NationalUniversity of Singapore

NUS BusinessSchool

Department of Marketing

BMA5511Channel Management and Pricing

Lecturer:Prof Trichy V. Krishnan

Email:

Phone: (65) 6516 3008

Session:Semester I, 2009/2010

This is a course that is meant for two important marketing mix variables, channel management and pricing.

Channel Management

Not much attention is usually paid to understanding marketing channels in detail. In fact people used to call channels the ‘dark continent’ of marketing that is best left to ‘truckers’. But, is this true? Think of the following:

  1. Wal-Mart owners are the richest in the world. And Wal-Mart is the biggest company in the world!
  2. Chinese suppliers to OEMs are moving up the chain and thereby restructuring the channel market down the chain! (Lenovo!)
  3. Dell is selling through WalMart and Courts in Singapore!
  4. Dell and HP are at loggerheads in the printer on-line selling format.
  5. While Dell and Gateway tried unsuccessfully at having their own physical stores (or kiosks), HP moved successfully into on-line format through acquiring Compaq.
  6. GM’s failure is partly attributed to its expensive dealer network.
  7. Many dot-coms failed to replace the traditional channels in the B2C markets, proving many business visionaries and management gurus totally wrong. But success is coming in gradually in the B2B sector!
  8. Caterpillar proclaims that their wholesalers are their breadwinners.
  9. Domino’s Pizza’s 30 minute delivery positioning redefined the pizza industry; FedEx has come to mean any quick delivery. And, UPS offers not only simple mail deliveries but logistics as well (also called 3PL and 4PL).
  10. Many travel agencies were marked for extinction when airlines went direct to the consumers but they are bouncing back with a new set of strategies!
  11. Name-brand manufacturers supply many private label grocery goods.
  12. Will WalMart and Carrefour wipe out the mom & pop stores in Asia, a feat they achieved in the US and Europe?

This list of observations clearly shows the strategic impact that the channels have on the market place. I can list more! Channels are no longer the dark continent of marketing but are actually the dominating power in the marketing chain. Compared to other strategic elements of marketing, channels differ in at least three ways. First is the long term commitment/impact of channel related decisions; second is the existence and implications of channel ‘power play’ because power is not contained in one company but distributed across many independent companies in the channel; third is the market dynamics caused by channel changes such as the internet. All these issues are very difficult to comprehend and solve if we do not understand what channels are for. This course is designed to help you to systematically analyze the various channel functions and strategies to adopt to address these strategic issues. Mastering the principles that will be discussed inthis course will help you in understanding the Supply Chain issues as well. Please note that this course is NOT about supply chain management.

Pricing

The one element of marketing strategy that is malleable, but is least understood and hence constantly feared by many managers is pricing. This is because pricing is a very complex issue. On one hand, it is supposed to reflect all the strategic steps the company has taken to bring the product to the consumer and convince him/her to buy it as well. On the other hand, it is supposed to reflect what the consumer would get out of the product by paying that price to acquire it. Will there be a match between the two? Perhaps and perhaps not! This dilemma makes it imperative for a manager to understand and analyze the various factors before deciding at an appropriate pricing strategy. And, pricing does not operate in vacuum. It has to be married with other elements of the marketing strategy, including the channel management. Thus, understanding the broader picture of the various elements of pricing, and building a scientific framework on pricing will always be reliable and better in the long run.

Text Books

“Marketing Channels,” by Anne Coughlan, Erin Andersen, Louis Stern and Adel El-Ansary, a Prentice Hall publication, 7th edition.

“The Strategy and Tactics of Pricing,” by Thomas T. Nagle and John Hogan, Prentice Hall, 4th edition[1].

Grading

The case reports (team work) will constitute 40% of the grade. There will be a project (team work again) for the 10% of the grade. 40% is from the 3 quizzes (individual performance) and 10% is from the peer evaluation on your contribution to the team work[2].

Office Hours

You can reach me any time by email () or 6516-3008 and let me know a day in advance if you want to meet in my office.

