UNIT 3 DISTRIBUTION CHANNEL MANAGEMENTManagement of Distribution Channel - Meaning & Need Channel Partners- Wholesalers, Distributors and Retailers & their Functions in Distribution Channel, Difference Between a Distributor and a Wholesaler Choice of Distribution System — Intensive, Selective, Exclusive Factors Affecting Distribution Strategy - Locational Demand, Product Characteristics, Pricing Policy, Speed or Efficiency, Distribution Cost Factors Affecting Effective Management Of Distribution Channels = Channel Design " Channel Policy * Channel Conflicts: Meaning, Types — Vertical, Horizontal, Multichannel, Reasons for Channel Conflict * Resolution of Conflicts: Methods — Kenneth Thomas's Five Styles of Conflict Resolution * Motivating Channel Members * Selecting Channel Partners = Evaluating Channels * Channel ControlDISTRIBUTION CHANNEL 0 Distribution channel (also called sales channel or trade channel) constitute an important factor or link in effective sales management. olt is the chain of businesses or intermediaries through which a good or service passes until it reaches the end consumer. 3 © Distribution channel can include wholesalers, retailers, distributors, agents, dealers etc, known = as intermediaries, middleman or channel partners. oChannels connect the producers to the ultimate consumers — it is the route through which goods move from the point of production to the point of utimg consumption.DISTRIBUTION CHANNEL oOWhen goods reach consumers through various intermediaries, it is called as Indirect selling. oln indirect selling, goods reach final consumers through the distribution channel. 2 oWhen the manufacturer sells directly to final consumer it is called direct selling, or zero level channel. ~ oThen there are one level, two levels and three levels channels depending upon number of intermediaries involved in the distribution channel. @ASIC CHANNELS oF CHANNELS OF DISTRIBUTION | y Ep a SS SS _y_ , aa = eS oe | Mert rr (source: eeireararitrorareor deri u )MANAGEMENT OF DISTRIBUTION CHANNEL o Channel management is a process by which a company creates formalized programs for selling and servicing customers within a specific channel. o Number of individual entities comprising the channel of distribution between producer and consumer is called Channel length. F o Number of different entities available for providing the same distribution function (as a distributor, wholesaler, or retailer) at different stages in a distribution channel is called as Channel Width. o The channel management service refers to how companies build tailored business streams to more effectively manage their business within and across channels, setting investment priorities and key areas of operational fo: managing channel conflict; deciding on the right prod and services to better and more profitably serve customers.NEED FOR A DISTRIBUTION CHANNEL o Every organization needs a good distribution channel so that the commodity reaches the customer at the right place and at the right time as per his convenience. oThere are many functions to be carried out in moving the product from manufacturer to the customer and each require funding and, often, specialist knowledge and expertise. 5 © Distribution channel adds value to selling or the pated and the consumer. Value addition takes place through place utility, time utility and possession utilityNEED FOR A DISTRIBUTION CHANNEL Supply of Information Product Promotion Financing of Operations fay, dOOAE 1c] te Maintaining Price Stability Title of Goods Creation of Place, Time and Form Utilities Holding StockNEED FOR CHANNEL MANAGEMENT Channel Efficiency Reduced Distribution Costs Role Clarity Reduced Channel Conflict POG yy UOBAREEE «(7 Ensure Timely Delivery of Goods Ethical Practices Maintain Price StabilityTYPE OF CHANNEL PARTNERS 1. Wholesalers A wholesaler is an intermediary in the distribution channel who buys in bulk and sells to resellers rather than to consumers. = “The wholesaler, or the wholesale trader, is a trader, who purchases goods in large quantities from manufacturers and resells to retailers in small quantities.” —S E Thomas: “Wholesaling is concerned with the activities of those persons or establishments that sell to retailers and other merchants, and/or industrial, institutional, and commercial users, but that do not sell in large amounts to final consumers.” — US Bureau of Censu@TYPE OF CHANNEL PARTNERS Functions of Wholesalers - Assembling Goods » Distribution of Goods - Provides a Trained Sales force - Marketing and Research - Reduces Physical Distribution Cost - Warehousing