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mc16 1

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Specific qualifications for success in this channel role. ... Opportunism. Uncertainty. Number of firms. Data impact. Specificity of assets. mc16- 19 ... Opportunism ... – PowerPoint PPT presentation

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Title: mc16 1


1
Developing Positive Channel Relationships
2
Developing Positive Channel Relationships
Step 5 Securing Channel Memberships
Step 4 Motivating Prospective Channel Members
Step 3 Selecting Prospective Channel Members
Step 2 Screening Prospective Channel Members
Step 1 Recruiting Prospective Channel Members
3
Recruiting New Prospects
  • Recruiting Issues
  • Precise role of channel members.
  • Specific qualifications for success in this
    channel role.
  • Precise products or channel assignment
    responsibility of channel member.
  • The bounds of authority of the prospective
    channel member.
  • The way in which the role might be expected to
    change over time.

4
Screening New Prospects
  • Consideration, evaluation, and, ultimately,
    rejection of most of a set of people, things or
    ideas.
  • Guidelines
  • Think about market segments.
  • Remember selling distribution requirements
    change over time.
  • Pick your distributor carefully weighing all
    factors product, size, service, capability.
  • Level type of support required by the channel
    member.

5
Selecting the Right Channel Partner
  • Final selection from the smaller pool (SPEAR)
  • Sales factors
  • Product factors
  • Experience factors
  • Administrative factors
  • Risk factors
  • Dont forget the distribution function.

6
Motivation
1. Distributor Advisory Councils
2. Personal contact 3. Adequate support
7
Securing Recruits for the Long Term
  • Assume responsibility for making intermediaries
    more effective
  • Joint product development
  • Careful pricing ordering policies
  • Shared training programs
  • Equity

8
Channel Relationship Life Cycle
Birth Explain operating philosophies, goals and
objectives
Growth Address initial problems Dont let
issues linger unresolved. Honestly and
sincerely strive to be opportunity driven. Seek
efficiency within through the relationship.
Death Get out - Fast
Maturity Communicate, communicate,
communicate. Continuously strive to strengthen
the relationship.
9
Improving Service to Channel Partners
Bundle
Different Partners Different Benefits Different
Times
Functional utility of exchange object
Timely delivery
  • Type of partner
  • Phase of order cycle
  • Stage of Product Life Cycle
  • Type of relationship between partners

Brand name or reputation benefits
Technical or economic assistance
10
Transaction Costs and Vertical Marketing Systems
11
The Exchange Process
12
Conditions for Exchange Continuity
Each exchange partner must
Possess Goal Preferences
Create or Accept New Behaviors to
Facilitate Goal Attainment
Anticipate the Outcome of the Exchange
Direct Actions toward Goal Performance
Exhibit 11.1
13
Transaction Cost Analysis (TCA)
  • Expenses resulting from negotiating, monitoring,
    and enforcing activities necessary to accomplish
    distribution tasks through exchange.
  • - Transaction costs involve the cost of
    arranging, monitoring, and enforcing contracts
  • - Production costs involved the costs
    associated with executing a contract
  • Costs occur whenever firms transfer title of
    economic assets and enforce their exclusive
    rights to those assets.
  • TCA states that firms should purse the most
    efficient channel arrangement based on cost
    avoidance.
  • Make
  • Buy

14
The Continuum of Exchange
Exhibit 11.2
Franchise Systems
Market Setting (outside firm)
Hierarchy (within firm)
Buying Groups
15
Internal versus External Transactions
  • Conditions for choosing hierarchy over market
  • A high level of environmental uncertainty should
    exist in the transaction cost assessment.
  • The assets involved should be highly specialized
    and unique to the exchange process.
  • The transaction should occur frequently.

16
Types of Information Costs
Real World Application
Information Category
Commodity and labor inputs
Channel members require information relating to
resource price.
Market behaviors
Relevant information about other channel members
new consumer products introduced into the market
Product planning and distribution decisions.
17
Types of Information Costs (cont.)
Information Category
Real world Application
Pricing information Information about price
changes is essential to any effort to control
transaction costs.
Monitoring and enforcing Ensuring standards
governing product quality or customer support
compromised in its new channel arrangement.
18
B.O.U.N.D.S.
  • Channel members negotiate, monitor, and enforce
    exchange aspects by using
  • Bounded rationality
  • Opportunism
  • Uncertainty
  • Number of firms
  • Data impact
  • Specificity of assets

19
Bounded Rationality
  • Presupposes that channel members, on both sides
    of the exchange, are constrained by reason.
  • Satisficing suggests people continually revise
    their target or goal whenever they fall short of
    their original aspiration.

20
Opportunism
  • Disseminating information with the intention of
    disguising ones true purpose or meaning or
    otherwise misleading ones exchange partner.
  • Greater control when channel is vertically
    integrated.

21
Transaction Uncertainty and Performance
high
low
Transaction Performance
Exchange relationships attempt to reduce the
risks of uncertainty
high
low
22
Number of Firms
23
Data Impact
24
Specificity of Assets
  • Specific site asset
  • Specific human assets
  • Brand capital
  • Time specificity

25
Building Channels
You can eliminate wholesalers, but you can not
eliminate their functions.
To vertically integrate or not vertically
integrate.
26
Marketing Systems
Conventional Channels
Vertical Systems
Independent Unified Separate, autonomous Linked
as a single competitive unit Aggressive
intrachannel One clear leader with negotiations
legitimate or contractual power Conflict not
controlled Conflict controlled stable structure
and membership Sometimes fail to see big
Channel-wide perspective picture

27
Vertical Marketing Systems
28
Three Types of Vertical Marketing Systems
  • Administered VMS
  • Contractual VMS
  • Corporate VMS

29
Costs of Vertical Integration
  • Incentives for efficiency dulled.
  • Channel goals may be different than corporate
    goals.
  • Investment in unnecessary overhead.
  • More employees/higher payrolls.
  • Can limit innovation.

30
When to Vertically Integrate
  • Few organizations that perform specific channel
    functions efficiently are available in a market
    or when the environment in which a firm operates
    is highly uncertain.
  • Changing to new channel partners would prove
    extremely costly should existing partners fail to
    perform as expected.
  • The buying decision is complex and/or involves
    high involvement, or when required customer
    service levels are high.

31
When to Vertically Integrate (cont.)
  • Channel members can potentially free-ride on the
    efforts of others, or when it is difficult to
    monitor the activities of outsiders.
  • An opportunity exists to gain substantial
    economies of scale of channel functions or flows.
  • The product in question is closely tied to the
    firms core business.

32
Functional Areas Where Synergies in Vertically
Integrated Channels Have Proven Hard to Obtain
Channels of distribution While products and
markets may appear similar, distribution channels
can differ radically. Even when channels are
similar, the end-user markets may differ.
Organ. integration Highly centralized and highly
decentralized organizations do not mix easily
within VMSs.
Inventory control Across the units that comprise
a corporate VMS,agreement on the levels,
deployment, and ownership of inventory often
prove elusive.
Allocation of costs Cost allocation techniques
are a continual source of strife across unit
levels.
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