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Marketing Basics - Kotler Philip

Channel Management Solutions

Based on the results of studying the main channel options, the company decides on its most effective structure. Now the task is to control the selected channel. Channel management requires the selection and motivation of individual intermediaries, as well as the subsequent evaluation of their activities.

Channel member selection

Manufacturers differ from each other in their ability to attract qualified intermediaries. Some have no problems. For example, the Ford company was able to easily attract 1,200 new dealers to trade with its ill-fated Ezel model. In some cases, the necessary number of candidates can be attracted by promising them the granting of exclusive or selective distribution rights.

Conversely, sometimes manufacturers have to make every effort to attract qualified intermediaries to the work. When the Polaroid company was just starting out, it was not able to organize the sale of its cameras in photo stores and had to be sold through active stores. It is also difficult for small food-producing companies, as a rule, to achieve the introduction of their goods in grocery and gastronomic shops

Channel members motivation

Intermediaries need to be constantly motivated to perform their duties in the best way. Most manufacturers see the main problem in how to achieve cooperation from the intermediary9. To do this, they resort to the politics of carrot and stick. As positive factors of motivation, we are talking about higher retail discounts, deals on preferential terms, premiums, offsets for joint advertising and exhibiting of goods, and competitions for sellers. From time to time, they also use negative factors of motivation, such as threats to reduce retail discounts, slow down the pace of supplies or even break off relations. The weakness of this approach is that the manufacturer does not really study the needs, problems, strengths and weaknesses of its distributors.

More sophisticated companies seek to establish long-term partnerships with their distributors. The manufacturer clearly defines what exactly he wants from distributors and what they can count on his part. He seeks agreement with them regarding retail policy settings and can link remuneration rates to how closely distributors of these settings adhere.

The most progressive method of activity is distribution planning. McCammon defines it as the process of creating on a planned basis a professionally managed vertical marketing system that takes into account the needs of both the manufacturer and distributors10. As part of the marketing service, the manufacturer establishes a special department, called the distributor planning department, which identifies the needs of distributors and develops trade promotion programs designed to help each distributor make the most of his opportunities. Together with distributors, the department outlines the commercial goals that must be achieved, determines the level of necessary inventory, develops plans for the use of retail space and their design for the promotion of goods, develops training requirements for sales staff, draws up advertising and sales promotion plans. The purpose of all this work is to clearly demonstrate to distributors that they make money because they are part of a carefully thought-out vertical marketing system.