and Delivery facilities - Credit Facilities - Advertisement - Finance — make advance payment and place the order - Undertake RisksTYPE OF CHANNEL PARTNERS 2. Distributors A distributor is an intermediary entity between the producer of a product and another entity in the distribution channel or supply chain, such as a retailer’ The distributor performs some of the same functions that a wholesaler does but generally takes a more active role. = Distributors sell to both — Wholesalers and retailers. zB A distributor may be required under three circumstances: o Entering a new town. © Additional coverage in the same town. e@ o Replacing an existing distributorTYPE OF CHANNEL PARTNERS Consumer durable, electronics, hardware or other equipment, medicines are perfect examples of sectors which use distributors and not wholesalers. A medicine retailer may have more then 1000 different type of medicines. He cannot afford to visit wholesalers who are stocking all these machines. e So the companies appoint a distributor who can distribute the various medicines to the retailer who in turn sells it to customers. For instance, Samsung Smart phones are distributed to all stores and the distributors may visit all the shops within a region to ensure that the material is on display by ® retailers. There is no wholesaler of Samsung but o retailers and distributors.TYPE OF CHANNEL PARTNERS Functions of Distributors - Selling » Promotion » Customer Service » Market Research - FinancingTYPE OF CHANNEL PARTNERS DISTRIBUTOR Mate] RNR Generally works on No contract is required contractual basis with the manufacturer Customers can be retailers, Customers are the retailers wholesalers and end users. Zz Wider area of operation Limited area of operation Require promotion to sell No promotion required Exclusive suppliers Bulk buyers Earns from the service fees Gains profit from the price charged discounts on bulk purchases Exclusively sells one brand at a Deals ina variety of brands time.TYPE OF CHANNEL PARTNERS 3. Retailers Retailer may be defined as a dealer or trader who sells goods/ services in small quantities to consumers for personal or family use. According to Philip Kotler “Retailing includes all the activities involved in selling goods or services directly to final consumers for personal, non business use” : Retailing is a set of business activities that adds value to the products and services. Retailing may be understood as the final step in distribution of merchandise, for consumption by the end consumersTYPE OF CHANNEL PARTNERS Any organization selling to final consumer is retailing, whether they are: A Manufacturer A Wholesaler A Retailer z It does not matter how they sell or serve by - i Person g Mail a Telephone Vending Machine or Internet Social Media Or e@ Where these are sold - A store, street or consumers houseTYPE OF CHANNEL PARTNERS Functions of Retailers - Providing Assortments - Breaking Bulk - Holding Inventory - Providing Goods at Convenient Locations and Timings - Providing Services - Feedback - Increasing the Value of Products and ServicesConsumption Points Consumption Points Consumption Points Consumption Points af Ba =£ Ea Retailer Retailer Retailer SO es a =a) Distributor 4a pf e e pec gs Manufacturer (Ref.: https://www.marketing91.com/difference-between-wholesalers-retailers-a distributors/) Teeny uooareg “aq, @Wholesaler Acts as a link between the distributor and the retailer Does not establish a business relationship with the product manufacturer Function in both a two and a three-level distribution channel Use the “business-to- business" (B2B) model Mainly responsible for warehousing and selling products to retailers and end consumers Allowed to sell products to end consumers (Reference: https:// and-a-retailer/) Distributor Acts as a major link between the manufacturer and the wholesaler Establishes a business relationship with the product manufacturer by securing a contract Function in a three-level distribution channel Use the “business-to-business" (B2B) model Mainly responsible for increasing the visibility and sales of the products and transporting goods to wholesalers or retailers Not allowed to sell products to end consumers Retailer Acts as a link between the wholesaler and the end consumer Does not establish a business relationshi with the product manufacturer Function in a one- level distribution channel Use the “business-to- consumer" (B20) model TedBeyy uaeateg “aq, Mainly responsible for selling products to end consumers Allowed to sell products to end ifference.guru/difference-between-a-wholesaler-a-distributorINDustRY 4.0 © Ist Industrial Revolution snroduton of mecha ‘rodicton toate wth fe po water and steam power © 3rd industrial Revolution ‘opleaton of dectroncs and © 2nd Industrial to.asonate prosicton Revolution triton of mass © 4th industria Revolution ode, assent ine mth siden of eter pyc Thealp of eect eneray producton systems Industry 4.059 all about optimisation of smart, exible supply chains factories and distribution models where machines captre and convey more data va machine-to"machine communication and to human operators All his aims at eabling ibninssex to make quicker, smarter decisional while minimising cont The thee hey tends that ae changing the way of ile for industrial commparics and their employees today areDISTRIBUTION 4.0 Asian Paints recently realized from market research that its consumer is the woman of the house who was making the choice of home decor. The conventional profile used to be the male consumer, 35-45 years of age. The findings from the research compelled the company to start looking at the female consumer strongly. "We have aligned our decor orientation at Asian paints to the woman of the house," said Amit Syngle, president, technology, sales & marketing, Asian Paints, adding that "all marketing initiatives, even in the social media space, are targeted at the woman". The company has roped in Deepika Padukone as the brand ambassador and is also keen to improve its gender diversity, which currently stands at 7%. Asian Paints believes it has now developed a better connect with its audience. "We have hit arrow at the right spot and it is showing clearly in terms of the equity of the hrand " caid Synole.APPLE MAY TWEAK INDIA STRATEGY IN BID TO INCREASE MARKET SHARE (MINT, 02 May 2019, 10:00 AM IST) Apple Inc. is likely to make some adjustments to its India strategy to improve its market share in the world’s second- largest market for mobile phones. As part of the strategy, the iPhone maker is expected to boost its manufacturing capacity and open branded retail stores. After announcing its fiscal-second-quarter earnings ofA Tuesday, chief executive Tim Cook told analysts that Apple, which only assembles the iPhone 7 in India, will increase local manufacturing, Press Trust of India reported. z According to Cook, a temporary 22% drop in price for the iPhone XR in April taught Apple something, as it helped the company increase sales. Apple iPhones account for less than 1% of the Indian smartphone market, largely dominated by vendors such as Samsung and Xiaomi The slowdown in the Chinese market is yet another reason({Bb Apple’s renewed interest in India.ENO PARTNERS WITH GOOGLE FOR 'WHAT A RELIEF’ CAMPAIGN (ETBRANDEQuITY, SEPTEMBER 09, 2020) GSK Consumer Healthcare’s antacid brand, Eno has partnered with Google to create a campaign where the communication is customised as per the recipe being searched by the user, based on search data from Youtube that said in-home food experiments continue to be a relevant trend. With this, it has launched the third phase of the #WhatARelief campaign to drive relevance for the brand. With this campaign, the brand aims to drive relevance via contextudl conversations and present itself as a reliable ally against acidity. The brand first picked up the top recipes being searched on YouTube and then developed customised six second creatives for each recipe. The Eno advertisement is customised on the basis of the recipe searched and played before the reci video commences. }$AMAZONS BUSINESS MODEL IN INDIA Amazon is an American international e-commerce company. It was started by Jeffrey P. Bezos in the year 1994 and it was launched in India in June 2013. Few years back, Amazon had _no infrastructure in India, and now it dominates the Indian markets. : At the very start it was perception of investors that ip India It will not go long like China as in the year 2004 when Amazon entered in China it hasn’t seen much success there with Alibaba, its Chinese competitor, dominating the e-commerce market.CASE STUDY Mr. Desai, the president of ‘Tracks Company’, leaned back in his chair and reflected on the success of his firm, which produces and distributes a line of farm equipment across India. He held a meeting of all his senior managers from different states and expressed his urge to introduce new models of farm equipment to satisfy changing demands of the customers (farmers). Distributors also suggested many modifications in the companys products. One of the managers, who had an engineering background, recognized the implications of the suggestion that came from the