margin
- for each benefit and function that a channel member provides they will want to be paid
unit cost
how much did it cost me to produce the item
$ margin
profit we make on an individual item
two equations
percent margin = $ margin/selling price
$ margin= selling price - unit cost
UNIT COST= COGS
what are the three parts to channel stewardship?
- mapping the industry channels
- building and updating the channel value chain
- aligning and influencing the channel system
what is mapping the industry channels?
- understanding how and why the channel is structured
- is the initial step that a channel steward takes, researching and understanding the roles of all external forces at play including what competitors are doing
what are the four forces affecting channel strategy?
- customer wants and needs - looking beyond needs and considering other elements around the purchase
- channel capabilities and costs - all activities used to fulfill customer demand
- channel power and influence- distribution power of different players
- competitive postures and actions- everything related to what the competition is doing and can do
in the channel context, where can power come from?
- having unique pdt
- having market access and intelligence
what is building an updating the channel?
- Analyzing channel options to build or rebuild the channel structure.
- Crafting channel strategy tailored to market segments.
- Aligning forms with customer needs to establish channel distribution systems.
direct vs indirect?
-direct: The manufacturer goes directly to the customer with no intermediary
- indirect: every other channel that includes an intermediary
what are the four key differences between indirect and direct?
size and distrib: few and concentrated
= nature of PDT: Complex
= role of PDT in end: fewer requirements
=nature of PDT firm: more established and more credible
indirect
= many and dispersed
= simpler
= needs to be bundled; financing
=less established and less credibility
what are the three decisions that we need to make about intensity of distribution in building the channel?
- intensive: aimed at having a PDT available in every outlet (commodity)
- selective: achieved by screening dealers to eliminate all but a few in a single area (north face)
- exclusive: established one or few dealers within a given area (prestige)
what are the three-channel structures?
- integrated- 1 company owns every layer
- franchised- supplier determines business decisions
- arm’s length - independently owned at each step
in an integrated network, what are the three trade-offs? what intermediaries do they go through?
-supplier → company owned distrib center→ company-owned retail outlets
- high cost
- potentially higher costs
- potentially lower coverage
in a franchised network, what intermediaries do they go through?
supplier → distributor (exclusive to the company) → independently owned but franchised retail outlet
in an arms-length network, what are the three tradeoffs? what are the intermediaries?
supplier → multi-brand distributor → multi-brand retailer
- low control
- potentially lower cost
- high coverage
aligning and influencing the channel system, what is it?
makes sure that the roles of the different channel partners are evolving constantly in keeping up with the needs of the company’s target customers
hard power vs soft power?
- hard: unique pdt/tech/brand (supplier power) vs market access and intelligence (retailer)
- soft: trust and commitment
when would you see a company use soft power? hwo can you build hard overtime?
when a small store with a bigger brand (a lot of power) and you do not really have anything
- so overtime you need to grow hard power by creating own branded PDT, create an assortment wth smaller brands and build more stores
channel conflict? when do they happen?
a clash of goals and methods between distribution channel members
- conflicting goals
- fail to fulfill expectations
- having ideological differences
channel partnering
the joint effort of all channel members to create a supply chain that serves costers and creates a competitive advantage
dual distribution
suppliers use both direct and indirect channels to reach the same or different customers
what are the two types of conflicts?
- horizontal: happens between firms at the same level of the channel (two car dealers)
- vertical: occurs between different levels of the same channel (Home Depot and black decker)
how can you reduce horizontal conflict from the producer’s perspective?
you can not give everyone the sane thing that causes. price competition so you. have to give each retailer a slightly different model/version
