Page 224 - DMGT408DMGT203_Marketing Management

Unit 9: Managing Marketing Channels

different territories, and also between the producer and the dealers. Mutual responsibilities and Notes
services should be clearly laid down in case of exclusive dealerships or where the producer has
franchise arrangement. The producer should also clearly state what kind of promotional support,
standards, services, records the dealers or franchisees must maintain, and what the dealers and
franchisees should expect from the producer in terms of training and other mutually beneficial
activities.

Self Assessment

State whether the following statements are true or false:

8. Price policy requires intermediaries to establish a price list, trade margins and allowances.
9. Territorial demarcation establishes territorial boundaries and rights of company appointed
distributors or dealers.

9.4 Evaluation of Channel Alternatives

The factors or criteria that are used for evaluating each of the channel alternatives are:
(i) Economic performance, (ii) Degree of control, and (iii) Adaptability to changing market situations.

Economic Factor: Economic performance of each channel alternative should be compared. For
this, the industrial marketer is required to estimate the levels of sales revenue and selling costs
of each channel alternative. The different levels of sales revenue can be optimistic, realistic, and
pessimistic. Similarly, the total costs of selling at the three levels of sales revenue can be estimated.
These estimates are then plotted on a graph.
As shown in Figure 9.5 at one level of sales revenue, say X sales, the total selling costs are same
for the two channel alternatives. This is the break-even level. If the expected sales revenue is
below the break-even level, the agents channel is appropriate because of lower selling costs.
However, in case of estimated sales revenue is higher than break-even level, company sales
force channel is more economical as the selling costs will be lower.

Figure 9.5: Comparison of Channel Alternatives by Economic Factor
Agents/Manufacturer's Reps Channel

Company Sales-force Channel

Total Selling
Cost ( ) `

Break-even level

X
Sales Revenue ( )
`
Control Factor: The degree of control that the industrial marketer can exercise over the channels
is an important factor. The company sales force channel gives the marketer the maximum
control followed by manufacturer’s representative (or agent), and broker channels. The industrial
distributor/dealer channel gives the least control.

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