distributors. He said that the implementation would require greater investments in research and development. Furthermore, the changes in the highly automated production line would be very costly. Also having a wider variety of models would require stocking many more spare parts depending on the kinds of changes, workers mi need to be retained.CASE STUDY Reflecting on the previous staff meetings, the president realized that sales or marketing people always wanted a greater variety of models but never acknowledged costs involved in changing models. Till date the company had been extremely successful with just a few models. Consequently, the president decided against the introduction of new models. Instead he considered improving the current models and reducing the cost and price. He felt that what the customer really wants was value. Nevertheless, to test his judgement, the president asked a consultant for an opinion. Questions 1. What do you think are the opportunities and threats in the external environment? 2. How would you go about evaluating the strength and weakness of the firm? 3. Discuss the role of distributors in selling farm equipmentCHOICE OF DISTRIBUTION SYSTEM Intensive Distribution Exclusive Jistribution |, Selective DistributionCHOICE OF DISTRIBUTION SYSTEM 1. Intensive Distribution Intensive distribution aims to provide saturation coverage of the market by using all available outlets. The objective is to distribute the product as extensively as possible. For many products, total sales are directly linked to the number of outlets used. e Intensive distribution is usually required where customers have a range of acceptable brands to choose from. In other words, if one brand is not available, a customer will simply choose another. This alternative involves all the possible outlets that can be used to distribute the product. This strategy is particularly useful in low involvement products like soft drinks where distribution is a key success factor. Here, soft drink firms distribute their brands through multiple outlets to ensure their easy availability to the customer. Hence, on one hand these brands are available in restaurants and five star hotels an the other hand they are also available through small soft stink stalls, kiosks, sweet marts, tea shops, and so on.CHOICE OF DISTRIBUTION SYSTEM 2. Selective Distribution Selective distribution involves a producer using a limited number of outlets in a geographical area to sell products. It ensures more control over the outlets. An advantage of this approach is that the producer can choose the most appropriate or best-performing outlets and focus efforts like training on them. Selective distribution works best when consumers have a preference for a particular brand or price and will search out the outlets that supply. This alternative helps focus the selling effort of manufacturing firms on a fewer outlets. It also enables the firm to establish a good working relationship with channel members. Selective distribution can help the manufacturer gain optimum market coverage and more control but at a lesser cost than intensive distribution. E.g. Dior or Prada perfumes are available at some depart stores.CHOICE OF DISTRIBUTION SYSTEM 3. Exclusive Distribution Exclusive distribution is an extreme form of selective distribution in which only one or maximum two - wholesaler, retailer or distributor has the right to sell the brand. When the firm distributes its brand through just one or two major outlets in the market, who exclusively deal in it and not all competing brands, it is said that the firm is using an exclusive distribution strategy. This is a common form of distribution in products and brands that seek a high prestigious image. Typical examples are designer wear, major domestic appliances and even automobiles. By granting exclusive distribution rights, the manufacturer hopes to h control over the intermediary’s price, promotion, credit inventory and service policies.FACTORS AFFECTING DISTRIBUTION STRATEGY _ Locational Demand Product Characteristics Pricing Policy Speed and Efficiency Distribution CostSELLING & DISTRIBUTION STRATEGIES Chandubhai Virani, the 60-year-old founder and director of Balaji Wafers Private Limited, started making potato wafers in 1982 with a minuscule investment of Rs 10,000 at a shed erected in the compound of his house. He then went on to build a company that has reaped Rs 1,800 crore as turnover in 2017. 