Terms and responsibilities of channel members

Terms and responsibilities of channel members

In conceiving the tasks to be performed by different types of intermediaries in the distribution channel, managers must also determine the mix of conditions and responsibilities that must be established among the channel members to get the tasks performed effectively and enthusiastically. The 'trade-relations mix' is capable of many variations and introduces a still further dimension of alternatives.

There are four main elements in the trade-relations mix: i. pricing policies ii. conditions of sale iii. territorial rights iv. specific performance of each party

i. Price policy is one of the major elements in the trade-relations mix.

Managers will usually establish an end user price and then will allow discounts from it to various types of intermediate customers and possibly for various quantities purchased. In developing their schedule of discounts, one must proceed carefully.

Firstly, because different types of intermediate customers have strong feelings about the discounts they and others are entitled to. For example, small retailers who buy through wholesalers resent a producer who allows the large retailers to buy direct at the wholesaler's discount; whereas the larger retailers resent not being allowed better terms on the basis of their quantity purchases. Thus the discount schedule is a potential source of channel conflict. Secondly, legislation may forbid price discrimination between different buyers of the same products where the discrimination may tend to lessen competition, except where the price differences are proportional to bona fide differences in the costs of selling to the different buyers. Therefore companies must be able to justify the discounts they offer to different buyers.

ii. Conditions of sale are the second element of the trade-relations mix.

The most important conditions relate to the payment terms and to the guarantees or other assurances