DISTRIBUTION MANAGEMENT

TABLE OF CONTENTS

UNIT I Introduction to Sale and Distribution Management 2

Sales Manager Responsibilities/Objectives 3
Sales Management in the 21st Century/Strategies 4
Sales Management: Functions and Importance of Sales Management 5
Importance of Sales Management 6
Assessing Learning 8

UNIT II Developing the Marketing Channel 9

What is Distribution Channel 13
What Are the Channels of Distribution? 13
What Are the Elements of Distribution Management? 15
Channel alternatives: direct deliveries 16
What Affects Distribution Management? 17
Different Types of Flow Concepts 18
Need for Selecting an Appropriate Channel of Distribution 20
Some Advantages of Distribution Channels 24
Role and Significance/Importance of Distribution Channels 25
Post Test 27
References 28

UNIT III. Managing the Marketing Channel 28

Motivating the Channel Members 29
Product Issues in Channel Management 30
Guidelines for Developing Effective Channel Pricing Strategies 32
Promotion through the Marketing Channel 32
Basic Push Promotional Strategies in Marketing Channels 33
Logistics and Channel Management 33
Four Key Areas of Interface between Logistics and Channel Management 34
Evaluating Channel Member Performance 35
Three Phases of Channel Member Performance Audit 36
References 37
Assessing Learning 38

UNIT IV. Additional Perspective on Marketing Channel 40

Online Channel Systems and Management 41
3 Structures of Electronic Marketing Channels 41
Franchise Growth Blueprint 43
Marketing Channels for Service 45
Global Marketing Channels/Benefits 46
International Marketing Channel Decisions 46
Selection of Distribution Channels 47
International Marketing Channel Structures (5Cs) 48
References 49
Assessing Learning 50

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UNIT I INTRODUCTION TO SALE AND DISTRIBUTION MANAGEMENT

Overview

The lesson deals with the responsible for participating for the preparation of
information critical to the making of key marketing decisions such as those on budgeting,
quotas and territories. And to participate- to an extent that varies with the company-in
decisions on products, marketing channels and distribution policies, advertising and other
promotion and pricing. And lastly it finalized the Sales Executives that guide and lead Sales
Personnel and middlemen who play critical role in implementing selling plans.

Learning Objectives:

At the end of the unit, I am able to:

1. Explain the concept and role of distribution management to elevates the growth of
economic industries
2. Review the different approaches in defining distribution channel
3. Discuss the relevance of distribution system at present time
4. Describe the concepts of distribution management and how to apply them to solve
business problems.

Setting up

Name: _____________________________________ Date: __________________

Course/Year/Section: ___________________________

Directions: From the previous discussion on Sales Marketing answer any two questions.
Write your answer on the space provided after the question.

Question:
1. Write your idea about Distribution Management.

Answer and Explain

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Lesson Proper

Introduction

Distribution Management: Definition, Advantages & Strategies

Distribution management has long been a source of contention in the business world. Raw
materials can arrive too early and spoil before they are used. Alternatively, finished products
may arrive too late, allowing a competitor to capture the lion's share of market share.

Effective distribution is so important that sub-discipline practices, such as just in time

inventory, have become an integral part of supply chain and inventory management. Overall,
successful distribution involves numerous moving parts and methods, necessitating a strong
distribution management strategy fueled by real-time data.

What Is Distribution Management?

Distribution management is the process of overseeing the movement of goods from the
supplier to the manufacturer, then to the wholesaler or retailer, and finally to the end
consumer. There are numerous activities and processes involved, such as raw material
vendor management, packaging, warehousing, inventory, supply chain, logistics, and, in
some cases, blockchain.

What Is a Distributor?

A distributor is a company that sells products to retailers and other companies that sell
directly to consumers. Consider a wholesale liquor distributor who sells alcohol to
restaurants, grocery stores, and liquor stores.

A produce distributor who supplies lettuce, tomatoes, and other produce to restaurants is
another example, as is a pharmaceutical distributor who supplies a variety of prescription-
controlled drugs to pharmacies.

Distribution vs. Logistics

Logistics is the detailed planning and processes that go into the efficient supply and
transportation of goods. Supply management, bulk and shipping packaging, temperature
controls, security, fleet management, delivery routing, shipment tracking, and warehousing
are all examples of logistics activities and processes. It's probably easiest to think of logistics
in terms of physical distribution.

Distribution is a logistics management system that focuses on order fulfillment across

distribution channels. A distribution channel is the network of agents and entities that a
product or service passes through on its way from its source to a consumer. Ecommerce

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websites, wholesalers, retailers, and third-party or independent distributors are examples

of distribution channels. Consumer or commercial packaging, order fulfillment, and order
shipping are all examples of distribution activities and processes. In a nutshell, distribution
can be classified as commercial or sales distribution.

Importance of Distribution Management

In the first place, distribution management is concerned with organizing everything that is
involved in getting goods to the buyer in a timely manner and with the least amount of waste.
As a result, it has a direct impact on profit margin.

Distribution Network Benefits

A distribution network is a network of storage facilities and transportation systems that are
connected to one another. In accordance with a distribution strategy designed to move goods
from a manufacturer to wholesalers, retailers, or buyers (or vice versa), it is formed.

Each product goes through a life cycle, from manufacturing to final destination, and the
product goes through various stages. When the product is finished, it is distributed to
consumers via a wholesaler and retailer system. The advanced distribution management
system manages the supply chain steps associated with finished product distribution.
Manufacturing, packaging, inventory, warehousing, and transportation facilities are all
included.

The entire process ensures that there are no errors in the types of products that must be
delivered and that the time and amount of delivery are not mixed up. All of these processes
necessitate effective communication, transaction monitoring, and pricing.

Here are a few reasons why there is a high demand for “Advanced distribution management
system.”

Advantages of Advance Distribution Management

1. Maintain organizational and systematization

In the absence of such a concept, each store receives goods directly from each manufacturer. A
truck carrying a large amount of cargo will arrive at the retail store, and the store will be
completely disorganized due to a lack of space to accommodate all of the goods.
The wholesaler or retailer rethinks the items in the warehouse and uses the required number of
other brands in the store using the appropriate system.

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2. Convenient for Customers

The Advanced distribution management system ensures that consumers can shop at their
leisure. If every company must have its own store, the customer must spend a lot of time and
effort going to another store to buy.

The right system for distributing merchandise from various brand manufacturers and product
manufacturers can use a variety of merchandise in one store, and customers can see the benefits
of selecting from multiple brands of products.

3. Break the batch

Customers do not have to worry about producing a large number of products. A wholesaler's or
retailer's job is to keep these items in stock so that they can sell small quantities of items to
customers via bulk purchases.

4. Dealer Plan

This system enables dealers to carry out operations that manufacturers are unable to
perform on their products. They frequently persuade customers to purchase promotional
items. Consumers can be enticed by a variety of promotions. Offer a variety of financial plans
to reduce overpayments and make payment easier for customers.

Dealers use appealing displays to sell their products in stores, resulting in increased sales.
The dealer provides product feedback to the manufacturer. It also assists manufacturers in
improving their products based on customer feedback. It is still used for business, and it is
now a fully automated system that simplifies deployment at all levels.

The Advanced Distribution Management System (DMS) application group controls and
monitors the entire distribution network, including ordering, delivery, inventory
management, payment, and service management. This system can help businesses. Its
function will undoubtedly meet the distribution company's unique requirements.

All dealers require an Advanced Distribution Management System that meets industry
standards. Food distributors, for example, require the code date for each product to
determine the expiration date. DMS focuses on size, style, and color in the apparel industry,
making it easier to handle everything with an automated system.

Easily store, access, and analyze all customer, business partner, stock, and supplier
information and data. You can perform better business analysis by using information
development reports and charts.

Customer satisfaction is ensured by the Advanced Distribution Management System's

integrated customer relationship management capabilities. Simple to manage, requiring less
manpower, saving time and money, and significantly lowering operating costs. Reduce
processing time while also effectively lowering management costs. As your productivity
rises, so will your return on investment (ROI), as your sales and service quality improve.

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Advanced Distribution Management benefits for small businesses

It is not easy to run a distribution company. When there are too many transactions per day,
especially for enterprise inventory management, it becomes difficult. Companies may find it
difficult to manage their stocks and transactions. Even for SMEs with a small amount of CO,
inventory tracking can be difficult if you conduct a variety of transactions on a regular basis. As
a result, it is also advised to provide distribution software for small businesses.

This is the recommended accounting software distribution business, in addition to monitoring

the stock company and focusing on the accounting department, because it provides more
accurate information on transactions conducted within the company. As a result, successful
business deployment management necessitates the use of both software.

Here are some of the advantages that small businesses can gain from using two types of
distribution management software:

1. Low Cost

The use of distribution management software in the enterprise can help to cut costs. Because
you don't need to hire more people to monitor your transactions, your company has saved a
lot of money. Furthermore, there is no need to pay for manual calculations because
businesses can reduce labor costs by tracking the amount of talent required for the actual
number of shares in the company.

2. Better Enterprise time management

Companies can save a lot of time by using simple inventory monitoring and management.
This enables businesses to devote more time to tasks such as improving customer service or
advertising campaigns. As a result, business management software is a time-saving tool
rather than a cost-effective tool.

Companies can better manage their time and avoid wasting time on automated inventory
and accounting tasks. This saves companies valuable time that they can put toward other
important aspects of their business, such as advertising, promotions, and sales.

3. Easy Inventory Monitoring

This is very useful because companies that use Advanced distribution management system
can immediately fill in customer inventory and get the items they need.

4. Mismatching monitoring

It also enables the company to determine if there is a discrepancy between the number of
shares in inventory and the actual number of shares. Companies can use recorded
transactions to check for inconsistencies in their records. This could cause issues for your

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company. Companies that use such software can avoid major issues caused by
inconsistencies in trading, delivery, inventory, and sales records.

5. Monitor your company for problems

Management and accounting software for the retail industry enables businesses to
determine if there are any new financial issues that must be avoided. Accurate reporting by
these software executives can determine whether a transaction is invalid or should be
stopped or managed due to a company's malicious behavior. As a result, the company will
face a few issues in the future.

Companies can use the software to verify all transactions and look for inconsistencies that
could lead to bigger problems.

6. Efficiency – fast trading

The Advanced Distribution Management System enables businesses to better serve their
customers. If you do not place your order ahead of time, it will be settled and delivered. This makes
the company appear more efficient and capable than the customer, resulting in increased demand
in the industry.

Because the software automates everything, businesses can handle all processes more efficiently
and quickly. The wait time report is reduced because everything is displayed in an easy-to-
understand format, converted to a vendor who is unfamiliar with the system.

