Title: mc16 1
1Developing Positive Channel Relationships
2Developing 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
3Recruiting 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.
4Screening 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.
5Selecting 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.
6Motivation
1. Distributor Advisory Councils
2. Personal contact 3. Adequate support
7Securing Recruits for the Long Term
- Assume responsibility for making intermediaries
more effective - Joint product development
- Careful pricing ordering policies
- Shared training programs
- Equity
8Channel 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.
9Improving 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
10Transaction Costs and Vertical Marketing Systems
11The Exchange Process
12Conditions 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
13Transaction 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
14The Continuum of Exchange
Exhibit 11.2
Franchise Systems
Market Setting (outside firm)
Hierarchy (within firm)
Buying Groups
15Internal 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.
16Types 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.
17Types 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.
18B.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
19Bounded 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.
20Opportunism
- 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.
21Transaction Uncertainty and Performance
high
low
Transaction Performance
Exchange relationships attempt to reduce the
risks of uncertainty
high
low
22Number of Firms
23Data Impact
24Specificity of Assets
- Specific site asset
- Specific human assets
- Brand capital
- Time specificity
25Building Channels
You can eliminate wholesalers, but you can not
eliminate their functions.
To vertically integrate or not vertically
integrate.
26Marketing 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
27Vertical Marketing Systems
28Three Types of Vertical Marketing Systems
- Administered VMS
- Contractual VMS
- Corporate VMS
29Costs 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.
30When 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.
31When 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.
32Functional 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.