AN ANALYSIS OF PERCEIVED COMPETITIVE ADVANTAGES WITHIN SELECTED MANUFACTURER . DISTRIBUTOR ALIGNMENTS Thesis for the Degree of Ph. D. MICHIGAN STATE UNIVERSITY PARKER MARTIN WORTHING 1968 LI 31‘ A Ii: " THESIS Mch .- - LIL‘C UCXV ("a 311'), This is to certify that the thesis entitled AN ANALYSIS OF PERCEIVED COMPETITIVE ADVANTAGES WITHIN SELECTED MANUFACTURER-DISTRIBUTOR ALIGNMENTS presented by Parker M. Worthing has been accepted towards fulfillment of the requirements for Ph.D. degree in BUSINESS Admin. Date 0-169 G) Parker; Mama ggnghing gee ALL RIGHTS RESERVED ii ; We} 5 ABSTRACT AN ANALYSIS OF PERCEIVED COMPETITIVE ADVANTAGES WITHIN SELECTED MANUFACTURER- DISTRIBUTOR ALIGNMENTS by Parker Martin Worthing This thesis deals with two concepts-—the concept of differential competitive advantage and the concept of marketing channels as integrated systems of action-- which are implicitly connected in much of the marketing literature. That is, if a channel is to offer a unified, Icoordinated marketing effort, it is assumed that the effectiveness of this effort will be a function of one or more competitive advantages. In this context, the channel is a "competitive unit" and the bases of these potential advantages range over all facets of the inter- dependent marketing activities of channel members. It was hypothesized that intrachannel agreement-- I agreement among men influencing marketing functions at various Operational levels in a channel—-regarding per- ceptions of competitive advantages or disadvantages associated with a channel-wide range of marketing activi- ties--each representing a source of possible differenti- ation——would be positively related to the marketing effectiveness of the channel as a competitive unit. Parker Martin Worthing This thesis investigated this relationship and other im- plications of combining the concept of differential advantage with the concept of marketing channels as unified systems of action. Measures of the marketing effectiveness of manu- facturer-distributor channels competing for sales of heavy construction equipment and the competitive advan- tages and disadvantages men within these channels associ- ate with sixty sources of possible differentiation covering six elements of channel-wide marketing activity were analyzed. The participating firms comprised nine groups of manufacturer- distributor channels or competitive units, each group com- peting for sales within a prescribed metropolitan trading area. Managers and field sales personnel with both firms in each manufacturer-distributor unit identified, through mailed questionnaires, the rival unit they feel offers the strongest competition in their respective trading areas. Respondents compared their unit's marketing effort with that offered by this rival unit for each of the sixty items which individually or in a variety of combinations may contribute to the marketing success enjoyed by these competing units. Competitive advantages or disadvantages corresponding to favorable and unfavorable comparisons were assigned to the sixty items by each respondent. Analysis of "horizontal" segments of data revealed areas Parker Martin Worthing of greatest congruency and variance in perceptions of marketing effort among men in different positions at both the manufacturer and distributor levels of operation. Analysis of "vertical" segments of data, each repre- senting the perceptions of men within competing inter- firm alliances, underscored the pattern of evaluations that tended to be associated with greater degrees of marketing success. Although product offerings were perceived as sources of competitive advantages by nearly all respondents, re- gardless of their manufacturer affiliation, the analysis revealed a significant relationship between congruency of intrachannel perceptions of marketing effort and mea- sures of the marketing effectiveness of competing channels. Men influencing the marketing effort of the more successful manufacturer-distributor units--units accounting for larger market shares in the nine trading areas--tended to agree more closely as to the sources and extent of Eggh’competi- tive advantages and disadvantages. The findings imply that more meaningful and durable bases of competitive differentiation--at least among the channels studied--may transcend the product and price