment attractiveness

Target a subset of the segment identified Customize the marketing channel system

solution for each targeted segment


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THE SERVICE OUTPUT DEMANDS (SOD) TEMPLATE

SERVICE OUTPUT DEMAND:

SEGMENT NAME/DESCRIPTOR

BULK BREAKING SPATIALCONVENIENCE

DELIVERY/WAITING TIME

ASSORTMENT/VARIETY

CUSTOMERSERVICE

INFORMATIONPROVISION

1.

2.

3.

4.

5.INSTRUCTIONS: If quantitative marketing-research data are available to enter

numerical ratings in each cell, this should be done. If not, an intuitive

ranking can be imposed by noting for each segment whether demand for thegiven service output is high, medium, or low.


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Channel Flows Eight generic channel flows

Channel and efficiency template Zero-based channel design


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8 Generic Channel Flows

Marketing Flow Cost RepresentedPhysical possession Storage & delivery

Ownership Inventory carrying

Promotion Personnel selling, advtg, PR

Negotiation Time and legalFinancing Terms of sale, credit terms

Risking Guarantees, insurance, service

Ordering Order processing

Payment Collection, bad debts

Producer Wholesaler R etailer C onsum er


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Channel Efficiency Template

Weights for flows Proportional performance of channel member

Channel flows Costs Producer WholesaleRetailer ConsumeTotal

100

Ownership 100

Promotion 100

Negotiation 100

Financing 100

Risking 100

Ordering 100

Payment 100Total 100N/A 100N/A N/A N/A N/A N/A

Benefitpotential

Finalweight

Physicalpossession


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BUILDING MATERIALS COMPANY EFFICIENCY TEMPLATE FOR

CHANNEL SERVING END-USERS THROUGH RETAILIERS:

UNDISGUISED DATA

WEIGHTS FOR FLOWS: PROPORTIONAL FLOW PERFORMANCE OFCHANNEL MEMBER:

COSTS BENEFITPOTENTIAL(High,Medium,or Low)

FINALWEIGHT

Mfgr. Retailer End-user TOTAL

PHYSICALPOSSESSION

30 High 35 30 30 40 100

OWNERSHIP 12 Medium 15 30 40 30 100

PROMOTION 10 Low 8 20 80 0 100

NEGOTIATION 5 Low/Medium 4 20 60 20 100

FINANCING 25 Medium 29 30 30 40 100

RISKING 5 Low 2 30 50 20 100

ORDERING 6 Low 3 20 60 20 100

PAYMENT 7 Low 4 20 60 20 100

TOTAL 100 N/A 100 N/A N/A N/A N/A

NORMATIVE N/A N/A N/A 28% 39% 33% 100


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CHANNEL SERVING END-USERS THROUGH RETAILERS: RANK-

ORDER DATA

`WEIGHTS FOR FLOWS: PROPORTIONAL FLOW PERFORMANCE OF

CHANNEL MEMBER:

COSTS BENEFITPOTENTIAL(High,Medium, or

Low)

FINALWEIGHT


PHYSICALPOSSESSION

30 High 35 2 2 2 100



NEGOTIATION 5 Low/Medium

4 1 2 1 100


RISKING 5 Low 2 2 2 1 100

ORDERING 6 Low 3 1 2 1 100

PAYMENT 7 Low 4 1 2 1 100


NORMATIVEPROFIT

N/A N/A N/A ? ? ? 100


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CHANNEL SERVING END-USERS THROUGH RETAILERS :

TRANSFORMED RANK-ORDER DATA

WEIGHTS FOR FLOWS: PROPORTIONAL FLOW PERFORMANCE OFCHANNEL MEMBER:

COSTS BENEFITPOTENTIAL(High,Medium, orLow)

