Step 1 - Segmentation • Define and profile service output demands (SOD) by segment. – Value added services performed by your channel members • Identify environmental characteristics and constraints – Limited infrastructure, government constraints, economic, technological
Step 2- Positioning • Position yourself in the channel (know your strengths / weaknesses) • Which segments are a good target (channel resources are limited) – Segments must be profitable, accessible, actionable and measurable
Step 3 - Targeting • Knowing what segments to ignore in one’s channel design and where to apply managements effort. • Focus on key segments that reap the profitable sales. • Be aware of – Managerial bounds – Environmental bounds – Competitive benchmarks
Step 4 (a) and (b) – Establish new or refineexisting channels • Gap analysis – Demand side – Supply side
Gap Analysis • What gaps in the service outputs of the ideal, existing, and management bounded distribution systems should the firm try to eliminate? • Figure 7.3 identifies three situations that require corrective action. Source: (Stern, Sturdivant and Getz, Accomplishing Marketing Channel Change: Paths and Pitfalls, 1987)
Figure 7.3 Gap Analysis in Distribution System Design Management Bounded Distribution Existing Situation A: Strategic Fit System Distribution System Ideal Distribution System Interpretation: Any distribution related problems result from poor execution, not poor design of the system. Necessary Actions: Sharpen performance; maintain existing system.
Figure 7.3 Gap Analysis in Distribution System Design Management Situation B: Partial Fit Bounded System Ideal Gap Distribution Existing System Distribution System Interpretation: Management has designed a system which reflects its needs, but has given inadequate attention to customer needs. Necessary Actions: Investigate validity of management constraints and objectives, and analyse customer requirements and expectations.
Figure 7.3 Gap Analysis in Distribution System Design Situation C: Complete Misfit Existing Gap Management Gap Ideal Distribution Bounded Distribution Distribution System System System Interpretation: End-user satisfaction can be improved by improving service outputs. Preferred Actions: Examine certain management criteria to assess the possibility of bringing the existing systems even closer to the ideal distribution system.
Step 5 – Channel Implementation • Communicate changes and improvements • Identifying power sources • Identifying channel conflicts and resolve • Coordinate, Control and manage relationships with channel partners.
Summary• Its important to review your distribution channels• Identify gaps and close them• Monitor and control your relationships• Conduct periodic gap analaysis
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