differences which are conventionally cited as top priority components of competitive effort. Although generalizations based on this study are limited, the data suggest that conceptualizing marketing channels as competitive units Parker Martin Worthing with Jointly develOped and sustained bases of possible competitive differentiation which mutually benefit member firms has potential value for marketing managers with firms forming channels in other segments of industrial distribution. A framework for Operationalizing this conceptual model by "auditing" scores reflecting intrachannel per- ceptions of competitive differentiation was developed. AN ANALYSIS OF PERCEIVED COMPETITIVE ADVANTAGES WITHIN SELECTED MANUFACTURER- DISTRIBUTOR ALIGNMENTS By Parker Martin Worthing A THESIS Submitted to Michigan State University in partial fulfillment of the requirements for the degree of DOCTOR OF PHILOSOPHY Department of Marketing and Transportation Administration 1968 Copyright by Parker Martin Worthing 1968 ii ACKNOWLEDGMENTS The writer extends his sincere appreciation to those who have contributed their time, effort, and consideration to this research effort. Members of my dissertation committee, Professors William J. E. Crissy, William Lazer and Frank Mossman, provided a blend of challenge, assistance and guidance while generously contributing their time and thoughts. I extend an especially warm personal note of gratitude to Professor Crissy who served as a tolerant, under- standing and instructive chairman of this committee. Members of the administrative staff of Associated Equipment Distributors, especially Mr. P. D. Hermann, Executive Director, and Mr. Frank Skidmore, Director of Industry Services, made substantial contributions to both the conceptual and operational development of the study. The sales and marketing managers with the partici- pating manufacturing firms gave their valuable time for interviews and discussions. Without the interest and c00peration of the district representatives, distributor principals, and field iii salesmen, who set aside time to provide me with their personal Judgments, the study could not have been accomplished. My wife, Marcia, and my children, Jane and Peter, withstood the tests of patience and understanding which accompanied this undertaking and contributed, in their own special way, support and encouragement. iv TABLE OF CONTENTS Page ACKNOWLEDGMENTS . . . . . . . . . . . iii LIST OF TABLES . . . . . . . . . . . vii LIST OF EXHIBITS. . . . . . . . . . . ix LIST OF APPENDICES . . . . . . . . . . x Chapter I. BACKGROUND OF THE STUDY: CONCEPTS AND CONTENTIONS . . . . . . . . . l The Concept of Differential Ad— vantage: Its Origin, Nature and Implications Marketing Channels: Complexities of Conflict, Control and Cooperation The Channel as a Competitive Unit: A Ratibnale for Research II. THE RESEARCH PROBLEM, DESIGN AND METHODOLOGY . . . . . . . . . 19 The Research Problem: Scope and Focus The Research Design: Manufacturers, Middlemen and Market Areas The Research Methodology: Compari- son, Congruency and Competitive Strength Chapter III. AGGREGATIVE ANALYSIS: COMPARISON OF INTERPOSITION PERCEPTIONS OF MARKET— ING EFFORT . . . . . . . . "Universal" Appraisals of Competitive Components "Particular" Appraisals of Competitive Components An Empirical Interpretation of Potential Competitive Advantages Summary of Aggregative Analysis IV. MACROSCOPIC ANALYSIS: COMPETITIVE STANDING AMONG MANU- FACTURER—DISTRIBUTOR COMBINATIONS Elements of Marketing Strength and Perceptual Congruency Within Competing Combinations Dimensions of Competitive Effectiveness CORRELATES OF Competitive Standing Summary of MacrOSCOpic Analysis V. MICROSCOPIC ANALYSIS: CORRELATES OF MARKETING EFFECTIVNESS AMONG MANU— FACTURER-DISTRIBUTOR UNITS. . . Element Evaluations Among Competitive Units Competitive Advantages and Market Shares Unit Element Scores as a Basis for "Channel Audits" Summary of Microsc0pic Analysis VI. A SUMMARY OF THE STUDY: RECOMMENDATIONS Review of the Findings RESULTS AND The Paradox of Perceived Product Superiority Benefits of the "Conceptual APPENDICES . BIBLIOGRAPHY. Marriage" vi Page 61 87 116 145 173 21” Table 10. ll. l2. 13. 