Channel Management in B2B Marketing Thesis

Channel Management B2B Marketing

The report analyzes the case studies of Lotus Development Corporation, Aqualisa Quartz Shower and Atlantic Computer. The report defines the problem statements and identifies the alternatives in the case, and the report provides recommendations to assist the companies to make effective decisions. The Lotus was facing challenges whether to discontinue with its distributor and dealers and use its saleforce to deal directly with its corporate users. The report recommends that the Director of Sales Operations should continue using its distributor and dealers; however, the company should use its saleforce to deal directly with corporate users demanding for direct services.

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However, the report recommends that the Harry Rawlinson (HBS) should use 2 or 3 minutes TV ads to demonstrate the innovation leap of Aqualisa Quartz Shower. The promotion strategy will assist the company to enjoy the sales advantages from the Aqualisa Quartz Shower. In the third case, the report recommends that the company should use cost-plus pricing approach to fix the new pricing.

Lotus Development Corporation Case

Lotus Sales Corporation is well-known for its development of a spreadsheet package Lotus 1-2-3, which dominated the software market in 1980s. In 1985, Lotus was a clear leader in the computer industry with sales of $225 Million, followed by Ashton-Tate and Microsoft with sales of $100 million to $125 million respectively. In 1980s, the Lotus was able to achieve powerful sales using its distributors and dealers. Thus, the company offered extensive training to its dealers using promotion called “Dealer Demo Days” to achieve powerful sales in the market.

Problem Statements

The case Lotus “Channel Choice: Direct vs. Distribution” discusses the preoccupation of Director of Sales Operations of Lotus Development Corporation, John Shagoury on the decision whether to bypass the company distributor and dealers and deal directly with saleforces in order to sell the company products to large corporate users. While the decision has some benefits, there are still several shortcomings associated to deal directly with salesforces. Shagoury attempted to make this radical decision because the company sophisticated corporate buyers were starting to demand for direct servicing. However, the buying trends in the industry made this decision very difficult to implement. (Harvard Business School, 1994).

The paper analyzes the alternatives facing Shagoury in order to make effective decision on Direct vs. Distribution.

A list of alternatives

In 1980s, Lotus relied on its distributors and dealers to make major sales and in 1985; the company realized 47% of its sales through its distributor, who later sold to retail dealers authorized by Lotus. Typically, approximately 70% of large and medium businesses buy directly from distributors and dealers making Lotus to enjoy several benefits:

First, the company was able to sell large quantity of its stock through dealers and distributors since the distributors always had product in stocks, and this assisted the company products to reach retailers and corporate clients. With the sales assistance from dealer and distributor, the company net income was $14.3 Million in 1983, $36 Million in 1984 and $38.1 Million in 1985.

In 1986, the Lotus sale force consisted of 90 personnel and they included account representatives (reps) and systems engineers. However, 75 of sale personnel handled sales responsibilities while other 15 personnel served as technical consultant to potential buyers. Formerly, Lotus 1-2-3 were sold through distributor and dealers and as industry evolved, dealers were competing with Lotus’s salesforce. However, in 1984, the company discontinued with saleforce because of the pressure from the company’s dealers and distributors.

With growth of the industry, corporate users were increasingly demanding for direct sale services from the company, and increasing number of companies were requesting for direct delivery from the company locations. Although, Lotus managers were aware of recent changes in the market trends, however, they were helpless because company’s distribution logistics were not geared towards distributing small lots since Lotus preferred dispatching its product in large batch in pallet loads of 500 units. John Shagoury believed that with the changes in the market trends, the sale force would be better serving the corporate users than using distributors and dealers since largest percentage of Lotus users were corporate organizations.


This report recommends that Lotus Development Corporation should continue using distributors and dealer. However, the company should develop a small unit of saleforces to cater for the corporate users insisting for direct sale services. Radical switching from distributor and dealers to the company Saleforce at this time could totally jeopardize the company market advantages because the company did not have enough Saleforce to serve the entire corporate user. The company should also consider the costs of switching radically from distributors to the Saleforce. The company will incur the costs of recruiting more Saleforce. Moreover, the company will also incur the cost of training. Additionally, the company would need to re-plan its distribution logistic systems to sell in smaller batch, and the implementation costs might be enormous.

Aqualisa Quartz Shower Case

Problem Statement

Harry Rawlinson (HBS) had just launched the Aqualisa Quartz shower, which was the first significant product innovation in the UK shower market. Despite that Quartz shower was a technological leap and was a bound above other showers in the UK market, however, the company was not achieving market advantages from the product despite that the product was a technological leap in term of ease of installation, use, water pressure and design. However, the company was facing challenges to choose an appropriate market strategy that could assist the company record high market sales from Aqualisa Quartz shower. ( Moon, 2006).

