B2B Marketing Managing Channels PGDM–B2B–RS–14

B2B MarketingManaging ChannelsPGDM–B2B–RS–14 Amarnath Krishnaswamy

Plan for this Session Managing Channels Business Marketing Channels Intermediaries Channel Design Customer Producer Intermediary • Managing Services • Role & Importance • Buying Services • The Marketing Mix

Channel Functions Producer Intermediary Customer Assortments Massing & Breaking Bulk Materials Handling Transporting & Inventory Reducing Transactions

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 Customer Manufacturer Channel 1 Business Distributor Customer Manufacturer Channel 2 Customer Manufacturer Manufacturer’s Representatives or Sales Branch Channel 3 Customer Manufacturer Manufacturer’s Representatives or Sales Branch Business Distributor Channel 4 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 A company sets up two or more channels to reach one customer segment Example: Direct & distributors Two or more companies at one channel level join together. Example: Petrol pumps - used for marketing auto parts (Fan belts, etc)

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: • Availability of good intermediates • Established trade patterns • Product characteristics • Company’s resources – financial / others • Competitive strategy • 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: • Number of channels • Levels in channel • Types of intermediaries required • 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 CarefulReview (See Step 6 in “Procedure) • All 3 are different and if feasible lies between existing and ideal Improvements possible

Stage 5 – Channel Selection … (2) Procedure for evaluating channel selection

Stage 5 – Channel Selection … (3) Evaluating channel selection (Contd.)

Stage 5 – Channel Selection … (4) Evaluating channel selection (Contd.)

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)

Thank you !

B2B Marketing Managing Channels PGDM–B2B–RS–14