Distribution Management Hugo van Zyl 083 629 2069

Distribution Management Hugo van Zyl 083 -629 2069 hugo@changesolutions. co. za Marketing 2 B Distribution Management

Quiz 1. 2. 3. 4. Name 2 disadvantages of being a Franchisor Name 2 disadvantages of being a Franchisee Name 2 advantages of being a Franchisor Name 2 advantages of being a Franchisee 8+2 Hugo van Zyl 083 -629 2069 hugo@changesolutions. co. za Marketing 2 B Distribution Management

Franchisor Disadvantages Advantages • • Acquire funds No direct ownership of Brand Reduction in Distribution cost Motivation is high Co-operative advertising opportunities Regulations limiting power Loss of control: – – – Over brand Over Distribution Expansion programs Financial situation Corporate intellectual property Franchisee Advantages • Risk of failure minimized: – Business model proven – Products proven • • • Continuous service Economies of scale High return on investment Disadvantages • • No guarantees of success Little say in expansion programs Loss of some level of independence Pricing model might may be a disadvantage to the Franchisee Hugo van Zyl 083 -629 2069 hugo@changesolutions. co. za Marketing 2 B Distribution Management

Behavioral processes in Distribution channels Hugo van Zyl 083 -629 2069 hugo@changesolutions. co. za Marketing 2 B Distribution Management

Behavioral processes in Distribution channels DC as part of a Social system Channel power • Reward Power Channel conflict • What is Channel conflict • Coercive Power • Legitimate power • Causes • Conflict resolution • Referent Power • Expert Power • Exercising Power • Methods to solve conflict Hugo van Zyl 083 -629 2069 hugo@changesolutions. co. za Marketing 2 B Distribution Management Communication in the DC

Behavioral processes in Distribution channels Why is the psychological aspect of Distribution channels important? Hugo van Zyl 083 -629 2069 hugo@changesolutions. co. za Marketing 2 B Distribution Management

DC as part of a Social system Hugo van Zyl 083 -629 2069 hugo@changesolutions. co. za Marketing 2 B Distribution Management

Customer purchase process 1. Awareness of a need – Hunger 2. Information search – Page through the Mr. Delivery menu 3. Purchase – Select a burger from Nando’s 4. Post purchase evaluation – Happy so put Number in Cell phone for future reference Hugo van Zyl 083 -629 2069 hugo@changesolutions. co. za Marketing 2 B Distribution Management

Mr. Delivery Distribution channel Hugo van Zyl 083 -629 2069 hugo@changesolutions. co. za Marketing 2 B Distribution Management

What will make you have a…… Positive experience • Delivered in your expected time frame • Food was freshly prepared and hot • Price was not perceived as a Rip off • Delivery guy was clean and neat Negative experience • • Food never delivered Cold and soggy Cost more than what they said Delivery guy was smoking and tipping ash on the package Hugo van Zyl 083 -629 2069 hugo@changesolutions. co. za Marketing 2 B Distribution Management

Customer purchase process • Awareness of a need – Hungry again • Information search –Get in your car and go to Mac. Donald's • Purchase – Order a Lucky meal • Post purchase evaluation – Happy so think Mac. D’s are great and go there again next time Hugo van Zyl 083 -629 2069 hugo@changesolutions. co. za Marketing 2 B Distribution Management

Channel power Hugo van Zyl 083 -629 2069 hugo@changesolutions. co. za Marketing 2 B Distribution Management

Channel power • The ability of one channel member to control or manipulate the behavior of another channel member • Negative and positive power 6 Influencing Strategies • Five sources (Rosenbloom) – – – Reward Coercive Legitimate Referent Expert • Promise Strategy • Threat strategy • Legal strategy • Request strategy • Info exchange strategy • Recommendation strategy Hugo van Zyl 083 -629 2069 hugo@changesolutions. co. za Marketing 2 B Distribution Management

Reward power • One or more members of the channel rewards one or more of the others if they conform to the expectations of the former. • Normally a financial reward • • Franchise agreements Bonuses Kick backs Incentives Hugo van Zyl 083 -629 2069 hugo@changesolutions. co. za Marketing 2 B Distribution Management

Coercive power • Opposite of Reward Power • Penalty system if members of the channel don’t comply to others demands and expectations • Found when one or two parties dominate the channel Hugo van Zyl 083 -629 2069 hugo@changesolutions. co. za Marketing 2 B Distribution Management

Legitimate power • Basis is in a legal contract or agreement • Franchise /Franchisor agreement • Independent suppliers have different power – Discounting – Specials Hugo van Zyl 083 -629 2069 hugo@changesolutions. co. za Marketing 2 B Distribution Management

Referent power • Objectives of 2 or more channel members are the same • Focused on same target market. Hugo van Zyl 083 -629 2069 hugo@changesolutions. co. za Marketing 2 B Distribution Management

