NORTHWESTERN UNIVERSITY

KELLOGG SCHOOL OF MANAGEMENT

Marketing 451, Section 81 Professor Anne Coughlan

Marketing Channel Strategies Office: Jacobs 482
Winter 2016 Hours: by appointment
Tuesdays 6:30-9:30 p.m. Phone: (847)491-2719
Evanston Campus e-mail: a-coughlan@kellogg.northwestern.edu

COVER SHEET : COURSE OVERVIEW AND NEW MATERIALS

This class is for individuals who currently work in or are targeting jobs in consulting and strategy,
entrepreneurial ventures, industrial sales and buying, and marketing management. The goal is for you to
leave the course with a solid framework and a set of tools that are useful in your work life. Alums of this
class have found them useful in assessing financial arrangements in their go-to-market structures;
deciding how broadly to distribute products in a new consumer-focused market when the company’s
history was in B2B sales; how to motivate and manage upstream partners who complete the firm’s
distribution channel to end users; and many other go-to-market challenges.

Most students learn that marketing is about the development of goods and services. However, this
viewpoint sells the marketing function short. One critical component of value creation for customers and
consumers that is often overlooked is how customers want to buy. The ability to make its products and
services available to customers and consumers at the right place and time is a key source of explosive
value, and the purview of marketing channel strategy.

Topics in this course include but are not limited to the following:
 How to segment your market to best understand end-users’ demands for how to buy – not just what to buy
 How to design and redesign routes to market
 How to select and incentivize partners
 How to use leverage sources to manage and prevent conflicts in the channel

We are always updating and improving the course; new content coming up includes:
 Materials from my forthcoming book, Strategic Channel Management: Designing Routes To Market
 The Sonologics case, a new case I’ve written about gray market problems and the general challenges of
managing channel relations and downstream channel pricing when selling in a multi-channel marketplace
 The New Distribution Capability (NDC) in the Airline Channel case. This case looks at the challenges
facing the air travel industry as airlines seek to modernize the handling and presentation of big-data
information throughout the channel and to travelers. The case is developed and presented in an online,
multi-media and interactive format (no paper case), allowing you to travel the time-path of the channel
players as they face and attack the challenges in this channel and to see a broad array of different types of
information as you develop your analysis. We’ll complement this case prep with both the usual in-class
case discussion, and a presentation and commentary by industry participants currently dealing with the
challenges of NDC.

Please see the detailed course syllabus below for more information, and contact me (a-
coughlan@kellogg.northwestern.edu ) with any questions. I hope to see you in January!

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 DETAILED COURSE SYLLABUS (current as of 10/27/15)

FIRST ASSIGNMENT (FOR CLASS ON JANUARY 5, 2016):

 Buy the case packet for the course (required).
 Read the assignments for Week 1.
 Watch the video “The Cola Road” (available on the course’s Canvas website) and come to class
ready to discuss the study questions for it.
 Feel free to contact me with any questions you might have.

FIRST CLASS ATTENDANCE POLICY:

You must attend the first class unless you have a serious medical or family emergency.

NATURE AND PURPOSE OF THE COURSE:

This class is for individuals who currently work in or are targeting jobs in consulting and strategy,
entrepreneurial ventures, industrial sales and buying, and marketing management. The goal is for you to
leave the course with a solid framework and a set of tools that are useful in your work life. Alums of this
class have found them useful in assessing financial arrangements in their go-to-market structures;
deciding how broadly to distribute products in a new consumer-focused market when the company’s
history was in B2B sales; how to motivate and manage upstream partners who complete the firm’s
distribution channel to end users; and many other go-to-market challenges.

Most students learn that marketing is about the development of goods and services. However, this
viewpoint sells the marketing function short. One critical component of value creation for customers and
consumers that is often overlooked is how customers want to buy. The ability to make its products and
services available to customers and consumers at the right place and time is a key source of explosive
value, and the purview of marketing channel strategy.

