Marketing channel reflection

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CHAPTER Promo,on through the Marke,ng Channel

Lecture 9

Part 3 Developing the Marke,ng Channel

Learning Objec,ves

①  Channel member support

②  Pull & Push Promotional Strategies

③  Promotion through channel members

④  Push promotion research findings

⑤  Basic Push promotional strategies

⑥  4 types of “kinder & gentler” push promotion strategies

Channel Member Support

Why is channel member support one of the major tools of the

manufacturer’s promotional mix?

Most products and services are not sold directly

to final customers.

Pull Strategy

Pull Strategy versus Push ! Promotional Strategies

Push Strategy

Manufacturer builds strong consumer demand for a

product to force members to automatically promote

the manufacturer’s product because it is in their obvious

self-interest to do so.

Manufacturer develops mutual effort & cooperation in the

development & implementation of

promotional strategies by working directly with members

to develop strong & viable promotional support.

Promotional Strategies Pull Strategy

Manufacturer

Channel members

Final users (consumer or industrial)

Channel members

Manufacturer

Push Strategy

1* 2 3

*Numbers indicate sequence! of flows! † Sequence of flows is! simultaneous!

†

Promotion flow! Negotiation flow! Product flow !

Stand a higher probability of being

favorably received by the channel members

Strategies that are part of an overall

program of manufacturer support of channel

member needs

Strategies that involve channel members

3 Promotion Through Channel Members

Push Promotion Research Findings

All of the studies suggest that ad hoc,

quick-fix, and frequently offered

push promotions do not

foster high levels

of channel member support

on a consistent basis.

Push Promotion Research Findings

Push promotions should be viewed as part of strategic

channel management rather than as mere tactical

actions to elicit quick channel member responses to

sell more products.

Push Promotion Research Findings

Given the wide range of factors that can affect channel

members’ responses to promotions, manufacturers

should study channel members’ needs carefully before

launching major push promotions.

Push Promotion Research Findings

A tradition of post-promotion (follow-up) research to

evaluate channel member responses to push

promotions is needed if manufacturers expect to make

steady progress in improving the effectiveness of push

promotions.

Push Promotion Research Findings

Despite the manufacturer’s best efforts, large and powerful

channel members will inevitably come into conflict

with the manufacturer over promotional issues

because their interests and goals will at times diverge.

Business Market Management, 3rd edition

Channel Core Elements

Financial Returns Quality Products Competitive Prices Reliable Delivery Brand Equity

Technical Assistance Market Research Company Policies

Promotional Support Responsiveness Systems Training

Manufacturer Sales Force Incentives

Distributor Firm Incentives

Distributor Sales Force Incentives

Capability-Building Program

Incen,ve Programs

Channel Capability Program

Partner program investments

GSMS Channel Training Workshop

Whole channel program

• Partners act from their own reasons not yours

• Partners do not sign contracts only because of a product or a set of marketing programs

• A complex set of relationship “elements” must be visible

• If recruitment is lagging, an important piece of the “whole program” may be missing

Partner program investments

Programs have different benefits for partners

Significant

None

Importance to Partner Low High

Happy Noise

CompulsoriesCompulsoriesTotal Waste

DifferentiatorsDifferentiators

D if

fe re

n ce

B et

w ee

V en

d o

Happy Noise Differentiator

TOTAL WASTE Compulsory

Channel organisational alignment

GSMS Channel Training Workshop

ChannelPRO™ framework

CE Channel

Enablement Business Plan

Technical, Sales Marketing & Operations

PS Partner

Selection Performance criteria

Gap analysis Selection

Recruitment

PP Partner

Programs Partner Profitability

Compensation Benchmarking

CA Company Alignment

Channel strategy & goals Partnering processes

Financial analysis Automation

WP Whole

Product Market need

Product Importance Partner roles Cost transfer

SP Sales

Productivity Management

Measurement Plan & Review

MM Market

Mapping Market Life Cycle

Segmentation Coverage

Channel organisational alignment

• Management (all functions) must agree why they want a channel. Channel decisions must be collaborative

• Channel programs must be fully integrated across organisational boundaries

• Partners place unexpected demands on everyone

• Most vendors fail to anticipate and plan for the impact of partner revenue growth on non- channel parts of the company

• Change is always required to grow partner revenue

Professional Services

Management

Direct Sales

Finance and Admin

Customer Services

Marketing

Basic Push Promotional Strategies 5

1.  Cooperative Advertising 2.  Promotional Allowances 3.  Slotting Fees

4.  Displays & Selling Aids 5.  In-store Promotions

6.  Contests & Incentives 7.  Special Promotional Deals & Merchandising Campaigns

Cooperative Advertising

Typical Strategy: A sharing in the cost on a 50–50

basis up to some percentage of

the retailer’s purchases from

the manufacturer

Administration: 1.  Effective administration by

manufacturer is necessary to avoid abuses & to help secure cooperation from channel members

2. Channel manager must be sensitive to channel members’ primary concern about this strategy

Using Coop Adver,sing

Promotional Allowances

Typical Strategy:

Manufacturer offers channel member

a direct cash payment or a certain

percentage of the purchases on

particular products

Administration: Manufacturer should conduct

research to determine whether it

is getting its money’s worth in

terms of retailer cooperation and

follow-through

Slotting Fees

Typical Strategy:

Payments by manufacturers to

persuade channel members, especially

retailers, to stock, display, and

support new products

Administration: Joint sponsorship of research

between retailers and manufacturers

on effects of slotting fees on various

topics could help alleviate conflict

What is sloMng allowance?

