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MindMap Gallery Intermediate Economist-Business Administration (Professional Knowledge and Practice)-04 Distribution Channel Management
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Intermediate Economist-Business Administration (Professional Knowledge and Practice)-04 Distribution Channel Management
Intermediate Economist - Business Administration includes an overview of channel management, construction of distribution channels for different types of goods, management of channel members, channel power management, channel conflict management, etc.
Edited at 2021-10-23 22:19:18
Intermediate Economist-Business Administration (Professional Knowledge and Practice)-04 Distribution Channel Management
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- Outline
Distribution channel management
Channel operation management
Channel Management Overview
marketing channels
Marketing channels are a unified association composed of suppliers, producers, wholesalers and retailers.
supplier
Distribution channel
producer
middleman
Distributors, retailers
end customer
Supplier
Logistics companies, banks, insurance, information, etc.
Distribution channel management goals and tasks
Target
market share
Profit amount
sales growth
Task
Propose and formulate distribution goals
Monitor distribution efficiency
Coordinate channel member relationships
Resolve channel member conflicts
Promote product sales
Modify and rebuild distribution channels
Construction of distribution channels for different types of commodities
Construction of consumer goods distribution channels
Classification of consumer goods
1. Convenience products
1) Daily necessities
2) Impulse purchases
Toys, fruits, etc.
3) Emergency items
Umbrellas, emergency medicines, etc.
2. Optional items
Make a careful comparison before purchasing, such as home appliances, etc.
3. Special products
Products for which you are willing to make special purchasing efforts, such as custom-made products, luxury goods, etc.
4. Non-desired goods
Things that are generally not purchased proactively, such as encyclopedias, artworks, life insurance, etc.
Distribution channel models of common consumer goods
1. Factory direct supply model
Advantages: short channels, quick response to information, stable prices, easy to control.
Disadvantages: sales blind spots are prone to occur and management costs are high.
2. Multiple distribution (agent) model
Advantages: Wide coverage and strong market penetration.
Disadvantages: There are many links and management is difficult; it is prone to price confusion due to cross-selling.
3. Exclusive distribution (agency) model
Advantages: Maximizes the enthusiasm of middlemen.
Disadvantages: Risks in channel control.
It is generally used when new products are launched or when the company itself is not well-known.
4. Platform sales model
The manufacturer takes the sub-packaging factory of the goods as the core, and the sub-packaging factory establishes an operation department, which is responsible for supplying goods to various retail terminals. Achieve the effect of deep distribution.
Advantages: Small service radius, considerate service; stable network, small impact of cross-selling goods.
Disadvantages: It is too restricted by regional market conditions and requires more personnel for management and cooperation.
Construction of distribution channels for industrial products
Characteristics of the industrial products market
1. Derivativeness of requirements
2. Low elasticity of demand
The quantity demanded is little affected by price.
3. Professional purchasing
4. A large purchase amount at one time
5. Customer concentration and stability
Industrial product distribution channel design
1. Manufacturer → wholesaler → customer.
2. Manufacturer→Distributor/Agent→Customer
3. Manufacturer→Wholesaler→Retailer→Customer
4. Manufacturer→Retailer→Customer
5. Manufacturer→Customer
Construction of distribution channels for service products
Characteristics of service products
1. Intangibility
2. Inseparability
Production and consumption are synchronized and cannot be separated in time.
3. Difference
Quality levels change frequently and there is a lack of standard operating procedures that are difficult to define and unify.
4. Unstorability
5. Non-transferability of ownership
Classification of service products
Christopher H Lovelock's basic taxonomy
The actions and results of service are tangible
Passenger transportation, medical care, beauty, catering, surgery, etc.
Freight, repair, retail, fueling, storage, etc.
The behavior and results of service are intangible
Entertainment, arts, broadcasting, education, counseling, religion, psychotherapy, etc.
Accounting, banking, legal services, programming, scientific research, investment, etc.
Common distribution channel models for service products
1. Direct distribution model
2. Distribution channels established by intermediary structures
Brokers, agents, wholesalers, retailers.
Channel member management
Channel member selection
Channel member incentives
To prevent "under-motivation" and "over-motivation".
Channel Member Assessment and Adjustment
Evaluation indicators
Sales quota completion status
average inventory level
Delivery time to customer
Handling lost and damaged goods
Cooperation with the company’s promotion and training programs
Channel power management
6 Sources of Channel Power
1. Reward rights
Also called "commitment strategy," it is the practice of giving benefits to a submissive partner.
2. Power of coercion
Refers to the ability of influencers in a channel to impose penalties on those affected.
3. Legal rights
"Explicit legal authority" expressly stipulated in laws and contracts.
Conventional industry norms, values, beliefs and other "customary legal rights".
