Deck 9: Motivating the Channel Members

Question 1

Steinway Sons has manufactured the world's best pianos for well over a century. Steinway sells its pianos in the U.S. through less than 75 carefully selected dealers. The quality of Steinway pianos is unquestionably very high, but for a time Steinway's management of its channel could make no such quality claim. It seems that Steinway was not sufficiently aware of its dealers' problems including low profit margins on the pianos, slow-moving inventory, and high costs associated with supplying Steinway pianos to performers (a service all dealers were expected to provide). Indeed, Steinway's main focus was on getting its dealers to stock more inventory, upgrade their showrooms, and hire more salespeople. Steinway's answer for dealing with this manufacturer/dealer disconnect was to send its president and CEO out on the road for half a year to visit the dealers in person so as to learn first-hand about their needs and problems.
What do you think of Steinway's approach for learning about its channel members' needs and problems? Is there a better way to do this? Would Steinway's approach be feasible for other companies? Explain.

Answer 1

Company S's approach towards learning the need of its channel members' can be improved to a great extent. The possible suggestions are mentioned below:
• Emphasizing on the supervision of the managerial skills of the members.
• The quality of the products offered by S is good but requires proper management of channel members.
• There must be proper communication with the manufacturer or dealer so that he/she is aware about the requirement in market.
There is a better way to perform S's approach. It is mentioned below:
• The company should work upon a strategy whereby, the choice of consumers and proper management by the channel members should be taken care of.
• The cost of the product must be affordable for consumers with proper inventory of the products.
• The dealing done with the manufacturer or retailer must work for the benefit of the customers with respect to the quality and cost of the product in order to have a feasible outcome.
• The channel members must work upon the promotion of the products in a skilled manner.
Hence, the above ways would make the approach of S feasible for other companies.

Question 2

Discuss the distinction between channel management and channel design.

Answer 2

Difference between channel design and channel management:
• Channel Design is concerned with setting of the channel whereas channel management deals with the functioning of the channel.
• The channel management is involved in seeking the co-operation of channel members unlike channel design.
• Channel management's task includes motivation of all the channel members through various measures such as identifying and evaluating needs and problems of channel members, formulating programs to address the problems and assisting the team through leadership.
On the other hand, considering the achievement of organization's objectives channel design has a lot of relevance. It focuses on devising and speculating the team on the basis of needs as well as requirements of the target market.

Question 3

The ubiquitous Bic razors, cigarette lighters, and, of course, ballpoint pens are sold by more than 100,000 supermarkets, drugstores, and other mass merchandisers in the United States. Bic Corporation has traditionally relied on large numbers of mass marketers to sell these products.
Can Bic Corporation be "partners" with each of the 100,000 retailers selling these products? Explain why or why not?

Answer 3

It is not mandatory for company C to be partners with 100,000 retailers to sell their products through them. It is because of the following reasons:
• Company C could traditionally rely on the mass marketers for distribution of their products instead of doing partnership and earning profits with so many retailers.
• Company C can distribute its products with skilled salespeople and marketing channel across different retailers in order to reach a large number of customers to earn revenues.
Hence, the above factors imply that it is not necessary for company C to enter into partnership in selling the products. The traditional marketing means also results in reaching large number of customers.

Question 4

Even if a marketing channel has been carefully designed in such a way that its structure reflects a near-optimal allocation of distribution tasks, the channel cannot be expected to "run" by itself. Discuss this statement.

Question 5

Harley-Davidson Inc. is one of the world's most well recognized companies because of its famous motorcycles-often referred to as "Hogs" by bike enthusiasts. During most of the 1990s, Harley motorbikes were in short supply, so Harley's 600 independent dealers had no trouble moving the bikes out the door almost as soon as they arrived from the factory-often at prices higher than the sticker price. But by 2001, just around the 100th anniversary of Harley-Davidson, things began to slow down, reflecting the stagnant economy. Bikes were not rolling out of the dealer showrooms as fast, and in fact, inventories in dealerships all over the country were starting to grow even though some of the bikes were offered at substantial discounts. Yet even in the face of slowing sales to consumers, Harley-Davidson was able to show an annual sales increase of over 25 percent. How was this possible? Harley was booking shipments of the bikes to dealers as if they were final sales to customers. Many of the dealers were very unhappy with this practice, often referring to it as "channel stuffing"-loading up the dealers with inventory that outstrips final customer demand to give the appearance of sales growth.
Are the dealers just being "crybabies" in accusing Harley-Davidson of channel stuffing? Is this just one-way channel partnership with the dealers being fair-weather friends? Discuss.

Question 6

An effective information flow in the channel is all that is needed to inform the channel manager of the needs and problems of channel members. Do you agree or disagree? Discuss.

