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Managing
distribution
channels
Vasiliy Starostin
Materials from
www.marketingmo.com
Distribu(on,	
  also	
  known	
  as	
  placement,	
  is	
  one	
  of	
  the	
  
classic	
  “4	
  Ps”	
  of	
  marke(ng	
  mix	
  
Distribu(on	
  channels	
  play	
  one	
  of	
  the	
  key	
  role	
  in	
  
your	
  en(re	
  marke(ng	
  strategy	
  —	
  they	
  help	
  you	
  
expand	
  your	
  reach	
  to	
  penetrate	
  your	
  market.	
  
	
  
*Цикл	
  товародвижения	
  по	
  всем	
  этапам	
  PLC	
  	
  
	
  
2	
  
Распределение	
  Производство	
  
Сырье,	
  материалы,	
  
компоненты	
  
Evaluate	
  how	
  your	
  end-­‐users	
  need	
  to	
  
buy	
  
Your	
  distribu(on	
  strategy	
  should	
  deliver	
  the	
  
informa(on	
  and	
  service	
  your	
  prospects	
  need.	
  For	
  
each	
  customer	
  segment,	
  consider:	
  
	
  
How	
  and	
  where	
  they	
  
prefer	
  to	
  buy	
  
Whether	
  your	
  
product	
  needs	
  to	
  be	
  
serviced	
  
Whether	
  your	
  
product	
  needs	
  to	
  be	
  
customized	
  or	
  
installed	
  
Whether	
  they	
  need	
  
personalized	
  
educa(on	
  and	
  
training	
  
Whether	
  they	
  need	
  
addi(onal	
  products	
  or	
  
services	
  to	
  be	
  used	
  
along	
  with	
  yours	
  
3	
  
B2B	
  and	
  B2C	
  companies	
  can	
  sell	
  through	
  a	
  single	
  
channel	
  or	
  through	
  mul(ple	
  channels	
  that	
  may	
  include:	
  
	
  
• Selling	
  through	
  your	
  own	
  e-­‐
commerce	
  website.	
  
Direct/
Internet	
  
• One	
  or	
  more	
  sales	
  teams	
  that	
  
you	
  employ	
  directly.	
  You	
  may	
  
use	
  mul(ple	
  teams	
  that	
  
specialize	
  in	
  different	
  
products	
  or	
  customer	
  
segments.	
  
Direct/Sales	
  
Team	
  
• Selling	
  through	
  your	
  own	
  
catalog.	
  
Direct	
  
Catalog	
  
• Retailers	
  sell	
  directly	
  to	
  end-­‐
users	
  via	
  a	
  physical	
  store,	
  a	
  
website	
  or	
  a	
  catalog.	
  
Retail	
  
• A	
  company	
  that	
  buys	
  
products	
  in	
  bulk	
  from	
  many	
  
manufacturers	
  and	
  then	
  
resells	
  smaller	
  volumes	
  to	
  
resellers	
  or	
  retailers.	
  
Wholesaler/
Distributor	
  
• A	
  VAR	
  works	
  with	
  end-­‐users	
  
to	
  provide	
  custom	
  solu(ons	
  
that	
  may	
  include	
  mul(ple	
  
products	
  and	
  services	
  from	
  
different	
  manufacturers.	
  
Value-­‐Added	
  
Reseller	
  
• A	
  consultant	
  develops	
  
rela(onships	
  with	
  companies	
  
and	
  provides	
  various	
  types	
  of	
  
services;	
  they	
  may	
  
recommend	
  a	
  manufacturer’s	
  
product	
  or	
  simply	
  purchase	
  it	
  
to	
  deliver	
  a	
  solu(on	
  to	
  their	
  
client.	
  
Consultant	
  
• A	
  company	
  or	
  person	
  who	
  
buys	
  inventory	
  from	
  either	
  a	
  
manufacturer	
  or	
  a	
  distributor,	
  
then	
  resells	
  it	
  to	
  an	
  end-­‐user.	
  
Dealer	
  
• You	
  can	
  outsource	
  your	
  sales	
  
func(on	
  to	
  a	
  company	
  that	
  
sells	
  different	
  manufacturers’	
  
products	
  to	
  a	
  group	
  of	
  similar	
  
customers	
  in	
  a	
  specific	
  
territory.	
  
Sales	
  Agent	
  
4	
  
DIRECT	
  TO	
  END	
  USERS	
   SELL	
  THROUGH	
  A	
  DEALER	
  
NETWORK	
  
SELL	
  THROUGH	
  A	
  VAR	
  
(VALUE-­‐ADDED	
  RESELLER	
  
You	
  have	
  a	
  sales	
  team	
  that	
  
sells	
  directly	
  to	
  Fortune	
  100	
  
companies.	
  
	
  
You	
  have	
  a	
  second	
  product	
  
line	
  for	
  small	
  businesses.	
  
