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Business Market Management 3 rd  edition Business Channel Management Chapter 7
Section III:  Creating Value Business Market Management,  3 rd  edition Chapter 7-
Chapter 7:  Business Channel Management <ul><li>Overview </li></ul><ul><ul><li>Designing Superior Value-Adding Marketing C...
Overview <ul><li>Marketing channels are a source of competitive differentiation as products and services become commodity-...
Business Channel Management <ul><li>The process of designing a set of marketing and distribution arrangements that create ...
Business Market Management,  3 rd  edition Chapter 7- Create Value for  Targeted Market Segments & Customer Firms Create V...
I. Designing Superior  Value-Adding Marketing Channels Business Market Management,  3 rd  edition Chapter 7-
Designing Superior  Value-Adding Marketing Channels <ul><li>Total Customer Experience (TCE) </li></ul><ul><ul><li>Entails ...
<ul><li>Immediacy of fulfillment </li></ul><ul><ul><li>Breadth & depth of products & services  </li></ul></ul><ul><ul><li>...
Four TCE-Based Positions Business Market Management,  3 rd  edition Chapter 7- Efficient, low-cost transaction experience ...
Designing a Superior Value-Adding Marketing Chanel <ul><li>Specify goals and objectives of the marketing channel(s) </li><...
Specify Goals and Objectives of Marketing Channels <ul><li>Three Predominant Goals </li></ul><ul><ul><li>Maximize Market A...
Assess Customer Value of Potential TCE Elements <ul><li>Business market managers should focus on value elements that contr...
Envision a Value Proposition for Each Targeted Market Segment <ul><li>Customer Value Proposition   serves as a beacon for ...
Reformulate the Intended TCE for Each Targeted Market Segment <ul><li>Add, delete, or modify products and valued-added ser...
Configure the Channel Network <ul><li>Managers simultaneously consult and consider the classic channel strategies related ...
Finalize Marketing and  Distribution Arrangements <ul><li>To gain market access, channels must provide sufficient exposure...
Distribution Intensity Strategies Business Market Management,  3 rd  edition Chapter 7- Exclusive Supplier  authorizes one...
Channel Exposure & Coverage Model for an Electronic Controls Supplier Firm Business Market Management,  3 rd  edition Chap...
Optimize Value-Added Through Postponement or Speculation <ul><li>Strategies hinge on: </li></ul><ul><ul><li>Predictability...
Postponement vs. Speculation Strategies Business Market Management,  3 rd  edition Chapter 7- <ul><li>Postponement Strateg...
Postponement vs. Speculation Manufacturing & Logistics Business Market Management,  3 rd  edition Chapter 7- Manufacturing...
Minimize Cost-to-Serve via Functional Acquisition & Functional Spin-Off <ul><li>Lean enterprise:   group of individuals, f...
Lean Enterprise Approach to the Design of a Firm’sChannel Networks <ul><li>Conceptualized channel networks: </li></ul><ul>...
Business Market Management,  3 rd  edition Chapter 7- Firm Performs Function Channel Firms Channel Firms Marketing Channel...
Business Market Management,  3 rd  edition Chapter 7- All Customers Supplier’s  Strategic customers Resellers’ targeted cu...
Channel Network Model <ul><li>Maps out the business processes and functions required to provide the reformulated TCE to ta...
General Network Models Business Market Management,  3 rd  edition Chapter 7- Conventional Modular <ul><li>Products and ser...
Finalize Marketing & Distribution <ul><li>Devise feasible profit model </li></ul><ul><ul><li>Cost-to-Serve (CTS) model </l...
Finalize Marketing & Distribution <ul><li>Consider e-business and wireless technology </li></ul><ul><ul><li>Infomediary:  ...
Finalize Marketing & Distribution <ul><li>Build International Marketing Channels </li></ul><ul><ul><li>Requires longer bus...
II. Creating Value Through  Direct Channels Business Market Management,  3 rd  edition Chapter 7-
Creating a Sales Force of Value Merchants <ul><li>Value merchant:  </li></ul><ul><ul><li>Recognizes supplier’s own cost  <...
