b2b marketing managing channels pgdm–b2b–rs–14

XIME / PGDM-B2B –RS–1404-March-2010

B2B Marketing

Managing Channels

PGDM–B2B–RS–14

Amarnath Krishnaswamy


Plan for this Session

• Managing Channels– Business Marketing

Channels– Intermediaries– Channel Design

Producer CustomerIntermediary

• Managing Services– Role & Importance– Buying Services– The Marketing Mix


Channel Functions

Producer CustomerIntermediary

Assortments

Transporting & Inventory

ReducingTransactions

Massing & BreakingBulk

Materials Handling


Marketing Channel Functions

• The Marketing Channel is the link between the manufacturer and the customer

• Includes all the tasks necessary to accomplish this:– Contacting– Negotiating– Contracting– Transferring title– Financing – Servicing– Stocking– Transporting

• Channels can be Direct / Indirect / Combination


Business Marketing - Channels

Manufacturer

Channel 1

Channel 2

Channel 3

Channel 4 Manufacturer’s Representatives or Sales Branch

BusinessDistributor

Customer

Manufacturer’s Representatives or Sales Branch

Manufacturer

Manufacturer

Manufacturer

BusinessDistributor

Customer

Customer

Customer

Channel for return of goods – Reverse Channel


Direct Distribution

• No intermediaries.

• Used when:– Volume / value of transactions warrant it

• Direct marketing eliminates the links but not the functions

• Sales force used could be “Generalists” or “Specialists”.


Indirect Distribution

• One or more intermediaries

• Used when:– Unit volume / value of each customer is small– Credit– Other considerations!


Innovations in Marketing Systems

Horizontal Marketing System

Hybrid Marketing System

Two or more companies at one channel level join together.

Example:

Petrol pumps - used for marketing auto parts (Fan belts, etc)

A company sets up two or more channels to reach one customer segment

Example:

Direct & distributors


Channel - Intermediaries

• Nomenclature of the intermediaries (Indirect) on the basis of the role they play

– Consignment Agents

– Distributors

– Representatives (Indenting Agents)

– Jobbers

– Brokers

– Retailers


Intermediaries – Distributors/Cons. Agents

• Classification– General Line: Stock an array of products– Specialists: Focus only on related products– Combination: Cater to both business and consumer markets

• Responsibilities– Defined area– Contact customers– Product availability– Assembly (If required)– Service


Intermediaries - Representatives

• Independent, or work for another organization• May handle related products too • Does not ‘own’ the product at any time

• Responsibilities

– Defined area– Contact customers– Good knowledge of the product


Intermediaries - Others

• Jobbers: Like ‘Reps’, but title of goods pass to them even though the material doesn’t. (In-transit sales )

• Brokers: Bring buyers and sellers together for a commission.

• Retailers:


Channel Design

• Developing Channels– Where none existed– Modifying existing ones. Do not wait for them to

evolve!

• Channel design done in stages:– Stage 1: Define objectives– Stage 2: Identify constraints– Stage 3: Allocate the activities (tasks)– Stage 4: Define alternatives– Stage 5: Select channel

Steps are very much the same as used in case analysis


Stage 1 – Define Objectives

Channel structure can be based on:

• Costs / Profits – helps decide between direct and indirect channels

• Marketing Goals – Call frequency, control et al would help decide the number of distribution points and manning


Stage 2 – Constraints

Options for channel structure could be limited by trade practices, competition, company policy and the environment:

1. Availability of good intermediates

2. Established trade patterns

3. Product characteristics

4. Company’s resources – financial / others

5. Competitive strategy

6. Geographic dispersion of customers


Stage 3 – Allocate the tasks

Assess what the task entails against the competence of the link.

– Some new products, for example, may require a high level of technical competence vis-à-vis others

– “Selling” the efficacy of drugs to doctors


Stage 4 – Channel Alternatives

Requires that the following be defined:

1. Number of channels

2. Levels in channel

3. Types of intermediaries required

4. Number of intermediaries required


Stage 5 – Channel Selection … (1)

• Define an ideal channel

• Compare with existing channel and the channel developed to conform with management objectives & constraints

– The systems are comparable. No change needed

– Existing & Feasible Systems comparable but differ from ideal

Careful Review (See Step 6 in “Procedure)– All 3 are different and if feasible lies between existing and

idealImprovements possible



Procedure for evaluating channel selection

Process Key Analytical Activities

Step 1Define customer requirements

Assess

(1) Sales assistance

(2) Locational convenience

(3) Buying convenience

(4) Range of possible services

Step 2Evaluate potential intermediaries

(1) Direct / Indirect Sale

(2) Types of intermediaries needed.

Step 3 Analyze costs

Find answers to the following:

a) Feasible to satisfy customer totally?

b) Types of supplier support needed

c) Costs for each



Evaluating channel selection (Contd.)


Step 4 Specify constraintsWhat are the objectives and constraints set by management? Specify channel based on these.

Step 5 Compare options

Compare

(1) Existing Channel

(2) Channel developed in Step 4

(3) Ideal

Step 6Review constraints and objectives

Use experts / consultants.



Evaluating channel selection (Contd.)


Step 7 Evaluate gapsIf gaps exists, analyze reasons for them

Step 8 ImplementationModify the ideal system according to objectives and constraints


Channel Behaviour

• Channel is most effective when:– Each member is assigned tasks it can do best– All members cooperate to attain overall channel

goals

• If this does not happen, conflict occurs– Horizontal Conflict: Amongst members at the

same level in the chain (E.g. Retailer with Retailer)– Vertical Conflict: Between different levels in the

same channel (E.g. Distributor with Retailer)

• Some conflict could promote healthy competition!


Before we break up …

• Would anyone who has set up, or modified, a distribution system like to share his experiences?

• If you were the President of XIME, what would you do to extend the delivery of its programmes?


All the B’s!

Bait and Switch

To advertise low priced items that aren’t actually available

Beat the Bushes

Marketing to unconventional or rural areas


Moving Forward

Next Session: PGDM-RS-15

Date: Tuesday, Mar 11, 2010

Subject: Quiz (RS-09 to RS13)

Managing Channels (Logistics)

b2b marketing managing channels pgdm–b2b–rs–14

Documents