The paper recommends an appropriate market strategy that could assist the company to record sales for the new product. Analysis of the alternatives assists in providing an appropriate solution for the company

A list of alternatives

The UK shower market consisted electric showers, mixed shower valves and integral power showers. Electric shower instantaneously heat cold water supply from the tap water. Electric shower also eliminates the needs for boiler and it is convenient for small bathroom. On the other hand, mixed shower consisted of manual and thermostatic use blended hot and cold water to create a comfortable temperature. The Aquavalve 609 was one of the companies that produced electric shower, and plumbers regarded it as a top quality and having a reliable mix shower with state-of-art technology. A unit price was generally between €675 and €750.

However, Integral power shower combined booster pump and a thermostatic mixer valve that delivered 18 liters blended water per minute. The Aquastream Thermostatic was a primary Aqualisa’s product in this category with price of €670, and the company recorded a sale of 20,000 units per year.

Generally, the channel of distribution of the UK showers consisted of trade shops, show room, Do-it-yourself and (DIY) retail outlets. Despite the various types of showers available in the UK market, the shower manufacturers lacked innovation and ingenuities in the shower deign. The Harry Rawlinson (HBS) attempted to fill this gap by introducing the Aqualisa Quartz shower in the UK market. The Aqualisa Quartz shower integrated the electronic devices that mixed water remotely away from the shower. The system also integrated maximum pressure and convenient water temperature at 41° [Celsius]. With Quartz technology, the temperature was controlled automatically. Despite €5.8 million spent to complete the project, the Aqualisa Quartz shower was not recording sales. The company projected a sale of between 100 and 200 a day. However, the company recorded the actual sales of between 30 and 40 units a day. To boost the sales of the Aqualisa Quartz shower, the sales manager proposed different sales strategies, which include:

Targeting Consumers Directly

Targeting Do-It-Yourselfers

Targeting Developers


The report recommends that the company should use the option of targeting customer directly. The print ads that company was implementing were not an appropriate advertising technique that the company should use for a product such as Aqualisa Quartz shower. The company should use the combination of TV and print ads. Virtually all households in the UK has at least one television, and the company should subscribe to two or three minutes TV ads to demonstrate the ease of installation, use, water pressure and design quality of Aqualisa Quartz. Using this promotion strategy, the customer all over the UK would gradually switch from other showers to Aqualisa Quartz shower. The major reason that made the company not recording sales was that people and plumbers had already developed negative attitudes towards electronic showers. To change these attitudes, the company will need to provide “3 or 6-Month Money Back Guarantee” in case the product damages after 3 or 6 months. The strategy will assist the company to increase the sales of Aqualisa Quartz shower.

Atlantic Computer Case

Atlantic Computer was a large company specializing in manufacturing of servers, and the company just manufactured a new server, which was specifically suited for the U.S. emerging marketplace. Jason Jowers, a young MBA graduate was assigned the responsibility of fixing the pricing for the new product.

Problem Statement

The challenge facing the company is the ability to fix the right price for the product in order to achieve a market success and not to lose market to the competitors. Although, the Atlantic Computer was the largest player in the computer industry with 30-year of selling high quality servers, however, the company was facing a stiff competition from Ontario Computer. Typically, Ontario Computer focused its market effort on low-end server market. Unlike Atlantic Computer, majority of Ontario Computer’s sales were generated online, and overview of Ontario business model reveals that the company focused on operational excellence.

A list of alternatives

Jason Jowers contemplated on different pricing decision, and the first strategy was to identify “an exemplary customer from the most viable segment in discussing his proposed pricing strategy.” (Sharadwaj, Gordon, 2007, P 3). Thus, Jason considered the following pricing strategies:

Status-quo pricing,

Competition-based pricing,

Cost-plus pricing,

Value-in-using pricing.


The report recommends that the company should charge price based on cost-plus approach. This approach is the best pricing strategy that the company should employ. Essentially, the company was the largest player in the computer server in the UK. Moreover, the company had already developed the brand advantages over its product. Since the industry norm was to give away software for all the hardware sold, the company should use the cost-plus pricing to determine the pricing strategy. However, the company will need to reduce the cost of software development. Typically, the company spent approximately $2,000,000 on software development. The company should use a trusted external software developer to develop the software needed for the hardware. Using this strategy, the company will be able to decline the costs of software development. The data in the Table and the graphs below revealed that the company was already enjoying product development advantages over Ontario Computer since Ontario Computer was unable to develop high performance computer. The customer would not be able to switch to another company with the new pricing of Atlantic Computer since the company was already enjoy monopoly in some of its product.

Cost Information (Per Server)

Electricity (Annual Costs)

Costs of Software Application Licenses

Number Labor per Server

Basic Server




High Performance Server




Atlantic Computer

Price Per Server

Cost Per Server

Tronn (Basic )



Rada (High Performances)



Ontario Computer

Zinc Basic




Harvard Business School (1994).Lotus Development Corporation Channel Choice: Direct vs. Distribution. Harvard Business School Publishing, Boston.

Moon, Y. (2006). Aqualisa Quartz: Simply a Better Shower. Harvard Business School Publishing, Boston.

Sharadwaj, N. Gordon, J.B. (2007). Atlantic Computer: A Bundle of Pricing Option. Harvard Business School Publishing, Boston.

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