Creating a  Sale  Force of Value Merchants <ul><li>Internally promote a value-based marketing philosophy & culture </li></...
Deploying Values Merchants <ul><li>Establish necessary sales units </li></ul><ul><li>Determine number of merchants needed ...
Designing a Logistics System that Creates Value <ul><li>Segment the market into logistically distinct businesses </li></ul...
III. Strengthening Reseller Performance Business Market Management,  3 rd  edition Chapter 7-
Strengthening Reseller Performance <ul><li>The best way to ensure resellers deliver  superior value to customers  is for t...
Channel Positioning <ul><li>Channel Positioning:   the process of establishing and sustaining the supplier’s reputation am...
Channel Positioning Business Market Management,  3 rd  edition Chapter 7- Step 1 Determine reseller performance expectatio...
Decomposing Marketplace Equity Business Market Management,  3 rd  edition Chapter 7- Marketplace Equity Supplier Reseller ...
Cultivate Brand and  Reseller Equity <ul><li>Supplier Firms </li></ul><ul><ul><li>Develop and sustain strong brand equity ...
Business Market Management,  3 rd  edition Chapter 7- Channel Core Elements Financial Returns Quality Products Competitive...
Reseller Value Proposition and Channel Offering Business Market Management,  3 rd  edition Chapter 7- Bundle A collection ...
Channel Positioning Matrix (CPM) (Figure 7.10) <ul><li>CPM:   a detailed comparative analysis of what a supplier:  </li></...
IV. Summary Business Market Management,  3 rd  edition Chapter 7-
Summary <ul><li>Business market channels augment customer value of supplier’s offering and create a competitive advantage ...
Business Market Management,  3 rd  edition Chapter 7- All rights reserved. No part of this publication may be reproduced, ...
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Chapter07

  1. 1. Business Market Management 3 rd edition Business Channel Management Chapter 7
  2. 2. Section III: Creating Value Business Market Management, 3 rd edition Chapter 7-
  3. 3. Chapter 7: Business Channel Management <ul><li>Overview </li></ul><ul><ul><li>Designing Superior Value-Adding Marketing Channels </li></ul></ul><ul><ul><li>Creating Value Through Direct Channels </li></ul></ul><ul><ul><li>Strengthening Reseller Performance </li></ul></ul><ul><ul><li>Summary </li></ul></ul>Business Market Management, 3 rd edition Chapter 7-
  4. 4. Overview <ul><li>Marketing channels are a source of competitive differentiation as products and services become commodity-like </li></ul><ul><li>Channels augment market offerings by creating a highly valued total customer experience (TCE) </li></ul>Business Market Management, 3 rd edition Chapter 7- Marketing Channel —a set of interdependent organizations involved in the process of making a product or service available for use or consumption. (Stern and El-Ansary)
  5. 5. Business Channel Management <ul><li>The process of designing a set of marketing and distribution arrangements that create superior customer value for targeted market segments and customers, and executing those arrangements directly through supplier firm sales forces and logistics systems or indirectly through resellers and 3 rd -party service providers </li></ul>Business Market Management, 3 rd edition Chapter 7-
  6. 6. Business Market Management, 3 rd edition Chapter 7- Create Value for Targeted Market Segments & Customer Firms Create Value for Targeted Market Segments & Customer Firms Create Value for Targeted Market Segments & Customer Firms Designing Superior Value-Adding Marketing Channels <ul><ul><li>Hybrid </li></ul></ul><ul><ul><li>Channel </li></ul></ul><ul><ul><li>Arrangements </li></ul></ul>Construct Channel Offering(s) Build Marketplace Equity Craft Reseller Value Proposition(s) Design Logistics Systems Create Value Merchants Deploy Value Merchants Creating Value Through Direct Channels Strengthening Reseller Performance