In this course, we will unpack the “black box” of distributors, reps, salespeople, systems integrators,
value-added resellers, and retailers that constitute the routes to market between the manufacturer and its
end users. You will learn how to capture and leverage channel value through the careful selection of
channel partners, the application of appropriate incentives and pricing agreements, and the design and
management of multiple channels. Topics in this course include but are not limited to the following:

 How to segment your market to best understand end-users’ demands for how to buy – not just
what to buy
 How to design and redesign routes to market
 How to select and incentivize partners
 How to use leverage sources to manage and prevent conflicts in the channel

The framework for analysis you will learn in this course is general and thus applicable across a wide array
of consumer, B2B, and service applications, and across multiple geographies. We will bring this variety
alive in this course through discussion of applications in emerging markets as well as developed
economies and applications in services as well as physical products, sold to consumer as well as business
end-users. Throughout the course, we will use lecture/discussion, case discussion, outside speakers, and a
group channel audit project to develop and use the course knowledge.

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COURSE MATERIALS:

You must buy the course packet of required readings, cases, lecture slides, and tools.

There is no required textbook for the course. An optional text, should you wish to acquire one, is
Marketing Channels (either the 7th or 8th editions).

Many class readings are proprietary copyrighted materials that I have developed for this course and that
are part of a new book on channels to be published by Pearson (Strategic Channel Management:
Designing Routes To Market) in late 2016. These readings are included in the course packet. Because
the book is in process and under contract, I have included various cautionary statements about copying,
storing, or sharing the materials, as per our contract with our publisher. I appreciate your consideration in
this matter.

Beyond these, we will also discuss several cases (included as well in the course packet) that reinforce the
framework and give you opportunities to use the analytic tools of this course. Proprietary lecture slides
are also included for your reference and use in class.

We will use the Canvas system in this class.

EVALUATION OF STUDENTS' WORK:

Your grade in this class will depend on several assignments done during the quarter. All assignments are
required. There will be no final exam in this course. Assignments and their weights are as follows:

GROUP/
ASSIGNMENT INDIVIDUAL? WEIGHT
End-User Channel Benefits exercise Individual 12%
Case memo #1 (pick one from this set: (i) Rockwell, (ii)
Mary Kay, (iii) Cemex) Individual 13%
FILL IN, ONCE SET CASE ORDER)
Case memo #2 (pick one from this set: (i) d.light, (ii) BMW,
Individual 13%
(iii) Sonologics)
New Distribution Capability in the Airline Channel: Answer case
questions in multimedia case as you prep the case (online Individual 12%
submission only)
Channel audit project: Group 35%
Class participation: Individual 15%

END-USER CHANNEL BENEFITS EXERCISE:

The End-User Channel Benefits exercise is due at the beginning of class on Tuesday, January 19 (week
3 of the course). It is an individual assignment – meaning that you are to work on it alone and hand in an
individual assignment for it. This assignment is worth 12% of your course grade. We will discuss what
end-user channel benefits are, and how to use them to segment end-users for the purpose of channel

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design and management. Your assignment will be to shop either for (a) a specific book; or (b) coffee (or
tea if you drink tea, not coffee). We will discuss the assignment requirements in our second class.

Please use the electronic version of the assignment to complete the work. Please submit an
electronic copy of your entire assignment via Canvas by 6:30 p.m. on January 19.

CASE MEMOS:

We will be discussing several cases in class. Each of you is required to write an individual case memo on
two of these in-class cases and each case memo is worth 13% of your course grade. Specifically, you will
pick one from the set of cases we are discussing in weeks 3, 4, and 5 {Rockwell, Mary Kay, Cemex} on
which to write your first individual case memo; and one from the set of cases we are discussing in weeks
6, 7, and 8 {d.light, BMW Project Switch, Sonologics} on which to write your second individual case
memo. Each case memo is due electronically on Canvas by 6:30 p.m. on the night we discuss the
case. The questions you are expected to answer for each case memo are in your course packet just in
front of the case itself. I will have sign-up sheets available in class for you to sign up for your preferred
case memo choices.