FINALWEIGHT


PHYSICALPOSSESSION

30 High 35 33 33 33 100



NEGOTIATION 5 Low/Medium

4 25 50 25 100


RISKING 5 Low 2 40 40 20 100

ORDERING 6 Low 3 25 50 25 100

PAYMENT 7 Low 4 25 50 25 100


NORMATIVEPROFITSHARE

N/A N/A N/A 32% 38% 29% 100


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Zero Based Channel Design

Channel design from scratch without a

pre-existing channel structure

Zero Based Channel Design:

Meets the target market segments SOD

At minimum cost of performing the

necessary channel flows that produce thoseservice outputs


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Bullwhip Effect

A phenomenon that occurs in distributionsupply chain when the customer's order and

one'e own inventoryform the basis forestimating the demand

The Bullwhip effect can be controlled by bettercommunication and forecasing methods


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THE BULLWHIP EFFECT


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Equity Principle

The compensation in the channel system

is to be given on the basis of values

created by channel members

This creates right incentives among

channel members to sustain value

generation in future


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Intermediary ChoicesMarketing Flow Intermediaries who can performPhysi l ssessi

ershiPr m i

egoti tion

Financing

Risking

Or ering

Payment

Contract warehouse, Shi ing com any, Distri utor,Retailers (bricks, catalog and on-line)Contract warehouse, Distributor, Retailers (bricks,

catalog and on-line)Distributor, Retailers (bricks, catalog and on-line),Broker, Franchisees, Independent sales repsDistributor,Independent sales reps,Export MarketingcompaniesDistributor, Retailers (bricks, catalog and on-line),Broker, Franchisees, Banks, Credit card companies

Distributor, Retailers (bricks, catalog and on-line),Franchisees, Credit card companiesDistributor, Retailers (bricks, catalog and on-line),Franchisees, Independent sales repsDistributor, Retailers (bricks, catalog and on-line),Franchisees, Shipping companies


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Intensity of Distribution Exclusive

One outlet per market

Selective

Few outlets in each market

IntensiveAvailable as widely as possible in market


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FIGURE 4- 2: : SELECTIVE COVERAGE--THE MANUFACTURERSCONSIDERATIONS

For the ManufacturerFor the Manufacturer

Manufacturers use the money to pay the Channel Members for :

- limiting its own coverage of brand in product category

(gaining exclusive dealing is very expensive)

- supporting premium positioning of the brand

- finding a narrow target market

- coordinating more closely with the manufacturer

- making-supplier specific investments

new products

new markets

differentiated marketing strategy requiring downstream implementation

- accepting limited direct selling by manufacturer

- accepting the risk of becoming dependent on a strong brand

Manufacturers need to pay more when :

- the product category is important to the Channel Member

- the product category is intensely competitive

Limited coverage is currencyMore selectivity = more money

Exclusive distribution =


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GURE 4- 3: CATEGORY SELECTIVITY: THE DOWNSTREAM CHANNEL MEMBERSONSIDERATIONS

For Downstream C annel emberForthe Downstream Channel ember

Downstream annel embers sethemoney to ay thesupplier or

limitingthenumberof ompetitorswho an arry thebrandinthe hannel emberstradingarea

-providingdesiredbrandsthatfitthe hannel embersstrategy-wording losely tohelpthe hannel emberachievecompetitiveadvantage

-making hannel-Member-specificinvestments

newproducts

newmarkets

differentiated hannelMemberstrategy requiringsuppliercooperation

-acceptingtheriskofbecomingdependentonastrong hannelMember

Downstream hannelMembersneedto pay morewhen

-thetradingareaisimportanttothesupplier

-thetradingareaisintensely competitive

LimitingbrandassortmentiscurrencyFeverbrand moremoney

clusivedealing


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Managing Channel Conflicts

Most common occurrence is the 'domainconflict'

Conflict with the company

Conflict with other channel members

Domain:

Activity responsibility

Geographic domain

Specific customer domain


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Managing Channel Conflicts

Managing conflicts:

Establish exclusive domains

Reimburse distributors

Handover new accounts

Apply equity principle

2 channel mktg ifim

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