  7. 7. I. Designing Superior Value-Adding Marketing Channels Business Market Management, 3 rd edition Chapter 7-
  8. 8. Designing Superior Value-Adding Marketing Channels <ul><li>Total Customer Experience (TCE) </li></ul><ul><ul><li>Entails all aspect of a customer firm’s encounter with a supplier firm </li></ul></ul><ul><ul><ul><li>TCE Goals: </li></ul></ul></ul><ul><ul><ul><ul><li>Positive experience </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Seamless </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Memorable interaction that matches customer firm’s purchasing requirements and preferences </li></ul></ul></ul></ul>Business Market Management, 3 rd edition Chapter 7-
  9. 9. <ul><li>Immediacy of fulfillment </li></ul><ul><ul><li>Breadth & depth of products & services </li></ul></ul><ul><ul><li>Availability of products and services </li></ul></ul><ul><ul><li>Timing and reliability of delivery </li></ul></ul><ul><ul><li>Installation </li></ul></ul><ul><ul><li>Payment terms and conditions </li></ul></ul><ul><li>Extent of augmenting value-added services </li></ul><ul><ul><li>Pre-sale </li></ul></ul><ul><ul><li>Point-of-sale </li></ul></ul><ul><ul><li>Post-sale services or </li></ul></ul><ul><ul><li>“ for-fee options” </li></ul></ul>Business Market Management, 3 rd edition Chapter 7- Research indicates that firms that focus on “fulfillment” are more profitable. ( Grove )
  10. 10. Four TCE-Based Positions Business Market Management, 3 rd edition Chapter 7- Efficient, low-cost transaction experience The high-touch, consultative experience <ul><li>Inexpensive, convenient, self-service </li></ul><ul><li>Minimal value-added service </li></ul><ul><ul><li>Internet Web sites </li></ul></ul><ul><ul><li>Direct marketing </li></ul></ul><ul><li>Extensive consultation and advice </li></ul><ul><li>Customization of offerings </li></ul><ul><li>Frequent face-to-face encounters </li></ul><ul><li>Complete range of value-added services </li></ul>The flexible, multi- access-point experience The one-stop shopping experience <ul><li>Customer free to purchase supplier's offerings intact or piecemeal from several integrated or stand-alone channels on a transaction-by- transaction basis </li></ul><ul><li>Customer can purchase a wide variety of complementary products and services from a single source </li></ul>
  11. 11. Designing a Superior Value-Adding Marketing Chanel <ul><li>Specify goals and objectives of the marketing channel(s) </li></ul><ul><li>Assess customer value of TCE </li></ul><ul><li>Envision value proposition for each targeted market </li></ul><ul><li>Reformulate the TCE for each targeted market </li></ul><ul><li>Configure the channel network </li></ul><ul><li>Finalize marketing and distribution arrangements </li></ul>Business Market Management, 3 rd edition Chapter 7-
  12. 12. Specify Goals and Objectives of Marketing Channels <ul><li>Three Predominant Goals </li></ul><ul><ul><li>Maximize Market Access </li></ul></ul><ul><ul><ul><li>How business channels enable a supplier to reach, develop, and serve targeted segments and customer firms </li></ul></ul></ul><ul><ul><li>Optimize Value-Added </li></ul></ul><ul><ul><ul><li>This entails the augmenting products and services that channel partners contribute to the supplier firm’s market offering </li></ul></ul></ul><ul><ul><li>Minimize Cost-to-Serve </li></ul></ul><ul><ul><ul><li>The total expenditures required to deliver the intended TCE to </li></ul></ul></ul><ul><ul><ul><li>targeted segments and </li></ul></ul></ul><ul><ul><ul><li>customers </li></ul></ul></ul>Business Market Management, 3 rd edition Chapter 7- Caution: Channel goals often work at odds with one another. Trade-offs & adjustment may be needed.
