strategy business marketing reflection paper (just guest speaker parts )
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sbm8.pdf
Session 8: Distribution Channel Management
Lecture Outline
Ø Overview Ø Emerging trends Ø Selecting partners Ø Aligning mutual self interest Ø Partnerships in stable market place Ø Incremental market place changes Ø Summary
2
• Purchasing Orientation and Negotiation • Chapter 3
3 • B2B Relationships and Networks • Handout
4 • Market Sensing / Price value • Chapter 2
5
• B2B Strategy and Planning • Chapter 4
6 • Managing B2B Products and Services • Chapter 5, 6
7
• Integrated B2B Marketing Communications and Consultative Selling • Handout
8 • Business Channel Management • Chapter 7
9 • Gaining and Managing Customers • Chapter 8, 10
10 • The Digital Evolution in B2B • Handout
11 • Exam Briefing and Poster presentation
Understanding Value
Creating Value
Delivering Value
B2B Marketing Framework
1. Regard Value as Cornerstone. 2. Focus on Relationship Interaction and
Networks. 3. Focus on Business Market Processes. 4. Stress doing Business Across Borders.
Guiding Principles
Overview
• A distributor partnership refers to “the extent to which there is mutual recognition and understanding that the success of each firm depends on the other firm, with each firm consequently taking actions so as to provide a coordinated effort focused on jointly satisfying the requirements of the customer marketplace.
Figure 2.2: Interaction of channel constructs in Channel Marketing Relationships (CMRs)
Trust
Cooperation Commitment (+) or (-) Outcomes
(absence of Conflict)
Long-term relationship
Shared values
Personality Factors
Balanced Power Communication
Inter-Dependence Adaptability
Importance
Emerging trends
• Over the last 10 years there has been a tendency to develop collaborative supplier- distributor relationships.
• Less manipulation • Less power more trust • Sharing of resources capabilities
Channel Relationships take a variety of forms:
Ø Indirect relationships ü Manufacturers have hardly any direct contact
with end-users. ü Major relationship with distributors.
Ø Blurring of roles ü Many distributor companies develop new
product types for their own customers. ü Distributor arranges manufacturer to produce
the product to their specs.
Todays issues in selecting partners Today’s Business Issues for Selecting Partners
“I am under more time pressure than ever before”
“We are expected to do more revenue with less resources”.
“The account managers spend to much time partner hand holding”.
“My instinct tells me they will not continue to succeed”.
“I never get the right information from my partners to make an informed decision”.
“How can I look to the future when I am only being measured on the this quarter”.
And therefore there is increased emphasis on picking the right partners
Solution – Develop a proactive partner selection process
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Solution - Develop A Proactive Partner Selection Process
� Start with the end user. � Go after specific partners. � Don’t wait for partners to come to you.
However ……………………
� It is hard to engage the right partners. � An initial investment is required. � Hardest to make quota today (but most predictable and robust in
the future). � Highest risk if you get it wrong but the most productive over time.
Proactive Partner Selection Process
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Proactive Partner Selection Process
1. Define the relationships, end user requirements and partner competencies.
2. Develop a partner/product segment map.
3. Qualify the number of partners you need.
4. Develop your partner evaluation process (screens).
5. Screen all existing partners.
6. Identify coverage gaps.
7. Identify new partners needed.
8. Evaluate new partners (screen).
9. Recruit.
The hard part is developing partner screens and sticking to them
Proactive Partner Selection Process
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Proactive Partner Selection Process Commercial Screen for a distributor.
Attribute Metric
Qty Score 1-10
Weighting 1-5
Weighted score
Have a marketing budget Match Vendor’s marketing fund contribution to
Vendor a focused event. (or commitment to)
50%
Efficient Sell thru and
forecasting reporting
processes and infrastructure
Delivered within 5 days of month close in the
prescribed format. (or demonstrated ability to)
5
days
Management stability Stable management team in place for more than 2
years
2
years
Management quality Highly regarded by industry peers and other
vendors
n/a
Financial strength, credit
worthiness
Must be able to get 1/6 in credit of annual sales
with Vendor (2004).
1/6
Volume Licensing
competency
A proven system in place to manage their software
licence sales – to be tested
n/a
Pre-sales capability Dedicated technical pre-sales group 4
Reseller extranet Comprehensive functionality to serve resellers such
as order entry, order status, inventory levels,
customized pricing, product/ sales information,
technical support, etc
n/a
No end user direct sales Wholesale only sale n/a
Proactive Partner Selection Process
Proactive Partner Selection Process
Relationship Screen for catalogue, mail order, online store reseller. Attribute Metric Qty Score
1-10 Weighting
1-5 Weighted
score Customer base More than 60% of revenue
from our top 4 market segments (finance, telco, Media, tertiary education).