5 Balaji Wafers, the largest regional potato wafer and snack brand and the second biggest player in the potato wafer segment in the country, started small. Now, despite being concentrated in the western States a Gujarat, Maharashtra, Goa, Rajasthan and Madhya Pradesh, it is a household name thanks to its strong distribution network. As one enters the premises of Balaji Wafers Private Limited in the village of Vajdi (Vad) around 20 km from Rajkot, a small Balaji temple in the forefront of the 50-acre factory area, is proof of the faith the owners have in Lord Balaji, from w' the brand name ‘Balaji’ came.SELLING & DISTRIBUTION STRATEGIES It was in 1972 that Chandubhai’s father, the late Popat Ramjibhai Virani who was an ordinary farmer, gave three of his sons — Meghjibhai, Bhikhubhai and Chandubhai — the sum of Rs 20,000 to invest it wisely. The family then lived in Dhundoraji in Jamnagar district - about 79 km from Rajkot - and Chandubhai was only 15 years old. = His elder brothers invested in agricultural tools and fertilisers, but lost the money. Forced to leave in search of earnings by 4 poor monsoon and subsequent severe drought, the three brothers came to Rajkot in 1974 while the youngest Kanubhai stayed back with his parents and two sisters. Chandubhai, a Class X pass, found a job in Astron Cinema. While his main job was to serve at the canteen, he also did odd jobs like sticking film posters, door-keeping and usheri, all for a monthly salary of Rs.90. 6SELLING & DISTRIBUTION STRATEGIES “At night after the show, | repaired torn seats and in exchange got a plate of chorafari (a Gujarati snack) and chutney,” shares Chandubhai. “We lived in a rented place, but one night we ran away from there because we did not have even Rs 50 to pay as rent.” (He later paid the landlord back.) The brothers started selling various items in the canteen including potato wafers bought from a supplier, who was always late. This spelt disaster at a movie hall! “After changing suppliers three times,” says Chandubhai, “I thought — why not make our own potato wafers?” By 1982, the whole family had moved to Rajkot and Ramjibhai had bought a house with a large compound. The family made ‘masala’ sandwiches for the canteen; it was a hit, but a perishable product and Chandubhai saw a future in wafers because they could be carried anywhere and everywhere. With an investment of Rs 10,000, Chandubhai set up as shed in the compound and began his experiments with ma chips, after canteen work.SELLING & DISTRIBUTION STRATEGIES Jumbo king was founded by Dheeraj Gupta, a third- generation entrepreneur from his family. Dheeraj’s family has been in the hotel and catering business and also had their sweet shops. Therefore on completing his MBA from Symbiosis, Pune, Dheeraj decided he will export sweets t6 markets with heavy India population, like Dubai. However, this attempt at exporting sweets didn’t work out well and Dheeraj had to shut shop. His second entrepreneurial outing was with street food and he opened an outlet in suburban Mumbai, in Malad under the name of Chaat Factory. As business grew, Dheeraj realized the best selling item on their menu was vadapav and decided to do a more thorough job with this particular food product. TI began the journey of Jumboking.SELLING & DISTRIBUTION STRATEGIES Jumboking opened its first outlet in 2001 and priced the vadapav at a premium of Rs 5 when the roadside offering was being sold at Rs 2. “People were very curious to try a vadapav in the shop, but they did come,” says Dheeraj. Being hygienic was their first differentiation. Soon there were flavours and variety -- cheese vadapav, butter vadapav, schezwan vadapav -- that they started offering. Sales started picking up and the company continued to constantly innovate as it chugged along. One of the earliest things Jumboking did was to open franchise stores in Tier 1 -2 cities, in areas where there were high footfalls — like outside a railway station. 200-300 sq. ft. stores that fit well with the locations, and the customer base was the crowd rushing to catch that 5.45 local back home, or ‘Ss the 9.15 train to rush for that meeting.DISCUSS THE DISTRIBUTION STRATEGIESON DU PWN PB FACTORS AFFECTING EFFECTIVE MANAGEMENT OF DISTRIBUTION CHANNEL . Channel Design . Channel Policy . Channel Conflicts . Resolution of Conflicts . Motivating Channel Members . Selecting Channel Partners . Evaluating Channels . Channel ControlCHANNEL DESIGN Channel design is the pattern of channel which is suitable for marketing its products. It includes the decision about the structure - o Length of the channel oNumber of members required in the distribution network. © Activities to be performed by channel members. Z o Role and responsibility