  13. 13. Assess Customer Value of Potential TCE Elements <ul><li>Business market managers should focus on value elements that contribute to the total customer experience </li></ul><ul><ul><li>Service Outputs & their Monetary Value </li></ul></ul><ul><ul><ul><li>Integrated supply </li></ul></ul></ul><ul><ul><ul><li>Local customization </li></ul></ul></ul><ul><ul><ul><li>Emergency delivery </li></ul></ul></ul><ul><ul><ul><li>Technical support </li></ul></ul></ul><ul><ul><ul><li>Product standardization </li></ul></ul></ul><ul><ul><li>Assess Customer Preferences for </li></ul></ul><ul><ul><ul><li>Learning </li></ul></ul></ul><ul><ul><ul><li>Shopping </li></ul></ul></ul><ul><ul><ul><li>Buying </li></ul></ul></ul><ul><ul><ul><li>Getting help </li></ul></ul></ul>Business Market Management, 3 rd edition Chapter 7- These services strongly suggest the type of channel network the supplier should adopt These are critical as they shape the “ soft” side of TCE
  14. 14. Envision a Value Proposition for Each Targeted Market Segment <ul><li>Customer Value Proposition serves as a beacon for all the supplier firm’s channel network design effort </li></ul>Business Market Management, 3 rd edition Chapter 7-
  15. 15. Reformulate the Intended TCE for Each Targeted Market Segment <ul><li>Add, delete, or modify products and valued-added services as well as fulfillment and communication processes to more closely meet the critical TCE requirements and preferences of the targeted segment </li></ul>Business Market Management, 3 rd edition Chapter 7-
  16. 16. Configure the Channel Network <ul><li>Managers simultaneously consult and consider the classic channel strategies related to exposure and coverage, postponement and speculation, and functional acquisition and functional spin-off </li></ul><ul><li>Managers meld their strategic preferences into a channel network design that can profitably deliver the intended TCE to targeted segments </li></ul>Business Market Management, 3 rd edition Chapter 7-
  17. 17. Finalize Marketing and Distribution Arrangements <ul><li>To gain market access, channels must provide sufficient exposure and coverage </li></ul><ul><ul><li>Exposure: degree targeted customer firms are reached and served by the appropriate kind and number of channels </li></ul></ul><ul><ul><ul><li>Single-channel strategy </li></ul></ul></ul><ul><ul><ul><li>Multiple-channel strategy </li></ul></ul></ul><ul><ul><li>Coverage: number of resellers or direct sales persons assigned per geographic trade area </li></ul></ul><ul><ul><ul><li>Distribution intensity strategy: exclusive, selective, or intensive </li></ul></ul></ul>Business Market Management, 3 rd edition Chapter 7-
  18. 18. Distribution Intensity Strategies Business Market Management, 3 rd edition Chapter 7- Exclusive Supplier authorizes one reseller per trade area Selective Supplier authorizes a limited number of resellers per trade area Intensive Supplier authorizes all resellers who want to carry its line The above three distribution intensity strategies can be differentiated in terms of the supplier’s share of the reseller’s business <ul><li>The reseller sells only the supplier’s offering </li></ul><ul><li>The reseller sells one of the supplier’s line along with other firm’s lines </li></ul><ul><li>The reseller sells only one of the supplier’s products and an assortment of other firms’ products </li></ul>
  19. 19. Channel Exposure & Coverage Model for an Electronic Controls Supplier Firm Business Market Management, 3 rd edition Chapter 7- Source: Adapted from Friedman & Furey 1999 Electronic Components Manufacturers No Coverage <ul><li>3 electronic </li></ul><ul><li>component </li></ul><ul><li>distributors </li></ul><ul><li>Direct Sales </li></ul><ul><li>20 field sales </li></ul><ul><li>persons </li></ul><ul><li>10 service reps </li></ul>Scientific Testing Equipment Manufacturers Indirect Sales <ul><li>8 scientific equipment </li></ul><ul><li>distributors </li></ul>Process Control Manufacturers <ul><li>Direct Marketing </li></ul><ul><li>Supplier Website </li></ul><ul><li>5 Inside Sales Reps </li></ul><ul><li>10 machine tool </li></ul><ul><li>distributors </li></ul><ul><li>Segment </li></ul><ul><ul><li>Offering </li></ul></ul>Small Orders of Standard Items Medium-Sized Order of Specialty Items Large Orders of Customized Solutions