We will also discuss the “New Distribution Capability in the Airline Channel” case in week 9 of the
course (March 1). This is a new multimedia case that you will prepare interactively, rather than reading a
paper case. Each of you is required to answer questions at various points in the interactive case
preparation, which together comprise your individual assignment for this case (worth 12% of your course
grade). I will provide more details on the interactive process for this case closer to the date of its
discussion. We will have outside visitors from the airline industry in class on March 1, and you will have
a chance to hear from them what is happening now in the distribution channel for air travel, as well as to
ask your own questions. This is a matter of very strong interest in the industry, so I expect a lively
discussion in class that evening.

I will not give credit for late memos (or late responses for the “New Distribution Capability in the Airline
Channel” case); please verify that your Canvas submission has been successful before class starts.

To recapitulate on case memos: (a) you will write two individually-done case memos (one from each
defined set of in-class cases); (b) you should submit an electronic copy of each case memo via CANVAS
by the beginning of class in order to earn credit for it; and (c) you will also submit answers to questions in
the multimedia, interactive case, “New Distribution Capability in the Airline Channel,” by the beginning
of class in week 9.

Of courses, you should prepare every case for in-class discussion, even if you are not scheduled to turn in
a case memo that day. Insufficient preparation will hamper your ability to participate in class and to learn
from the case.

CLASS PARTICIPATION AND CASE DISCUSSION:

Each student is expected to participate regularly in class discussions. A substantial part of the benefit that
you will derive from the assignments is a function of your willingness to expose your viewpoints and
conclusions to the critical judgment of the class, as well as of your ability to build upon and evaluate
critically the judgments of your classmates.

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It is very important that all of you come prepared to air your views in class. I have provided suggested
questions for you to prepare in studying the cases before class. In general, you should view preparing the
cases as an opportunity to practice using the analytical tools we are developing in class.

15% of your course grade depends on class participation. Effective (i.e., quality as well as quantity of)
participation can therefore mean the difference between a higher and lower grade. Regular class
attendance is crucial to good class participation.

GROUP CHANNEL AUDIT ASSIGNMENT:

You will be required to perform an audit of a specific firm's existing distribution channel as part of the
course requirements. Your audit will count for 35% of your final course grade, and is due at the
beginning of class on Tuesday, March 8 – week 10 of class. This audit will consist of a report
describing the current state of the channel (its structure, members, allocation of channel functions and
flows, ability to meet target customer segments' demands for channel benefits, misalignment analysis, and
power and conflict characteristics), as well as suggestions for improvement of the channel’s design and
management. You will be introduced to templates and analytic tools over the course of the quarter that
will equip you to do this real-world analysis. You are responsible for finding a firm whose distribution
channel you wish to study. Primary data (personal interviews) are crucial to an excellent audit; secondary
data (company reports, business press articles, consulting studies of the industry or company, census data,
etc.) are also helpful to fill out information for your audit. Your audit should include bibliographic
references and citations to any secondary sources you use (business press articles, journals, books, etc.) as
well as mentioning the names, titles, and companies of any people you interview for the audit. You will
be graded on the quality of your analysis and recommendations and on your ability to apply the analytic
concepts from class to your chosen distribution channel situation.

It is best to study a pre-existing channel rather than a firm's plans to enter a new market and build up a
new channel. However, if you wish to look at a case of new market entry, you may do so, but please
include an analysis of the firm's pre-existing channel for other products and suggestions for altering it for
the new product or market.

Please work on your audit in a group of 4 to 6 people. You may choose your group members; I will ask
for your group membership by week 3 of the course, to make sure everyone is in a group.