Supermarket Psychology

Slotting Fees

•  Manufacturer pays retailer to get a product into a store and/or gain prominent placement.

•  Thousands of new grocery products per year •  Grocery stores often stock 30-45 thousand items •  There is room for only about 5% of 15,000 new

grocery products each year.

•  Slotting fees help ensure grocer profits on a product, help balance risk of trying unknown product.

•  Grocery is a narrow margin business, slotting fees can represent a significant revenue source.

Displays and Selling Aids

Typical Strategy:

Include point-of-purchase (POP)

displays, dealer identification signs,

promotional kits, special in-store

displays, & mailing pieces

Administration: Channel manager should make the

effort to see whether the firm’s

selling aids and displays are serving

any useful purpose

Nike interac,ve window displays

In-Store Promotions

Typical Strategy:

Short-term events designed to create

added interest and excitement

for the manufacturer’s products

Administration: The planning of a successful

in-store promotion should always

include considerations of the

potential benefits for the

retailers involved.

Contests and Incentives

Typical Strategy:

Techniques that manufacturers use

to stimulate channel member sales

efforts for their products

Administration: Manufacturer should put much

effort into determining the

view of channel members

toward this form of promotion

Seinfield the Sales Contest

Special Promotional Deals & Merchandising Campaigns

Typical Strategy: Include a variety of push-type

promotional deals such as discounts

to channel members to encourage

them to order more products

Administration: Manufacturers need to develop

carefully planned strategies that are

based on knowledge of channel

member needs and that take a

long-term perspective on promotion

through the marketing channel

4 Types of “Kinder & Gentler” Push Promotion

Training Programs

Quota Specification

Missionary Selling

Trade Shows

Training Programs

Wholesale: Help wholesalers’ knowledge, selling techniques, and skill in counseling customers they call on

Retail: Help retailer’s product knowledge, selling techniques,

and counseling customers on product usage

Pro: Manufacturers can assist wholesalers & retailers by helping to offset the cost.

Con: There is often little time for training.

Quota Specification

Sales volumes that manufacturers specify for

channel members to generate during a

certain time period

Pros: •  Can amount to a substantial

sum and can make a major difference in the dealers’ overall profit picture

•  Can be effective in improving channel member promotional support

Cons: •  If presented in a coercive

fashion, it can produce ill will and conflict rather than support

•  Channel members may ignore quota if manufacturer’s line does not make up an important part of the member’s product mix

Missionary Selling

Manufacturer’s salespeople who are

specially assigned to supplement the selling

activities of channel members

Pro: •  A useful strategy when

channel members lack sales capacity or competence to handle tasks assigned to them

•  Useful when channel members desire this service

Cons: •  Expensive •  Can cause conflicts in the

channel •  Some members view these

salespeople as intruding on the time of their own sales force

Trade Shows

Annual events organized by associations in particular industries

Pros: •  Opportunity for manufacturer to sell existing & new channel

members substantial quantities of new products face-to-face

•  A chance for manufacturers to socialize with channel members

•  Creates a sense of pride and belonging in channel members that

sell its products

Crocs Boat Trade Show Dubai

Digital Disrup,on

•  Digital disrup-on is the change that occurs when new digital technologies and business models affect the value proposi,on of exis,ng goods and services.

•  Digital disrup,on impacts all elements of the marke,ng mix

•  Digital disrup,on can be viewed as a threat or opportunity.

What is Digital Disrup,on?

Technology and Market Factors

10 Hyper Disrup,ve Business Models

1. The Subscrip-on Model (Ne]lix, Dollar Shave Club, Apple Music) 2. The Freemium Model (Spo,fy, LinkedIn, Dropbox) 3. The Free Model (Google, Facebook) 4. The Marketplace Model (eBay, iTunes, App Store, Uber, AirBnB) 5. The Access-over-Ownership Model (Zipcar, Peerbuy, AirBnB)

10 Hyper Disrup,ve Business Models

6. The Hypermarket Model (Amazon, Apple) 7. The Experience Model (Tesla, Apple) 8. The Pyramid Model (Amazon, Microsoc, Dropbox) 9. The On-Demand Model (Uber, Operator, Taskrabbit) 10. The Ecosystem Model (Apple, Google)

Summary •  Promo,onal support and developing capability building programs for channel partners is important.

•  Promo,onal ac,vity must be co ordinated and planned with channel partners.

•  There is a variety of standard promo,onal programs

•  Move to more “kinder and gentler” promo,ons •  Digital Disrup,on new digital technologies and business models and distribu,on models