Question 7

Mary Robinson, vice president of marketing for a famous men's dress shirt manufacturer, had spent three months working on the in-store promotional campaign to be used for the new all-cotton, easy-care shirt line. The campaign stressed an unusual point-of-purchase fixture: a life-sized cardboard figure wearing one of the actual shirts. Department stores and specialty stores were expected to use this display to attract customers' attention to the new line by featuring it prominently. Robinson had played a major role in creating this dealer promotion and was rather proud of it. The campaign had now been going on for six weeks and she was anxiously awaiting the report prepared by the company's marketing research department, due that afternoon. She just knew it would be laudatory. In fact, however, most of the retailers thought the campaign was a disaster-especially the life-sized cardboard sign that many of them did not have the space to display. And even if they did, they added, they thought it would be gauche to do so.
Can Mary be sure that the research report that will be on her desk that afternoon will fully and accurately convey the retailers' opinions? Discuss.

Question 8

What are some of the major sources of interaction that exist in the typical channel communications system?

Question 9

For decades, McDonald's was almost universally admired as the leader in the fast-food industry. Its franchise system was the envy of virtually all the other fast-food chains. But at the start of the new millennium, problems that had been festering during the late 1990s began not only to undermine McDonald's enviable reputation but also to hit the top and bottom lines. Same-store sales fell off by as much as 10 percent for many units and net profits went down even more. Ironically, a major cause of the problem McDonald's was experiencing resulted from an attempt to improve its products. McDonald's and many of its franchisees made a huge investment in kitchen technology to enable the restaurant to custom make food to individual customer orders so it would be fresher and tastier than the premade products kept hot under warming lights. But the new approach, which McDonald's called "Made for You," slowed down service dramatically. This in turn created a "chain reaction" of unhappy customers as well as employees who felt frustrated at not being able to meet customers' demands for speedier service. Moreover, the employees felt abused when customers complained to them. McDonald's claims the franchisees have not learned how to use the new kitchen technology properly, while the franchisees say the new technology is flawed and poorly designed.
What do you think is going on here? Does McDonald's really understand the needs and problems of its franchisees? Was the support in the form of an attempt to provide a better product for the customer misdirected? Discuss.

Question 10

Discuss the major features of the four approaches for finding out about channel member needs and problems discussed in this chapter.

Question 11

GTE's Sylvania Lighting Division introduced "Prestige Partnership," a program aimed at helping its 2,200 distributors do a more effective job of marketing Sylvania products. In particular, the program will help the distributors locate market segments for which Sylvania products are especially well suited. Through a database called Sylvania Source, detailed data will be provided on the names, addresses, and phone numbers of businesses, as well as the names of the individuals in charge of ordering lighting products, the annual sales potentials of the customers, and the number of lighting fixtures each customer has. Sylvania and its distributors also do a road show with a "Lightmobile" created by Sylvania to provide customers with a mobile educational program on lighting applications. All this augments Sylvania's "Techniques for Better Lighting" information kit, which the distributors make available to final customers. The partnership has been wholeheartedly embraced by distributors, according to Sylvania, and has motivated them to become better marketers of Sylvania products.
Why do you think Sylvania's partnership program is effective? Discuss from the standpoint of the distributors' needs and problems. Does the partnership program suggest effective leadership on Sylvania's part? Explain.

Question 12

Compare and contrast the major features of cooperative arrangements, partnerships and strategic alliances, and distribution programming as approaches for motivating channel members.

Question 13

FilmDistrict, a newly-formed film studio and distributor worked out a deal with Netflix, Inc. to stream new movies over the Internet just a few months after they are released on DVDs. Under the terms of the agreement, new movies from FilmDistrict will be licensed exclusively to Netflix instead of appearing on premium cable channels. Industry observers believe this deal reflects the new realities of changing channels for movies from theaters, home videos, and cable pay TV to online streaming. Netflix also has a similar deal with Relativity Media, the movie company that financed the highly-acclaimed boxing movie, The Fighter.
Given the rapid and dramatic changes occurring in film distribution channels, how might partnerships or alliances such as that between Netflix and Film District be helpful to either firm in managing their distribution channels?

Question 14

Discuss the differences between a conventional channel and a channel based on a distribution programming arrangement.

Question 15

Toyota Motor Corporation took extraordinary care in developing the channel and selecting the dealers for its Lexus luxury cars. The attention to detail in setting up the channel for the Lexus is reminiscent of the kind of care Toyota gives to the building of its cars. In fact, standards for the dealerships cover such minute details as setting specifications for doorknob designs and the grade of rice paper for sohji screens used to decorate the dealerships. It would seem that everything had been so carefully planned that the Lexus dealerships should virtually run themselves.
Comment on this situation in terms of the need for channel management and the motivation of channel members.

Question 16

Discuss the concept of leadership as it applies to motivating channel members.

Question 17

What are some of the problems faced by the channel manager in attempting to exercise leadership to motivate channel members in the inter-organizational setting of the marketing channel?

Question 18

What particular facets of the Cisco Systems case indicate effective leadership in motivating the firm's channel members?