Business channel Management

Role of B2B vs B2C Channels

B2B Channels B2C Channels

Creating total customer experience Product Availability
Create superior customer value

All the aspects of encounters between supplier and customers are referred as
TOTAL CUSTOMER EXPERIENCE (TCE).

TCE should be seamless, positive, and memorable. TCE should match with
customer’s preferences and requirement.

TCE elements

Immediacy of (Breadth & depth of the product, availability, timing &

fulfilment reliability of delivery, installations, payment terms &
conditions)
Extend of (Pre-sales, point of sales and afters sales services)
value added
services

Four TCE positions B2B firms can occupy

1. Efficient low cost transactional experience – self-service, inexpensive and

convenient (e.g. Catalogue sales in apparels)
2. The high touch consultative experience (e.g. Selling insurance cover to
IPL team)
3. The flexible multi point experience (e.g. CRM solution providers)
4. The one stop shopping experience (wide variety of complementary
products & services e.g. Alibaba )

B2B Channel design challenges

1 Customer value assessments
2. Conceptualize superior and distinctive TCE for targeted segment
3. Which elements of TCT to insource or outsource (it will cut cost but what
about customer ownership)

Steps of channel design: -

1. DECIDE CHANNEL GOALS & OBJETIVES
Three dominant goals
- Maximize channel access (reach, develop and serve targeted markets)
- Optimize value added
- Minimize cost to serve
But one has to create trade off amongst these goals.

2. ASSESS THE CUSTOMER VALUE OF EACH POTENTIAL TCE ELEMENT

A template to assess each potential element
POTENTIAL TCE VALUE ADDED COST OF PROFIT
ELEMENT ELEMENT POTENTIAL
95% on time
delivery
24 hr availability

Above template will unfurl vital TCE elements from value added as well as
from profit potential point of view.
One has to choose channel members capable to perform these TCE
elements.
e.g. If marketer want to offer integrated solutions then intermediaries
ability to create bundle (e.g. electrical contractors) is vital

3. ENVISION VALUE PREPOSITION FOR EACH TARGETTED SEGMENT

As marketer you have to decide positioning for each segment. Three options
- Focus
- Favourable point of difference
- All benefit

4. REFORMULATE THE INTENDED TCE FOR EACH TARGETTED SEGMENT

Build flexible market offerings as per value preposition.
Add, delete or modify products and services.
If reformulated TCE is highly different than current TCE then marketer
has to make major radical changes across the organization.
5. CONFIGURE THE CHANNEL NETWORK
5.1 Maximize channel access by balancing exposure & coverage
Exposure – Degree to which targeted customer firms are actually
reached and served by channel.
Coverage – Number of channel members authorized per geographic
area. (Distribution intensity)

Coverage options: -
Distribution Exclusive
intensity Intensive
Selective
Only offerings One product line One product
How much supplier’s (marketer) offerings are sold
by channels?

One can use “channel exposure & coverage model” to balance

15 - Key
Corporates X X account
managers
25 - Direct sales Direct sales
Institutions Industrial team – 20 team – 50
Segments
distributors reps reps
Agri
equipment
Agriculture X X
dealers in
each taluka
Small Medium Large
orders orders orders
Nature of Offering
5.2 Optimize value added through postponement & speculation

Augmentation Low cost

Postponement Manufacturing Manufacturing Speculation
strategy postponement speculation strategy
Design Local assembly, Mass Standard
Customization fabrication, customization products,
Geographically compounding at low cost Large orders,
close to e.g. Steel e.g. Dell Intensive
customers centres distribution
JIT approach (indirect
e.g. Direct channels are
channels, used)
Logistics Logistics
Postponement Speculation
Reverse Stockless
stocking, local inventory plans,
warehousing vendor
managed
inventory

If you are at this extreme then try If you are at this extreme then
to play “postponement try to play “speculation
strategies” to decrease the cost strategies” to add value while
while offering augmentation offering low cost

5.3 Minimize cost to serve via functional acquisition & functional spin off
Companies would like to become “lean enterprise”
Marketers would like to create channel system in which
“Group of organizations, individuals, functions which are legally
separate but operationally synchronized”
Companies has to engage in following activities
Allocate functions to capable partners
Bolster partner’s ability
Coordinating & integrating all efforts
Eliminating wastage
Firms / suppliers / marketers can use two strategies
Functional acquisition (acquiring channel functions)
 Functional spin off (transferring channel functions to channel
participants)
An example of channel integration is Japanese “keiretsu”

5.4 Build channel network model

Four options to build channels
a) Conventional channels (linear, various levels) – each level is
performing some functions. Profit (in the form of margins) sharing
model. One dominant firm is channel captain.
e.g. In swimming pool chemicals “formulators” are channel
captain.
b) Modular channel
Marketer deconstructs all processes and act as a system
integrator. As a marketer you will act as integrator and offers
bundled products / service, customized solutions to customers by
maintaining face and relationships with customers.
e.g. ITC e choupal, Mahindra shubh labh, investment broker

c) Hybrid channels
It is combination of both conventional and modular channels.
e.g. IT solutions to small enterprise (They offer products through
conventional channels by appointing resellers. Some customers
may also need system design, hardware / technical supports. For
them reseller may create network (modular channels) to act as
system integrator.

d) Integrated multi channels

Let the customer decide which channel they want to use and as
marketer you will build all forms of direct as well as indirect
channels.
6. FINALIZE MARKETING & DISTRIBUTION ARRANGEMENT
6.1 Devise profit models
Decide channel incentives (margin, discounts, allowances, etc.)
Some may also offer commissions on referrals, advertising charges
and other fees.
6.2 Selection of channel partners
Based on various criterion supplier has to choose channel partners.
Criterion can be ability to perform channel functions, cost to serve,
value addition, access, ability to fulfil TCE elements, technical
competence, Credit ratings, GST ratings, delivery capability, financial
stability, leadership, sales force deployment, etc.
6.3 Consider e business and wireless technologies
Two kinds of internet based intermediaries are possible viz
infomediary (e.g. Comparison agent), metamediaries (bigger
electronic markets where all complimentary products and services
are offered e.g. Grainger.com)
B2B marketers can add values by considering e business and wireless
technologies
a) Community building (offers information, facilitates dialogue) e.g.
CRM forum
b) Catalogue format (facilitates shopping)
c) Electronic auction (facilitate transactions)
d) B2B exchange (one stop shop solution) e.g. vertical markets such
as Chemconnect for chemicals
6.4 Formalize partnership agreement
Four types of agreements are possible in b2b markets between
supplier and its channel partners
- Handshake agreement (based on oral commitments)
- Written agreement
- Licensing agreement
- Franchisee agreement