Product Issues In Distribution Channel Design & Management


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Product Issues In Distribution Channel Design & Management

  1. 1. Product Issues in Channel Design & Management
  2. 2. 6-Step Channel Design Process Step 1 Step 2 • Identify End-User customer segment • Identify and Prioritize customer’s channel function requirements • Benchmark existing channel and competitor’s capabilities to channel function requirements Step 3 • Develop feasible channel options Step 4
  3. 3. Channel Design Tool Based on What Customers Value low 1 Product information Product Customization Product Quality Assurance Lot Size Assortment Availability After Sales Service Logistics 2 3 4 high 5
  4. 4. 6-Step Channel Design Process Step 5 • Evaluate the benefits and costs for each option • Elaborate the channel overlaps for multiproduct, multimarket businesses using data from Step 5 Step 6
  5. 5. The Channel Helps To Differentiate a Product and Company in Consumer’s Mind
  6. 6. The Channel Helps To Position a Product in Consumer’s Mind
  7. 7. The Channel Helps To Set The Frame Of Reference for Consumer
  8. 8. Channel Design Can Augment or Detract A Product’s Differentiation Strategy
  9. 9. Support from Channel Members is Critical to the Success of New & Existing Products Encourage Input Foster Acceptance Channel Success Provide Education Trouble-Free Products
  10. 10. Channel Design And Mgmt. Must Be Aligned With Product Lines, Not Just Individual Products Potential Problems With Product Lines How Manufacturer’s Can Influence Channel Partners • Delicate balance between product proliferation and product losses • Incorporate channel member’s opinions before expanding/contracting Product Lines • Differences of opinion between manufacturer and channel members on which customers to target • Explain rationale and adequate advance notice • Cannibalization of the product line • Differentiate products within the product line enough to motivate channel members to sell them all; not focus only on the highest earning products
  11. 11. Channel Needs To Adapt OR Change As Products Mature Sales ($) Maturity Decline Growth Introduction Adequate market coverage Adequate market coverage and inventory levels Make sure the product remains attractive to channel Phase out marginal channel members Adequate supply Gauge effects of competition on channel support Possible changes in channel structure to extend maturity phase Determine impact of product deletion on channel
  12. 12. Entering New Markets Will Typically Require Changes To Existing Channels and/or Creation of New Channels Confidence of channel in manufacturer Adequate channel coverage Brand strategy may cause rifts New Market
  13. 13. Market Maturity Impacts Channel Design And Management Source: Deloitte, “Channel Strategy – Getting straight to the point
  14. 14. Coca-Cola India : Rural vs. Urban Urban Market Rural Market Bottling Plant Large Distributors (Hubs) Bottling Plants Smaller Distributors (Spokes) Retailers Retailers Retailers Retailers Consumers
  15. 15. Let’s Build a Channel For a New Product Product 1 - A Humanoid Robot that walks, talks, and helps from Honda Product 2 – A Household vacuum cleaner from Black&Decker Product 3 – Personalized Sweaters and Other Clothing ITems
  16. 16. Channel Management wrap-up graphic Channel Design Product Issues • Customer • Differentiation • Positioning • Frame of reference • Company resources Channel Management Product Issues • Building Support • Product Line Channel Issues • Product Life Cycle Impact • Market Maturity Affect