Page 215 - DMGT408DMGT203_Marketing Management

Marketing Management/Essentials of Marketing

Notes 2. Benefit and Costs Offered to Intermediaries: The company should offer various benefits to
a distributor. These, as well as reimbursement of expenses, will create a positive impact
on the distributor. The company can offer the following benefits to a distributor:
(a) Reduction in the amount of capital employed by the distributor.
(b) Lower operating costs
(c) Availability of specialist services

(d) Reduction of overall risk
(e) Customer finance schemes
(f) Increased sales promotion
3. Co-operative Programs: Co-operative approach is a traditional method of motivating the
intermediaries. Co-operative approach allowances, training sale people, payment for
displays, free goods, commission on extra sales, etc. These programs will help increase the
sales of intermediaries.
4. Distributor Advisory Councils (DAC): In this method, a council of distributors is formed
which gives the opinion of distributors to the company. Normally, in these councils, top
management discusses its problems with channel members. DAC results in an overall
improvement of channel communication and helps the manufacturer to learn more about
the needs and problems of his channel members.

Evaluating Channel Members

The next task is to evaluate the performance of channel members on periodic basis. The marketing
manager may set up standard evaluation bench marks like sales quota, market share, average
inventory carrying level, customer response and delivery time, usage and management of
unused, unusable and damaged goods and cooperation in sales promotion and channel employee
training programs organized by the company. While the company should reward the exceptions,
it should also guide, goad, re-motivate and terminate the underperformers. It should see that
the intermediaries are able to achieve the Economic Order Quantity (EOQ) in their transactions
with the company. The company should ensure that the inventory level, the accounts receivables
and cash management is proper and there is a sustained commitment from the intermediaries
towards organization’s products and services.

Modifying Channel Arrangements

Management of distribution channel is a continuous and dynamic process. We have mentioned
in the beginning that channel structure and levels emerge as the organization grows over a
period of time. As it changes its strategies from exclusive distribution to selective distribution
and finally to intensive distribution, the structure and nature of the distribution channel will
change. This change is to take care of market expansion, new product launch, brand extension,
and addition of new products to the company’s existing product line. The modification of the
channel structure is also linked with the life cycle stage of the product.
In the case of a new product, which has no close substitute, the marketing manager tries to
establish an exclusive distribution at the introductory stage. But as the market expands, the
manager may cover larger territories by following an intensive distribution at the growth stage
of the product life cycle. As the product moves to the maturity stage, many managers shift the
products to low cost channels and follow mass merchandise. In the decline stage of a product,
lower cost channels like mail orders, off price discounts are followed. In markets where there is

208 LOVELY PROFESSIONAL UNIVERSITY