Instead	
  of	
  using	
  your	
  sales	
  
team,	
  you	
  sell	
  this	
  line	
  directly	
  
to	
  end-­‐users	
  through	
  your	
  
website	
  and	
  marke(ng	
  
campaigns.	
  
	
  
You	
  have	
  two	
  markets	
  and	
  two	
  
distribu(on	
  channels.	
  
You	
  sell	
  a	
  product	
  through	
  a	
  
geographical	
  network	
  of	
  
dealers	
  who	
  sell	
  to	
  end-­‐users	
  
in	
  their	
  areas.	
  The	
  dealers	
  may	
  
service	
  the	
  product	
  as	
  well.	
  
	
  
Your	
  dealers	
  are	
  essen(ally	
  
your	
  customers,	
  and	
  you	
  have	
  
a	
  strong	
  program	
  to	
  train	
  and	
  
support	
  them	
  with	
  marke(ng	
  
campaigns	
  and	
  materials.	
  
You	
  sell	
  a	
  product	
  to	
  a	
  
company	
  who	
  bundles	
  it	
  with	
  
services	
  or	
  other	
  products	
  and	
  
resells	
  it.	
  That	
  company	
  is	
  
called	
  a	
  Value	
  Added	
  Reseller	
  
(VAR)	
  because	
  it	
  adds	
  value	
  to	
  
your	
  product.	
  
	
  
A	
  VAR	
  may	
  work	
  with	
  an	
  end-­‐
user	
  to	
  determine	
  the	
  right	
  
products	
  and	
  configura(ons,	
  
and	
  then	
  implement	
  a	
  system	
  
that	
  includes	
  your	
  product.	
  
5	
  
6	
  
Ques(ons	
  to	
  consider	
  
1.  If	
  users	
  need	
  personalized	
  service,	
  you	
  can	
  u(lize	
  a	
  
local	
  dealer	
  network	
  or	
  reseller	
  program	
  to	
  provide	
  
that	
  service.	
  
2.  If	
  your	
  users	
  prefer	
  to	
  buy	
  online,	
  you	
  can	
  create	
  an	
  
e-­‐commerce	
  website	
  and	
  fulfillment	
  system	
  and	
  sell	
  
direct;	
  you	
  can	
  also	
  sell	
  to	
  another	
  online	
  retailer	
  or	
  
distributor	
  that	
  can	
  offer	
  your	
  product	
  on	
  their	
  own	
  
sites.	
  
3.  You	
  can	
  build	
  your	
  own	
  specialized	
  sales	
  team	
  to	
  
prospect	
  and	
  close	
  deals	
  directly	
  with	
  customers.	
  
7	
  
8	
  
Before	
  you	
  begin	
  
1.  Your	
  distribu(on	
  channels	
  should	
  support	
  
your	
  posi(oning	
  and	
  brand	
  strategy.	
  	
  
– You	
  are	
  a	
  selling	
  value-­‐added	
  product	
  
– So}ware	
  vendor	
  
2.  It’s	
  especially	
  important	
  to	
  think	
  about	
  
distribu(on	
  when	
  you’re	
  going	
  a}er	
  a	
  new	
  
customer	
  segment,	
  releasing	
  a	
  new	
  product,	
  
or	
  looking	
  for	
  ways	
  to	
  aggressively	
  grow	
  your	
  
business.	
  
9	
  
Minimize	
  pricing	
  conflicts	
  
	
  
Mul(ple	
  channels	
  	
  
•  Carefully	
  map	
  out	
  the	
  price	
  for	
  each	
  step	
  in	
  your	
  
channel	
  and	
  include	
  a	
  fair	
  profit	
  for	
  each	
  type	
  of	
  
partner.	
  	
  
•  Then	
  compare	
  the	
  price	
  that	
  the	
  end-­‐user	
  will	
  pay;	
  if	
  a	
  
customer	
  can	
  buy	
  from	
  one	
  channel	
  at	
  a	
  lower	
  price	
  
than	
  from	
  another,	
  your	
  partners	
  will	
  righ€ully	
  have	
  
concerns.	
  	
  
•  Pricing	
  conflict	
  is	
  common,	
  and	
  it	
  can	
  jeopardize	
  your	
  
en(re	
  strategy,	
  so	
  do	
  your	
  best	
  to	
  map	
  out	
  the	
  price	
  at	
  
each	
  step	
  and	
  develop	
  the	
  best	
  solu(on	
  possible.	
  
