This document discusses channel management strategies. It covers: 1. Types of power producers can use to motivate channel members including coercive, reward, legitimate, expert, and referent power. 2. Producers should periodically evaluate channel members' performance on metrics like sales, inventory levels, delivery times, and cooperation. 3. Producers must periodically review and modify channel arrangements when needed due to changes in the market, competition, or product lifecycle. 4. Vertical marketing systems integrate production and distribution under one owner (corporate VMS) or through coordination of one member (administered VMS). Contractual VMS integrate through voluntary chains, cooperatives, or franchises.

1. WRIITTEN REPORT
Motivating Channel members
The company should provide training programs, market research programs and other
capability –building programs to improve intermediaries’ performance.
Producers vary greatly in skill in managing distributors. They can draw on the
following types of power:
 Coercive Power
A manufacturer threathens to withdraw s resource or terminate a relationship if
intermediaries fail to cooperate
 Reward Power
The manufacturer offers intermediaries an extra benefit for performing specific acts
or functions
 Legitimate Power
The manufacturer requests a behavior that is warranted under the contract
 Expert Power
The manufacturer has special knowledge that the intermediaries value.
 Referent Power
The manufacturer is so highly respected that intermediaries are proud to be
associated with it
Evaluating Channel members
Producers must periodically evaluate intermediaries’ performance against such
standards as sales-quota attainment, average inventory levels, customer delivery time,
treatment of damaged and lost goods, and cooperation in promotional and training
programs.
Modifying Channel Arrangements
A producer must periodically review and modify its channel arrangements.
Modification becomes necessary when the distribution channel is not working as planned,
consumer buying patterns change, the market expands, new competition arises, innovative
distribution channels emerge, and the product moves into latter stages in the product life
cycle.

2. Channel Dynamics
Vertical Marketing Systems (VMS)
 Conventional Marketing Channel
In these system producers, wholesalers, and retailers are separate businesses
that are all trying to maximize their profits.
 Vertical Marketing System
is one in which the main members of a distribution channel—producer,
wholesaler, and retailer—work together as a unified group in order to meet
consumer needs
Corporate and Administered VMS
 Corporate VMS
It combines successive stages of production and distribution under single
ownership.
 Administered VMS
It coordinates successive stages of production and distribution through the
size and power of one of the members.
Contractual VMS
It consists of independent firms at different levels of production integrating their
programs on contractual basis to obtain more economies or sales impact than they could
achieve alone.
Contractual VMS have three types:
1. Wholesaler-sponsored voluntary chains
Wholesalers organize voluntary chains of independent retailers to help them
compete with large corporations.
2. Retailer cooperatives
Retailers take the initiative and organize a new business entity to carry on
wholesaling and possibly some production
3. Franchise Organizations
A channel member called a franchisor might link several successive stages in the
production-distribution process.
Horizontal Marketing Systems
A Horizontal Marketing Systems, in which two or more unrelated companies put together
resources or programs to exploit an emerging marketing opportunity.

3. Multichannel Marketing Systems
Multichannel Marketing Systems occurs when a single firm uses two or more marketing
channels to reach one or more customer segments.
Roles of Individual Firms
1. Insiders
Are the members of the dominant channel, they enjoy access to preferred sources of
supply and high respect in the industry. They want to perpetuate the existing channel
arrangements and are the main enforcers of industry codes of conduct
2. Strivers
Are firms seeking to become insiders, they have less access to performed sources of
supply, which can handcap them in periods of short supply.
3. Complementers
Are not part of the dominant channel, they perform functions not normally
performed by others in the channel, serve smaller segments of the market, or handle
smaller quantities of merchandise
4. Transients
Are outside the dominant channel and do not seek membership. They go in and out
of the market and move around as opportunities arise
5. Outside Innovators
Are the real challengers and disrupters of the dominant channel, they develop a new
system for carrying out the marketing work of the channel
Conflict, Cooperation and Competition
Types of Conflict and Competition
 Vertical Channel conflict
It means conflict between different levels within the same channel.
 Horizontal Channel Conflict
It involves conflict between members at the same level within the same
channel
 Multichannel conflict
It exist when the manufacturer has established two or more channels that sell
to the same market

4. Legal and Ethical Issues in Channel relations
 Exclusive distribution
A strategy in which the seller allows only certain outlets to carry its product
 Exclusive dealing
A strategy in which the seller requires that these dealers not handle
competitors’ products
 Tying agreements

5. CHAPTER 13
Designing and Managing Value
Networks and Marketing Channels
Submitted by:
Francisco, Jeoriza L.
CBET-o2-501E