7. Accuracy

The Advanced Distribution Management System (ADMS) enables businesses to order the
exact number of items they require in a given amount of time. Because the software can
provide the appropriate amount of inventory at any given time, the company can calculate
the number of items that will need to be ordered in the near future. This ensures that
customers do not overlook important products that they frequently order. Inventory can also
be ordered on a schedule to ensure that it is fully retained at all times and can be used for a
variety of customer order transactions.

This allows the company to make more money because it can continue to provide all of its
customers' needs. This encourages the customer to return. Ideal for growing strong
customer lists and customer circles, which can be a significant source of profit and revenue.

The Advanced Distribution Management System is extremely beneficial. This software will
save the company a lot of time and money, which will help the company's success and
development. There is still a long way to go before investing in management software. As a
result, even small businesses must invest in such system software. They will reap enormous
benefits from investing.

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Assessing Learning

ACTIVITY 1

Name: _________________________________________________________________
Course/Year/Section:_____________________________ _________________ Date:
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Directions: Answer the following question by writing the answer on the space provided
after the questions.

1. What is Distribution Management ?

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2. Identify the importance distribution management?

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3. Discuss Advantages of advance distribution management?

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UNIT II DEVELOPING DISTRIBUTION CHANNEL

Overview

This chapter considers the alternative ways in which products can reach their market.
Different types of distribution channel are discussed, and an approach to channel selection is
described. Finally, the key decision of whether to run an own-account distribution operation or
whether to outsource to a third party is introduced. Physical distribution channel is the term used
to describe the method and means by which a product or a group of products are physically
transferred, or distributed, from their point of production to the point at which they are made
available to the final customer. For consumer products the end point is, generally, a retail outlet
but, increasingly, it may also be the customer’s house, because some channels bypass the shop
and go direct to the consumer. For industrial products the end point is likely to be a factory. In
addition to the physical distribution channel, another type of channel exists. This is known as the
trading or transaction channel.
The trading channel is also concerned with the product, and with the fact that it is being
transferred from the point of production to the point of consumption. The trading channel,
however, is concerned with the non-physical aspects of this transfer. These aspects concern the
sequence of negotiation, the buying and selling of the product, and the ownership of the goods
as they are transferred through the various distribution systems. One of the more fundamental
issues of distribution planning is regarding the choice and selection of these channels. The
question that arises, for both physical and trading channels, is whether the producer should
transfer the product directly to the consumer, or whether intermediaries should be used. These
intermediaries are, at the final stage, very likely to be retailers, but for some of the other links in
the supply chain it is now very usual to outsource to a third-party operator to undertake the
operation.

Learning Objectives:

At the end of the unit, I am able to:

1. Appraise the major role of distribution in managing supply chains;
2. Apply specialised knowledge of distribution management to review channels of
distribution, their main participants and their relative importance;
3. Conceptualise how the distribution function provides the key link between manufacturers
and suppliers on the inbound side and retail and customers on the outbound side;
4. Review the functions of a distribution centre and the design features which cater for
specific types of products;
5. Explain how companies use marketing channels and discuss the functions these channels
perform.
6. Work collaboratively with other team members to prepare a group project report and
delivering a professional presentation based on a selected case study.
7. Discuss the nature and importance of marketing logistics and integrated supply c

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Pre-Test

Name: _____________________________________________ Date: __________________

Course/Year/Section: ___________________________

Directions: Explain in your own words. 20 Points each

Questions:

1. How does the value of distribution channel functions change when they become Internet
based?
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2. Although direct selling often results in lower prices, does it have disadvantages for buyers?
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3. Each intermediary in the channels has to mark up a product’s for almost double the wholesale
cost. What would a retailer have to do add enough value to justify such a markup?
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Lesson Proper

What is Distribution Channel

In the field of marketing, channels of distribution indicate routes or pathways through

which goods and services flow, or move from producers to consumers.

We can define formally the distribution channel as the set of interdependent marketing
institutions participating in the marketing activities involved in the movement or the flow of goods
or services from the primary producer to the ultimate consumer.

Distribution channel refers to the network used to get a product from the manufacturer or
creator to the end user.

When a distribution channel is “direct,” the manufacturer is selling directly to the end user
without a middleman. When the distribution channel is “indirect,” the product changes hands
several times before reaching the ultimate consumer. Intermediaries between the manufacturer and
the consumer in an indirect distribution channel might include:

The prime of object of production is its consumption. The movement of product from
producer to consumer is an important function of marketing. It is the obligation of the producer to
make goods available at right place, at right time right price and in right quantity. The process of
making goods available to the consumer needs effective channel of distribution. Therefore, the
path taken by the goods in its movement is termed as channel of distribution.

Distribution channels are the network of organizations, including manufacturers,

wholesalers, and retailers, that distributes goods or services to consumers. A distribution channel
is the network of individuals and organizations involved in getting a product or service from the
producer to the customer. Distribution channels are also known as marketing channels or
marketing distribution channels.

An entrepreneur has a number of alternative channels available to him for distributing his
products. These channels vary in the number and types of middlemen involved. Some channels
are short as they directly link producers with customers. Whereas other channels are long and
indirectly link the two through one or several middlemen.

In short, the distribution channel can be defined as ‘the path through which goods and
services or payment for those goods or services travel from the vendor to the consumers’.
Distribution channel can be as short as a direct transaction from the vendor to the consumer, or
may include several interconnected intermediaries along the way such as the followings –

What Are the Channels of Distribution?

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Different distribution channels service different points or entities along the entire supply
chain that extends from raw material suppliers and manufacturers all the way to consumers or other

end users. The various distribution channels have to consider different factors that can affect
efficient distribution.

Wholesaler. Goods are distributed from manufacturers to wholesalers in this channel. For
example, liquor distillers distribute their brands of liquors to wholesalers.

Retailer. Goods are distributed from manufacturer or wholesaler to retailers. For example, big
name designer clothing and accessories are distributed to higher end retailing chains such as
Neiman Marcus, Nordstrom and Macy’s.

Distributor. This channel moves goods from the source or manufacturer to an authorized
distributor. For example, a Ford factory distributes various Ford makes and models to authorized
Ford dealerships for sale to consumers or company fleets.

Brokers and Agents: Make way for agents. They handle the logistics of the sales. Agents handle
contracts, marketing, and pulling together specialized shipments. A part of their job is customer
relationship management. On behalf of manufacturers, they take ownership of products through the
distribution process. They represent the producer in the sales process

Ecommerce. This is the newest and most disruptive distribution channel wherein goods and
services are represented virtually online and then distributed directly to the buyer. Ecommerce as
a fourth channel has led to rapid changes and makes distributors rethink their traditional strategies.

Therefore, the channel serves to bridge the gap between the point of production and the point of
consumption thereby creating time, place and possession of utilities.

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What Are the Elements of Distribution Management?

The elements of distribution management systems are the steps involved in getting the
product from the manufacturer to the end customer and can include: supply chain, blockchain,
logistics, a purchase order and invoicing system, vendor relationship management (VRM),
customer relationship management (CRM), an inventory management system (IMS), a warehouse
management system (WMS) and a transportation management system (TMS).

Prepare for the Internet

The Internet is the most powerful marketing tool in history. It could be the most powerful
development since the assembly line, the automobile or the telephone.

This is an excellent opportunity to expand your marketing reach. The future will be a time
of immediate and personalized satisfaction. Customers want it now and the Internet will satisfy
that gratification. The Internet is not a quick fix solution; it takes much time and effort to gain
rewards. However, the rewards are huge for those that jump on board.

Technology will Over-Promise and Under-Deliver

Do not look to technology to make marketing easier. It will make it more challenging.
Technology can offer false hope because no one really knows which technologies will take off and
which will stagnate. It is best to approach the promise of high-tech cautiously and following
extensive research. There are no quick fixes. Any business tool requires hard work and a
substantial investment, before you see substantial rewards.

Physical distribution channel types and structures Channel alternatives: manufacturer-to-

retail There are several alternative physical channels of distribution that can be used, and a
combination of these may be incorporated within a channel structure. The diagram illustrates the
main alternative channels for a single consumer product being transferred from a manufacturer’s
production point to a retail store. The circles in the diagram indicate when products are physically
transferred from one channel member to another. There are, of course, other channels that are used
– channels from industrial suppliers to industrial customers, or channels that are direct to the final
consumer – and these are discussed separately later in the chapter.

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Channel alternatives: direct deliveries

The main alternative physical distribution channels previously described refer to those
consumer products where the movement is from the manufacturer to the retail store. There are
additional channels for industrial products and for the delivery of some consumer products that do
not fit within the structure of the diagram because they bypass the retail store. There are different
types of distribution channel for these flows, which are sometimes referred to as business to
consumer (B2C):

• Mail order. The use of mail order or catalogue shopping has become very popular. Goods are
ordered by catalogue, and delivered to the home by post or parcels carrier. The physical
distribution channel is thus from manufacturer to mail order house as a conventional primary
transport (line-haul) operation, and then to the consumer’s home by post or parcels carrier,
bypassing the retail store.

• Factory direct to home. The direct factory-to-home channel is a relatively rare alternative. It can
occur by direct selling methods, often as a result of newspaper or magazine advertising. It is also
commonly used for one-off products that are specially made and do not need to be stocked in a
warehouse to provide a particular level of service to the customer.

Internet and shopping from home. Shopping from home via the internet is now a very
common means of buying products. Initially, physical distribution channels were similar to those
used by mail order operations – by post and parcels carrier. The move to internet shopping for
grocery products has, however, led to the introduction of additional specialist home delivery
distribution operations. These are almost all run by third-party companies. In the grocery industry,
home delivery is usually undertaken on small specialist vehicles that operate from distribution
centres or from retail stores. A completely new channel development is that of computer-to-
computer, as some products, such as music, software, films and books are distributed directly
online. See Chapter 11, multichannel fulfilment, for a more detailed discussion on the implications
for distribution channels that have resulted from developments in home delivery.

• Factory to factory/business to business (B2B). The factory-to-factory or business-

tobusiness channel is an extremely important one, as it includes all of the movement of industrial

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products, of which there are many. This may cover raw materials, components, part-assembled
products, etc. Options vary according to the type and size of product and order. This may range
from full loads to small parcels, and may be undertaken by the manufacturers themselves or by a
third party.

The Three Types of Distribution

Distribution strategies depend on the type of product being sold. The trick is knowing
what type of distribution you will need to achieve your growth goals. There are three
methods of distribution that outline how manufacturers choose how they want their goods
to be dispersed in the market.

1. Intensive Distribution: As many outlets as possible. The goal of intensive

distribution is to penetrate as much of the market as possible.
2. Selective Distribution: Select outlets in specific locations. This is often based on a
particular good and its fit within a store. Doing this allows manufacturers to pick a
price point that targets a specific market of consumer, therefore providing a more
customized shopping experience. Selective distribution caps the number of locations
in a particular area.
Exclusive Distribution: Limited outlets. This can mean anything from luxury brands that are
exclusive to special collections available only in particular locations or stores. This method helps
maintain a brand’s image

What Affects Distribution Management?