of channel members. Firms can use different channels to reach different segments of the market or different channels for reachi. the same market. éCHANNEL DESIGN The channel selected should be best suited to the firms requirements for the particular segment. It should focus on: Customers Needs and Wants 3 Selling Objectives g Constraints = Customer ConvenienceCHANNEL DESIGN Steps in Designing the Channel Analysis of Customer Needs and Wants Establishing Objectives and Constraints Identifying and Evaluating Major (nT ee} VCH UE LMU oM Teele (ory Affecting Channel Design Selecting the “Be: Channel Structure TedBeyy uooAreg “aq,CHANNEL POLICY Channel Policy has to be reviewed at regular intervals from time to time. It is framed in the areas of © Market Coverage — Extent to which manufacturers cover the market through the distribution channels. o Channel Coverage — Use of various channels (direct and indirect) to reach diversified group of customers througl different pricing strategies. o Product Lines — Group of products that are closely related because they function in similar manner, are sold to the same customer groups, are marketed through the same types of outlets or fall within given price ranges. E.g. Bata o Pricing © Choice of Channel PartnersCHANNEL CONFLICTS Channels are managed by individual businessmen who are motivated by personal goals Each channel member is interested to increase sales and make profits. . When one channel members actions prevent another channel from achieving its goals, channel conflicts occur. 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 losses as partners try to undercut one another. It can also lower morale within the channel and case some partners to consider other vendors.CHANNEL CONFLICTS Channel conflict causes unnecessary hurdles, problems in sales and reducing efficiencies of the channel partners. To prevent channel conflict, partners sometimes enact agreements such as_ deal registration between manufacturer and the channel partner -CHANNEL CONFLICTS Types of Channel Conflicts i Vertical Channel Conflict: Relates to different levels within the same channel. E.g. Conflict between Manufacturer and Distributor Horizontal Channel Conflict: Takes place on same level of distribution. E.g. One dealer may overlap and interfere with sales territory assigned to the other dealer and adopt price cutting. Multi Channel Conflict: When the manufacturer uses two or more different channels to sell the product to the same target market. E.g. A manufacturer may sell his product through an agent and also online at same timeREASONS FOR CHANNEL CONFLICTS Role Ambiguity Goal Incompatibility Mismatch of Market Perception Bias or Target fixing Competitor Inducement Demand for Higher Commission Stocking of Competitive BrandsRESOLUTION OF CHANNEL CONFLICTS Channel conflicts should be avoided to maximize profits and achieve overall goals and objectives. Conflicts can take different forms such as_ hostility, incompatibility, disagreement etc. : Thus every effort should be taken to resolve conflict by i o Effective communication “ o Understanding the nature and intensity of the conflict o Finding out the source of conflict 0 Arbitration o Formation of Dealer Councils @ © Mediation etc.KENNETH THOMAS’S 5 STYLES OF CONFLICT RESOLUTION Kenneth W. Thomas and Ralph H. Kilmann developed five stages of conflict resolution It assess individuals behaviour in conflict situations. In such situation, a persons behaviour can be described along 2 dimensions: a. Assertiveness, the extent to which the individual attempts to satisfy his own concerns 2 b. Cooperativeness, the extent to which the individual attempts to satisfy the other persons concerns. The two dimensions of behaviour can be used to define five methods of dealing with conflict. 6KENNETH THOMAS’S 5 STYLES OF CONFLICT RESOLUTION | HIGH | COMPETING COLLABORATING > 9 = % COMPROMISING y | AVOIDING ACCOMMODATING LOW Low ~————— COOPERATIVE ————+ HIGH |KENNETH THOMAS’S 5 STYLES OF CONFLICT RESOLUTION 1. Competing: is a power — oriented mode It is assertive and uncooperative. Competition results from the desire to survive. An individual may follow his own concerns at the other persons expense. Competing can emerge as a winning strategy wh assertive individuals are on the job. 2 2. Collaborating: It is assertive and cooperative People try to meet the needs of everyone and acknowledge them. Conflict resolution requires mutual respect, a willing to listen to others and creativity.KENNETH THOMAS’S 5 STYLES OF CONFLICT RESOLUTION 3. Compromising: Moderate in assertiveness