  20. 20. Optimize Value-Added Through Postponement or Speculation <ul><li>Strategies hinge on: </li></ul><ul><ul><li>Predictability of demand </li></ul></ul><ul><ul><li>Quantity of production </li></ul></ul><ul><ul><li>Inventory held in reserve </li></ul></ul><ul><ul><li>Required proximity of customization activities & inventory to customer location </li></ul></ul>Business Market Management, 3 rd edition Chapter 7-
  21. 21. Postponement vs. Speculation Strategies Business Market Management, 3 rd edition Chapter 7- <ul><li>Postponement Strategy </li></ul><ul><ul><li>Supplier firm undertakes product design, customization, and value-added service geographically close to customer firm </li></ul></ul><ul><li>Speculation Strategy </li></ul><ul><ul><li>Suppler firm manufactures standard products in large quantities well in advance of demand at a distance from the customer </li></ul></ul><ul><ul><li>Direct sales </li></ul></ul><ul><ul><li>Design-to-order offerings </li></ul></ul><ul><ul><li>Technically competent and consultative </li></ul></ul><ul><ul><li>sales team </li></ul></ul><ul><ul><li>Just-in-time inventory </li></ul></ul><ul><ul><li>High level end-to-end customer service </li></ul></ul><ul><ul><li>Indirect sales </li></ul></ul><ul><ul><li>Intensive distribution </li></ul></ul><ul><ul><li>Reseller firm stocks inventories </li></ul></ul><ul><ul><li>Takes orders </li></ul></ul><ul><ul><li>Makes deliveries </li></ul></ul><ul><ul><li>Provides minimum valued-added service </li></ul></ul>
  22. 22. Postponement vs. Speculation Manufacturing & Logistics Business Market Management, 3 rd edition Chapter 7- Manufacturing Postponement Manufacturing Speculation <ul><li>Indirect sales </li></ul><ul><li>Local assembly, fabrication, compounding, or extrusion firms </li></ul><ul><li>Customize supplier’s production to unique requirement for regional firms </li></ul><ul><li>Direct marketing via telephone or Internet </li></ul><ul><li>Build-to-order </li></ul><ul><li>Mass customizing products </li></ul><ul><li>Ships directly to customer via 3 rd party logistics </li></ul>Logistics Postponement Logistics Speculation <ul><li>Indirect sales </li></ul><ul><li>24-hour delivery </li></ul><ul><li>Reserve stock in local warehouse </li></ul><ul><li>Provide immediate emergency deliveries </li></ul><ul><li>Leave item on consignment at customer’s plant </li></ul><ul><li>Direct sales </li></ul><ul><li>Reserved for largest, most profitable customers </li></ul><ul><li>Vendor-managed inventory program </li></ul><ul><li>Supplier firm takes responsibility for customer inventories </li></ul><ul><li>Emergency delivery of bottleneck items </li></ul>
  23. 23. Minimize Cost-to-Serve via Functional Acquisition & Functional Spin-Off <ul><li>Lean enterprise: group of individuals, functions, and legally separate but operationally synchronized companies </li></ul><ul><li>To improve business processes: </li></ul><ul><ul><li>Allocate functions to the most capable partner </li></ul></ul><ul><ul><li>Bolster their partners’ ability to perform tasks </li></ul></ul><ul><ul><li>Coordinate and integrate efforts of all firms in lean enterprise </li></ul></ul><ul><ul><li>Eliminate redundancies in efforts </li></ul></ul>Business Market Management, 3 rd edition Chapter 7-
  24. 24. Lean Enterprise Approach to the Design of a Firm’sChannel Networks <ul><li>Conceptualized channel networks: </li></ul><ul><ul><li>Horizontally Within Each Channel Level: Functions or Tasks Performed by a Specific Channel Partner </li></ul></ul><ul><ul><ul><li>Focus on functions when incremental channel improvement needed </li></ul></ul></ul><ul><ul><ul><li>Functional acquisition & functional spin-off helps to lower system costs </li></ul></ul></ul><ul><ul><li>Vertically across All Channel Levels: Business Processes </li></ul></ul><ul><ul><ul><li>Appropriate for radical channel redesign </li></ul></ul></ul><ul><ul><ul><li>Eliminate resources & effort redundancies within entire channel network </li></ul></ul></ul><ul><ul><ul><li>Lowers total system costs </li></ul></ul></ul><ul><ul><ul><li>Maximizes the total value delivered </li></ul></ul></ul>Business Market Management, 3 rd edition Chapter 7-