50%
Customer base More than 1,000 active accounts in the last trading month.
1,000
Commitment to vendor Exclusive Excl- usive
Satisfied customer base Customer references 5
Complementary vendor relationships
Trading relationships with xxx, xxx or xxx
1
Resources in Distribution
• In general, business relationships are established so that each of the companies involved can take advantage of the skills and resources of the other party.
Sustaining Distributor Partnerships
Strengthening Partnerships in Stable Marketplaces
Ensuring that Value is Delivered
Enhancing Interfirm
Coordination
Fulfilling Supplier Commitments Fulfilling Distributor Commitments
Responding Adaptively to Incremental Changes
Creating Adaptive Channels
Adjusting Commitments
Transforming Channels in the Face of Disruptive Forces
Establishing Integrated Multi-Channels
Skillfully Handling Relationship Transfers
Terminating Existing Partnerships
Delivering Superior Value
to Targeted Market
Segments and Customer Firms
Aligning Mutual Self-Interests and
Complementary Resources
Mutual Self-Interests and Complementary Resources
Ø Business Marketing Channels – Shared goals – Distinct individual goals
Ø Supplier firm and distributor firm – Sharing complementary resources and
capabilities increases likelihood that both achieve respective goals
Causes of Channel Conflict
Ø Differences in goals Ø Understandings of the allocation
of partnership responsibilities Ø Perceptions of the marketplace
Figure 10.1: Levels of Conflict and Separation that lead to Alienation in Channel Marketing Relationships
Degree of Separation
Intensity of Conflict
High Conflict Zone
Medium Conflict Zone
Low Conflict Zone
High
Med
Low
Minor Disagreemenst
Occasional Intense Disagreements
Disputes of Major impact
II. Strengthening Partnerships in a Stable
Marketplace
Strengthening Partnerships in a Stable Marketplace
Ø Commitment: captures the perceived continuity or growth in the relationship between two firms Ø Desire to develop stable relations Ø Willingness to make short-term sacrifices to maintain the relationship
Ø Confidence in the stability of the relationship
Fulfilling Supplier Commitments to Deliver Value
Ø Supplier Training: Ø Product knowledge Ø Selling skills Ø Technical competence
Ø Distributor Courses: Ø Customer applications Ø Changing customer needs Ø Operational procedures
Fulfilling Supplier Commitments to Deliver Value
Ø Train and Coach Partner firms – Certification programs
• Series of technical courses • Demonstrate competence (examinations)
– Skills training • Courses on focused topic
– Coaching • Improvement and reinforcement of
desired skills, behaviors, and performance • Strategic coaching • Skills coaching
Back Up Distributors with Pricing Support
Ø To keep reseller focused on delivering value, leading supplier firms promise pricing support – Finding cost reduction in customer’s
plants – Large-order price discounts – Initial-use discounts – Defeaturing pricing
Furnish Operational and Technical Support
Ø Supplier firms can reduce the cost-to-serve customers by maintaining and providing operational and technical support in the form of: • Inventory control • Logistics • Customer service systems for other channel partners
Ø Eliminating redundancies enables reseller partners to offering a broader arrays of services at far lower costs
Participate in Periodic Joint Annual Plan
Ø Supplier and Distributor participate in planning process – Both more likely to view plan as theirs and work
hard to implement it • What do we know? • What do we want to accomplish? • How will we do it?
– Reseller Marketing Plan • Situational analysis (SWOT) • Mutual objectives • Basic requirements • Implementation and control
Written Agreements
Ø Equitable sales agreements – Sharpen expectations and
direct the actions of both firms
Ø Policy manuals – Detailed descriptions of tasks
each member should perform
Ø Policy statements – Detailed statement of changes and
modifications in a specific policy
III. Responding Adaptively to Incremental Marketplace
Changes
Adjusting Commitments
Ø Establish a Reseller Advisory Council
Ø Reformulate channel partners’ “Gives & Gets”
Ø Make responsive adjustments to the Joint Annual Plan
Ø Seek influence among channel partner firms
Ø Establish a process and procedures for conflict resolution
Efficient Distribution in the future
“We’d sooner cut off our right arm than sell directly to customers and bypass dealers… We won’t turn on dealers in bad times to avoid short term pain…When we see particular dealers not performing well, we jump in and help them…We want dealers to succeed.”