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The planning and operation of distribution must take into account a number of factors that
can alter or affect distribution.

1. Buyers’ demands

The first is the variation in buyers’ demands. Throughout the year, buyers have different demand
levels for goods. For example, the Christmas season sees an upsurge in consumer buying of all
kinds of products. Therefore, companies need to plan for how to handle increased purchases,
orders, and deliveries.

2. Shipping optimization

Shipping optimization is another factor that can impact effective distribution management.
For example, it is more cost-efficient for a company to ship all of the goods going to one
destination together, such as in a single truckload, compared to creating multiple, less than capacity
shipments to the same destination.

Efficient shipping of perishable goods is always important for any business that handles
such items because any losses through spoilage will negatively impact profits.

3. Other factors

In addition, there are a number of other factors that can impact efficient distribution and
that distribution management needs to consider. They include such things as shipping delays that
can be caused by vehicle accidents or breakdowns, airport delays, or delays related to severe
weather events.

Potential changes in government regulations regarding transportation or shipping are another

factor that distribution management teams must create plans for dealing with. Product recalls or
packaging problems can also affect distribution. Buyers may derail efficient distribution by doing
things such as making changes to orders or to the address for delivery of goods.

Because of all the various factors related to distribution management, managers must not
only make careful distribution plans but also create a number of contingency plans designed to
deal with problems in distribution that may arise.

Different Types of Flow Concepts:

There are five different types of flow concepts are:
i. Physical Flow:
Once products are manufactured they need to be moved to point of consumption. In this
journey, products physically flow from their point of production to the point of consumption. This
physical movement is perceptible when products move from distant locations where they are
produced to the marketplace.
For instance, many luxury cars like Porsche, which are not manufactured in India, travel
from their factories to the ultimate buyers using a complex path or ‘route to market’ that involves

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intermediaries in the country of their origin to intermediaries in the country of sale. The
participating partners take physical possession of products in this journey. This flow is also often
called downward flow.
ii. Title or Ownership:
Besides the physical flow of products, there are other flows that happen in this process.
Along with the physical movement of products, sometimes the title to the goods also gets
transferred from one intermediary to the other. That is, as goods move the ownership also gets
transferred. For instance, companies sell their goods to wholesalers and who in turn sell the same
to retailers. Here the title flows from the manufacturer in the direction of the consumer.
iii. Promotion Flow:
Efforts made by channel partners in the promotion of goods with their customers is known
as promotion flow. Like any other marketing entity, the channel partners also employ a variety of
promotion tools including advertising, sales promotions, and personal selling to push their
products to the next participating partner in the chain. For instance, wholesalers often offer
incentives and bulk discounts to retailers who buy more quantity of their products.
iv. Information Flow:
In the channels of distribution information flow can take both upward and downward form.
Information that flows upwards from channel members is of great importance because it contains
inputs on how marketing can be made better. For instance, how consumers react to a new model
of car may reach the producing company through the dealership where buyers interact with the
sales staff.
The intermediaries, because of their proximity to the customers, have better access to their
feedback and needs and wants. They are particularly better placed in forecasting demand and
consumer trends. Information also flows from intermediaries to customers. Since intermediaries
are experts in their areas they help customers take better and informed buying decisions. This
happens when a customer of insurance, car, or house seek information from resellers.
v. Monetary Flow:
As the product moves from producer to consumer following a path, money flows in the
reverse direction. The money that a customer parts at the point of sale moves up to the point at
which the products originate. The monetary flow in channels of distribution is upwards.
An important question that arises is why firms use channel partners or intermediaries. The
channels of distribution are necessary because they add value by performing functions that cannot
be efficiently performed by the producer.

6 Important Objectives: Achieving a Given Level of Services, Enhancing the Prospect of

Sales being Made and a Few Others
The objectives of channels of distributions are discussed as follows:

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Objective # 1. Receiving Fast and Accurate Feedback of Information:

In order to maintain and provide an efficient distribution system and service, a good and
regular. How of relevant information is necessary, which includes inventory levels, sales trends,
damage reports, service levels, cost monitoring etc.

Objective # 2. Making the Product Readily Available to the Market Consumers:

To ensuring the product is represented in the right type of outlet or retail store is an
important objectives of channels of distribution. Having identified the correct marketplace for the
goods, the company must make certain that the appropriate physical distribution channel is
selected to achieve this objective.

Objective # 3. Achieving a given Level of Service:

Once again, from both the supplier’s and the customer’s viewpoints, a specified level of
service should be established, measured, and maintained. The customer normally sees this as
crucial and relative performance in achieving service level requirements is often used to compare
suppliers and may be the basis for subsequent buying decisions.

Objective # 4. Enhancing the Prospect of Sales being Made:

The most appropriate factors for each product or type of retail store will be reflected in the
choice of channel. The general aims are to get good positions and displays in the store; and to gain
the active support of the retail salesperson, if required. The product should be “visible, accessible,
and attractively displayed’.

Channel choice is affected by this objective in a number of ways:

(i) Does the deliverer arrange the merchandise in the shop?
(ii) Are special displays being utilised?
(iii) Does the product required to be installed, demonstrated or explained?
(iv) Is there a special promotion of the product is required?

Objective # 5. Minimising Logistics and Total Costs:

Costs are very crucially significant as they are reflected in the final price of the product.
The selected channel will reflect a certain cost and this cost must be assessed in relation to the type
of product offered and the level of service required.

Objective # 6. Achieving Co-Operation with Regard to any Relevant Distribution Factors:

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These factors can either be from the supplier’s or the receiver’s point of view and include
minimum order sizes, unit load types, product handling characteristics, materials handling aids,
delivery access (e.g., vehicle size), and delivery time constraints, etc.

Need for Selecting an Appropriate Channel of Distribution

It is a fact that the distribution channels are greatly required by the manufacturers. The
need for selecting an appropriate channel can be understood on the basis of the parameters
considered, which highlight the fact why distribution channels must be selected?
1. Attention – Little attention of companies to their distribution channels may damage results such
as profit, brand, number of customers etc.
2. Imaginative distribution systems – Companies can use imaginative distribution systems to take
competitive advantage. For example Dell, Flipkart.com etc. Dell is the best example of revolution
in Distribution channel. Dell is selling its products directly to the consumer rather than through
retailer.
3. Difficult to Replace – Companies can change their products, advertising and Pricing easily but
not their distribution channels. It is not an easy task to change distribution channel, franchisees,
dealers and retailers.
4. Value Addition – Distribution Channel Members can provide greater efficiency in making
availability of goods to the target markets through their Contacts, Specialization, experience, and
scale of operation. This can add value to the product or service at each level of distribution.
5. Reduced number of Channel Transactions – Marketing intermediaries or channel members help
to reduce the number of channel transactions.
6. Information – Gathering and distributing information is very helpful.
7. Promotion – Communication to the consumer regarding product information and offers through
advertising and promotion.
8. Financial support – Offering financial support for example Purchase on credit, exchange
options, purchase using payment plans
9. Other – Financing, Physical Distribution and Risk Taking are other parameters that influence a
channel selection decision Reduces Distribution cost and time.

Most Common Routes Used for Bringing the Products to the Market
The most common routes used for bringing the products to the market from-producer to
consumer are as follows:
1. Manufacturer-Consumer (Direct Sale):
There are three alternatives in direct sale to consumers.
They are:
(i) Sale through advertising and direct methods (mail order selling),

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(ii) Sale through travelling sales force (house to house canvassing),

(iii) Sale through retail shops of manufacture, for example, shops selling mill cloth. Bata Shoe
Company outlets, etc.
2. Manufacturer-Retailer-Consumer:
This channel option is preferable when buyers are large retailers, for example, a
departmental store, discount house, chain stores, super market, big mail-order houses or
cooperative stores. The wholesaler can be by-passed in this trade route. It is also suitable when
products are perishable and where speed in distribution is essential. However, the manufacturer
has to perform the functions of a wholesaler such as storage, insurance, financing of inventories
and transport.
3. Manufacturer-Wholesaler-Retailer-Consumer:
This is a normal, regular and popular channel option used in groceries, drugs goods, etc. It
is suitable for producers under the given conditions – (i) They have a narrow product line (ii) They
have limited finance (iii) Wholesalers are specialized and can provide strong promotional support,
(iv) Products are durable and not subject to physical deterioration or fashion changes.
4. Manufacturer-Agent-Wholesaler-Retailer-Consumer:
In this channel the producer uses the service of agent middlemen such as – a sales agent,
for the initial dispersion of goods. The agent in turn may distribute to wholesalers, who in turn sell
to retailers. There may be a sole selling agent for many manufacturers, for example, Voltas. Many
textile mills have sales agents for distribution. Agent middlemen generally operate at the wholesale
level. They are common in agricultural marketing.
Agent middlemen sell directly to wholesaler or to a large retailer on commission basis. They are
used by manufacturers for marketing of this goods.
5. Manufacturer-Wholesalers-Consumer:
Wholesaler may by-pass retailer when there are large and institutional buyers, e.g.,
industrial buyers, for example, government, consumer cooperatives, hospitals, educational
institutions, business houses, etc.
6. Competitors:
Marketers closely watch the channels used by rivals. Many a time, they prefer similar
channels to bring about distribution of their products also. For instance, they may by-pass retail
store channel and adopt door-to-door sales.

2 Types of Middlemen in Distribution: Merchant and Agent Middlemen

There are two types of middlemen in distribution:
1. Merchant middlemen buy and sell goods on their own account and at their own risk of loss, e.g.,
wholesaler and retailer.

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2. Agent middlemen who do not take ownership title to goods but actively negotiate the transfer
of ownership right from the seller to the buyer, e.g., selling commission agent or broker.

In the channel management, a manufacturer has to make three decisions:

1. Selection of general channel of distribution to be adopted.
2. Number of middlemen at each level and in each market.
3. Selection of a particular middleman for selling ‘goods’ with or without any exclusive rights of
distribution.
In all commodity markets, whether primary or central, we have a host of middlemen acting as
essential functionaries.
a. Brokers:
Broker is an agent who does not have direct physical possession of goods in which he deals
but he represents either the buyer or the seller in negotiating purchases or sales for his principals.
They may be organised as individuals, partnership or even companies. They act as agents for their
clients — producers, dealers, manufacturers, etc.
The produce brokers offer services of expert middlemen between sellers and buyers.
Brokers are experts in grades, qualities, trade terms and contract terms as well as in warehousing
and transport problems. They buy and sell specific quantities of specific grades of a commodity
on behalf of their masters or employers who undertake all market, credit, transport, and other risks.
In the primary markets, they do business on account of their customers not only in spot goods,
ready for immediate delivery, but they also make sales at negotiated prices for forward delivery of
specific grades and of definite quantities.
b. Commission Agents:
In each primary and central market, individuals, firms or even companies are organised to
buy or sell commodities, acting as buying or selling agents of producers, dealers or manufacturers
who convert the commodities into consumer goods. They may buy or sell on their own account
and at their own risk of loss. In that case, they are called commission merchants or factors.
They may receive goods for sale on consignment acting as consignees of their employers. They
are important in agricultural markets. The consignment method is used by manufacturers who wish
to maintain resale prices of their goods. They may also act as sole agents of their employers.
Resident buyers or buying agents are important in central markets for purchases on behalf of
distant buyers.
Selling agents sell the entire output of their principals or all of given lines of goods; they
also often have full authority to finalise prices, terms and other conditions of sale. We have also
manufacturer’s agents to sell goods of a number of a non-competing producers or manufacturers.