14. LIST OF TABLES Sources of Possible Competitive Advantage for Manufacturer-Distributor Units . Response to Questionnaire Mailings . . Summary of Analytical Segments and Statistics . . . . . . . . . Distribution of Respondents by Position. Bases of "Universal" Competitive Advantages Bases of "Universal" Competitive Dis- advantages . . . . .. . . . . "Particular" Appraisals of Competitive Advantages and Disadvantages . . . Items with Statistically Significant D values 0 I O O O O O O I 0 Composition of Competing Manufacturer- Distributor Combinations . . . . Ranking of Competitors by MMGR's . . . Manufacturer-Distributor Combination Ele- ment Mean Score Totals . . . . Rank Correlation of Combination Element Mean Score Totals and Competitive Standing 0 O O O O O O O O O Manufacturer-Distributor Combination Ele- ment Standard Deviation Totals . . Rank Correlation of Combination Element Standard Deviation Score Totals and Competitive Standing. . . . . . vii Page AA 49 53 63 68 71 75 81 88 90 9A 100 105 107 Table Page 15. Distribution of Item Mean Scores Among Competing Combinations . . . . . . 110 16. Distribution of Competing Manufacturer- Distributor Units. . . . . . . . 119 1?. Competitive Unit Element Score Totals-- Product, Service and Financial . . . 123 18. Competitive Unit Element Score Totals-- Personal Selling, Promotion and Personnel . . . . . . . . . . 12A 19. Competitive Unit Composite Score Totals and Market Share Percentages . .‘ . . 125 20. Competitive Advantages and Disadvantages Associated with Nonproduct Elements Among Competing Units . . . . . . 128 21. Matrix of Area Element Scores.. . . . . 138 II-l. Competitive Comparison Item Response Percentages. . . . . . . . . . 195 II-2. Responses to Competitive Comparison Items . 20l III-l. Manufacturer—Distributor Combination Item Mean Scores. . . . . . . . . . 205 III-2. Manufacturer—Distributor Combination Item Standard Deviation Scores . . . . . 207 IV-l. Rank Correlation of Competitive Unit Market Shares and Element Scores-- Product and Service . . . . . . . 210 IV-2. Rank Correlation of Competitive Unit Market Shares and Element Scores-- Financial and Personal Selling . . . 211 IV-3. Rank Correlation of Competitive Unit Market Shares and Element Scores-- Promotion and Personnel. . . . . . 212 IV—A. Rank Correlation of Competitive Unit Market Shares and Composite Scores . . 213 viii LIST OF EXHIBITS Exhibit 1A. 1B. 1C. 1D. 3A. 3B. 30. AA. AB. AC. Cover Letter to District Representatives-- First Mailing . . . . . . . . . Cover Letter to Distributor Managers-- First Mailing . . . . . . . Cover Letter to District Representatives-- Second Mailing. . . . . . . . Cover Letter to Distributor Managers—- Second Mailing. . . . . . . . . Common Cover Sheet for Questionnaires Request for Ranking of Competitors and Market Share Estimates--Manufacturer Managers. . . . . . . . . . Request for Ranking of Competitors and Market Share Estimates-—District Representatives . . . . Request for Ranking of Competitors and Market Share Estimates——Distributor Managers and Field Salesmen . . . . Instructions for Competitive Comparisons-— Manufacturer Managers . . . . . . Instructions for Competitive Comparisons-- District Representatives . . . . . Instructions for Competitive Comparisons-- Distributor Managers and Field Salesmen Delineation of Potential Competitive Advantages . . . . . . . . Individual Distributor Firm Data Sheet. ix Page 175 176 177 178 179 180 182 183 18A 185 186 187 193 LIST OF APPENDICES Appendix Page I. Data Gathering Instruments . . . . . 17” II. Aggregative Analysis Tables. . . . . 194 III. Macroscopic Analysis Tables. . . . . 205 IV. Micros00pic Analysis Tables. . . . . 209 CHAPTER I BACKGROUND OF THE STUDY: CONCEPTS AND CONTENTIONS Knowledge of the competitive environment is a major prerequisite to marketing success. Theodore Levitt's "prescriptions" have helped increase managerial sensitivity to the dangers of "myopia" in this context.1 Marketing managers cannot avoid realizing the impact of change on past decisions. Nor can they avoid the dis- comforts of continued decision making in the face of un— certainty. The unpredictable rate of technological pro- gress challenges marketing planners. Inter-related economic, social and psychological variables add further complexity. The sources of change are many and varied. Its influence on a firm's products, markets or other facets of marketing activity may be subtle or direct. lTheodore Levitt, "Marketing