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Strategies for Making the Channel Effective and Efficient (Part 02)
http://www.reportbd.com/articles/3041/1/Strategies-for-Making-the-Channel-Effective-and-Efficient-Part-02/Page1.html
Asif Rahman
I m studying B.B.A at a Private University and majoring in Marketing. 
By Asif Rahman
Published on 24 November 2012
 
Strategies for Making the Channel Effective and Efficient. Conflict Management Strategies. Strategies to Manage the Intermediaries. Strategic Alliances.

Strategies for Making Channel Effective and Efficient
Strategies for Making the Channel Effective and Efficient

Free Goods:
Royal Sugar will provide free goods to the retailers and to the wholesalers in the beginning. This will motivate the wholesaler and the retailer to give good effort to sell the product As Royal Sugar are launching a new brand of sugar and sugar is a product for which people don’t have much of a brand preference. So, Royal Sugar will have to give some sort of benefit to the intermediaries in the form of free goods so they will keep our products and push it to the customers at the point of purchase. For a product like sugar retailers opinion has great importance to the consumers.   

Display and Slotting Allowance:
Super Salt will provide a fixed fee to the retailers in the form of display and slotting allowance. For most of the department stores like Nandan, Agora and Almas, Royal Sugar will offer them slotting allowance to display our product in the shelves. In these department stores if Royal Sugar can have a well decorated shelf, then Royal Sugar can easily attract the buyers. After that when these consumers will go to their local retailer they would hope fully ask for royal sugar. For the convenience stores and other retailers Royal Sugar will give them display allowance to put up our product instead of those of our competitors.

Count-Recount:
A count recount system can be introduced and incentives can be paid to the retailer on the basis of the number of products they sell in a 30 day period.

Conflict
Conflict is a state of discord caused by the actual or perceived opposition of needs, values and interests. A conflict can be internal (within oneself) or external (between two or more individuals). Channel Conflict arises when the behavior of a channel member is in opposition to its counterpart. It is opponent centered and direct in which the goal or object sought is controlled by its counterpart.

Since Royal Sugar are going for an intensive product distribution in the market it’s quite obvious there will be conflict among different channel members. It could be vertical channel conflict or horizontal channel conflict.

Horizontal Conflict
-    Disagreements among channel members at the same level.
-    For example – retailer with another retailer or wholesaler with another wholesaler.
                   
Vertical Conflict
-    Channel members at different levels find many reasons for disputes.
-    For example wholesaler with manufacturer.                                                                                                                                               

Conflict Management Strategies
There are different type of conflict management strategies.

Institutionalized Mechanisms
As an institutionalized mechanism, Royal Sugar will use information intensive mechanism and building relational norms which are more appropriate for our channel. The justifications are given below-

Information Intensive Mechanism:
Royal Sugar are going to encourage our channel members to share information among them to make the channel more effective and efficient. By doing so there will be free flow of all information regarding what is happening around. When everything will be known to everyone then there will be lesser chance to arise conflict.

Building Relational Norms:
Royal Sugar will encourage our intermediary partners to cultivate rational norms among themselves. It will help them to work together rather than against each other. Moreover, Royal Sugar might be able to build synergy among them.

Style of Conflict Resoulation
Royal Sugar think, accommodation and collaboration style are the style should follow to resolve conflict.

Accommodation:
Royal Sugar can assist the retailers or wholesaler with guidance and strategies to cope up with the situation rather than ignoring them and thus build up a healthy relationship. Royal Sugar can open up a troubleshooting or problem solver or a communication branch in our company where we will listen to the problems that the retailers or other wholesalers are facing.

Collaboration:
Solving a problem with collaboration strategy is really difficult because it requires high level of resources, information, time and energy. Since it’s a win-win approach its desirable by intermediaries. Royal Sugar will consider this approach whereby a serious issue arises. The issue could be arising from domain conflict, perception conflict or goal conflict. Whatever the area is we will try to come up with an optimal solution through negotiation by considering everyone’s expectation.

Conflict Resolution Via Economic Incentive

Sometimes it’s a good idea to use economic incentives to resolve conflict. Economic incentives are offered to encourage people to make certain choices or behaviour in a certain way. They usually involve money, higher commission/revenue sharing scope, easy finance etc.

Economic Incentives will do the following:
  • Encourage intermediaries to perform better.
  • Persuade them to push our product to the buyer.
  • Convince them to continue doing business with us.
  • Give them a positive feeling of becoming our channel partner.
Types of Intermediaries
Royal Sugar are going to use the following intermediaries as our channel partners.