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They are appointed on a continuing agency basis; they often sell within an exclusive area. But they
possess limited authority with regard to prices and terms of sale. All commission agents work for
a fee or commission, e.g., 3% to 5% on sales or purchase.
Manufacturer’s agents are very helpful, in the three circumstances:
i. For a small manufacturer with a few products and having no sales force,
ii. For entering into a new market to be fully developed,
iii. For sale of a new line of product which the present sales force is unable to manage or the new
market is not within their territory.
c. Dealers:
In all primary and central commodity markets, we invariably have merchant dealers. They
are great risk-bearers in the physical or spot markets. They are the backbone of our markets. These
dealers act as principals, buying and selling commodities on their own account and at their own
risk merely for a chance of profit. By selling to them, all producers can be free from risk of loss.
They also act as warehouse keepers of the market and to that extent manufacturers are also free
from risk of loss to a certain extent. The development of the dealer — the risk- bearing middle
man between the producer and the manufacturer, and between the manufacturer and the ultimate
consumers — permitted the producers and converters to transfer some of their market risks to the
dealer. The commodity dealer voluntarily absorbs both market and credit risks in the expectation
of making profits. There is no assurance of profits.

Some Advantages of Distribution Channels

Some advantages of distribution channel are as under:
1. Results in Customer Convenience – Channel distribution provides accumulating and assorting
services, which means they purchase from many suppliers the various goods that a customer, may
demand. Secondly, channel distribution is time saving as the customers can find all that they need
in on$ retail store and the retailer.
2. Customers can buy in small quantities – The phenomenon of breaking bulk quantities and selling
them in smaller quantities is known as bulk breaking. The customers have the benefit of buying in
smaller quantities and they also get a share of the profit the retailer makes when he buys in bulk
from the supplier.
3. Customers receive financial support – Resellers offer financial programs to their customers
which make payment easier for the customer. Customers can buy on credit and using a payment
plan etc.
4. It is Cost Saving – Distribution channel partners are specialists in what they do therefore, they
perform at much lower costs than companies trying to run the entire distribution channel all by
itself.

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5. It is Time Saving – Time of delivery is reduced due to efficiency and experience of the channel
members. For example, the grocery store receives deliveries from the wholesaler in amounts
required and at a suitable time and often in a single truck. In this way cost as well as time is saved.
6. Channel members also help in boosting sales – Resellers often use persuasive techniques to
persuade customers into buying a product thereby increasing sales for that product. They often
make use of various promotional offers and special product displays to entice customers into
buying certain products.
7. Channel members provide valuable information – Manufacturers s rely on the intermediaries to
provide information which will help in improving the product or in increasing its sale. High- level
channel members often provide sales data. On all other occasions the manufacturer can always
rely on the reseller to provide him with customer feedback.
8. Bigger Reach – A channel of distribution makes it possible to deal with customers that the
company could not economically reach with own sales force or store. A network of distributors or
retailers provides ready-made coverage of other regions or the whole country without the company
having to invest.
9. Increased Market Knowledge – Distributors provide company with local market knowledge,
enabling it to enter new markets quickly and effectively without the cost of market research or
marketing programs
10. Increased Core Competency – A small business needs to focus its resources on product
development and generate revenue. Using channel distribution allows a small business to focus on
those core competencies without having to hire new personnel
11. Results in increased Efficiency – the intermediaries help to develop a single line of contact for
each customer. That line of contact would include order placement, defective product returns,
payment collections, product questions and product returns. All this helps in increasing the
efficiency of the manufacturer.
12. Results in Growth – An international channel distributor can help a small business reach
markets all over the world

Disadvantages: Loss of Product Importance due to Delay, Lack of Communication Control,

Revenue Loss and a Few Others

1. Loss of Product Importance due to delay – In case of transportation delays, the product loses its
importance in the channel and the sales suffer.
2. More importance to competitor’s product – Similarly a competitor’s product may enjoy greater
importance as the channel members might be getting a higher promotional incentive.
3. Lack of Communication Control – Manufacturer loses control over what message is being
conveyed to the final customers. The reseller may engage in personal selling in order to increase

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the product sale and communicate about the product to his customers. He might exaggerate about
the benefits of the product this may lead to miscommunication problems with end users.
4. Revenue loss – The manufacturer sells his product to the intermediaries at costs lower than the
price at which these middlemen sell to the final customers. Therefore the manufacturer goes for a
loss in revenue.

Role and Significance/Importance of Distribution Channels

The role of distribution channels can be summarized as follows:

1. Distribution channels offer salesmanship: The distribution channels offer pivotal role of
a sales agent. They help in creating new products in market. They specialize in word of
mouth selling and promotion of products. They assure pre-sale and post-sale service to the
consumers. Since these channels are in direct and regular contact with the consumers, they
do salesmanship very well and at the same time provide true and valuable feedback to the
producers.
2. Distribution channels increase distributional efficiency: The intermediary channels
ease the sales process as they are in direct contact with the customers. They narrow down
the gap between producers and consumers both ecoomically and efficiently. These
intermediaries reduce the number of transactions involved in making products available
from producers to consumers. For instance, there are four producers who are targeting to
sell their products to four customers . If there is no distribution channel involved, then there
will be sixteen transactions involved. But if the producers use distribution channels, then
the number of transactions involved will be reduced to eight( four from producer to
intermediary and four from intermediary to customer), and thereby the transportation costs
and efforts will also be reduced.
3. The channels offer products in required assortments: Just like the producers have
expertise in manufacturing products, similarly the intermediaries have their own expertise.
The wholesalers specialize in moving and transferring products from various producers to
greater number of retailers. Similarly, the retailers have expertise in selling a wide
assortment of goods in less quantity to a greater number of final customers. Due to the
presence of distribution channels(wholesalers and retailers), it is possible for a consumer
to buy the required products at right time from a store conveniently located(geographically
closer) rather than ordering from a far located factory. Thus, these intermediaries break the
bulk and meet the less quantity demand of the customers.
4. They assist in product merchandising: It is actually the merchandising by intermediaries
which fastens the product movement from the retail shop desk to the customer’s basket.
When a customer goes to a retail shop, he may be fascinated by the attractive display of
some new product, may get curious about that new product, and he may switch over to that
new product leaving his regular product. Thus merchandising activities of the
intermediaries serve as a quiet seller at a retail store.
5. The channels assist in executing the price mechanism between the firm and the final
customers: The intermediaries help in reaching a price level which is acceptable both to
the producers as well to the consumers.
6. Distribution channels assist in stock holding: The intermediaries perform various other
functions like financing the products, storing the products, bearing of risks and providing
required warehouse space.

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Thus, the distribution channels are a vital constituent of a firm’s comprehensive marketing
strategy. They assist in expanding product reach and availability, as well in increasing revenue.

POST-TEST

NAME_______________________________________________ SCORE___________
YEAR&SECTION________________ DATE____________

CASE ANALYSIS

Motivating Channel Members

The basic objective of any incentive is to increase sales. Most of the products come to the
market through a distribution channel comprising of dealers. Dealers or distributors are the front-
runners and the growth of any company largely depends on its channel network, particularly in a
highly competitive market. Companies are offering several kinds of incentive schemes to motivate
their dealers to fight competition and pursue them to increase sales in spite of all odds, such
schemes are now widely used in many industrial sectors, whether they always give the desired
results, can be questioned. Let us analyze this in the light of the prime competition sector, the
automobile sector. Ji Chang Wook. is one of the dealers of one of the leading Korean Automobile
Companies. He holds a market share of around 50% and is market leader in his area. With new
players coming in, his market share has dropped by 04% in last three years. The profit margins are
also squeezing. The company which never used to question him for his performance has now
started reviewing his performance on monthly basis and tremendous pressures have built up to
increase sales. In order to support and motivate to dealers the company has come out with an
incentive scheme during the peak selling quarter of the year. The scheme was designed to increase
the over all market share of the company by 04%. The dealers were given sales targets on the basis
of their performance in theprevious year in that quarter, estimated industry growth for the year and
targeted market-share in their areas. The incentive was based on the collection of payment sent by
dealers at the end of the quarter. Ji Chang Wook Automobiles was quite attracted by the scheme
and put his best efforts to reach his targets for the quarter. In the process it had to increase the
salesman's commission and spend a lot on advertising and field—activities. Inspite of the efforts

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and expenses, it reached closed to its target but found itself unable to reach the desired figure. In
order to achieve the collection figure it arranged some external finance and finally achieved the
target. In lieu of the collection sent it was supplied the vehicles. This increased its wholesale market
share, however the retail market share remained to be almost the same. The company was happy
to see a rise in the wholesale market share and attributed this to the incentive scheme. They ignored
the fact that the entire collection had not come by actual sales and the stock at the dealership and
the dealer’s market liabilities have increased. I In order to attract similar performance, the company
extended the scheme for the next month also. Similar happenings took place, however the impact
was low. After continuing for eight months in this manner, the company stopped the scheme. It
was found that the sales started dropping.

In order to gain more and more sales for incentives the dealer increased the salesman
commissions. Some contribution of the incentives was also transferred to the end consumers.
These gains slowly became an integral part of the salesman's and dealer’s income rather than an
incentive and when the schemes were taken back they considered this as a reduction in their income
and lost the motivation to sell, leading to loss insales. It was observed at the end of the year that
the sales had increased but the profitability had gone down. This happened because of the increased
expenses on sales promotions activities and interest charges on large stocks and external finances,
which was done to achieve the incentive targets.

