GB530 Unit 8 Channel Strategy Example

When Cost Cannot Separate the Routes: A Unit 8 Channel Strategy for an Independent Roof Survey Firm

[Student Name]

Purdue University Global

GB530: Marketing Management

Unit 8 Channel Strategy

[Instructor Name]

[Date]

The firm, its partners, costs and every figure are composite and illustrative; the sources cited are real.

The Question

Scioto Thermal Imaging has chosen industrial and logistics portfolio owners as its target and an annual roof program as its lead product. It now needs routes to reach asset managers. Palmatier et al. (2020) describe channel design as choosing the set of organizations through which a product reaches its users, weighing the cost of each route against the control and the services it provides.

The Four Routes

1. Direct sales. Account executives employed by Scioto sell programs to asset managers.

2. Insurance brokers. Commercial property brokers refer clients who need roof condition evidence at renewal, for a referral fee.

3. Roofing consultants. Independent roof engineering firms resell the program to owners they advise, for a margin.

4. Roofing contractors. Contractors resell surveys to their customers, as most of Scioto's volume does today.

Exhibit 1: Channel Cost Table

Direct sales. Each account executive costs about $142,000 a year, loaded, and closes about 14 program accounts averaging nine buildings. Cost per account about $10,143; cost per building about $1,127.

Insurance brokers. An 8 percent referral fee on first-year program revenue of about $6,770 a building, or about $542, plus about 60 percent of a partner manager's $95,000 loaded salary spread over about 90 referred buildings a year, about $633. Cost per building about $1,175.

Roofing consultants. A 15 percent reseller margin, about $1,016 a building, plus about $180 a building in training and joint marketing. Cost per building about $1,196.

Roofing contractors. Contractors buy surveys for their own use in selling replacements. In the past year, none of the surveys sold through contractors led to an owner enrolling directly with Scioto. Cost per owner won: no owner won.

The three routes that reach owners cost within about $70 a building of each other, so the choice among them cannot be made on cost.

Exhibit 2: The Conflict Matrix

With cost nearly equal, four other criteria were applied.

Fit with the independent position. Direct: strong. Brokers: strong, since brokers do not sell repairs. Consultants: moderate, since some consultants also design replacements. Contractors: none; contractor sales contradict the position.

Control of the customer relationship. Direct: full. Brokers: shared; the broker introduces, Scioto serves. Consultants: limited; the consultant owns the client. Contractors: none.

Ownership of roof data. Direct and brokers: Scioto holds the portfolio data and the dashboard relationship. Consultants: the consultant may insist on holding data. Contractors: the contractor uses the data to sell.

Conflict with other routes. Direct and brokers complement each other: brokers create urgency at renewal, and direct sales close portfolio programs. Consultants could compete with Scioto's direct team for the same asset managers. Contractors conflict with every other route, because owners who hear from a contractor and from Scioto will doubt both.

How the Routes Reach the Buying Center

According to the Unit 3 interviews and survey, facility managers make the first call, asset managers approve spending and outside parties such as insurers influence the decision. Webster and Wind (1972) describe such groups as buying centers, and a channel works only if it reaches the members who matter. Direct sales reach the asset manager, who decides. Brokers reach the asset manager through the insurance renewal, an influencer who often decides when the question of roof condition comes up at all. Consultants reach the asset manager as trusted advisers, but on their own schedule. Contractors reach the facility manager, who starts the process but cannot approve a program, and they deliver the contractor's message rather than Scioto's.

The Combined Effect

Direct sales and brokers together should add about 85 to 95 program buildings in the first year: two account executives would bring about 126 at full productivity, but hiring and ramp-up halve that to about 63 in year one, and of about 90 buildings referred through brokers, perhaps a third would enroll in the first season. That would cover most of the program growth the marketing plan requires for year one, at a blended cost near $1,150 a building.

Recommendation

Lead with direct sales to asset managers of the targeted industrial portfolios. Hire two account executives in the first year and a third if the pipeline supports it.

Add an insurance broker program with three to five brokers who specialize in industrial property, paying the 8 percent referral fee and assigning a partner manager.

Work with roofing consultants as advisers, not resellers. Consultants who specify thermal surveys in their own reports can be offered training and a technical referral arrangement without a resale margin, which keeps the client relationship with Scioto while gaining their support.

Exit the contractor channel over two years, as the product strategy in Unit 6 proposed.

Kotler and Keller (2016) note that channel decisions are long-term commitments that shape positioning, and the recommendation chooses routes that strengthen the firm's independence even where another route would be equally cheap.

Managing the Broker Channel

Brokers will refer clients only if referrals make them look good. The partner manager should give brokers a simple guide to when a roof survey helps a renewal, a quick-turnaround promise for referred clients and a shared update when the report is delivered. Referral fees should be paid on first-year revenue only, so that renewals belong to Scioto's relationship with the owner. Palmatier et al. (2020) stress that channel partners need clear roles and rewards to avoid conflict, and the broker agreement should state both.

Measures

The firm should track cost per building won, time from first contact to signed program, and first-year retention by route. If brokers' referred clients renew at lower rates than direct clients, the referral fee should be revisited.

Risks

Direct sales depend on hiring account executives who can speak to asset managers about insurance and capital planning, not only about drones. Brokers may refer few clients if survey turnaround slows in a wet spring. And consultants may resent being offered no margin; the firm should explain that independence is the reason and offer them early access to new services.

Conclusion

The channel cost table shows that three routes reach owners at nearly the same cost. Control of the customer, ownership of data and fit with the independent position separate them. Direct sales and insurance brokers best preserve all three, and the contractor channel, whatever its volume, works against the business the firm is trying to build.

References

Kotler, P., & Keller, K. L. (2016). Marketing management (15th ed.). Pearson.

Palmatier, R. W., Sivadas, E., Stern, L. W., & El-Ansary, A. I. (2020). Marketing channel strategy: An omni-channel approach (9th ed.). Routledge.

Webster, F. E., & Wind, Y. (1972). A general model for understanding organizational buying behavior. Journal of Marketing, 36(2), 12-19. https://doi.org/10.1177/002224297203600204