4. Right of recognition
Also known as "reference power", it arises when channel members believe that they are in the same camp as other members. When channel members feel that their own goals are closely related or consistent with those of other members, identification rights are likely to arise.
5. Right to expertise
Franchising is a typical channel management method that leases the "expertise" of the franchisor to carry out its own business.
6. Right to information
The ability of channel members to provide certain information.
Distinguishing the nature of sources of channel power
coercive power
Power of coercion.
non-coercive power
Powers other than coercion.
intermediary power
The power of reward, the power of coercion, and the express legal authority.
disintermediated power
Right of recognition, right of expertise, right of information, right of customary law.
Use of channel power
1. Commitment strategy, "rewards will be given if you obey."
Correspondence: Reward rights
2. Threat strategy, "punishment if disobedience".
Correspondence: coercive power
3. Legal strategy, "According to agreements and customs, you must obey."
Correspondence: legal authority
4. Ask for strategies and "give some face."
Corresponding to: right of recognition, right of reward, right of coercion
5. Information exchange strategy, “invite to discuss appropriate distribution of benefits.”
Corresponding to: expertise rights, information rights, reward rights
6. Suggest strategies, "Trust me and make a fortune."
Corresponding to: expertise rights, information rights, reward rights
Maintenance of channel power
The essence of maintaining channel power is: "maintaining channel control."
Several conditions conducive to manufacturers maintaining channel power
1. The industry is controlled by a few large manufacturers.
2. There are no substitutes for the manufacturer’s products.
3. It is very important for buyers to obtain products from this manufacturer.
4. Consumers or products are differentiated, and manufacturers can easily complete cost transfers.
5. Manufacturers can implement forward integration.
10 Strategies for Middlemen to Maintain Channel Power
1. Use influential independent brands.
2. Form a large sales scale.
3. Provide promotional services.
4. Cultivate loyal customers.
5. Use centralized purchasing strategy.
6. Use gray market strategies when appropriate.
Refers to the impact of purchasing products from other manufacturers on the sales volume of manufacturers within the channel.
7. Sign a close cooperation agreement to sell slow-moving goods.
8. Use vertical integration strategy when appropriate.
9. Attract more customers.
10. Influence suppliers through flexible payment settlement policies.
Channel conflict management
Definition of channel conflict
Conflicts and disharmony among channel members arising from interest relationships.
Classification of channel conflicts
Classification by hierarchical relationship
horizontal conflict
vertical conflict
Multi-channel conflict
Divided according to the relationship between interests and confrontational behavior
I conflict
Conflict of interest and confrontational behavior.
II Latent Conflict
Conflict of interest, no confrontational behavior.
III False Conflict
No conflict of interest, no confrontational behavior.
IV does not conflict
No conflict of interest, no confrontational behavior.
According to the degree of channel conflict
Wagrath and Hardy divided channel conflicts into three levels based on three dimensions: "conflict frequency, conflict intensity, and importance of conflict events."
low conflict zone
Moderate conflict zone
high conflict zone
Divided by the influence of channel conflicts on enterprise development
functional conflict
Mutual confrontation among channel members is conducive to the healthy development of the channel, such as the catfish effect.
destructive conflict
Mutual confrontation among channel members is harmful to the health of the channel, such as: channeling goods, defaulting on accounts, producing and selling fake goods, etc.
Causes of channel conflict
role misalignment
Goal difference
difference of opinion
Difficulty communicating
Differences in decision-making power and competition for decision-making power.
Expectation difference
This mainly reflects different expectations for future development.
Resources are scarce and they compete with each other.
How to deal with channel conflicts
1. Based on common interests, determine the long-term goals of channel members.
2. Encourage members of each channel to actively participate in channel activities and the formulation process of related policies.
3. Use incentives appropriately.
4. Use personnel delivery to reduce channel conflicts.
5. Make good use of conflict resolution methods such as negotiation, mediation, arbitration, and litigation.
6. Clean up channel members in a timely manner.
Distribution channel system assessment
Channel Gap Assessment
channel gap
Refers to the gap between the channels designed by the enterprise and the requirements of end customers. The gap between the actual channel system and the ideal channel system.
A model for analyzing channel gaps
Service quality gap model
1980-1990s, Parasuraman. Zantham, and Bailey et al.
The upper half of the model is related to customers, and the lower half is related to service providers.
Customers’ “service expectations” are related to “word-of-mouth communication, personal needs, past experiences, and external communications between providers and customers.”
There are 5 types of "quality gaps GAP" between various factors that determine service quality.
Gap 1: Quality perception gap
Insufficient understanding of customers' "service expectations".
Gap 2: Quality standards gap
Insufficient design of "service quality specifications".