Question for Discussion : In the light of above case study, discuss the importance of motivating
the channel members. And suggest that how can incentive selling scheme/strategy, help in
balancing the market share, profitability and consumer satisfaction simultaneously

REFERNCES

https://corporatefinanceinstitute.com/resources/knowledge/other/distribution-management/
Distribution Management: Definition, Advantages & Strategies ...https://www.netsuite.com
https://www.shopify.com.ph/encyclopedia/distribution-channel
https://www.economicsdiscussion.net/distribution-channel/what-is-distribution-channel/31950
https://www.managementstudyguide.com/distribution-channels.htm
https://industri.fatek.unpatti.ac.id/wp-content/uploads/2019/03/149-The-Handbook-of-Logistics-
and-Distribution-Management-Understanding-the-Supply-Chain-Alan-Rushton-Phil-Croucher-
Peter-Baker-Edisi-1-2014.pdf
https://gurukpo.com/Content/MBA/Sales_Management.pdf
Videos
Video: What Is Distribution Management?
https://www.netsuite.com/portal/resource/articles/erp/distribution-
management.shtml#:~:text=in%20your%20browser.-
,What%20Is%20Distribution%20Management%3F,finally%20to%20the%20end%20consum
Lecture 36 : Distribution Channel Management: Distribution Channels: Part I
https://www.youtube.com/watch?v=Q52eTM4wRGE

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https://www.youtube.com/watch?v=80N8cBp2LvU
https://www.youtube.com/watch?v=JzLoo8cFJBI

UNIT III. MANAGING THE MARKETING CHANNEL

Overview

The lesson deals with the administration of existing channels. It opens with the
comprehensive analysis of the motivation of channel members. Some issues have also been
included to give emphasis on information gathering to monitor the product flow, pricing and
promotions through the channel. Lastly, it presents an analysis of the issues involved in
evaluating channel member performance.

Learning Objectives

At the end of the unit, I am able to:

1. understand the importance of motivating the channel members;
2. identify the product issues in channel management;
3. list and evaluate the pricing issues in channel management;
4. explain the different promotion through the marketing channel;
5. have an awareness about the role of logistics in the firm; and,
6. be familiar with the evaluation of the channel member performance.

Setting up

Name: _____________________________________________ Date: __________________

Course/Year/Section: ___________________________

Which Channel Would You Choose?

This activity provides a hypothetical channel selection decision for the Tea Liling Milk
Tea Shop. Assuming that the owner wanted to introduce a new bundle which is composed of
a mini dedication cake and milk tea, then which would be the best way for them to distribute
it? The possible channels are listed below:
▪ Offer as a ‘take away’ option in all their stores (which would require their stores
opening 4-5 hours earlier than normal)
▪ Offer as a ‘take away’ option in their key/busy stores (that is, those located in
shopping centers and on main roads)

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▪ Offer as a home delivery option only (which would still require their stores to open
4-5 hours earlier than normal)
▪ Distribute via convenience stores
▪ Set up a range of special kiosks (small booths) in key city and transport locations

Questions:
1. Are there any other channel alternatives that you can think of that may be suitable?
_________________________________________________________________________________________________
_________________________________________________________________________________________________
_______________

2. Which retail channel/s would you select for the best way to distribute the new
bundle? Why?
_________________________________________________________________________________________________
_________________________________________________________________________________________________
________________________________________________________________________________________________

Lesson Proper

Motivating the Channel Members

According to Rosenbloom (2016), channel management can be defined as the

administration of existing channels to secure the cooperation of channel members in
achieving the firm’s distribution objectives.
One of the most fundamental and important aspects of channel management is
motivating channel members. Common Language Marketing Dictionary defined a channel
member as one part of the organized network of institutions which, in combination, perform
all the functions required to link producers with end users. Channel members may include
manufacturers, wholesalers, agents, distributors, and retailers.
Motivating the channel members is one of the most fundamental and important
aspects of channel management. In this context, motivation refers to the actions taken by
the manufacturer, producer or franchisor to foster channel member cooperation in
implementing the distribution objective. There are three basic steps involved in motivation
management in the channel:

1. Finding out the needs and problems of channel members

There are four approaches in identifying the needs and problems of channel
members:
i. research studies of channel members,
ii. research studies by outside parties,
iii. marketing channel audits, and
iv. distributor advisory councils (sometimes referred to as a dealer advisory
counsel or channel member committee).

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2. Offering support to the channel members that is consistent with their needs
and problems

Support for channel members refers to the producer or manufacturer’s efforts

in helping channel members to meet their needs and solve their problems
(Rosenbloom, 2016). There are programs provided by McCammon to support the
channel members:

i. Cooperative Arrangements – These are used to provide incentives for

getting extra effort from channel members in the promotion of products of the
manufacturer offering the cooperative program;
ii. Partnership and Strategic Alliances – These serve as a continuing and
mutually supportive relationship between the manufacturer and its channel
members to provide a more highly motivated team, network, or alliance of
channel partners; and,
iii. Distribution Programming – It is defined as a comprehensive set of policies
for the promotion of a product through the channel.

3. Providing leadership through the effective use of power

Irrespective of which approach the channel manager utilizes to motivate

channel members, leadership must still be exercised on a continuing basis if the
motivation programs are to operate effectively and viably. Some of the challenges
exist in the marketing channels are:
i. the looseness of the organization of the many channel systems,
ii. a proclivity by channel members to avoid central direction,
iii. lack of single ownership, and
iv. no clear demarcation of a super-subordinate relationship.

Product Issues in Channel Management

It deals with presenting the effect of product decisions on channel management

decisions. The channel manager must consider the other variable in the marketing mix
before developing new strategies. There are three major areas of product management:

1. New Product Planning and Channel Management

Most new products failed to stay in the market, thus, new product
development is a challenge faced by all producers and manufacturers. Many factors
must be considered to make the new products successful. One of considerations is the
degree of support a new product receives from independent channel members. It is
vital for the channel manager to evaluate the possible channel implications in the
planning and development of new products. The following are the most commonly
issues faced by the channel managers:

i. encouraging channel member input for new product planning,

ii. fostering channel member acceptance of new products,

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iii. fitting the new product into channel member assortments,

iv. educating channel members about new products, and
v. making sure new products are trouble-free.

2. The Product Life Cycle and Channel Management

Product life cycle is a model for describing the stages through which product
pass. Moreover, according to Kotler, it is the course that a product’s sales and profits
take over its lifetime. These stages are:

i. Introductory Stage – It must ensure that sufficient members of channel

members are available for adequate market coverage;
ii. Growth Stage – To reinforce the adequacy of channel member coverage and
monitor the effects of competitive products on channel member support;
iii. Maturity Stage – To motivate channel members to mitigate competitive
impacts and investigate possibility for changes in channel structure; and,
iv. Decline Stage – To phase out marginal channel members and investigate
impact of product deletion on channel members.

3. Strategic Product Management and Channel Management

The success of the manufacturer’s product strategies is dependent upon the

effectiveness of the channel members in carrying out the manufacturer’s product
strategies such as follow: These stages are:

i. Product Differentiation and Channel Management – It represents the

manufacturer’s attempt to portray a product or products as being different
from competitive products and therefore more desirable to purchase, even
though the price may be higher. The real key to creating a differentiated
product is to get the consumer to perceive a significant difference.
Two channel management implications for product differentiation
strategy can be derived. First, when product differentiation strategy is affected
by who will be selling the product, channel managers should try to select and
help develop channel members who “fit” the product’s image. Second, when
product differentiation strategy is influenced by how the product is sold at
retail, the channel manager should provide retailers with the kinds of support
and assistance needed to properly present the product.

ii. Product Positioning and Channel Management – It refers to a

manufacturer’s attempt to have consumers perceive the products in a
particular way relative to competitive products. If this is accomplished, the
product is then “positioned” in consumers’ minds as an alternative to other
products that they currently use.

There are three implications for channel management in product

positioning. First, the possible interfaces between the product positioning
strategy and where the product will be displayed and sold to consumers

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should be considered before the positioning strategy is implemented. Second,

retailer support in the form of proper merchandise presentation and display
should be elicited before attempting to implement the positioning strategy.

Finally, a sufficient “war chest” of funds should be available to provide

retailers with attractive incentives to gain strong retailer acceptance in
support of the positioning strategy.

iii. Product Line Expansion/Contraction and Channel Management – A

product line expansion is when a company creates a new product in the same
product line of an existing brand.

When dealing with the interface between product line expansion and
contraction and channel strategy: It make good sense to incorporate channel
member views before the expansion or contraction of product lines. The
manufacturer should also attempt to explain to channel members the rationale
underlying product line expansion or deletion strategies. And lastly, the
manufacturer should try to provide adequate advance notice of significant
product line changes to channel members to allow them sufficient time to
prepare for such changes.

iv. Trading Down, Trading Up, and Channel Management – Trading down
refers to the addition of lower-priced products or a product line to a product
mix than had typically been offered in the past. On the other hand, trading up
is adding products or a product line that are substantially more expensive than
other products in the line or mix.

Pricing Issues in Channel Management

The “golden rule” of channel pricing when developing a pricing strategy is stated as
follows: “It is not enough to base pricing decisions solely on the market, internal cost
considerations, and competitive factors. Rather, for those firms using independent channel
members, explicit considerations of how pricing decisions affect channel member behavior
is an important part of pricing strategy.”

Pricing decisions can have a substantial impact on channel member performance. If

channel members perceive the manufacturer’s pricing strategy as congruent with their own
interests, then a higher level of cooperation can be expected. And the reverse is also true.

Therefore, the major challenge facing the channel manager in the area of pricing is to
help foster pricing strategies that promote channel member cooperation and minimize
conflict.

Guidelines for Developing Effective Channel Pricing Strategies

Oxenfeldt offers a set of eight classic guidelines for developing pricing strategies that
incorporate channel considerations. While not comprehensive, they do provide a basic

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framework and benchmark for pricing decisions that incorporate channel considerations.
These are:

1. Each efficient reseller must obtain unit profit margins in excess of unit operating
costs.
2. Each class of reseller margins should vary in rough proportion to the cost of the
functions the reseller performs.
3. At all points in the vertical chain (channel levels), prices charged must be in line with
those charged for comparable rival brands.
4. Special distribution arrangements–variations in functions performed or departures
from the usual flow of merchandise–should be accompanied by corresponding
variations in financial arrangements.
5. Margins allowed to any type of reseller must conform to the conventional percentage
norms unless a very strong case can be made for departing from the norms.
6. Variations in margins on individual models and styles of a line are permissible and
expected. They must, however, vary around the conventional margin for the trade.
7. A price structure should contain offerings at the chief price points, where such price
points exist.
8. A manufacturer’s price structure must reflect variations in the attractiveness of
individual product offerings.