Myopia," Harvard Business Review, (July—August, 1960), pp. “5-56. The Substance of this article was subsequently incorporated in his book. See especially Chapter 3, "Management Myopia" in Theodore Levitt, Innovation in Marketing (New York: McGraw-Hill Book Company, 1962), pp. 39-75. If a firm's marketing success is to endure against this background of change and uncertainty, some basis for competitive superiority must be developed and sus- tained. Wroe Alderson contends that "what is important in competition is differential advantage, which can give a firm an edge over what others in the field are offer- ing."2 This suggests a second level of necessary knowledge of the competitive environment. Marketing managers must provide for an awareness and appraisal of their intra- industry competitive standing. As a consequence, strategy and tactics will reflect an appreciation of competitors' strengths and weaknesses. To use Alderson's words again: Sellers' competition is not merely a matter of tactics as in the case of two military forces in fixed positions gradually wearing each other down. Competition is a war of movement in which each of the participants is searching for strategies which will improve his relative position.3 In the context of the above quotation, "victory" is measured by the attainment of profit and growth. This, in turn, depends upon marketing efforts that develop and sustain a favorable comparative relationship to competitors. Alderson treats the search for such a differential advan- tage as the essence of competition in his functionalistic 2Wroe Alderson, Marketing Behavior and Executive Action (Homewood, Illinois: Richard D. Irwin, Inc., T9575, p. 102. 31bid., p. 108. approach to marketing theory construction.“ His influence on marketing thought has resulted in this term taking its place alongside consumer orientation, product differen- tiation, and market segmentation as conceptual "standards" in the parlance of marketers. The Concept of Differential Advantage: Its Origin, Nature and Implications The term differential advantage traces back to the writings of the early economists. For example, both Adam Smith's classic example of pin making and David Ricardo's "theory of comparative advantage" in inter-regional trade concern relative evaluations of economic variables. Edward H. Chamberlin's well-known treatise served to point up the concept of differentiation and its impact on competition.5 He attempted to sharpen the descriptive reality and analytical methodology of earlier economic theorists with his renewed view of competition. In formulating the principle that the market for every competitor is in some degree unique, Chamberlin broadened the bases of differentiation in a competitive context. “See Chapter IV, "Competition for Differential Ad- vantage" in Wroe Alderson, Marketing Behavior and Execu- tive Action (Homewood, Illinois: Richard D. Irwin, Inc., 1957), pp. 101-129 and Chapter 8, "The Search for Differ— ential Advantage" in Wroe Alderson, Dynamic Marketing Behavior (Homewood, Illinois: Richard D. Irwin, Inc., 19655, pp. 18u-210. 5Edward H. Chamberlin, Theory of Monopolistic Competition (Cambridge, Mass.: Harvard University Press, 1933). As he put it: Differentiation may be based upon certain charac- teristics of the product itself, such as exclu- sive patented features; trade-marks; trade names; peculiarities of the package or container, if any; or singularity in quality, design, color or style. It may also exist with respect to the conditions surrounding its sale. The specific term differential advantage is used in an essay by John Maurice Clark outlining the basis for a more adequate diagnosis of competition.7 He argued that a firm's actions to gain added business result in "the neutralizing process whereby rivals follow the initiator's lead and destroy his differential advantage."8 Clark viewed these temporary differential advantages and their subsequent competitive neutralization as inseparable from the processes of progress. In his final work, Competition as a Dynamic Process, Clark contends that price, product quality, selling effort and processing efficiency are the 9 four inter-related elements of competition. Commenting on differentiation, he said: 6Ibid., p. 56. 