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Evaluating Channel Members

Producers must periodically evaluate intermediaries’ performance against such standards as sales-quota attainment, average inventory levels, customer delivery time, treatment of damaged and lost goods, and cooperation in promotional and training programs. Producers should set up functional discounts in which they pay specified amounts for the trade channel’s performance of each agreed-upon service. Underperformers need to be counseled, retrained, motivated, or terminated.

Modifying Channel Design and Arrangements

A new firm typically starts as a local operation selling in a fairly circumscribed market, using a few existing intermediaries. Here the problem is often to convince the available intermediaries to handle the firm’s line. If the firm is successful, it might branch into new markets with different channels. However, no channel strategy remains effective over the whole product life cycle. The distribution channel may not work as planned, consumer buying patterns change, the market expands, new competition arises, innovative distribution channels emerge, and the product moves into later stages in the product life cycle.19 To add or drop individual channel members, the company needs to make an incremental analysis. What would the firm’s sales and profits look like with and without this intermediary?

Global Channel Considerations

International markets pose distinct challenges, including variations in customers’ shopping habits and the need to gain social acceptance or legitimacy among others, but opportunities do exist.20 The first step in global channel planning is to get close to customers. To adapt its clothing lines to European tastes, Philadelphia-based Urban Outfitters set up a separate design and merchandising unit in London before it opened its first store in Europe. Although it increased costs, the distinctive blend of U.S. and European looks helped the retailer stand out, and it was one of the few fashion retailers to build strength during the recent recession.21

 
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