Managing Channel Relations

Chapter 10 Managing Global Channel Relations

Imanuel Hutagalung

Channel Design The term channel design refers to the length and the width of the channel employed. Channel design is determined by 11 C’s: customer characteristics, culture, competition, company objectives, character, capital, cost, coverage, control, continuity, communication.

Customer Characteristics Culture Competition

Customer Characteristics Need to answer questions such as what customer need-as well as why, when, and how they buy-are used to determine ways in which the products should be made available to generate a competitive advantage.

Culture In planning a distribution system, the marketer must analyze existing channel systems, or distribution culture. CHANNEL MEMBER MANUFACTURER Production Advertising Nat’l Sales Promo Dealer aids Education of dealers Financing

INTERMEDIARY Order Taking Inventory maintenance Space control at the retail level Dispatching of sales support personnel Area Marketing Financing

RETAIL Selling Organizing consumer In-store promo

Examples of Function Performance in the Channel Systems for the Japanese Cosmetic Industry

Competition Channels used by competitors may be the only productdistribution system that is accepted by both the trade and consumers The alternative is to use a distribution approach totally different and hope to develop a competitive advantage.(5A) The new approach will have to be carefully analyzed and tested against the cultural, political and legal environment in which it is to be introduced.

Selection of Intermediaries DISTRIBUTOR INTERMEDIARIES AGENTS

Agents: have less freedom of movement because they operate on a commission basis and do not physically handle the goods.(5B)

A distributor: will purchase the product, more independent than agents. Distributors provide a complete marketing service to int’l marketer.(5B)

Screening for Intermediaries Performance(5C)(choose 2) Financial standing of the candidate Sales are excellent indicator Distributor’s existing product lines Market Coverage and how well the markets are served

Professionalism(5C)(choose 2) Reputation Distributor’s business strategy Overall attitude in terms of cooperation and commitment to the marketer by developing a local marketing plan.

Gray Markets Also known as parallel importation: authentic and legitimately manufactured trademark items that are produced and purchased abroad but imported or diverted to the U.S by bypassing designated channels(5D) Gray-market products vary from inexpensive consumer goods (candy) to expensive capital goods (equipment) Problems: Price segmentation Exchange rate fluctuation

Example: Japanese marketers often find it cheaper to go to Los Angeles to buy export versions of Japanese-made products.