Gap 3: Service delivery gap
Insufficient enforcement of "Service Quality Specifications".
Gap 4: Market communication gap
Failure to properly communicate “service quality specifications” to customers
The services promised did not match what was actually provided.
Gap 5: Service perception gap
The gap between customers’ “service perception” and “service expectations”
It is the core of the service quality gap model.
Ideas to eliminate channel gaps
Eliminate demand-side gaps
By segmenting the market, we accurately provide products and services for different market segments.
Based on the reasons for the gaps, products and services will be improved in a targeted manner.
Transform the target market to match supply and demand.
Eliminate supply-side gaps
Change the role of current channel members.
Leverage new distribution technologies to reduce costs.
Bring in new distribution experts to improve channel operations.
Change the channel gap caused by the channel environment and management restrictions, and optimize the channel structure.
Distribution channel operation performance evaluation
Channel smoothness assessment
1. Evaluation of commodity turnover speed
Product transmission time = product inventory time, transportation time of each link
2. Evaluation of payment recovery speed
3. Evaluation of sales recovery rate
Channel coverage assessment
1. Market coverage assessment
Market coverage = sum of distribution network terminal sales area - sum of overlapping sales areas
2. Market coverage assessment
Channel Financial Performance Assessment
1. Distribution channel cost indicators
1) Distribution channel expenses
2) Distribution channel expense rate
= Total distribution channel expenses ÷ Channel merchandise sales × 100%
3) Increase and decrease rate of distribution channel expense rate
= Expense rate for the current period – Expense rate for the previous period
2. Channel market share indicators
market share
1) Based on overall calculation
2) Calculation based on target market
3) Calculation based on the three major competitors
= own share ÷ sum of share of three major competitors × 100%
Oneself accounts for 25%, and the sum of the three major competitors is 75%. Oneself = 25% ÷ 75% × 100% = 33%.
Generally speaking, a relative market share of more than 33% indicates a certain market strength.
4) Calculated according to the largest competitor
Channel market share
= Total distribution amount of a certain channel ÷ Total sales amount of the product in the same period × 100%
3. Channel profitability indicators
Channel sales growth rate
= Sales growth this year ÷ Total sales last year × 100%
Channel sales profit margin
= Channel profit ÷ Channel sales × 100%
Channel fee profit margin
= Channel profit ÷ Channel cost × 100%
channel asset profit margin
= Channel profit ÷ Channel asset occupation × 100%
Distribution channel development trends
Internet distribution channels
Comparison with traditional distribution channels
1. Function
Communication between supply and demand parties is faster.
2. Structure
Traditional channels are linear, while online channels are network-like.
3. Cost
Online channels are relatively low.
feature
1. Virtuality
2. Economical
3. Convenience
The composition of network distribution system
1. Ordering system
2. Settlement system
3. Distribution system
type
1. Online direct sales channels
Manufacturer → End customer
2. Internet indirect distribution channels
Manufacturer→Network intermediary→End customer
Channel flattening
concept
Peter M. Senge proposed in "The Fifth Discipline".
Flat: wider range; flat: more efficient contact between products and customers.
Channel flattening: Minimize intermediate links to reduce costs and information distortion.
Impact on distributors
Weaken the role of distributors as "information flow platform" and "funding platform", and only retain the role of "logistics platform".
Reasons for flattening
1. The influence of network information technology
2. The impact of channel vertical integration
3. Influence of customer demand characteristics
1) Customers’ personalized needs are getting higher and higher.
2) Increase in customer uncertainty and loss of commitment.
3. The "eclecticism" of consumption means that customer needs are more fickle and unpredictable.
flat form
1. Direct channel
Eliminate the middleman
2. Flat channels with first-level middlemen
Hypermarkets, chain stores, shopping mall counters, consulting service providers, network agents, etc. have become the main force connecting manufacturers and end customers.
3. Flat channels with two levels of middlemen
Manufacturer→Distributor/Agent→Retailer→End Customer.
Features:
1) The overall strength of the dealer is small.
2) Dealers are mainly responsible for logistics tasks.
3) The growth of business volume depends on the manufacturer's own sales team.
4) The number of salespeople increases with the expansion of business coverage.
Channel strategic alliance
Strategic alliances between dealers
Joint centralized procurement, resource sharing and other methods.
Strategic alliances between suppliers
It started as a price alliance and later developed into a strategic alliance.
It is dynamic due to changes in the external environment and is actually mostly short-term behavior.
Strategic alliances between suppliers and distributors
Rooted in the buyer-oriented market, it is an objective reflection of the customer-oriented marketing concept.
The purpose is to integrate the efficiency of cooperation between the upstream and downstream supply chains and provide customers with more satisfactory products and services.