10	
  
11	
  

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Managing distribution channels

  • 2. Distribu(on,  also  known  as  placement,  is  one  of  the   classic  “4  Ps”  of  marke(ng  mix   Distribu(on  channels  play  one  of  the  key  role  in   your  en(re  marke(ng  strategy  —  they  help  you   expand  your  reach  to  penetrate  your  market.     *Цикл  товародвижения  по  всем  этапам  PLC       2   Распределение  Производство   Сырье,  материалы,   компоненты  
  • 3. Evaluate  how  your  end-­‐users  need  to   buy   Your  distribu(on  strategy  should  deliver  the   informa(on  and  service  your  prospects  need.  For   each  customer  segment,  consider:     How  and  where  they   prefer  to  buy   Whether  your   product  needs  to  be   serviced   Whether  your   product  needs  to  be   customized  or   installed   Whether  they  need   personalized   educa(on  and   training   Whether  they  need   addi(onal  products  or   services  to  be  used   along  with  yours   3  
  • 4. B2B  and  B2C  companies  can  sell  through  a  single   channel  or  through  mul(ple  channels  that  may  include:     • Selling  through  your  own  e-­‐ commerce  website.   Direct/ Internet   • One  or  more  sales  teams  that   you  employ  directly.  You  may   use  mul(ple  teams  that   specialize  in  different   products  or  customer   segments.   Direct/Sales   Team   • Selling  through  your  own   catalog.   Direct   Catalog   • Retailers  sell  directly  to  end-­‐ users  via  a  physical  store,  a   website  or  a  catalog.   Retail   • A  company  that  buys   products  in  bulk  from  many   manufacturers  and  then   resells  smaller  volumes  to   resellers  or  retailers.   Wholesaler/ Distributor   • A  VAR  works  with  end-­‐users   to  provide  custom  solu(ons   that  may  include  mul(ple   products  and  services  from   different  manufacturers.   Value-­‐Added   Reseller   • A  consultant  develops   rela(onships  with  companies   and  provides  various  types  of   services;  they  may   recommend  a  manufacturer’s   product  or  simply  purchase  it   to  deliver  a  solu(on  to  their   client.   Consultant   • A  company  or  person  who   buys  inventory  from  either  a   manufacturer  or  a  distributor,   then  resells  it  to  an  end-­‐user.   Dealer   • You  can  outsource  your  sales   func(on  to  a  company  that   sells  different  manufacturers’   products  to  a  group  of  similar   customers  in  a  specific   territory.   Sales  Agent   4  
  • 5. DIRECT  TO  END  USERS   SELL  THROUGH  A  DEALER   NETWORK   SELL  THROUGH  A  VAR   (VALUE-­‐ADDED  RESELLER   You  have  a  sales  team  that   sells  directly  to  Fortune  100   companies.     You  have  a  second  product   line  for  small  businesses.   Instead  of  using  your  sales   team,  you  sell  this  line  directly   to  end-­‐users  through  your   website  and  marke(ng   campaigns.     You  have  two  markets  and  two   distribu(on  channels.   You  sell  a  product  through  a   geographical  network  of   dealers  who  sell  to  end-­‐users   in  their  areas.  The  dealers  may   service  the  product  as  well.     Your  dealers  are  essen(ally   your  customers,  and  you  have   a  strong  program  to  train  and   support  them  with  marke(ng   campaigns  and  materials.   You  sell  a  product  to  a   company  who  bundles  it  with   services  or  other  products  and   resells  it.  That  company  is   called  a  Value  Added  Reseller   (VAR)  because  it  adds  value  to   your  product.     A  VAR  may  work  with  an  end-­‐ user  to  determine  the  right   products  and  configura(ons,   and  then  implement  a  system   that  includes  your  product.   5  
  • 7. Ques(ons  to  consider   1.  If  users  need  personalized  service,  you  can  u(lize  a   local  dealer  network  or  reseller  program  to  provide   that  service.   2.  If  your  users  prefer  to  buy  online,  you  can  create  an   e-­‐commerce  website  and  fulfillment  system  and  sell   direct;  you  can  also  sell  to  another  online  retailer  or   distributor  that  can  offer  your  product  on  their  own   sites.   3.  You  can  build  your  own  specialized  sales  team  to   prospect  and  close  deals  directly  with  customers.   7  
  • 9. Before  you  begin   1.  Your  distribu(on  channels  should  support   your  posi(oning  and  brand  strategy.     – You  are  a  selling  value-­‐added  product   – So}ware  vendor   2.  It’s  especially  important  to  think  about   distribu(on  when  you’re  going  a}er  a  new   customer  segment,  releasing  a  new  product,   or  looking  for  ways  to  aggressively  grow  your   business.   9  
  • 10. Minimize  pricing  conflicts     Mul(ple  channels     •  Carefully  map  out  the  price  for  each  step  in  your   channel  and  include  a  fair  profit  for  each  type  of   partner.     •  Then  compare  the  price  that  the  end-­‐user  will  pay;  if  a   customer  can  buy  from  one  channel  at  a  lower  price   than  from  another,  your  partners  will  righ€ully  have   concerns.     •  Pricing  conflict  is  common,  and  it  can  jeopardize  your   en(re  strategy,  so  do  your  best  to  map  out  the  price  at   each  step  and  develop  the  best  solu(on  possible.   10  
  • 11. 11