About me

I graduated with Honors in Bachelor of Engineering from MadrasUniversity in India and worked for 6 years as a Marketing Executive with a leading automobile company in India before enrolling in the Ph.D. program of the University of Texas at Dallas in 1989. After obtaining my Ph.D. degree in 1994, I worked as a marketing faculty for three years in the Netherlands, with RiceUniversityin Houston for next 5 years, and joined NUS in Jan 2003. I have published research papers in top marketing journals (four focusing on channel related issues, two on pricing) and have written two award winning case studies. I also do consulting on marketing of new products, pricing and channel issues.

Course Schedule

Week

/ Topic of Discussion / Cases to Prepare[3] / Readings[4]/Quizzes/Articles
1 / Channel System’s key drivers / Skim: Chapter 1
2 / Segmentation, SOD / Read: Chapter 2.
Submit Report 1 on Rohm & Haas
HB Case: 587055
Prepare to discuss the Consistent Assortment paper
3 / Channel Flows, Flow providers / Read: Chapters 3 and 4
Submit Report 2 on Atlas-Copco-A
HB Case: 588004
4 / Gap Analysis / Read: Chapters 5
QUIZ-1 (closed book) on Page 19-27
5 / Channel Power and Conflict / Course Project start: Toyota: Demand Chain Mangement[5].HB Case/Stanford GS42
Read: Chapters 6 and 7, and the Guaranteed Profit Margin research paper.
Submit report 3 on GINO (China) case
HBS/IVEY: 902A013
6 / Vertical Integration
Franchising / Read: Chapters 9, 12
Submit report 4 on Pizza Hut Thailand case
HBS/IVEY: 903A24
7 / Retailing, e-channel / Read Chapter 10
Submit report 5 on Louis VuittonIVEY: 9B08A020
Submit report 6 on Arrow ElectronicsHBS: 598022
QUIZ-2 (open book) on Franchising and Retailing
8 / Cost based pricing? / Quick read: Chapters 1, 8 and 9
9 / Pricing: Fundamental drivers (Value) / Read: Chapters 3, 4 and 5
Submit report 7 on John Deere case
HBS: 9577112

10

/ Pricing: Fundamental drivers (Value) / Submit report 8 on Virgin-USA:HBS 9-504-028
Discuss: Barco: HBS 591133

11

/ Price Sensitivity and Optimal pricing / Quick-read chapters 7 and 13.
QUIZ-3(closed book) on Chapters 3 4, and 5
12 / Pricing competitively / Quick-read chapter 10
Submit report 9 on Federated caseHBS: 585104

13

/ Other issues in Channel and Pricing (Grey markets) / Submit report 10 on Looks.com case
IVEY: 9B00A012

14

/ PROJECT presentation by teams[6]

1

BMA5511 Channel Management & Pricing

Semester I, 2009/2010, Prof Trichy Krishnan

[1]Prentice Hall, the publisher of both the books, has magnanimously agreed to give a single bundled price for these two instead of charging them separately. The bundle price is $ 75.20 which is much lower than the total price of $120 or so (i.e. if they are sold separately).

[2] If you have problems with your team members, please get them sorted out immediately. If you want to opt out of your team, please let me know within the first two or three weeks. Towards the end of the course i.e. in the period Nov13 toNov 20, I would like each member of a team to rate his/her team members on a scale of 1 to 5 (1 being the worst contribution and 5 being the best contribution) and send to me by email. If I don’t receive any email from you, I would assume that you rate all of your team members as 5.

[3] Submit the case reports before the beginning of the class-concerned.

[4] From the beginning week till week-7 use the book on Channels. For the rest use the book on pricing.

[5]As a team you can take a real-world company project, or an article you could analyze deeply. For example, in the Toyota article, analyze what compromises Toyota makes in order to move from SCM to DCM. Use theories to build a model that quantifies the cost involved in doing so, and develop a framework to measure the advantages of using DCM instead of SCM. Is there any optimum point?

[6] Each team will be given 20 minutes each. No written report is needed but a copy of the power-point presentation is to be sent to me the day before. Spend 2 minutes on the back-ground, move on quickly to answering the questions.