and cooperativeness Find solutions that will satisfy everyone to some extent. It is a situation in which both the parties sacrifice to gete a midway solution of the problem. They call for meetings, understand the nature of the problem and get a solution to the problem 4. Avoiding: It is unassertive and uncooperative Avoidance is used by the weak or disinterested members of the channel. Members who cannot solve a problem try to avoid ignore the problem. é} Solution of the conflict is postponed or avoided.KENNETH THOMAS’S 5 STYLES OF CONFLICT RESOLUTION 5. Accommodating: It is unassertive and cooperative Accommodation is a solution through surrender and understanding. In accommodation one channel member allows the otheF party to achieve goals without being concerned about his own interests. B Only those people willing to sacrifice their ego can adopt this strategyMOTIVATING CHANNEL MEMBERS a dl vo re} a oI = xa) < i= oO = s Pe) ¢ & oO = & i) a Breer == = on == TedBeyy uooareg “AC,MOTIVATING CHANNEL MEMBERS Referent Power - Image or recognition that a company enjoys in the market. Such position gives the company power of reference. Members feel proud to be associated with such a company and it naturally motivates them to be associated with the company. Companies like ITC, HUL, Bisleri, Sony and many others enjoy referent power. S Expert Power - refers to some skills or capability that a company possesses which can be imparted to the channel partners. Channel members can thus learn more about the technology and business and hence get motivated to be associated with the company. Technology oriented companies in automobiles, electronics and telecommunication use this expert power. Reward Power - Companys willingness to reward the channel members in order to motivate them. It may be conventional reward or incentive system used companies for better results. Rewards can be finan non financial or both.MOTIVATING CHANNEL MEMBERS Legitimate Power: refers to power or authority derived by a company from any contract or agreement signed by the company with its channel partners like distributors. The agreement gives the company legal powers to expect the members to perform as per the expectations or members are obligated to do so. However the legitimate power should be used as a source of motivation rather than means of pressuring the channel partners to perform. Coercive power: refers to use of threat by a company to make the channel members perform. Large companies which are very powerful due to their strong positions make use of these powers to ensure that the work is done through the distributors. Coercion or threat should avoided as it is not a motivating factor.SELECTING CHANNEL MEMBERS Finding the right channel partner may not be an easy task. Channel partners must efficiently perform the distribution tasks necessary to implement the channel strategy. Motivation of channel members can become much easier if the correct channel partners are selected. : In case of FMCG products, channel members like wholesalers and retailers are already present and become a part of distribution network to the company. For consumer goods like automobiles and electrical goods, dealers have to be selected or appointed.SELECTING CHANNEL MEMBERS While selecting the channel partners, company must evaluate their various characteristics such as: o Reputation 0 Location o Number of years in business o Profit Records © Cooperativeness © Line Specialization o Size and Quality of Salesforce o Future Growth PotentialSELECTING CHANNEL MEMBERS A checklist of indicators that can be taken into consideration before selecting a channel: - Knowledge of market - Local presence Relationship with customers - Reputation in market Financial stability - Sales area coverage z + Selling skills - Competitive service skills - Marketing support to manufacturer » Shared values and culture - Ethical practices © - Necessary leadership skillsCRITERIA FOR SELECTING CHANNEL MEMBERS [eden uaaated “IqSELECTING CHANNEL MEMBERS Market Factors- Existing market structure of the product(s). This includes the process of buying and selling, consumer location and preferences and behavior, competition, existence or proportion of industrial or organizational buyers etc. Product Factors - Product characteristics - physical properties, technical or technological aspects, life cycles, consumer perceptions, market position etc. e Channel Factors - Different aspects, characteristics and capabilities of channel members, such as, _ financial trustworthiness or reputation, product promotion capabilities, selling