7John M. Clark, "Competition and the Objectives of Government Policy" in Edward H. Chamberlin (ed.), Monopoly and Competition and Their Regulation (New York: St. Martin's Press, 195“), pp. 317-337. Of particular rele- vance is Section (3), "A Unifying Framework for a Broader Theory: Competition as a Sequence of Initiatory Moves and Counteracting Responses," pp. 326-328. 8Ibid., p. 327. 9John M. Clark, Competition as a Dynamic Process (Washington, D. C.: The Brookings Institution, 1961). While product differentiation is treated in theory as a special case, it is actually the most general case, or the most comprehensive class of cases, since nearly all the products and services in in- dustry and trade involve some differentiation be— tween competing sellers, in the product itself, in services connected with it, including transport, or in the "image" it presents to the mind of the buyer.10 The implications of Chamberlin's "monopolistic "11 and the essence of what Clark termed "the "12 competition economics of differential advantage are clear in Alderson's writing.l3 Clark's influence is perhaps greater as he placed considerable emphasis on the dynamics of competition. This is more in keeping with Alderson's functionalist approach to competition which rests on the assumption that "every firm must seek and find a function in order to maintain itself in the market p1ace."lu lOIbid., p. 212. llChamberlin, op. cit. 12John M. Clark, "Competition and the Objectives of Government Policy" in Edward H. Chamberlin (ed.), Monopoly and Competition and Their Regulation (New York: St. Martin's Press, 1954), pp. 326—328. 13See especially Wroe Alderson, Marketing Behavior and Executive Action (Homewood, Illinois: Richard D. Irwin, Inc., 1957), pp. 101-109 and Dynamic Marketing Behavior (Homewood, Illinois: Richard D. Irwin, Inc., 19655. pp. 192-19“. l“Alderson, Marketing Behavior and Executive Action, op. cit., p. 101. As Alderson's theoretical perspective broadened, so did his discussion of potential sources of this "function" in the form of some competitive advantage. The posthumously published Dynamic Marketing Be- havior includes differentiation through market segmen- tation, along with differentiation by selection of appeals, by transvection, by product improvement, by process improvement and by product innovation as six aSpects of the search for differential advantage.15 Earlier treatment centered on the dimensions of "product" in the Chamberlinian sense, along with technological and geographic grounds, as sources of competitive advantage.16 Other writers, while not using the term differential advantage, have delineated variables related to firms' competitive standing. Culliton's study resulted in a lengthy list of "order-getting ingredients" which, in various combinations, distinguish the efforts of indi- vidual firms.17 Oswald Knauth lists location, exclusive position, custom, reputation, established organization, 15Alderson, Dynamic Marketing Behavior, op. cit., 16Alderson, Marketing Behavior and Executive Action, op. cit., pp. 1061108. A brief discussion is also included in Wroe Alderson and Paul E. Green, Planning and Problem Solving in Marketipg (Homewood, Illinois: Richard D. Irwin, Inc., 196A), pp. 392-395. 17James W. Culliton, The Management of Marketing Costs (Boston: Division of Research, Graduate School of Business Administration, Harvard University, 19A8). resource ownership, few competitors, and bigness as possible advantages in attaining a favorable "trade position."18 Knauth points out that no concern can have every trade advantage. "Hence the choice of which is most possible to attain in each particular situation is of the utmost importance."19 There are two aspects of such choices that need emphasis. First, several dimensions of competitive advantage discussed above are beyond the influence of marketing managers. They are not "con- trollable" variables in the marketing executive's decision making process.20 Yet responsibility for con— tinued pursuit or maintenance of a favorable competitive standing remains essentially with marketing managers. Secondly, an advantage exists only in relation to the efforts of rival firms in the competitive setting. A comparative evaluation is necessary. Thomas Berg sub- stantiates this point in the following quotation. Competitors are always seeking to achieve a stronger relative position than you possess in this milieu. l8Oswald Knauth, Business Practices, Trade Position, and Competition (New York: Columbia University Press, 1956), pp. 13-62. l91b1d., p. A3. 