Your channel audit report can be up to 3000 words long, and can include up to 15 exhibits. Please
turn in a paper copy of your report, as well as submitting all files to Canvas, by the beginning of
class on March 8. Each team should also plan on a brief presentation about their channel audit to the rest
of the class on March 8.

FINAL EXAM

There is no final exam in this course.

CONTACTING ME

I will routinely use e-mail and/or Canvas to communicate with you about various course-related issues. I
check e-mail almost every day. My e-mail address is: a-coughlan@kellogg.northwestern.edu .

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THE HONOR CODE

Students in this class are expected to abide by the honor code approved both by the students and by the
faculty. When doing your written graded assignments for this class, you are not permitted to copy
material from assignments done by students who have taken this class in the past (this would be
plagiarism). Individual assignments are to be done individually, without collaborating with other
students. Cooperation between teams in preparing team assignments is also prohibited. It is also an
honor code violation to sign in on an attendance sheet for someone who is absent from class, or to
otherwise misrepresent one's lack of attendance at class.

Please remember that the honor code requires that any student observing another student or other students
violating the honor code inform the professor of that violation. Failure to do so is in itself a violation of
the honor code.

Clearly, activities such as sharing class notes or discussing in-class materials outside of class are not
honor code violations. Indeed, I want to encourage such interaction among you, because it enhances
learning.

CLASS ATTENDANCE AND CLASS BEHAVIOR

You must attend the first class session for this course, unless you have a truly extraordinary reason not
to do so (such as a serious illness). Please e-mail to me in advance if you have to miss class. Regular
class attendance is expected. Missing more than two of our ten class sessions is inadvisable. If you
know you will need to miss three or more class sessions, you should postpone taking the course until a
later date. Please contact me if you have questions concerning your schedule.

Attendance is particularly expected on days that either an outside speaker is presenting, or your peers in
class are presenting. Each such class missed (for any reason: interview, illness, trip out of town, etc.)
will take away two of the 15 percentage points available to you in class participation credit.

The use of PDAs, cell phones, or other similar electronic devices is prohibited in class. You may use a
laptop for class note-taking only in the back row of the classroom only. Use of your laptop for non-class
purposes (e.g. surfing the web, checking or sending e-mail, etc.) is not permitted and violates the honor
code for this class. I reserve the right to ask you to shut your laptops at any time if the laptop policy is
being violated.

Please arrive on time for class. Those arriving late to class will be required to deposit $2.00 into a fund to
be donated to a charity (chosen by you and your fellow students) at the end of term. You may bring
coffee, tea, or a soft drink into the classroom, and food if necessary. We will take a break approximately
halfway or a bit later through each week’s class, so you will have a chance to stretch your legs then.

Please do not leave the classroom in the middle of class for a few minutes and then return; this also is
disruptive. However, I understand that you may on occasion need to leave class early or arrive to class
late. If this is the case, please let me know, and sit on the end of an aisle to avoid bothering the other
students when you leave. Finally, I expect you to treat me, and your fellow students, professionally and
with respect at all times.

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 CLASS SCHEDULE, MKTG451-81, WINTER 2016
(as of October 26, 2015)
ALL CLASSES FROM 6:30 P.M. - 9:30 P.M. AT JACOBS CENTER

Week Date Topic Comments

1 1/5 Course Introduction: This week’s class will introduce the course; its framework for analyzing, structuring, and upgrading channels; and
Channel Strategy how channels can significantly affect total go-to-market value. We’ll discuss the go-to-market challenges raised
Framework in the video “The Cola Road.”

Creating Explosive Read/Prepare before Week 1 class:

Channel Value Course Syllabus
Watch video: “The Cola Road”
Study Questions for “The Cola Road”
A Framework for Channel Strategy
Identifying and Capturing Explosive Channel Value
“Will the Real Channel Manager Please Stand Up?”

