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Channel Positioning

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If you want to know what channel positioning is, why it's important and what potential threats there are, this one's for you.

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Channel Positioning

  1. 1. Channel Positioning Prepared by: Harneet Maggu & Neha Randhawa
  2. 2. What is Channel Positioning? How an organization views its relationship with channel members as a partnership OR Strategic Alliance Offers benefits on a long-term basis Supplier Reseller Customer
  3. 3. Channel Positioning • Suppliers need to consider the reseller a valued partner in its process • Develop a working relationship that builds mutual self-interest and Better coordinate efforts to satisfy customer requirements Continuum of Intensity of Distribution
  4. 4. Channel Offering vs Channel Positioning When a supplier creates a reseller value proposition with distinct bundle of core products, capability- building programs and incentives Creating a reputation among resellers for delivering superior value Compensates reseller for efforts and encourages them to provide augmented services to build total customer experience (TCE)
  5. 5. Four Steps in Channel Positioning 1. Determine reseller performance expectations 2. Assess the reseller value of channel offering elements 3. Craft a reseller value proposition and channel offering 4. Communicate the reseller value proposition
  6. 6. How do you evaluate the contributions you as a supplier and your resellers are making to provide value to targeted market segments?
  7. 7. Marketplace Equity • The value a customer firm receives from acquiring a particular supplier’s product or service through a particular reseller in its local trade area • Result of reseller equity and brand equity • Reseller equity – value of acquiring a supplier’s offering from a particular reseller vs other authorized resellers in the local trade area
  8. 8. Marketplace Equity • Brand equity – value of acquiring a particular supplier’s offering vs other competing supplier’s offerings • Channel equity – value reseller receives from channel offering supplier provides
  9. 9. Why is Marketplace Equity Important? • Determines nature of partnership between supplier firm and its reseller • Determines respective profit margins • Let’s walk-through an example…
  10. 10. Example – Brand equity vs Reseller equity You are a customer manager and contact a reseller to buy a product. They are currently out of stock. You have two options: • Option 1: You want that particular brand of product so you contact other resellers to see if it’s available. • Option 2: The reseller convinces you to purchase a competitor’s comparable product, since it’s in stock. In either scenario, who has more equity power?
  11. 11. Example – Brand equity vs Reseller equity • Option 1: You want that particular brand of product so you contact other resellers to see if it’s available. Brand equity is superior to reseller equity since you are willing to contact other resellers for that particular brand of product. Supplier firm has power advantage over resellers. Supplier directs all marketing efforts. Supplier takes lion’s share of profits.
  12. 12. Example – Brand equity vs Reseller equity • Option 2: The reseller convinces you to purchase a competitor’s comparable product, since it’s in stock. Reseller equity is superior to brand equity since the reseller has convinced you of its key value elements such as product availability, 24/7 delivery, credit policies, etc. Reseller has power advantage over suppliers.
  13. 13. Building Brand Equity is Vital to Create “Pull” • Avoid having supplier products viewed as commodities by building on brand equity • Eg. Lightbulbs • Marketing communications and support services, eg. toll-free help line • Vital to create “pull” demand
  14. 14. Reseller Equity Important to Add Value • Customize market offerings and TCE they offer customer firms • Improve quality of customer services (on-time delivery, route maintenance, credit) • Promote their firm to end customers • Ensures customer loyalty, cross-sell opportunities, avoid intense price competition
  15. 15. Four Steps in Channel Positioning 1. Determine reseller performance expectations 2. Assess the reseller value of channel offering elements 3. Craft a reseller value proposition and channel offering 4. Communicate the reseller value proposition
  16. 16. Determine Reseller Performance Expectations • Supplier managers determine expectations of reseller performance by specific goals: 1. Market access 2. Value-added services 3. Cost-to-serve targets 4. Intended TCE 5. Management professionalism
  17. 17. Determine Reseller Performance Expectations • Determine reseller requirements: – Facilities and personnel – Technical and marketing expertise – Repair and service work – Professionalism (strategic planning, financial management, operations, succession planning)
  18. 18. Four Steps in Channel Positioning 1. Determine reseller performance expectations 2. Assess the reseller value of channel offering elements 3. Craft a reseller value proposition and channel offering 4. Communicate the reseller value proposition
  19. 19. Assess the Reseller Value of Channel Offering Elements • Three main elements of channel offering: 1. Channel core elements 2. Capability- building programs 3. Incentive programs
  20. 20. Assess the Reseller Value of Channel Offering Elements • Channel core elements – Basics reseller requires from suppliers – Adequate financial returns, strong brand equity • Capability-building programs – Enable resellers to strengthen own performance and enhance value they provide to customers – Training programs, info-sharing systems, collaborate policies
  21. 21. Assess the Reseller Value of Channel Offering Elements • Incentive programs – Motivate short term improvements in reseller and salesperson performance – Bonuses for supplier’s salespeople – Growth rebate for resellers – Contents for reseller salespeople • Be mindful of what competitors are offering resellers
  22. 22. Supplier’s Role in Resellers Offering • Value of channel offering through bundles or solution • Bundle – collection of loosely connected products and services a supplier consolidates into a transaction at a discounted price • Solution – deliberately engineered and integrated group of products or services a supplier markets for a premium price
  23. 23. Construct a Channel Positioning Matrix to Determine Value
  24. 24. Four Steps in Channel Positioning 1. Determine reseller performance expectations 2. Assess the reseller value of channel offering elements 3. Craft a reseller value proposition and channel offering 4. Communicate the reseller value proposition
  25. 25. Craft Reseller Value Proposition and Channel Offering • Use the value assessment and channel positioning matrix to devise a reseller value proposition • Develop distinct value proposition for each type of reseller • Most potent reseller value proposition tends to be closely related to role of supplier’s offering – Eg. Reseller-offering platform – increased reseller traffic (high product turnover)… use “pull” promotions – Eg. Reseller-offering peripheral – ability of partner to cross- sell item, increasing reseller’s lines per order or transaction profitability… reward cross-selling purchases – Eg. Reseller-offering accessory – promote ability to sweeten transaction profitability… merchandising assistance, special deals to promote impulse buying
  26. 26. Craft Reseller Value Proposition and Channel Offering • Reformulate channel offering based on assessment • In highly competitive industries (core elements), capability-building programs are useful to differentiate • Incentives are short-term and competitors can copy easily – Use sparingly – Provide incentive to reseller firm rather than employees
  27. 27. Four Steps in Channel Positioning 1. Determine reseller performance expectations 2. Assess the reseller value of channel offering elements 3. Craft a reseller value proposition and channel offering 4. Communicate the reseller value proposition
  28. 28. Communicate Reseller Value Proposition • Actively communicate reseller value proposition through full range or promotional tools • Supplier must deliver what it’s promised to reseller • Reinforce value proposition at every opportunity • Constantly monitor market and adjust according to channel positioning matrix • Conduct reseller satisfaction studies frequently, at least annually to assess
  29. 29. Channel Communication System
  30. 30. Thank you! Q&A
  31. 31. Bibliography • Business Market Management, Third Edition, J.C. Anderson, J.A. Narus and D. Narayandas, Pearson Prentice Hall, 2009 • Marketing Channels – A Management View, Eighth Edition, B. Rosenbloom, Thompson - South Western, 2011 • Growth Process Toolkit, Distribution Channel Optimization, Frost & Sullivan • 3Cs of Positioning - Part II: The Channel. AIPMM article. http://www.aipmm.com/html/newsletter/archives/0001 61.php

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