8.3.4 Managing channels

From the manufacturers' point of view

From the wholesalers' point of view

1. Wholesalers fail to promote products aggressively. Wholesalers generally concur with this charge. Since they usually carry thousands of items it is not possible for their salesforces even to mention each item to a prospective customer, much less try to sell each item.

1. Manufacturers do not understand that the primary obligation of wholesalers is to serve their customers. Serving the manufacturer is only secondary.

2. Wholesalers no longer perform the storage services that producers were accustomed to. Improvements in transportation and communication enable wholesalers to carry smaller inventories, thus shifting the storage function back to the manufacturers.

2. Manufacturers expect too much. Wholesalers' discounts are not high enough to justify the level of warehousing and promotion expected by producers.

3. Some wholesalers promote their own brands in direct competition with manufacturers' brands.

3. Manufacturers skim the cream off the market: that is, they use wholesalers only in the early stages of territorial development or in the least profitable segments of the market. In the concentrated, profitable areas or after a new market has been developed, manufacturers bypass the wholesalers and sell directly to retailers or industrial users. (This observation is accurate. However, wholesalers should understand that their real value lies in their being able to reach markets the manufacturers themselves cannot penetrate profitably.)

4. Wholesalers' services cost too much. The manufacturers believe they can do the job at a lower cost. However, this may be a mistaken assumption. Many producers have learned the hard way that bypassing wholesalers may actually increase the cost of marketing or result in poor market coverage.

5. Manufacturers want closer market contact. They want control over their products for a greater part of the route to the final customer.

6. Some products may need rapid physical distribution because they are perishable or are subject to fashion obsolescence, and the producer to retailer channel is faster.

7. Large-scale retailers usually prefer to buy directly from manufacturers.

The perfect intermediary

The perfect manufacturer

1. Has access to the market that the manufacturer wants to reach.

2. Carries adequate stocks of the manufacturer's products and a satisfactory assortment of other products.

3. Has an effective promotional program-advertising, personal selling and product displays. Promotional demands placed on the manufacturer are in line with what the manufacturer intends to do.

4. Provides services to customers-credit, delivery, installation and product repairs-and honours the product warranty conditions.

5. Pays its bills on time and has capable management.

1. Provides a desirable assortment of products ¾ well designed, properly priced, attractively packaged, and delivered on time and in adequate quantities.

2. Builds product demand for these products by advertising them.

3. Furnishes promotion assistance to its intermediaries.

4. Provides managerial assistance for its intermediaries.

5. Honours product warranties and provides repair and installation service.

6. Is financially sound.

The perfect combination:

Probably doesn't exist.