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Quote: Chief executive of Caterpillar Fites 1996
Summary Ø Supplier and Distributor must creatively fulfill
commitments to deliver value to customer firms.
Ø Successful companies support there partners when unexpected crisis arise
Ø Complacency often brings the demise of distributor partnerships.
Ø Process improvements by learning how to work closer to overcome problems.
Ø Create adaptive channels to address infrequent yet critical customer requirements by devising cooperative agreements with channel partners for assistance.
The Art of Negotiation
Contents
Introduction About this workshop Phase 1 – Preparation Introduction Step 1 – Set Objectives Step 2 – Decide Fall back position Step 4 – Set best and worst limits Step 5 – Use ‘what if’ approaches
Contents
Phase 2 – Bargaining Introduction Step 1 – Get the issues on the table Step 2 – Ask questions Step 3 – Clarify Step 4 – Trade concessions Step 5 – Conclude Case Study Bibliography
Negotiation – What It’s Not
• Negotiation is one of the more abused words in the English language.
• Some believe negotiation is a code for: – Manipulation – Lying
What people say about Negotiation
• ‘The old idea of a good bargain was a transaction in which one man got the better of another. The new idea of a good contract is a transaction which is good for both parties to it’
Judge Louis D. Brandeis
What people say about Negotiation
• ‘I’ll make him an offer he cant refuse.’ Mario Puzo (Don Corleone, The Godfather)
• ‘Diplomacy is the art of letting someone else have your way’. Daniel Vare (Italian Diplomat)
Negotiation – A Definition
Negotiation is – ‘conference and bargaining for mutual agreement’.
For Negotiation to take place
1. Both Parties must have some level of commitment to do a Deal.
For Negotiation to take place
2. Both Parties must have the authority and the will to vary the terms of the agreement.
Negotiation
• Phase One - Preparation • Phase Two - Bargaining
Preparation
Step 1 – Set Objectives
Win - Win
‘Their Shoes’
Objective
Us • To secure major retail
account representing $5 million in new business p.a.
Them • To find a supplier who can
supply product to meet our immediate price objectives and customer requirements.
Preparation
Step 2 – Decide our Fallback Position
Imagine Total Failure
Decide Best Alternative
Fallback
Us • To secure $1 million of
business for high margin niche products only.
Them • To find another supplier.
Preparation
Step 3 – Prioritise your Tradeables
What are the Tradeables?
What are the Priorities?
Prioritise Tradeables
Us Them?
Product Range
High Low?
Rebates Low High?
Catalogue funding
Low High?
Product training
High Low?
Preparation
Step 4 – Set Best and Worst Trading Limits.
Best = Best allowing Win – Win
Worst = Walkaway to Review
Best and Worst Limits
B W B W
Product range
Range 10 product lines
Range only 3 product lines
? ?
Rebates 1.0% to sales 2.5% to sales
? ?
Catalogue funding
$60,000 p.a $150,000 p.a ? ?
Product Training
15 Training workshops
5 training workshops
? ?
Us Them
Preparation
Step 5 – Plan ‘What If…’ Strategies and Supporting Arguments.
Plan Options around Tradeables
Plan Creative Solutions
Bargaining
Step 1 – Get the Issues on the Table.
Start the Process
Don’t Show your priorities.
Bargaining
Step 2 – Ask Questions
For Information and Motives
To create movement
Bargaining
Step 3 – Clarify
Paraphrasing
Summarising
Bargaining
Step 4 – Trade Concessions
If … then …
Bargaining
Step 5 – Conclude
Summarise
Write it Down
Negotiation Mistakes
1. Neglecting the other sides problem 2. Letting price bulldoze other interests 3. Letting positions drive out interests 4. Searching to hard for common ground 5. Neglecting BATNAs (“best alternative to a negotiated
agreement”)
6. Failing to correct a skewed vision
Source: HBR Six Habits of Merely Effective Negotiators by James K. Sebenius April 2001
Bibliography
1. Do We Have a Deal? Gavin Kennedy, Gower 1991 2. Negotiation Skills, Baden Eunson, John Wiley & Sons 1994 3. Getting to Yes, Roger Fisher and William Ury, Penguin 1981. 4. Account Strategies for Major Sales, N. Rockham, Gower
1988. 5. It’s a Deal – A Practical Negotiation Handbook, P. Steele, J.
Murphy, R Russil, McGraw Hill 1989. 6. Negotiating: Everybody Wins, V. Helps, BBC Books 1992. 7. Planning for Behaviours for Win – Win Negotiations,
Research papers available from Huthwaite Research Group Ltd
