Core Concepts of Marketing by John Burnett - HTML preview

CHAPTER 10

CHANNEL CONCEPTS: DISTRIBUTING THE PRODUCT

Having identified several possible alternative channel structures, the channel man-

ager is now at a place where he or she can

these alternatives with respect to some

set of criteria. Company factors, environmental trends, reputation of the reseller, experi-

ence of reseller are just a few examples.

Who Should Lead

Regardless of the channel framework selected, channels usually perform better if someone

is in charge, providing some level of

Essentiall y, the purpose of this leadership

is to coordinate the goals

of channel irstitutions. The level of leadership can

range from very passive to quite active-verging on dictato rial. The style may range from

very negative, based on fear and punishment, to very positive, based on encouragement and

reward. In a given situation, any of these leadership styles may prove effective.

Given the restrictions inherent in channel leadership, the final question is "who should

lead the channel?" Two

trends are

noting, since they influence the answer.

First, if we look at the early years of marketing, i.e., pre-I92G, the role of the wholesaler

(to bring the producer and consumer together) was most vital. Consequently, during this

period, the wholesaler led most channels . This is no longer

A second trend is the appar-

ent strategy of both manufacturers and retailers to exert power through size. In a type of

business cold war, manufacturers and retailers are constantly trying to match each other's

size. The result has been some serious warfare to gain channel superiority.

Under which conditions shouid the manufacturers lead? The wholesaler? The retailer?

While the answer is contingent

factors, in general, the manufacturer should lead

if control of the product (merchandising, repair) is critical and if the design and redes ign

of the channel is best done by the manufacturer. The wholesaler should lead where the man-

ufacturers and retailers have remained small in size, large in number, relatively scattered

geographically, are financially weak, and lack marketing expertise. The retailer should lead

when product development and demand

are relatively unimportant and when

personal attention to the customer is important.

Evaluating Channel Member Performance

The need to

the

level of

channel members is just as important as

the evaluation of the other marketing functions.

the marketing mix is qu ite inter-

dependent and the failure of one

can cause the failure of the whole . There is

one important difference,

the exception of the corporate VMS; the channel member

is dealing with independent business firms, rather than employees and activities under the

control of the channel member, and their willingness to change is lacking.

Sales is the most popular performance criteria used in channel evaluation. Sales might

further be subdivided into current sales compared with

sales, comparisons of sales

with other channel members, and comparisons of the channel member's sales with prede-

termined quotas. Other possible performance criteria are: maintenance of adequate inven-

tory, selling capabilities, attitudes of channel intermediaries toward the product, competition

from other intermediaries and from other product line carried by the manufacturers own

channel members.

Correcting or Modifying the Channel

As a result of the evaluation process, or because of

factors

as new competi-

tion, technology, or market potential, changes will be made in the channel structure.

Because channel relationships have tended to be long-term , and the channel de cision

THE HUMAN ASPECT OF DISTRIBUTION

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has such a pervasive impact on the business, great care should be taken before chang-

ing the status quo.

of channel members not performing at

standards

should be employed only as a last resort. Corrective actions are far less destructive and main-

tain the goodwill that is so crucial in channel rel ationships. This requires that the channel

manager attempt to find out why these channel members have performed poorly and then

implement a strategy to correct these deficiencies.

Sometimes a producer decides that an entirely new channel needs to be added, or an

existing one deleted. A manufacturer of camera accessories

decide that he wants to reach

the skilled amateur market in addition to the professional photographer market. This would

mean designing a different channel, and learning about a different set of intermediaries.

THE HUMAN ASPECT OF DISTRIBUTION

A channel of distribution by its very nature is made up of people. Ideally, a channel mem-

ber should coordinate his or her efforts with other members in such a way that the performance

of the total distribution system to which he or she belongs is enhanced. This is rarely the

case. Part of this

of cooperation is due to the organization structure of many channels,

which encourages a channel member to be concerned only with channel members imme-

adjacent to them, from whom they buy and to whom they sell. A second reason is

the tendency of channel members to exhibit their independence as separate business oper-

ations. It is difficult to gain cooperation under this arrangement. Four human dimensions

have been incorporated into the study of channel behavior: roles, communication, conflict,

and power. It is assumed that an understanding of these behavioral characteristics will increase the effectiveness of the channel.

Role

Most channel members participate in several channels. Establishing the role of a channel member means defining what the behavior of the channel member should be. For example, a basic role prescription of the manufacturer may be to maximize the sales of his/her

particular brand of product. This connotes that the manufacturer is to actively compete for

market share, and aggressively promote his or her brand . The role prescriptions of inde-

pendent wholesalers, however, are likely to be quite

Since wholesalers may rep-

resent several competing manufacturers, his or her role would be to build sales with whatever

brands are most heavily demanded by retailers. Therefore, a major issue in channel man-

agement relates to defining the role prescriptions of the various participants in order to achieve desired results. This is accomplished through a careful appraisal of the tasks to be performed

by each channel member and clear communication of these roles to the members.

Communication

Channel communication is sending and receiving information that is relevant to the oper-

ation of the channel. It is critical for the success of the channel member to work to create

and foster an effective flow of information within the channel. Communication will take

place only if the channel member is aware of the pitfalls that await. The channel manager

should therefore try to detect any behavioral problems that tend to inhibit the effective flow

of information through the channel and try to solve these problems before the communi-

cation process in the channel becomes seriously distorted.

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