  25. 25. Business Market Management, 3 rd edition Chapter 7- Firm Performs Function Channel Firms Channel Firms Marketing Channel Prior to Functional Acquisition and Spin-Off Marketing Channel After to Functional Acquisition and Spin-Off Functional Allocation Charts for Electrical Products Supplier Functions Manufacturer Manufacturer’s Representatives Electrical Wholesalers Manufacturing Advertising Lead Generation Field Sales Calls Fulfillment Customer Credit Repair Work Functions Manufacturer Manufacturer’s Representatives Electrical Wholesalers Manufacturing Advertising Lead Generation Field Sales Calls Fulfillment Customer Credit Repair Work
  26. 26. Business Market Management, 3 rd edition Chapter 7- All Customers Supplier’s Strategic customers Resellers’ targeted customers Manufacturer’s Process Distributor’s Process Integrated Multi-Channel Process Model Firms or Groups Lead Generation Prospect Qualification Initial Sales Contact Negotiation & Close Order Processing Fulfillment Relationship Management After-the-Sale Customer Support & Service Resellers Supplier’s Operational Group Supplier’s Field Sales Force Supplier’s Inside Sales Force Supplier’s Direct Marketing Supplier’s Internet Web Site
  27. 27. Channel Network Model <ul><li>Maps out the business processes and functions required to provide the reformulated TCE to targeted customer firms </li></ul><ul><li>Model specifies who will complete the required processes and functions </li></ul><ul><ul><li>Supplier firm </li></ul></ul><ul><ul><li>Resellers </li></ul></ul><ul><ul><li>Third-party service providers </li></ul></ul><ul><ul><li>Customer firms </li></ul></ul>Business Market Management, 3 rd edition Chapter 7-
  28. 28. General Network Models Business Market Management, 3 rd edition Chapter 7- Conventional Modular <ul><li>Products and services flow from supplier firm  resellers  market segment or customer firms </li></ul><ul><li>Channel captain: a dominant firm emerges </li></ul><ul><ul><li>Manages and coordinates distribution </li></ul></ul><ul><ul><li>Invests in and cultivates brand or reseller equity </li></ul></ul><ul><li>Emerging information and logistics technologies </li></ul><ul><li>Complex networks of relationships among firms </li></ul><ul><li>Direct or indirect channels </li></ul><ul><li>Manager from one firm is system integrator </li></ul><ul><ul><li>Envision channel network </li></ul></ul><ul><ul><li>Select participating firms </li></ul></ul><ul><ul><li>Manage ongoing relationships </li></ul></ul>Hybrid Integrated Multi-Channel <ul><li>Combination of conventional and modular </li></ul><ul><li>Adaptive channels: special hybrid </li></ul><ul><ul><li>Suppliers, resellers, 3 rd -party service providers and customer firms agree to share complementary capabilities </li></ul></ul><ul><li>Internet customers </li></ul><ul><li>Empower customers to select from different resellers or channels formats </li></ul><ul><li>Rather than compete for customer loyalty, suppliers and reseller work together to serve mutual customer </li></ul>
  29. 29. Finalize Marketing & Distribution <ul><li>Devise feasible profit model </li></ul><ul><ul><li>Cost-to-Serve (CTS) model </li></ul></ul><ul><ul><li>Payments cover the actual wholesaler’s cost plus a prespecified profit </li></ul></ul><ul><li>Carefully select channel partners </li></ul><ul><ul><li>Market research survey to assess customer preferences for and satisfaction with reseller firms </li></ul></ul><ul><ul><li>Validate research with on-site visits </li></ul></ul>Business Market Management, 3 rd edition Chapter 7-