Week 1 slides to be used in class:

Introduction
Creating Channel Value

Channel Analysis Workbooks (for your reference; we will discuss and use these throughout the course):
Channel Benefit Demands Workbook
Channel Partner Value Creation Workbook
Channel Power, Conflict, Resolution (PCR) Workbook

Channel Audit Project Overview Materials and Past Examples (for your reference throughout the course):
The Channel Audit: An Informal Guide
The Channel Audit Handbook
Pure Barre (sample channel audit)
LKQ (sample channel audit)

ATTENDANCE REQUIRED

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Week Date Topic Comments
2 1/12 Case application: Michaels We first analyze Michaels Craft Store’s channel strategy and how it aims to create explosive channel value… and
Craft Stores Case what challenges to doing so are encountered.

End-User Channel We then continue the discussion, turning to demand-side analysis of end-users’ channel benefits – channel value
Benefits: Channel creation in terms of how the end-user buys, not just what s/he buys.
Segmentation
Read/Prepare before Week 2 class:
Michaels Craft Stores case
Study Questions for Michaels Craft Stores case
Note on Channel Benefits
Retail Channel Benefit Audit Assignment Directions

Week 2 slides to be used in class:

Channel Benefits: Segmenting on How End-Users Buy
3 1/19 Case application: We consider the Rockwell case this week, which presents a B2B company’s challenge in serving multiple
Rockwell Case segments of end-users. This case lets you think about the link between channel segmentation insights and the
resulting channel structure to meet different segments’ channel benefit demands.
Channel Partner Value
Creation: Doing the Work We go on to discuss the supply side of channel design analysis: what the work of the channel is and which
of the Channel channel member(s) can/should do which elements of the work, in the pursuit of generating end-user channel
benefits while controlling channel operations costs.

Assignment: Your individual End-User Channel Benefits assignment is due at the beginning of class.
Assignment: If chosen, your individual Rockwell case memo is due at the beginning of class.

Read/Prepare before Week 3 class:

Rockwell case
Study Questions for Rockwell case
Note on Channel Partner Value Creation: The Work of the Channel

Week 3 slides to be used in class:

Channel Partner Value Creation

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Week Date Topic Comments
4 1/26 Case application: Mary We examine the challenges faced by Mary Kay in serving target consumers and keeping its direct-selling
Kay Case distributors motivated, in the face of changing market, technological, and demographic conditions that affect end-
users’ desired channel benefits and distributors’ ability and willingness to sell MK products.
Channel Alignment
Analysis We use this discussion to motivate a framework for analyzing Channel Alignment challenges on both the demand
and supply sides, from their antecedents through to suggested methods of improving Alignment.

Outside Speaker (tentative): Kregg Jodie, Chief Information Officer, Mary Kay Corporation.
ATTENDANCE REQUIRED.

Assignment: If chosen, your individual Mary Kay case memo is due at the beginning of class.

Read/Prepare before Week 4 class:

Mary Kay case
Study Questions for Mary Kay case
Note on Channel Alignment Analysis

Week 4 slides to be used in class:

Channel Alignment Analysis
5 2/2 Case Application: Cemex Cemex, the largest cement company in Mexico and one of the largest in the world, seeks to help low-income,
Case informal-economy consumers build rooms for their homes and faces challenges in encouraging its dealers to
support the effort.
End-User Channel
Benefits Presentations and We then discuss the individual End-User Channel Benefits assignments you submitted in week 3, to illustrate
Discussion segmented demands for the “elements of how” that the channel provides and to show how marketing research can
identify these benefit demands and the resulting channel segments.

Assignment: If chosen, your individual Cemex case memo is due at the beginning of class.

Read/Prepare before Week 5 class:

Cemex case
Study Questions for Cemex case

Week 5 slides to be used in class: none.