Other Issues in Channel Pricing

The channel manager is faced with other channel pricing issues that require more
specific and detailed attention such as follow:
1. Exercising Control in Channel Pricing
2. Changing Price Policies
3. Passing Price Increases through the Channel
4. Using Price Incentives in the Channel
5. Dealing with the Gray Market and Free Riding

Promotion through the Marketing Channel

Promotion is an essential element and an effective tool used by businesses, both

small and large to create awareness and persuade the customers to buy the product and
services on offer. Without proper promotion, business would remain stagnant it would be
difficult to generate profit due to low visibility in the market.
One of the major tools the manufacturer uses for implementing an integrated
promotional program is selling support by channel members. A manufacturer must carefully
administer promotional strategies to help assure a high degree of channel member
cooperation in the promotion of its products.
Some manufacturers rely on promotion in the form of advertising to their target
markets to “pull” their products through the channel and hence indirectly secure channel
cooperation. The belief underlying this so-called pull strategy is that by building strong
consumer demands, the manufacturer will force channel members to automatically promote
the manufacturer’s product because it is in their obvious self-interest to do so. This strategy
is often insufficient by itself to secure strong channel member promotional support.

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An approach referred to as push strategy, requires more direct involvement by the

manufacturer with channel members in the use of promotional strategies. The real concept
underlying the push strategy should be one of mutual effort and cooperation between the
manufacturer and channel members in the development and implementation of promotional
strategies.

Basic Push Promotional Strategies in Marketing Channels

1. Cooperative Advertising – It is the sharing of costs for locally placed advertising

between a retailer or wholesaler and a manufacturer.
2. Promotional Allowances – The most typical strategy used for promotional
allowances is to offer the channel member a direct cash payment or a certain
percentage of the purchases on particular products.
3. Slotting Fees – Payments (either in cash or merchandise) by manufacturers to
persuade channel members, especially retailers, to stock, display, and support new
products.
4. Displays and Selling Aids – The typical strategy is point-of-purchase (POP) displays,
other common types of displays and selling aids include dealer identification signs,
promotional kits, special in-store displays, and mailing pieces.
5. In-store Promotions – These are short-term events designed to create added
interest and excitement for the manufacturer’s products.
6. Contests and Incentives – These are done to stimulate channel member sales efforts
for their products are another popular form of promotion.
7. Special Promotional Deals and Merchandising Campaigns – It includes a variety
of push type promotional deals such as discounts to channel members to encourage
them to order more products, favorable offers to consumers to foster larger
purchases, percentage or cents-off offers, rebates, coupons, prizes, and premium
offers.

Logistics and Channel Management

Logistics, the synonymous term of physical distribution, involves planning,

implementing, and controlling the physical flow of materials from the point of origin to the
point of the consumer at a profit. On the other hand, supply chain management emphasizes
close cooperation and comprehensive inter-organizational management to integrate the
logistical operations of the different firms in the channel.

The role of logistics is to get the right amount of product to the right places in the right
time. Third-party logistics providers are the firms specialize in performing most or all of the
logistical tasks that manufacturers or other channel members would normally perform
themselves.

Six Components of a Logistic Systems

1. Transportation – It is the most fundamental and obviously necessary component of

any logistics system. Transportation is also often the component accounting for the
highest percentage of the total cost of logistics.

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2. Materials Handling – This encompasses the range of activities and equipment

involved in the placement and movement of products in storage areas. Issues that
must be addressed when designing materials handling systems include how to
minimize the distances products are moved, what kinds of mechanical equipment to
use to minimize costs, and how best to use labor.

3. Order Processing – It is often a key component of logistics, and developing an

efficient order processing system can often be far from routine. The importance of
order processing in logistics lies in its relationship with order cycle time. Order cycle
time is the length of time between when an order is placed and when it is finally
received by the customer.

4. Inventory Control – It refers to the firm’s attempt to hold the lowest level of
inventory that will still enable it to meet customer demand.

5. Warehousing – It is concerned with the holding of products until they are ready to
be sold. Warehousing can be one of the more complex components of a logistics
system because it entails several key decisions like where to locate warehouses, how
many, size, design and ownership. Warehousing can be an important component of a
logistics system because it is so closely linked to the ability of the firm to provide high
levels of customer service.

6. Packaging – The costs associated with the packaging of products (consumer package
and case design) can affect the other components of the system and vice versa. The
type of transport used can affect packaging and packing costs. Materials handling and
order processing procedures and costs can also be affected by packaging because a
well-designed package can help to increase efficiencies in these components.
Additionally, effective packaging can help reduce inventory-carrying costs by
reducing product damage. Packaging has an important logistics dimension that can
make a significant difference in the effectiveness and efficiency of the logistics system.

Four Key Areas of Interface between Logistics and Channel Management

Channel management and logistics management go together hand in hand to provide

effective and efficient distribution.

This especially applies to four major areas of interface between channel management
and logistics management.

1. Defining Logistics Service Standards

In general, the higher the service standards the manufacturer offers the higher
the costs. It is usually not possible to completely escape the trade-off of higher costs
for higher service standards. Thus, the key issue facing the channel manager with
respect to defining logistics service standards is to determine precisely the types and
levels of logistics service desired by the channel members.

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To deal with this issue effectively, the channel manager needs to obtain the
channel members’ views about what kinds of service standards they want before
developing a logistics program.

2. Evaluating the Logistics Program

A logistics program may be offered to channel members as a separate entity
or may be included as a major component of the manufacturer’s overall approach for
supporting channel member needs. The logistics program may be a key feature of a
channel “partnership” or strategic alliance.

The channel manager should play a role to ensure that the program does
indeed meet the channel members’ service requirements. It does require the channel
manager to have a clear understanding of the objectives of the logistics program.

3. Selling the channel members on the logistics program

4.
Stewart suggests several types of appeals to help sell the logistics program to
channel members.

i. Minimizing Out-Of-Stock Occurrences – By minimizing out-of-stock

occurrences through an improved logistics program, sales lost by the channel
members will be reduced. Overselling the benefits of the new system to the
channel members should be avoided due to some systems failing to live up to
expected promises. Two systems that do seem to work are computer-to-
computer ordering and EDI.
ii. Reducing Channel Member Inventory Requirements – A well-designed
and responsive logistics program can mean shortened channel member order
cycles, which means that they can carry less inventory.
According to Investopedia, the just-in-time (JIT) inventory system is a
management strategy that aligns raw-material orders from suppliers directly
with production schedules. Companies employ this inventory strategy to
increase efficiency and decrease waste by receiving goods only as they need
them for the production process, which reduces inventory costs. This method
requires producers to forecast demand accurately.
iii. Strengthening the Manufacturer–Channel Member Relationship – An
improved logistics management system offers great potential as a strategic
marketing tool – as it will offer greater potential to those manufacturers who
are able to, with their superior logistics capabilities, help channel members
improve their logistics and marketing capabilities as well.

5. Monitoring the Logistics System

Logistics systems must be continuously monitored, both in terms of how

successful they are in performing for the manufacturer and, just as important, how
well they are meeting channel member needs.

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The channel manager should continually monitor the channel members’

reactions to the logistics program. The most effective way is to conduct a survey of a
sample of channel members. The survey should be part of the overall marketing
channel audit.
If the survey or audit finds areas for improvement or deficiencies, the
manufacturer must actually follow through and make these improvements or correct
these deficiencies.

Evaluating Channel Member Performance

The success of the firm using independent channel members serve its target markets
is dependent upon effective and efficient performance from its channel members. The
evaluation of channel member performance is therefore an important part of channel
management.

Scope and Frequency of Channel Member Performance

1. Degree of Control – It is the control that a producer, manufacturer or franchisor has

over members which is based on contractual agreements.
2. Importance of Channel Members – Evaluation of channel members is more
comprehensive for manufacturers who sell all of their output through intermediaries
than for manufacturers who rely less on intermediaries.
3. Nature of the Product – The more complex the product, the broader the scope of
evaluation and vice versa. For products of very high unit value, the gain or loss of a
single order is important to the manufacturer.
4. Number of Channel Members – For the manufacturers who use intensive
distribution, channel member evaluation may be cursory. On the other hand,
manufacturers who use highly distribution, the evaluation should be comprehensive.

Performance Evaluation versus Day-to-Day Monitoring

Pegram identified two basic types of evaluation approaches:

1. Appraisals – It is used to assist management in maintaining current operating
control of distributors’ efforts, insofar as the company’s products is concerned. It is a
routine, day-to-day monitoring of performance of the channel members reflected in
standard sales reports.
2. Overall Performance Reviews – It is designed to give management a complete and
objective analysis of each distributor’s operations. It involves a number of criteria
besides sales.

Three Phases of Channel Member Performance Audit

INTOSAI states that performance auditing seeks to provide new information,

analysis or insights and, where appropriate, recommendations for improvement.
Performance audits provide new information, knowledge or value by:

▪ providing new analytical insights (broader or deeper analysis or new perspectives)

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▪ making existing information more accessible to various stakeholders

▪ providing an independent and authoritative view or conclusion based on audit
evidence
▪ providing recommendations based on an analysis of audit findings.

Rosenbloom (2016) presents the three phases of channel member performance audit
which are as follow:

1. Developing Criteria – Most manufacturers use a combination of sales performance,

inventory maintenance, selling capabilities, customer service and technical support
capabilities, attitudes, competition and general growth prospects of the channel
members.
2. Periodic Evaluation of the Channel Members’ Performance Against Criteria – To
evaluate the channel members in terms if the criteria developed, three approaches
can be used:

i. separate performance evaluations on one or more criteria,

ii. multiple criteria combined informally to evaluate overall performance
qualitatively, or
iii. multiple criteria combined formally to arrive at a quantitative index of overall
performance.

3. Recommending Corrective – It is done to improve the performance of channel

members who are not meeting minimum performance standards. The channel
manager must develop concrete and practical approaches aimed at actively seeking
information on channel ember needs and problems such as building a formal channel
communication network, conducting marketing channel audits, forming distributor
advisory councils and utilizing research conducted by outside parties.

References

Books:
Kotler, P., Armstrong, G., & Cunningham, M. H. (2005). Principles of marketing. Toronto:
Pearson Prentice Hall.
Rosenbloom, B. (2016). Distribution Management. Philippines: Cengage Learning Asia Pte
Ltd.

Journal:
International Organization of Supreme Audit Institutions (ND). Fundamental Principles of
Performance Auditing. The International Standards of Supreme Audit Institutions.
Retrieved from http://www.psc-
intosai.org/data/files/1E/96/00/30/4EBF6510C0EA0E65CA5818A8/ev-issai-300-
for-approval-by-the-psc-sc.pdf

Websites:
Banton, C. (2020, February 4). Understanding Just-in-Time (JIT) Inventory Systems.

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Investopedia. Retrieved from https://www.investopedia.com/terms/j/jit.asp

Channel member. (2018, May 24). The Common Language Marketing Dictionary. Retrieved
from https://marketing-dictionary.org/c/channel-member/

Assessing Learning

ACTIVITY 1

Name: _____________________________________________ Date: __________________

Course/Year/Section: ___________________________ Score:
_________________

Directions: Identify the term being described in the following statement. Write your answer
on the space provided in each number.