Expert power • Knowledge and expertise from one Channel member is used to change the behavior of other channel members • Often seen in Monopoly manufacturers. • Info on consumer demo, psych and geographic profile can be used upstream as well. Hugo van Zyl 083 -629 2069 hugo@changesolutions. co. za Marketing 2 B Distribution Management

6 Influencing strategies • The Power is used in different strategies to influence behavior. • Promise (Power source – Reward) – Do what we ask and we will reward you. • Threat ( Power source – Coercion) – Don’t do what we ask and we will punish you • Legal (Power Source - Legitimacy) – Do what we ask cause you signed a contract • Request (Power source – Referent, Reward, Coercion) – Just do what we ask • Info Exchange (Power source - Expertise, Reward) – Lets show you in detail why we are asking you to do this • Recommendation (Power source – Expertise, Reward) – Lets work together to develop the best way in addressing the request Hugo van Zyl 083 -629 2069 hugo@changesolutions. co. za Marketing 2 B Distribution Management

Channel conflict Hugo van Zyl 083 -629 2069 hugo@changesolutions. co. za Marketing 2 B Distribution Management

Channel conflict • Definition – a Situation in which one member of a DC perceives another member as an adversary engaged in behavior designed to injure, thwart or gain scarce resources at the expense of the original member • Various causes of conflict in any DC Hugo van Zyl 083 -629 2069 hugo@changesolutions. co. za Marketing 2 B Distribution Management

Causes of channel conflict Cause NB points 1 Oversaturation • To many intermediaries in a channel • E. g. to many food franchises in a shopping centre 2 Stocking levels • Stock levels in different parties in DC • Different expectations especially from up stream 3 Direct / Indirect channels • Manufactures Reps calling on customers in competition with Suppliers reps • Prominent in Big customers 4 Regional / National Distributors • National Reps in conflict with regional reps Hugo van Zyl 083 -629 2069 hugo@changesolutions. co. za Marketing 2 B Distribution Management

Causes of channel conflict Cause 5 Large Account NB points • Large corporate accounts serviced directly by Manufacturer 6 Sales quotas • Forcing intermediaries to adhere to Sales quotas • No consultation in setting sales targets with intermediaries 7 Market life cycle changes • Involvement by all intermediaries in determining the position in LC • All intermediaries to agree on compensation 8 New market development • Expansion of distribution coverage without agreement by current intermediaries Hugo van Zyl 083 -629 2069 hugo@changesolutions. co. za Marketing 2 B Distribution Management

Causes of channel conflict Cause NB points 9 New product launches • Intermediaries might not agree or believe in the new product 10 Channel tasks • Disagreement re the specific responsibilities of different intermediaries 11 Technology required 12 Training • Advances in technology might bring Manufacturer closer to customer and need less intermediaries • Technology advances might be to expensive for intermediaries to carry • Differences in opinion re the training needs Hugo van Zyl 083 -629 2069 hugo@changesolutions. co. za Marketing 2 B Distribution Management

Causes of channel conflict Cause 13 Phantom Channel 14 Single supplier 15 Overselling 16 Business philosophies NB points • Unofficial vendors • Supplier to stock only single range or manufacturers goods • New products being sold on quota basis • Manufacturers = Bureaucratic • Intermediaries = Entrepreneurial Hugo van Zyl 083 -629 2069 hugo@changesolutions. co. za Marketing 2 B Distribution Management

Causes of channel conflict Cause Pricing • Conflict between Manufacturers and suppliers on what the correct price to the consumer should be Profit Margins • Disagreement on what an appropriate level of profit margin should be between manufacturer and supplier 17 18 NB points 19 Resources • Suppliers competing to get resources from Manufacturer such as training, stock or delivery schedules 20 Transhipping • Suppliers selling products in another suppliers geographical area. 21 Assigned markets • Existing suppliers might be upset when they don’t first rights on new products or markets Hugo van Zyl 083 -629 2069 hugo@changesolutions. co. za Marketing 2 B Distribution Management

Conflict resolution Methods to resolve conflict • Problem solving – Super ordinate goals – Communication process • Persuasion – Agreement to change objectives by all parties • Negotiation – All parties compromise on aspects of their goals • Politics – Coalitions – Mediation / Arbitration – Lobbying / Judicial appeal Hugo van Zyl 083 -629 2069 hugo@changesolutions. co. za Marketing 2 B Distribution Management

Communication in the DC • Free flow of Comms is the best way to avoid and dissolve any conflict in a DC 3 Behavioral problems that inhibit comms • Perceptual differences • Secretive behavior • Infrequent communication Hugo van Zyl 083 -629 2069 hugo@changesolutions. co. za Marketing 2 B Distribution Management