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Week Date Topic
6 2/9 Case Application: d.light
Design: Marketing
Channel Strategies in India
Case
Channel Leverage:
Sources and Analysis
7 2/16 Case Application: BMW
Project Switch Case
Channel Conflict Analysis
Comments
We use the d.light case to examine the constraints and misalignments that challenge the entrepreneurial new
channel design process for a new solar lamp product line targeted at the rural poor in India.
We go on to discuss the first of our Channel Implementation topics, Channel Leverage and Power: the ways in
which a channel member can influence others to take channel actions they would not otherwise take, and which
improve channel performance/profitability.
Assignment: If chosen, your individual d.light Design case memo is due at the beginning of class.
Read/Prepare before Week 6 class:
d.light Design: Marketing Channel Strategies in India case
Study Questions for d.light Design: Marketing Channel Strategies in India case
Note on Channel Relationships
Note on Channel Leverage and Power
Week 6 slides to be used in class:
Channel Leverage and Power
We first discuss the BMW Project Switch case, which presents a channel redesign problem of an existing
company driven by regulatory change, and complicated by legacy channel structures and behaviors that may not
be consistent with the new market realities.
We then develop a framework for identifying and analyzing sources of Channel Conflict, i.e. the situation where a
channel “partner” does not want to support your channel initiatives – and how to control (or prevent) it from
occurring.
Assignment: If chosen, your individual BMW Project Switch case memo is due at the beginning of class.
Read/Prepare before Week 7 class:
BMW Project Switch case
Study Questions for BMW Project Switch case
Note on Channel Conflict Identification and Management
Week 7 slides to be used in class:
Channel Conflict
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Week Date Topic Comments
Case Application: The Sonologics case examines the problem of gray marketing through multi-channel systems. Gray marketing is
Sonologics Case the sale of real, authorized, branded products by unauthorized resellers, which can result in price erosion and the
cannibalization of sales in the authorized channel structure. Resolving gray market problems requires the
Pricing Through the identification of the “culprit” supplying the gray market, and the design of monitoring and channel pricing
Channel policies to mitigate the associated channel conflicts.

We will then discuss more broadly the challenge of managing channel pricing and what tools and policies are
available to motivate downstream channel partners to set the “right” price.
8 2/23
Assignment: If chosen, your individual Sonologics case memo is due at the beginning of class.

Read/Prepare before Week 8 class:

Sonologics case
Study Questions for Sonologics case

Week 8 slides to be used in class:

Pricing Through the Channel
Case Application: This new multi-media interactive case on the airline industry allows you to diagnose misalignments in the air
New Distribution travel distribution channel and assess the viability of a suggested new technological standard (“NDC”) for the
Capability in the Airline representation of much richer big data to convey airlines’ differentiated offerings to business and leisure travelers.
Channel Case This case is in an online, interactive form rather than in the standard paper-case form. As a new case in a new
case-delivery format, your feedback on it is particularly welcome.
Outside Speakers’ Case
Wrap-up and Discussion The in-class discussion will be augmented by comments from outside visitors from the airlines industry,
on Current State of, and including: Rob Britton, Principal, AirLearn, former director, American Airlines; and Gary Doernhoefer,
Future Prospects for, NDC Principal, Skylarc, former General Counsel, IATA.

9 3/1 ATTENDANCE REQUIRED.

In the second half of class, our outside speakers will speak on the current state of, and future prospects for, NDC-
related technologies in the air travel industry.

Assignment: all students should submit online answers to questions posed throughout the interactive online
case; your submission is due before the start of class.

Read/Prepare before Week 9 class:

Prepare the New Distribution Capability in the Airlines Industry interactive, online case (accessed through
Canvas)

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Week Date Topic Comments
Channel Audit Assignment: Final Group Channel Audit Project Write-Ups are due at the beginning of class.
Presentations Assignment: Each team will make a brief presentation of its channel audit topic and key findings/insights.
10 3/8 Course Wrap-Up We then wrap up the course and wish each other a good Spring Break!

ATTENDANCE REQUIRED.

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