DISTIBUTION PLANNING AND

CONTROL
 INDEX

 CHANNEL MANAGEMENT DECISIONS

 CHANNEL DYNAMICS
 CHANNEL CONFLICT AND
MANAGEMENT
 CHANNEL MANAGEMENT
DECISIONS
 Selecting Channel Members

 Motivating Channel Members

 Notion of Fairness: A dental supply company, instead of
paying a straight 35% commission to distributors, pays 20%
for carrying out the basic sales work, 5% for carrying a 60 day
inventory, 5% for paying bills on time and 5% for reporting
consumer purchase information
 Evaluating Channel Members
 Sales quota attainment; average inventory levels; customer
delivery time; treatment of lost and damaged goods; co-
operation in promotional & training programs
 Channel management
decisions
1. Selecting Channel Members
– Producers should determine characteristics to
distinguish the better intermediaries
– Characteristics like number of years in
business, other lines carried, growth and profit
record, solvency, cooperativeness, and
reputation
– Selection, a two-way process: Just as
producers select their channel members, the
intermediaries also select their producer
partners.
 Contd.
2. Training and Motivating Channel Members
– Careful training programs, capability-building and market
research programs for the distributors and dealers because
the intermediaries will be viewed as the company by end
users
– Training initiatives keep employees updated on the latest
product specifications and service requirements
– Motivating the intermediaries through Channel Power
 Contd.
– Producers can draw on following types of
power to elicit cooperation:
 Reward Power
 Coercive Power
 Legitimate Power
 Expert Power
 Referent Power
– Forging long-term partnerships with the
distributors
– Efficient Consumer Response (ECR) practices
 Contd.
3. Evaluating Channel Members
 Evaluate intermediaries’ performance
against standards as sales-quota
attainment, average inventory levels,
customer delivery time, treatment of
damaged and lost goods, and cooperation
in promotional and training programs
 Contd.
4. Modifying Channel Design and
Arrangements
 CHANNEL
DYNAMICS
 Vertical marketing system
 a tightly coordinated distribution channel
designed to improve operating efficiency and
marketing effectiveness
 Conventional Channels
 Independent producer, wholesaler and retailer
 Double marginalization problems
 VMS
 Producer, wholesaler and retailer act as a unified system
– Corporate VMS: Vertical Integration
 Administered VMS: Co-ordination through power of one
player (e.g., P&G)
 Contractual VMS: Franchising
 Horizontal Marketing
System
 Two or more unrelated companies at one level
join together to follow new market opportunities
 Companies might join forces with competitors or
non-competitors
 Temporary or permanent basis, or a separate
joint venture company
 Also called, symbiotic marketing

e.g., HUL entering a strategic tie-up with PepsiCo

India for bottling and distribution of Lipton’s ready-
to-drink and other beverages
Eg. Airline companies: British & American; Lufthansa &
United; KLM & Northwest
 Multichannel Marketing
System
 A single firm uses two or more marketing channels
to reach one or more customer segments.
 Offers three important benefits:
– Increased market coverage
– Lower channel cost
– More customized selling
e.g., Disney sells its DVDs through 5 main channels: movie rental
stores; Disney Stores; retail stores; online retailers and Disney’s
own online stores; and the Disney catalog and other catalog
sellers.
 Multichannel Marketing Systems
When a single firm uses two or more marketing channels to reach one or
more customer segments.
Gain increased market coverage; lower channel cost and more
customized selling
Downside - conflict and control problems
Generate a hybrid grid to design channel architecture. Use marketing
tasks as basis
Demand Generation Tasks
Nat. A/C Mgt

Direct Sales BIG CUSTOMERS

CUSTOMER
Telemarketing
Channels &

MIDSIZE CUSTOMERS
VENDOR
Marketing

Methods

Direct Mail

Retail Stores

Distributors SMALL CUSTOMERS

VARs
 Example of Multichannel
Marketing: IBM

Cost of Using Different

Channels
COST
($) Cost of Using only Direct
Salesforce

SALESFORCE
TELEMARKETING
DEALER Conflict
AGENT
Conflict

Small, Rural Small, Urban Medium Large Very Large

CUSTOMER SIZE
 Channel Dynamics: Designer Apparel

Value added by channel

High Low

Off-Price
Boutiques
Stores
Market
Growth
Rate
Better Department Mass
Store Merchandisers
 CHANNEL
CONFLICT AND
MANAGEMENT
 Channel conflicts
 Channel conflict is a situation in which channel
partners have to compete against one another or
the vendor's internal sales department. Channel
conflict can cost a company and its partners
money as partners try to undercut one another. It
can also lower morale within the channel and
cause some partners to consider other vendors.
To prevent channel conflict, partners sometimes
enact agreements such as deal registration.
Channel conflict may also occur among various
segments of corporate departments, such as the
sales channel. For example, the direct contact
component of the sales department may have to
compete with other sales channels, such as
telephone, online and mail campaigns
 Causes of Channel Conflict
 Goal incompatibility :Manufacturer wants
to achieve rapid market growth via lower prices;
retailer interested in large margins
 Domain Dissensus:Territory boundaries,
who gets credit for sale
 Differing perceptions of
reality:Optimistic manufacturer, pessimistic
retailer
 Intermediaries’ dependence on the
manufacture:Of retailer on manufacturer or
vice-versa
 Channel conflicts
 Channel conflict is generated when one
channel member’s actions prevent
another channel from achieving its goal
 Types of channel conflicts
 Vertical
 Coca-Cola and bottlers wanting to bottle Dr. Pepper
 Horizontal
 Some Ford dealers coplaining about other dealers being too
aggressive in their pricing
 Multichannel
 Anne Klein opening own stores while distributing through large
department stores
 Managing Channel Conflict
 Superordinate Goals
 Exchange of persons
 Co-optation
 Include members
of other
organization on
advisory councils,
boards, etc.
 Joint membership in
trade associations
 Diplomacy, mediation,
arbitration for chronic
or acute conflict
THANKYOU
