Administered VMS
Category: Marketing
If there is some agreement, tacit or overt on the apportionment and management of activities within the channel then the system can be described as being «administered». The administrator can be at any level in the channel and typically would be a powerful manufacturer or retailer. To be effective this leadership needs to be acknowledged as such by other channel members and this usually involves the offer of incentives. These might entail granting some concessions, such as exclusive distribution rights, the provision of services such as in accounting or stock control or discounts and other preferential terms. Leadership might also be based upon market power, such as a manufacturer of a brand leader which retailers believe they need to stock to be credible in that product field. Channel activities are much more planned and co-ordinated than in consensus channels with the channel leader determining important facets of operations.
In the industrial market the small size of most distributors means that they often lack effective marketing. This can stimulate the formation of informal partnerships between suppliers and distributors, so that the channel becomes
increasingly administered. Many distributors carry products from competing suppliers and to increase the attention given to their products manufacturers may offer inducements such as thorough marketing training and support and information management services. The relationship requires careful nurturing because, as Shipley and Prinia point out, the distributor’s prime loyalty is given to customers rather than suppliers.
If a strong retailer leads the channel then the incentive to belong to the administered system might simply be the listing of a manufacturer as an approved supplier.