  30. 30. Finalize Marketing & Distribution <ul><li>Consider e-business and wireless technology </li></ul><ul><ul><li>Infomediary: broker that finds, retrieves, sorts, processes & analyzes information from the web (comparison agent) </li></ul></ul><ul><ul><li>Metamediaries: Web sites that furnish multivendor, multiproduce, multi-service market place </li></ul></ul><ul><ul><li>Electronic transaction formats </li></ul></ul><ul><ul><ul><li>Communities </li></ul></ul></ul><ul><ul><ul><li>Catalogs </li></ul></ul></ul><ul><ul><ul><li>Electronic auctions </li></ul></ul></ul><ul><ul><ul><li>B2B exchange </li></ul></ul></ul><ul><ul><li>Wireless technologies: </li></ul></ul><ul><ul><ul><li>Remote, 24X7 order tracking, payment, and delivery </li></ul></ul></ul><ul><ul><ul><li>Contact Management </li></ul></ul></ul>Business Market Management, 3 rd edition Chapter 7-
  31. 31. Finalize Marketing & Distribution <ul><li>Build International Marketing Channels </li></ul><ul><ul><li>Requires longer business processes and additional functions in marketing channel </li></ul></ul><ul><ul><li>Division of functions among channel members vary </li></ul></ul><ul><ul><ul><li>From region to region </li></ul></ul></ul><ul><ul><ul><li>From country to country </li></ul></ul></ul><ul><li>Formalized Partnership Agreements </li></ul><ul><ul><li>Handshake agreements </li></ul></ul><ul><ul><li>Written contract </li></ul></ul><ul><ul><li>Licensing agreement </li></ul></ul><ul><ul><li>Franchise agreement </li></ul></ul>Business Market Management, 3 rd edition Chapter 7-
  32. 32. II. Creating Value Through Direct Channels Business Market Management, 3 rd edition Chapter 7-
  33. 33. Creating a Sales Force of Value Merchants <ul><li>Value merchant: </li></ul><ul><ul><li>Recognizes supplier’s own cost </li></ul></ul><ul><ul><li>Recognizes the value to the customer in each market </li></ul></ul><ul><ul><li>Works to obtain fair return for both supplier firm and customer firm </li></ul></ul>Business Market Management, 3 rd edition Chapter 7-
  34. 34. Creating a Sale Force of Value Merchants <ul><li>Internally promote a value-based marketing philosophy & culture </li></ul><ul><li>Train value merchants </li></ul><ul><li>Compensate value merchants based on profitability of accounts </li></ul>Business Market Management, 3 rd edition Chapter 7-
  35. 35. Deploying Values Merchants <ul><li>Establish necessary sales units </li></ul><ul><li>Determine number of merchants needed </li></ul><ul><li>Designate areas of responsibility </li></ul><ul><li>Assign value merchants to areas of responsibility </li></ul>Business Market Management, 3 rd edition Chapter 7-
  36. 36. Designing a Logistics System that Creates Value <ul><li>Segment the market into logistically distinct businesses </li></ul><ul><ul><li>A set of customers with unique physical distribution requirements </li></ul></ul><ul><ul><li>Establish differential service standards for each market segment </li></ul></ul><ul><ul><li>Tailor unique logistics systems to deliver differential services </li></ul></ul><ul><ul><li>Exploit economies of scale among the different logistics systems </li></ul></ul>Business Market Management, 3 rd edition Chapter 7-
  37. 37. III. Strengthening Reseller Performance Business Market Management, 3 rd edition Chapter 7-
  38. 38. Strengthening Reseller Performance <ul><li>The best way to ensure resellers deliver superior value to customers is for the supplier to create superior value for resellers . </li></ul>Business Market Management, 3 rd edition Chapter 7-
  39. 39. Channel Positioning <ul><li>Channel Positioning: the process of establishing and sustaining the supplier’s reputation among targeted resellers for providing superior value </li></ul><ul><ul><li>Suppliers need to recognize resellers as partners </li></ul></ul><ul><ul><li>Supplier and reseller must build a working relationship founded on mutual self-respect </li></ul></ul>Business Market Management, 3 rd edition Chapter 7-
