B2B channels

B2B distribution
channels
Manufacturer

Direct channel

Direct sales

Indirect channel

Online

Manufacturers
representative

Industrial
Distributors

Business customers

B2B distribution
channels

BC = Business Channel

Channel functions
Product Information
Customers seek more information for new and/or
technically complex products

Product Customization
products to be technically modified or need to be
adapted to meet the customers unique requirements

Product Quality Assurance

Assortment
After-Sales Services
Logistics

Channel flows in marketing

channels

Wholesaler / Distributor tasks

upstream and downstream

Channel structure
Opportunity networks
Loose alliances of independent organisations
that often come together to provide a one-off
solution for a customer. Once the task is
completed, the alliance might disband.

Channel structure
Vertical marketing systems

Power game in channels

Power concerns the ability to get another
(individual or organisation) to do what they/it
would not normally have done.
In a channel context, power is obtained through
the possession and control of resources that are
valued by another member.
power is a function of dependency. The more
dependent X is on Y, the greater power Y has over
X.
As all members of a channel are interdependent
then all members have a degree of power.

Power game in channels

Dependency is concerned with two main
elements:
the value that one organisation derives from
interacting with another, and
the number of alternative sources of equivalent
value that an organisation has.

Power game in channels

Sources of power:
Rewards:
Example: A manufacturer might grant a wholesaler
particular discounts dependent upon the volume of
products bought during an agreed period

Coercion:
Example: should a retailer feel threatened by a
manufacturer then a range of responses might include,
delisting, reduced stocking, moving orders to a competitor

Expertise:
Example: the expert power exercised by leading
pharmaceutical manufacturers is derived from the
dependency of the pharmacies and general practitioners
(GPs) on them

Power game in channels

Sources of power:
Legitimate
Legitimacy is provided either through the judicial system
(for example trademarks and contracts) or through the
norms and social values established within particular
markets and industries. It is more popular in franchisorsfranchisee model

Reference bases
Example: a retailer may find it beneficial, that is of
increased value, to be able to carry particular
prestigious brands as the association will enhance the
perception end-user customers will have of them

Power game in channels

Using power for influence:
Organisations seek to influence
interorganisational relationships through a variety
of communication strategies.

Channel conflicts - types

Channel-based conflict means the perception on
the part of a channel member that its goal
attainment is being impeded by another, with stress
or tension the result
Negative conflict is normally associated with
hostility, disagreement, friction and contention
Positive or functional conflict can be healthy as it
may encourage change and development, often by
generating a new, more efficient allocation of
resources

Channel conflicts - types

Task conflict to be incompatibilities and
disagreements between organisations about
respective responsibilities. It is based on
judgements about the most appropriate way to
achieve shared goals.
Emotional conflict is concerned with interpersonal
incompatibilities and friction between members of
each participating group.

Channel conflicts reasons

Deviance from agreed roles and responsibilities
Disagreements about resources or the decisions
other members make, differences in the way
organisations perceive the actions of others
Poor interorganisational communications.

Channel conflicts reasons

1. Competing goals
Typically occurs when one upstream member
changes strategy so that its goals become difficult
for other downstream members to support
Example: A manufacturer may decide that it wants
to reach new market sectors but current dealers
might resist this strategy as it is not in their
interest to supply other (new) channels with the
same products

Channel conflicts reasons

1. Competing goals
Example: when retailers try to increase
performance by lowering their stock levels.
Conflict is likely as the manufacturers goal is to
increase the level of stock in the channel, while
intermediaries prefer to be able to pull down
stock on demand and, hence, avoid working
capital costs.

Channel conflicts reasons

2. Domain differences
A channel domain refers to an area, field or sphere of
function such as population, territory, member roles
and issues concerning technology and marketing
Example: A wholesaler and a manufacturer may
disagree about margins, training, or marketing
policies.
Example: A manufacturer decides to sell through a
dealers competitors, to the extent of even breaking
an exclusivity arrangement

Channel conflicts reasons

2. Domain differences
Example: when a manufacturer perceives an
intermediary
selling
another
(competing)
manufacturers products at the expense of its
own range of products
Example: A manufacturer is selling on multiple
channels that retailer feels threatened by
increased competition and reduced financial
performance opportunities

Channel conflicts how to

manage
Conflict cannot be eradicated but it can be
managed
Managing conflict is a continuous activity
Conflict resolution strategies

In-class exercise

You are a food restaurant that sells sandwiches

You sell a series of food products
You cater to business and consumer markets
You operate in Manipal and Udupi
You have presence in physical as well as online
retail stores
Physical consists of dining as well as home
delivery
B2B physical (dining), B2B physical (office
delivery), B2B online

In-class exercise
What will be the tasks upstream and
downstream of each channel member?
What shall be the channel structure?
How will it be the power game (sources of
power, strategy for power influence)?
What may be the possible channel
conflicts (conflict types, reasons for
conflicts, how will it be managed)?