Retailers   
Retailers are those who have the direct contact with the end user. There are many types of retailers. For our product, we have decided to distribute only in department stores, super stores and convenient stores which are more feasible and even will not decrease the brand image. We cannot go for Category Killers, City Market/Open Market; because these do not suit our product. So, for the above reason

Wholesalers
For our purpose, Royal Sugar are going to target general merchandise wholesaler. These wholesalers offer broad but shallow product lines that are mostly of interest to retailers carrying a wide assortment of products, such as convenience stores, variety stores etc. Since these wholesalers offer such a wide range of products, their knowledge of individual products may not be strong. But we are paying more attention to enhance the knowledge of these wholesalers about our product so that they can push the retailers as well.

Distribution Channel Intensity 
Universally there are three types of distribution intensity in marketing channel.

Our Choice: Intensive Distribution
Royal Sugar are planning to select intensive distribution to distribute our product because sugar is regarded to be one of the most useful products and the demand for sugar is always in the market.

Strategies to Manage the Intermediaries
Royal Sugar have to be very attentive towards these intermediaries in order to manage them well for getting the best output of it. Because our product which is newly introduced needs to pay a greater attention to get the market share; because there are already other competitors of sugar are doing very well in their respective field. The strategies taken in response to manage our intermediary partners are given below:

Invest in Brand Equity Building
Royal Sugar need to undertake steps to build brand equity such that the consumers demands the product from the channel intermediaries for the sake of enjoying benefits derived from the usage of the product. For our product, service is not required and consumers buy preferred one without considering the alternatives. When our brand equity will be strongly established then if the customers cannot find it, they will be dissatisfied with the outlet and the outlet cannot convince them to change their preferences. So, the channel member will be bound to carry our product because we have high brand equity.

Incentives
Monetary and non monetary incentives will be provided to our channel intermediaries in regard to manage them well so that they do not switch to others. It is a very important issue. If there is a chance that our channel member may switch to those where they will get chance to make more money out of the business, then we should apply this strategy. It will attempt to strengthen the performance –reward relationship and thus motivate the affected related members.

Auditing and Tracking
It refers to continuous performance evaluation of the channel members. We have to audit and track their performance in regard to ensure competitive distribution of our newly introduced product. For this there will be our territory managers who will observe and take the feedback of the convenient stores in regard to know that how our distributors are performing.

Encourage Retailers to Go for Push Strategy
As Royal Sugar are a newly introduced brand so we have to encourage the retailers to go for push strategy to divert the attention of the consumers from a well recognized brand to our brand.

Strategic Alliances
Strategic Alliances refer to co-operative agreements between channel members, which may be wholesalers and retailers to share or transfer skills and resources to meet mutually agreed goals. Royal Sugar will form strategic alliances with our wholesaler and retailer so that they collaboratively work together for the betterment of the channel. Definitely this will help both of the parties in regard to make more profit when they will work together as their goal will be same.
Royal Sugar have identified some of the purposes of going for strategic alliances between our intermediaries.

Achieve Better Market Coverage
From a manufacturer’s perspective this will provide us with better and wider market coverage in low cost.

Motivating the Downstream Partners
Through an alliance, we can harvest strong commitment with the wholesalers and retailers..

Barriers to Entry
An alliance with our channel partners will help us to prevent our competetors of being exposed to the customers as much as we do.

Uninterrupted Flow of Goods Supply
With an alliance, Royal Sugar can maintain an uninterrupted flow of goods to the market. So customer will never return empty handed when they will ask for our sugar.

Revenue Generation
Royal Sugar can provide our sugar to our allied intermediary partners at a minimized cost which will help them to generate more revenue.

Differentiation
Our intermediary partners can position themselves creating a differentiation in the eyes of the consumers indicating they have better stock, good price and all necessary service outputs to better satisfy the customers.

Concluding Remarks
This time is recognized as the era of globalization. Customers are more knowledgeable about the current market as they are more exposed to different product of both home and abroad. This is really very difficult task to please the customers and quite impossible to deceive them. They are always so demanding and in order to meet their demand the marketer always need to up to date about the market, need to understand what customer want, customize their product offerings, communicate them well and most importantly keep track what their competitor’s do. By doing these all successfully they will become the market leader. So, in conclusion we can say that the distribution network we have designed and the strategies we have developed will enable us to become the most effective and efficient distribution channel and serve our end-user appropriately.

Reference:
  • Coughlan,A.T, Anderson,E, Stern, L.W & El-Ansary, A.I. (2003).Marketing Channels, Edition 6th  . Prentice-Hall Ltd: New Delhi, India.
  • Buhalis, D. & Laws, E. (2001) Tourism Distribution Channels: Practices, Issues and transformations, Cengage Learning EMEA.
  • Kotler, P. and Keller, L. K.(2007-2008). Marketing Management. Edition 12th. Prentice-Hall Ltd: New Delhi, India.
  • Kapoor,S.K & Kansal,P (2003) Basics of Distribution Management: A logistics Approach, Edition 2nd   . Prentice-Hall Ltd: New Delhi, India.