Marketing Channel Strategy

Importance Weights for Function
s
Proportional Function Performance of Channe
l
Member
Total
Costs*
Bene
it
Po
tent
ia
l
(High,
Medium, Low)
Fina
l
We
ig
ht
*
12
34
(End-User)
Ph
ysical P
ossession**
100
Owner
ship
100
Pr
omotio
n
100
Ne
go
tiatio
n
100
Financin
g
100
Risk
100
Ord
ering 
100
Pa
ymen
t
100
Information Sharin
g
100
To
tal
100
N/
A
100
N/
AN
/A
N/
AN
/A
N/
A
Norm
ative Proit
Shar
e***
N/
AN
/A
N/
A
100
*Entries
in each
column 
must
add up
to 
100 points
.
**Entries 
across 
each
row (sum 
of
p
roportional function
p
erformance
o
f channel 
members 
1–4)
for
each 
channel 
member
m
ust 
add 
up
to 
100 points
.
*** 
Normative 
proit
share
o
f channel 
member
i 
is calculated 
as
(inal 
weight, 
physical
p
ossession)
×
(channel 
member
i’s proportional function
p
erformance
o
f physical
p
ossession)
+
…+ (inal 
weight, 
informatio
n
sharing)
×
(channel 
member
i’s proportional function
p
erformance
o
f information 
sharing). 
Entries 
across
rows (sum
o
f normative proit 
shares
for
channel
m
embers
1
–4) 
must
add up
to 
100 points
.
FIGURE 2.2
The Efficiency 
Template

CHANNEL BASICS
55
though, the task is more comprehensive: we need good quantitative measures of 
the costs of all activities performed by all channel members. If we know the total 
costs, we still need to ask: what proportion of these total channel costs is accounted 
for by, say, promotions?
Even without quantitative cost measures, analysts can use qualitative tech-
niques to estimate cost weights. With a Delphi-type research technique, several 
expert managers in the channel might each develop their best estimates of the 
cost weights.
10
The output of this exercise is a set of weights, adding up to 100, 
that measure the proportion or percentage of total channel costs accounted for 
by each function.
But costs are not the entire picture. The performance of each function also cre-
ates value, and determining how much is a more intuitive process, linking the 
performance of functions to the generation of desired service outputs for a targeted 
segment of end-users. With this information, we can adjust the “Cost” weight to 
derive the final set of importance weights for each function in the channel. The 
adjustment process is judgmental but generally increases the weight for functions 
that generate “high” added value in the channel, while diminishing the value 
assigned to functions with “low” value added. Again in this case, the final weights 
must sum to 100, so if some function weights increase, others must decrease. A 
Delphi analysis can complement this approach and help channel members arrive at 
a final set of weights to represent both the cost borne and the value created through 
the performance of a channel function.
To complete the other columns in the efficiency template in Figure 2.2, the 
channel analyst must allocate the total cost of each function across all channel 
members. Again, the analyst enters figures adding up to 100, to represent the pro-
portion of the total cost of a function that a particular channel member bears. So if 
a channel consists of a manufacturer, a distributor, a retailer, and an end-user, the 
costs of physical possession spread across these four channel members—though 
not all channel members bear all costs. For example, a manufacturer may use 
independent sales reps to help sell its product. These sales reps do not inventory 
any product or take any title to it; they specialize in promotional and sometimes 
order-taking activities. Their cost proportion entry in the physical possession row 
thus would be 0.
Note that the end-user is also a member of the channel. Any time end-users buy 
a larger lot size than they really need in the short term (i.e., forgo bulk-breaking 
by stocking up on paper towels at a hypermarket), they are performing some of 
the physical possession function, because they have to maintain the inventory of 
the unused product themselves. This consumer therefore bears inventory carrying 
costs too, which means sharing the costs of ownership in the channel. The costs of 
financing also might fall on an end-user who pays for the whole lot at the time of 
purchase. The various ways end-users can participate in channel functions thus pro-
duce costs for them; as for any channel member, these costs need to be measured. 

CHANNEL BASICS
56
The resulting information can be particularly useful for contrasting one segment of 
end-users against another, which sheds light on the fundamental question of why 
it costs more to serve some end-users than others. The answer is generally because 
they perform fewer costly channel functions themselves, thrusting this cost back 
onto other channel members.
After having assigned weights to each function and allocated cost proportions 
for the performance of each function across all channel members, the channel ana-
lyst can calculate a weighted average for each channel member, which reveals its 
contributions to the costs borne and value created in the channel. This weighted 
average is calculated as (weight × cost proportion) for each function, then summed 
across all functions.
These percentages have special meaning, especially when we turn to the total 
profit available to the channel from products sold at full-service list prices. This 
value equals total revenues (assuming all units sell at their list prices), minus all 
costs of running the channel. These percentages not only measure the propor-
tionate value creation but also suggest the 

tải về 5.39 Mb.

Chia sẻ với bạn bè của bạn: