Marketing Management, Millenium Edition - epiheirimatikotita.gr

244 CHAPTER 13 SELECTING AND MANAGING MARKETING CHANNELScommunicates clearly what it wants from its distributors in the way of market coverage,inventory levels, marketing development, account solicitation, technical advice and services,and marketing information. The manufacturer then seeks distributor agreementwith these policies and may introduce a compensation plan or other rewards for adheringto the policies. For example, Dayco Corporation, a maker of engineered plastics andrubber products, strengthens channel partnerships by running an annual week-longretreat with 20 distributors’ executives and 20 Dayco executives.Still, too many manufacturers think of their distributors and dealers as customersrather than as working partners. Up to now, we have treated manufacturers and distributorsas separate organizations. But many manufacturers are distributors of relatedproducts made by other manufacturers, and some distributors also own or contract forthe manufacture of in-house brands. JCPenney sells national brands of jeans by manufacturerssuch as Levi Strauss in addition to a line of jeans under the Original ArizonaJeans company private label. This situation, which is common in the jeans industry andin many others, complicates the process of selecting and motivating channel members.Evaluating Channel MembersProducers must periodically evaluate intermediaries’ performance against such standardsas sales-quota attainment, average inventory levels, customer delivery time,treatment of damaged and lost goods, and cooperation in promotional and trainingprograms.A producer will occasionally discover that it is paying too much to particularintermediaries for what they are actually doing. As one example, a manufacturer thatwas compensating a distributor for holding inventories found that the inventorieswere actually held in a public warehouse at the manufacturer’s expense. Producersshould therefore set up functional discounts in which they pay specified amounts forthe trade channel’s performance of each agreed-upon service. Underperformers needto be counseled, retrained, remotivated, or terminated.Modifying Channel ArrangementsChannel arrangements must be reviewed periodically and modified when distributionis not working as planned, consumer buying patterns change, the market expands,new competition arises, innovative distribution channels emerge, or the productmoves into later stages in the product life cycle.Rarely will a marketing channel remain effective over the entire product lifecycle. Early buyers might be willing to pay for high value-added channels, but laterbuyers will switch to lower-cost channels. This was the pattern for many products,including small office copiers, which were first sold by manufacturers’ direct salesforces, later through office-equipment dealers, still later through mass merchandisers,and now by mail-order firms and Internet marketers.Miland Lele developed the grid in Figure 5-4 to show how marketing channelshave changed for PCs and designer apparel at different stages in the product life cycle.As the grid indicates, new products in the introductory stage of the life cycle enter themarket through specialist channels that attract early adopters. As interest grows,higher-volume channels appear (dedicated chains, department stores), offering someservices, but not as many as the previous channels. In the maturity stage, where growthis slowing, some competitors move their product into lower-cost channels (mass merchandisers).In decline, even lower-cost channels emerge (mail-order, discount Websites, off-price discounters). 12