Accessing Market Channel Performance

Presented By: Ravi Kumar Gupta MBA-Marketing IV th SEM Roll No. : 33

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Marketing Channel
A marketing channel is a set of practices or activities necessary to transfer the ownership of goods, and to move goods, from the point of production to the point of consumption which consists of all the institutions and all the marketing activities in the marketing process.

An alternative term is distribution channel or 'route-to-market'. It is a 'path' or 'pipeline' through which goods and services flow in one direction (from vendor to the consumer), and the payments generated by them flow in the opposite direction (from consumer to the vendor). E. Raymond Corey

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Measurement of Channel Performance

It includes all processes that will lead managers to taking appropriate actions in the present that will create a performing organization in the future 'or in other words, doing today what will lead to measured value outcomes tomorrow

It focus on profitability & cost relative figures of channel members Which channel member are solid run Which channel seems to produce highest returns Which suppliers/intermediaries will help the firm generate the greatest end user satisfaction which of the marketing flows is best performed by specific channel member

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Accessing Marketing Channel Performance:

The evaluations assess the channels financial performance and looks into societal contributions made by individual members of the channel. Can be done in two ways: l. Macro Level or societal perspective

2. Micro Level or managerial perspective

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Macro Level:
Performance at macro Level is evaluated in terms of contributions made by intermediaries to the society. Major elements that will determine the success of the intermediary are:

Product Availability Channel efficiency Effectiveness Equity Profitability Promotional effort Market information

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Product availability
The most important objective for any distribution channel is to make the product conveniently available for customers who want to buy it.

Considerations taken:

1. Level of coverage
2. Items positioning within the store

3. Market and competitive factors

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Channel Efficiency
Channel Efficiency is a channel performance dimension that judges the abilities of the intermediaries to undertake necessary channel functions by incurring minimal costs . Channels must be designed to minimize the costs necessary to attain the firms channel objectives.

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Channel Effectiveness
Channel Effectiveness measures channel performance and considers the ability to satisfy customers needs. Some service requirements that might be targeted for consumers, industrial end users, or other members of the distribution channel (e.g., the firms intermediate customers such as distributors or retailers) include: a) b) c) d) Order cycle time Communication Convenience Post-sale services

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Channel Equity(Distribution Equity)

Distribution Equity refers to the increase in options value of marketing opportunities that results when the firm effectively utilizes its knowledge relationships with an existing distribution channel partner to create and market its products. Companies have been leveraging this strength for quite long to test launch new products , and based on the acceptance of they decide to launch the product nationally with adequate marketing support. It is logical for products in the same category, like a soft drink company leveraging its existing distribution to launch a new flavor of variant or pushing a new variant. But some companies have used their channel strength to even enter into totally new categories , like ITC which has leveraged its channels strength and equity to enter new markets like snacks, and even FMCG.
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Profitability
The profitability of a distributor has to be measured in terms of

The return on sales as a percentage(profit is the distributors sales in a period)

The return on capital employed as a percentage per annum(turnover of assests) The first part indicates the margin on sales achieved and the second part indicates the administrative and managerial aspects of the distributors management skills.

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Promotional effort
Another common channel objective is to obtain strong promotional support from channel members for the firms product, including the use of local media, in-store displays, and cooperation in special promotion events.
Market information Because of their proximity to the marketplace, middlemen are often relied on for fast and accurate feedback of information about such things as sales trends, inventory levels, and competitors actions. Channel feedback is particularly important for firms in highly competitive industries characterized by rapid changes in product technology or customer preferences, such as the computer and fashion industries

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Micro Level
Channel performance at micro level involves a closer look at the Performance of individual intermediaries associated with a marketing channel. Each intermediary should aid the manufacturer attain the objectives of goal attainment, pattern maintenance, integration and adaptation.
Goal Attainment
It refers to achieving the firms goals by interacting with the task environment and maximizing outputs given the constraints of costs and company specific obstacles.

Pattern Maintenance
It involves coordination of processes and function among organizational units to help the system function smoothly.

Integration and Adaptation

Integration refers to the coordination among the components of the channel or an organization to meet common objectives and maintain the equity as single unit. Adaptation is the modification of resources required to meet system objectives
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Sources
Wikipedia Sales and Distribution Management, Dr. S.L. Gupta

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