1. These serve as a continuing and mutually supportive

relationship between the manufacturer and its channel
members to provide a more highly motivated team,
network, or alliance of channel partners.
2. It as one part of the organized network of institutions
which, in combination, perform all the functions required
to link producers with end users.
3. It refers to the addition of lower-priced products or a
product line to a product mix than had typically been
offered in the past.
4. It means adding products or a product line that are
substantially more expensive than other products in the
line or mix.
5. It represents the manufacturer’s attempt to portray a
product or products as being different from competitive
products and therefore more desirable to purchase, even
though the price may be higher.
6. This promotional strategy requires more direct
involvement by the manufacturer with channel members
in the use of promotional strategies.
7. It the administration of existing channels to secure the
cooperation of channel members in achieving the firm’s
distribution objectives.
8. It is the most fundamental and obviously necessary
component of any logistics system. Transportation is also
often the component accounting for the highest
percentage of the total cost of logistics.

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9. It is used to assist management in maintaining current

operating control of distributors’ efforts, insofar as the
company’s products is concerned.
10. It is a comprehensive set of policies for the promotion of a
product through the channel.
11. It involves planning, implementing, and controlling the
physical flow of materials from the point of origin to the
point of the consumer at a profit.
12. It refers to the firm’s attempt to hold the lowest level of
inventory that will still enable it to meet customer
demand.
13. It is designed to give management a complete and
objective analysis of each distributor’s operations.
14. It is used to provide incentives for getting extra effort from
channel members in the promotion of products of the
manufacturer offering the cooperative program
15. It is the sharing of costs for locally placed advertising
between a retailer or wholesaler and a manufacturer.

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UNIT IV. ADDITIONAL PERSPECTIVES ON MARKETING CHANNELS

Overview:

This unit gives you an idea about additional perspectives on marketing channels such
as Electronic Marketing Channels, Franchise Marketing Channels, Marketing Channels for
Services, and Global Marketing Channels. This will help you to design and implement new
marketing strategy that will help in providing consistent distribution of the products or
services.

Learning Objectives:

At the end of the unit, I am able to:

1. Design, Implement, manage and evaluate channel strategy to distribute company’s
products consistent into a firm.
2. Come up with recommendations for managing the firm’s channel strategy.

Setting up

Name: ____________________________________ ___________ Date:

________________
Course/Year/Section: _____________________________

Directions: The following grid contains 5 terms associated with additional perspectives on
marketing channels. Find and encircle them. Look for them in all directions including
backwards and diagonally.

A L P W Z R T S E C N E I D U A Q C X P
Z Q E P E R S U A S I O B S G H J I K R
D F A C R X B N E L E C T R O N I C I O
C R B N L O V E P G H O M E S D C E C M
D A G W V A D A L P O U R D T S C N B O
A N X V B N M U A S S T C E V P B T Y T
P C I N T R X Y C U I D P M A E S I W I
S H V B N M R T E T A O Z A B R E F F O
Y I C M T J F H Y U I O N N B S S Y F N
R S P A P R O D U C S R U D B U A I A B
T E O R U P R I C I N G G S T A S N C B
N C R K M A R C O V E R T K E S T G I N
E Y M E A C H A N N E L S C V X D Z T U
T A O T G R A E C I R P C E P O I R G U

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N N L` P Z S S E N I S U B E C I V R E S
O N H A I L E Y F R A N C I S C O N A I
C E A P U B L I C G L O B A L K M N O Z

Lesson Proper

Additional Perspectives on Marketing Channels

Online Channel Systems and Management

The term Channel Management is widely used in sales marketing parlance. It is

defined as a process where the company develops various marketing techniques as well as
sales strategies to reach the widest possible customer base. The channels are nothing but
ways or outlets to market and sell products. The ultimate aim of any organization is to
develop a better relationship between the customer and the product.

Channel management helps in developing a program for selling and servicing

customers within a specific channel. The aim is to streamline communication between a
business and the customer. To do this, you need to segment your channels according to the
characteristics of your customers: their needs, buying patterns, success factors, etc. and then
customize a program that includes goals, policies, products, sales, and marketing program.
The goal of channel management is to establish direct communication with customers in
each channel. If the company is able to effectively achieve this goal, the management will
have a better idea which marketing channel best suits that particular customer base. The
techniques used in each channel could be different, but the overall strategy must always
brand the business consistently throughout the communication.

A business must determine what it wants out of each channel and also clearly define
the framework for each of those channels to produce desired results. Identifying the segment
of the population linked to each channel also helps to determine the best products to pitch
to those channels.

According to Junwang Lee, Electronic Marketing Channel refers to the use of of the
Internet to make products and services available so that the target market with access to
computers or other enabling technologies can shop and complete the transaction for
purchase via interactive electronic means.

3 Structures of Electronic Marketing Channels

1. Disintermediation versus re-intermediation

In Disintermediation, Intermediaries become superfluous because producers gain
exposure to vast numbers of customers in cyberspace, while in Re-intermediation
shifting, changing, or adding of middlemen to the channel is done.

2. Information flow versus product flow

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Information flow identifies the individuals who participate in the flow of information
either up or down the channel while , The product flow refers to the movement of the
physical product from the manufacturer through all the parties who take physical
possession of the product until it reaches the ultimate consumer.

3. Virtual channel structure versus physical channel structure

Virtual channel structure uses internet as the medium for sales while in physical
channel, location of the business is significant since it serves as the place of exchange.

Franchise Marketing Channel

Franchise marketing is any activity that a franchise does in order to grow, these
activities can include pay-per-click advertising, email marketing, SEO, trade shows, content
marketing, commercials and more.

Franchise
A legal agreement between two independent parties whereby one of those parties
grants a license to the other party to sell a trademarked product or service.

Product Distribution Franchise

A licensed product (or service) that can be sold by the franchisee. (e.g., GM and Ford)

Business Format Franchise

A licensed product or service, but the franchisor also provides the complete system
or format for operating the business. (e.g., McDonalds)

Two types of franchise

Single-Unit-Franchise
In this type of structure, the franchisor grants the franchisee the right to own and
operate one unit. This is the most common and simplest form of franchise channel structure.

Multi-Unit-Franchise
Under this structure, the franchisor grants the franchisee the right to own and operate
more than one unit at the outset of the relationship.

Fees in Franchising

Franchise Fee
A franchise fee is typically a one-time flat fee paid by the franchisee to the franchisor
usually when the franchisee signs the franchise contract.

Royalty Fee
Royalty fees are required payments by franchisees to franchisors in the form of
regular and continuous royalty fees for as long as they hold the franchise.

Franchise marketing can then be divided into two sections:

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Operational franchise marketing is marketing activity that both you as a franchisor and
your franchisees do in order to acquire and retain customers.

Franchise development marketing is any marketing activity that you as a franchisor does
in order to sell more franchise locations.

How to do Franchise Marketing?

Marketing let alone franchise marketing is difficult due to the ever growing and
innovating competition. What separates a successful franchise marketing campaign and
unsuccessful one really boils down to understanding the personas that you’re targeting and
using the correct channels to reach each on in a profitable manner.

Franchise Growth Blueprint

Before any marketing begins, your first step should be developing a growth blueprint
that allows you to full understand who you’re targeting, what makes you stand-out from the
competition and what a short and long term strategy looks like.

Types of franchise marketing

Below are some channels that you should be exploring when creating your franchise
marketing plan:

Website
Your website is a 24/7 salesperson that helps both end customers and potential
franchisees discover your franchise, learn more about what you do and become a paying
customer.
When it comes to franchise development marketing your website move would be franchisees
through the AIDA funnel. This means having:

• Educational content on what it means to own one of your franchises

• Trust builders on why someone should become a franchisee
• Various points of conversion to gather an email address
• A site that is well designed and easy to browse on any type of device (desktop, tablet,
mobile)

Social media
It’s important to go where your customers, or in this case franchisees, and social
media is where many spend their time. As of 2017, Facebook has over 2 billion monthly
active users and while smaller but, still important LinkedIn has 10 million monthly active
users. Being active and interacting with your audiences on a personal and in a non-sales
focused way will help build your reach and ultimately your franchisee pipeline.

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SEO (Search Engine Option)

With just over 3.5 billion searches per day, Google is relied on by many to find the
right answers to their questions. This is where search engine optimization comes into your
franchise development marketing strategy. Optimizing and ranking for the correct keyword
can be the difference between a steady flow of leads and no visitors.

PPC Advertising
Getting in front of the right person at the right time in front of your competitors is
important, especially when the stakes are as big as they are with potential franchisees and
that is exactly what PPC advertising allows you to do.
Using search engine networks such as Google AdWords and Bing, you are able to
target people at every stage of their research process when looking for a franchise to invest
in. Layered on top of a display network such as Google’s display network, which reaches 90%
of internet users, can turn your PPC campaign into a lead generation machine.
Don’t just rely on Google’s AdWords network to drive results but, invest in social
media advertising as well. Facebook is a perfect example of a social network that allows you
to use laser focused targeting to show your ads to the right people at the right time.

Direct Mail
Yes, direct mail still works and it can be used to grow your franchise. Like any
marketing channel, it should be meticulously planned and closely tracked. That means
instead of using a shotgun pray and spray strategy, use a laser focused approach targeting
potential franchisees that fit your criteria and using tools such as call tracking technology to
keep track of response rates.

Trade Shows
Attending trade shows, whether they are specifically franchise focused trade
shows or industry specific events, they are are a great way to get in front of and interact with
people who may end up being future franchisees. When attending be sure not to sure pass
out business cards and sales material but, collect email addresses and contact information
as well. That way you can not only does this allow you to continue to nurture hits person into
a franchisee but, also helps you keep track of the effectiveness of each trade show that you
attend.

Associations
By partnering with associations such as the International Franchise Association and
the Canadian Franchise Association helps you on multiple fronts. It allows you to gain
credibility when compared to other franchises that aren’t apart of it and provide you with
helpful educational and professional development resources such as webinars, seminars and
conferences.

Brokers
Working with franchise brokers such as the ones in the Franchise Broker
Association is a great way to quickly expand your reach when it comes to acquiring new
franchisees. The advantage of working with brokers is that they help you with your vetting
process to make sure that you’re only speaking with potential franchisees that are qualified.

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Sponsorships
Depending on the opportunity, sponsorship can help with both operational
marketing and franchise development marketing. On the franchise development marketing
side, think about targeting business and entrepreneurial focused sponsorship opportunities
in local areas that you want to expand into.

Franchise Portals
Franchise portals also help you grow your franchise, they are websites have a
directory of various franchise opportunities based on various qualities such as investment
size, location, and sector. In exchange for franchise opportunities, you pay these portals a fee.

Marketing Automation
Marketing automation is one of the most powerful marketing tactics that you should
be using in your franchise marketing strategy. With careful planning and the right execution,
it allows you to nurture each potential franchisee by providing them with timely and
personalized touch points at scale.