abilities, after-sales service facilities or abilities (wherever applicable), and, finally, willingness or availability of particular channel members. SWOT Analysis refers to the overall appraisal of prospective channel members before selection. Different channel members may exhibit different strengths and weaknesses in the existing market environment, i.e., opportunities and threats. S channel members may be effective in pushing slow-moling products into the market while some other channel memb: may be effective in selling Industrial goods.EVALUATING CHANNELS Evaluation is more commonly done on monthly basis; some companies do on quarterly basis; and some other companies do on monthly and quarterly basis. Performance evaluation is done on the basis of prescribed standards, tasks and targets. Tasks and targets can relate to sales volume, channel inventory level/management, efficiency, profitability ete. Evaluation norms or criteria are usually agreed between the company and a particular channel partner.EVALUATING CHANNELS Measures for evaluating performance of channel members: o Effectiveness - assessed in terms of delivery and proficiency to satisfy customer needs. 7 oEfficiency/ Productivity - involves controlling costs incurred by intermediaries, maximizing output for a given level of input / o Equity - the extent to which distribution channels serve markets/ segments such as distant or isolated consumer pockets along with normal consumers (Accessibility of channel among customers) o Profitability — concerns financial that brings revenug@® the manufacturer.CHANNEL CONTROL Channel control refers to verify whether specified functions have been carried out in accordance with the pre-determined targets and to rectify the errors, if any. Channel control ensures that operations are on the right track in prescribed norms and standards. = Channel control can be physical, financial, male quantitative, formal or informal. It depends on the company what kind of control system it plans to design. The control system is then administered through instruments of control, known as control devices @INSTRUMENTS OF CHANNEL CONTROL _". [edBey uated “IqINSTRUMENTS OF CHANNEL CONTROL Contract or Agreement: The most traditional, oldest, instrumental method of exercising control over channel members functioning or operations. Most of the companies enter into a written agreement that specifies details of association between the palsies and also the terms of operations such as: - Products handled. + Territories handled. - Categories or types of customers. - Selling price and margins. - Sales promotion responsibility of channel partner. - Payment and credit mechanism. - Inventory levels — management by the channel partnerINSTRUMENTS OF CHANNEL CONTROL 2. Budgets and Reports: Budgets are prepared well in advance and enables rational utilization of financial resources. Budgets indicate the framework within which the entire operation is to be completed. It also includes the commission/ incentives that are to bé paid. To ensure that the channel _ is functioning smoothly, reporting must keep the channel members informed about what is going on. ~ Monitoring and control become very easy and effective if there is a proper reporting system. Weekly reports can be short and precise showing immediate results. Monthly and quarterly reports can be more i detail showing targets and planning parameters. éINSTRUMENTS OF CHANNEL CONTROL 3. Distribution Audit: It is systematic and objective criteria to study the distribution efficiency and evaluate the distribution policies of the manufacturer. Its objective is systematic analysis of activities, targets and results of a channel member. Every manufacturet wants to minimize the costs by eliminating wastage and utilizing manpower optimally. Z Distribution audit can easily identify any shortcomings in operations of a channel. These issues can be deliberated upon and improvement measures can be undertaken by channel members on the basis of the review. e@REFERENCES Nag, Sales And Distribution Management, Mc Graw Hill, 2013 Edition Richard R. Still, Edward W. Cundiff, Norman A.P. Govoni, Sales Management, Pearson Education, 5th Edition 2 Krishna K. Havaldar, Vasant M. Cavale, Sales And Distribution Management — Text & Cases, Mc Graw Hill Education, 2nd Edition, 2011 Kotler & Armstrong, Principles Of Marketing — South Asian Perspective, Pearson Education, 13‘ Edition Nagpal, Sharma, Kukreja - Sales And Distribution Management, TYBMS, Sheth Publishers.Dr. Parveen weeps www.linkedin.com/in/dr-parveen-kaur-nagpal-82965b15