  40. 40. Channel Positioning Business Market Management, 3 rd edition Chapter 7- Step 1 Determine reseller performance expectations Step 2 Assess the reseller value of channel offering elements Step 3 Craft a reseller value proposition and channel offering Step 4 Communicate the reseller value proposition
  41. 41. Decomposing Marketplace Equity Business Market Management, 3 rd edition Chapter 7- Marketplace Equity Supplier Reseller Targeted Customer Segment Channel Equity Reseller Equity Brand Equity
  42. 42. Cultivate Brand and Reseller Equity <ul><li>Supplier Firms </li></ul><ul><ul><li>Develop and sustain strong brand equity among targeted customers </li></ul></ul><ul><ul><li>Avoid the “final customer” syndrome where the supplier treats the reseller as the final customer </li></ul></ul><ul><li>Reseller Firms </li></ul><ul><ul><li>Strive to keep their equity strong </li></ul></ul><ul><ul><ul><li>Customize market offerings </li></ul></ul></ul><ul><ul><ul><li>Continuous improvements in customer services </li></ul></ul></ul>Business Market Management, 3 rd edition Chapter 7-
  43. 43. Business Market Management, 3 rd edition Chapter 7- Channel Core Elements Financial Returns Quality Products Competitive Prices Reliable Delivery Brand Equity Technical Assistance Market Research Company Policies Promotional Support Responsiveness Systems Training Manufacturer Sales Force Incentives Distributor Firm Incentives Distributor Sales Force Incentives Capability-Building Program Incentive Programs The Channel Offering
  44. 44. Reseller Value Proposition and Channel Offering Business Market Management, 3 rd edition Chapter 7- Bundle A collection of loosely connected products and services that a supplier firm consolidates in a transaction for a discounted price Solution A deliberately engineered and integrated group of products and services that the supplier firm markets for a premium price Reseller-Offering Platform A product or service upon which the bundle or solution is assembled (tends to be a high-turnover, lower-margin item) Reseller-Offering Peripheral A component, subassembly, or complementary item that functions in conjunction with the platform Reseller-Offering Accessory An extra, noncritical item that is often added onto a transaction without forethought. May or may not be complementary to the platform (tends to have slower turnover but high margins).
  45. 45. Channel Positioning Matrix (CPM) (Figure 7.10) <ul><li>CPM: a detailed comparative analysis of what a supplier: </li></ul><ul><ul><li>provides to its reseller </li></ul></ul><ul><ul><li>what its competitors provide </li></ul></ul><ul><ul><li>what are its resellers’ requirement </li></ul></ul><ul><li>Results of CPM: </li></ul><ul><ul><li>Changes for suppliers to pursue that will contribute most to a reseller value proposition </li></ul></ul>Business Market Management, 3 rd edition Chapter 7-
  46. 46. IV. Summary Business Market Management, 3 rd edition Chapter 7-
  47. 47. Summary <ul><li>Business market channels augment customer value of supplier’s offering and create a competitive advantage through the delivery of TCE. </li></ul><ul><li>A TCE entails all aspects of a customers firm’s encounter with a supplier. It should be positive, seamless and a memorable interactions that matches the customer firm’s purchasing requirements and preferences. </li></ul><ul><li>Business channel management is the process of designing a set of marketing and distribution arrangements that create superior customer value via tailored TCE for targeted segments and customers and executing those arrangements. </li></ul><ul><li>Suppliers turn to channel positioning to ensure that resellers will enthusiastically market their products and services as well as deliver the intended TCE. </li></ul>Business Market Management, 3 rd edition Chapter 7-
  48. 48. Business Market Management, 3 rd edition Chapter 7- All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. Copyright © 2009 Pearson Education, Inc.   Publishing as Prentice Hall

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