Direct Sales
It isn’t as sexy as something like marketing automation or PPC advertising but, it gets
the job done. Direct sales whether it is hitting the pavement hard and doing cold calls or
further nurturing personal relationships from a trade show is a powerful weapon. in the
franchise development marketing arsenal.

Marketing Channels for Service

Before you can reach your targeted audience in a service business, you must
understand the different platforms that are available to sell your services. This is known
as distribution of service, and refining this process is the difference between success and
failure. Using different channels for distribution of service can help you manage demand
for your core services. You can use different distribution of service channels to reach
various market segments, and develop different pricing strategies that correspond to the
income of market segment members. Once you understand that channels of distribution
are different for different products, you can analyze examples of distribution channels in
marketing to access new markets while bridging temporary reductions in demand.

Direct Sales Method

Some of the best examples of distribution channels in marketing are direct sales,
which enable you to contact customers and prospects, without using an intermediary.
Direct sales involve personal visits, mail order and online solicitation such as newsletters
and email subscription. It gives you complete control over how you present your offers and
the prices you can offer to your customers. Direct interaction means direct feedback, which
lets you adjust your marketing strategy accordingly.

Virtual Service Distribution

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One of the newest examples of distribution channels in marketing is offering virtual

service. For example, a sales consultant could offer his services through a combination of
phone, email, or video conferences that would make use of software available on cloud
platforms. Remote service delivery is also available to artists and writers who create
content on a freelance basis. For example, if you’re a website content writer, you can create
content for clients and deliver them on platforms such as Basecamp, which enable you to
post content and maintain milestones without ever having to speak to your clients. By
exclusively distributing your services online, you can save the costs of owning an office that
requires a monthly rental payment for space.

Agents or Referrals

Using an agent or a referral is one of the best examples that channels of distribution
are different for different products. Let’s say that you make a living as a marketing guru
who attends conferences and training sessions. However, you may not enjoy the marketing
effort it takes to gain profitable clients. You can take advantage of professional agents
whose job is to find work that matches your talents. These agents would take a commission
off the work you book, and can even keep your name relevant within the industry through
marketing. You can also take advantage of referrals through industry professionals. For
example, if you’re a wedding planner, you could establish a referral program with a
wedding photographer or a wedding gown boutique in which you offer cross-promotions
that benefit both your service businesses.

Distribution Through Publication

Many service customers have become used to the proliferation of publications that
provides them with exactly what they need. In an on-demand world, for example, you can
deliver your service through a blog that amplifies and explains various services that you
offer, a website that not only sells your service but also offers written and visual content
that answers questions and concerns related to your service, or an e-book that customers
can order directly online. Keeping in mind that channels of distribution are different for
different products, you may choose to monetize your publications or offer them as an
incentive for your customers to buy a service. For example, if you own a customer-
relationship management software company, you may choose to offer a specialized white
paper about customer service marketing that prospects can download off your website.
Once they download that white paper, you could offer a discount for them to purchase your
software, or offer a free 7-day trial.

Global Marketing Channels

Global marketing is defined as the process of adjusting the marketing strategies of

your company to adapt to the conditions of other countries. Of course, global marketing is
more than selling your product or service globally. It is the full process of planning, creating,
positioning, and promoting your products in a global market.

Big businesses usually have offices abroad for countries they market to. Currently,
with the proliferation of the internet, even small businesses can reach consumers anywhere
in the world. If a business chooses not to extend internationally, it can face domestic

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competition from international companies that are extending their international presence.
The presence of this competition almost makes it a requirement for many businesses to have
an international presence.

Benefits of Global Marketing

• First, it can improve the effectiveness of your product or service. This is because the
more you grow, the more you learn, and the faster you learn, you become more effective
at producing new product or service offerings.

• Second, you are able to have a strong competitive advantage. It is easy enough for
companies to be competing in the local market. But there are very few companies who
can do so on the worldwide arena. Hence, if you can compete in the worldwide market
and your competitors cannot, you have become a strong force in your industry.

• Third, you increase consumer awareness of your brand and product or service.
Through the internet, consumers can keep track of your progress in the world.

• Finally, global marketing can reduce your costs and increase your savings. In focusing
on other markets, you can attain economies of scale and range by standardizing your
processes – not to mention the savings that you get when you leverage the internet.

Companies evolving towards global marketing are actually quite gradual. The first stage
has the company concentrating on the domestic side, with its activities focused on their
home market. Stage two has the company still focusing domestically but has exports. By
stage three, the company has realized that they need to adapt their marketing geared
towards overseas. The concentration moves from multinational. Thus, adaption has become
crucial. The fourth and last stage has the company creating value when it extends its
programs and products to serve worldwide markets. Definitely, there are no definite time
periods to this evolution process.

International Marketing Channel Decisions

Distribution Intensity

The extent to which products are distributed throughout a country and the number
of intermediaries utilized to carry a good constitutes the product’s distribution intensity.
Strategic decisions pertaining to level of distribution intensity are made on a country-by
country basis, because demand for products can vary greatly across countries. Marketing
infrastructures differ greatly. In developing countries, some products can only be made
available in limited locations.

Intensive Distribution International marketing strategy in which products are

distributed through as many wholesalers and retailers possible in a particular market.
Marketers prefer this approach when the company offers items that appeal to a mass market
of consumers. Marketing efforts focus on making the product widely available. Usually, the
items are low-price products that retailers sell with relatively high volume such as
convenience products.

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Selective Distribution

A strategy of using only a limited number of channel intermediaries in the

international marketing program is a selective distribution system. Producers normally
exert fairly strong control over channels that utilize selective distribution because close
relationships develop among channel members. Shopping products are often marketed
worldwide using selective distribution methods.

Exclusive Distribution

Exclusive distribution focuses on offering products through only one wholesaler or

retailer in a particular market area. – Prestigious products are often offered through an
exclusive distribution strategy. Strategic distribution intensity choices rely primarily on the
factors of price, quality, and competition. – In international markets, the same basic
approaches are viable, depending on the infrastructure of the host country and any
mitigating factors, such as legal restrictions on imports.

Selection of Distribution Channels

Direct Marketing

A primary option for many international marketers, especially those just entering a
new host country, is to engage in direct marketing. A direct marketing channel relies on
direct selling of a product or service to consumers or end users without the use of
wholesalers, retailers, industrial agents, or industrial merchants. Consumers around the
world are familiar with direct marketing. In Germany, more than 80% of companies provide
some form of direct marketing. Telemarketing, email, and direct marketing programs are
popular in Brazil.

Indirect Marketing

When indirect channels are used, the goods and services move through one or more
intermediaries or organizations that move products for producers to consumers and end
users.

Agent middlemen do not take title or ownership of the products. Agents, or brokers,
bring buyers and sellers together in a particular country. These channel members generally
work on a commission basis. Agent wholesalers may or may not take physical possession of

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the products. Merchant middlemen assume title and ownership of the products. An import
middleman purchases products from producers in one country and sells them to established
distribution system members in another country. Merchant retailers purchase goods for
resale and then market those products to consumers.

Many larger international companies, will ship products directly to retail outlets,
bypassing any local wholesale operations. Trading companies are common in the Pacific Rim.
These organizations provide intermediary activities that include marketing services,
financial assistance, and information flow. The Japanese keiretsu trading companies act as a
family of firms with close relationships and, often, shared ownership. The chaebols of South
Korea are similar in many ways and play an important part in South Korean politics and
business culture. Other marketing teams may select the traditional international marketing
channel, which consists of producers, wholesalers, and retailers. – In developed countries,
distribution systems tend to be more institutionalized and focus on the traditional roles of
producer, wholesaler, and retailer.

Business-to-Business Channels

Many countries house large industrial agent and merchant companies. The
manufacturer’s marketing team selects those that reach the company’s target market most
effectively. Local conditions and considerations, including legal restrictions, the availability
of delivery systems, and the potential to create quality partnerships, affect these decisions.
International marketing channels may include a series of different wholesalers and retailers.
Facilitating agencies assist in various aspects of negotiation, financing, documentation,
physical distribution, and warehousing of products internationally.

International Marketing Channel Structures (5Cs)

1. Cost
Some costs are incurred when establishing the channel and choosing
members. • Some costs are associated with maintaining the system, which typically
center on encouraging channel members to remain members of the system.

2. Coordination
Coordinating the marketing efforts that must take place at each level of the
system constitutes an important part of managing the international marketing.
Decisions are made as to what promotional and logistical activities each member will
perform. Marketing channel coordination requires an efficient international
distribution process.

3. Coverage
Marketers examine questions pertaining to the extent to which channel
members cover certain territories. Channel member roles differ according to the
country being served, and as a result, distribution strategies will likely vary from
country to country. When addressing coverage, international marketers consider
intensive, selective, and exclusive distribution strategies.

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4. Cooperation
Although it is difficult to assess, channel leaders attempt to assess the
cooperation of potential channel members prior to the formation of a formalized
marketing channel. The reputation of potential members, along with evidence of
previous marketing success in targeted regions or countries, becomes critical. The
extent to which marketing channel members simply trust one another becomes the
primary determinant of cooperation between parties in a marketing channel.

5. Control
Channel leaders can consolidate international distribution systems in order to
maintain better control and cooperation among channel members.
International marketers lose some control over the physical movement of goods
when goods are shipped domestically. Monitoring the movement of goods and
ensuring their safe delivery brings about extra expenses.

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References

Bennett, Coleman & Co., (2020), The Economic Times.

Retrieved from: https://economictimes.indiatimes.com/definition/channel-management

Open textbooks for HongKong, The Open University of HongKong

Retrieved from: http://www.opentextbooks.org.hk/ditatopic/34128

Choo, J. 2019, What is Franchise Marketing, Kogneta.

Retrieved from: https://kogneta.com/what-is-franchise-marketing-and-how-to-do-it/

Quain, S. (2018), What Are the Different Distribution Channels in a Service

Business?, Houston Chronicle
Retrieved from: https://smallbusiness.chron.com/different-distribution-channels-service-
business-72943.html
Leunendok, M., (2019), Global Marketing: Strategies, Definition, Issues, Examples,
Cleverism.Com

Retrieved from: https://www.cleverism.com/global-marketing-strategies/

Wordpress (2014) , Chapter Eleven International Channel Management Retrieved from:

https://administration21.files.wordpress.com/2014/03/10-international-
distribution1.pdf

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Assessing Learning

Activity 1

Name: ____________________________________ ____ Date:________________

Course/Year/Section: _____________________ Score: ______________

Direction: On a separate sheet/s of paper, answer the questions with honesty and
integrity.

Rubrics for Essay: *50% Content *30% Organization of Ideas *20% Grammar and Use of Words
= 100%

1. For you, choose and Explain your 3 best types of franchise marketing.
2. Enumerate and explain the International Marketing Channel Structures (5Cs)

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