2OFor amplification of the term "controllable" variables see John A. Howard, Marketing Management: Analysis and Planning (Homewood, Illinois: Richard D. Irwin, Inc., revised edition, 1963), pp. “-9. They attempt to do this, of course, in one of two ways: (a) in a positive fashion, by trying to improve their strong points and minimize their weaknesses; or (b) by attempting to neutralize or destroy your functional position. It is rela- tive strengths that frequently tell the tale. And to achieve a strong relative position each competitor must, of course, have some absolute strengths.2l This suggests a need for additional stress on the "controllable" facets of competing firms' marketing efforts. Competition is not as glamorous as it is often described. In the absence of exciting innovative breakthroughs in technology and knowledge, competition continues. During these sometimes lengthy periods, it takes the form of strategy and tactics designed to maximize the relative effectiveness of standard competitive "inputs" such as service, promotion and personal selling. If any criticism is to be made of Alderson's theo— retical framework or descriptive treatments like Culliton's and Knauth's, it may be that they have tended to under— emphasize these elements of marketing as possible sources of competitive advantage. Although Alderson suggests that "marketing methods offer an ever-widening basis for "22 his discussion of these exploiting an advantage, "methods" is limited. Such aspects of firms' marketing activities, considered individually and collectively, H 21Thomas L. Berg, "Designing the Distribution System, (unpublished Ph.D. dissertation, Columbia University, 1960), p' 250 22 p. 196. Alderson, Dynamic Marketing Behavior, op. cit., may well constitute the most significant sources of lasting competitive advantage. Whether differential advantage, competitive ad- vantage, favorable trade position, or some other com— parable term is adopted, a firm's objective remains one of locating and sustaining some basis for lasting allegiance from present and potential customers. How- ever, when a firm moves its products to markets through intermediaries, as is often the case, the concept of differential advantage takes on additional problematic dimensions. Marketing Channels: Complexities of Conflict, Control and Cooperation Most contemporary marketing scholars would likely agree with Wroe Alderson's contention that "the analysis of factors affecting marketing channels rests on the con- ception of a system of action of which the individual firms are elements."23 Variations of this "systems" perspective have accounted for several approaches to the study of marketing channels.”4 Whether the analysis is 23Wroe Alderson, "The Development of Marketing Channels" in Richard M. Clewett (ed.), Marketing Channels for Manufactured Products (Homewood, Illinois: Richard D. Irwin, Inc., 1954), p. 22. 2“A thorough discussion of these approaches is included in Bert C. McCammon, Jr. and Robert W. Little, "Marketing Channels: Analytical Systems and Approaches," in George Schwartz (ed.), Science in Marketing (New York: John Wiley & Sons, Inc., 1965), pp. 321-385. 10 26 25 or quantitative, emphasis is placed on descriptive functional relationships and patterns of interaction within channels. It is generally assumed that the activities of individual firms in a channel should be related in a unified, channel—wide marketing effort. Merely conceptualizing marketing channels as inte- grated operating systems does not, of course, remove dissimilarities in the objectives and operations of firms within the same channel. Some observers feel conflict resulting from inherent structural and Operational conditions is often under-emphasized in descriptions of marketing channels. Phillip McVey.suggested that channels are more realistically viewed as a series of vertical markets rather than operating systems, per se.27 Warren Wittreich argued that when a manufacturer-oriented approach 25For example, Berg turns to the literature on organization theory and approaches channel designing as a problem in social organization. See, Berg, op. cit. 26See Frederick E. Bladerston, "Design of Marketing Channels" in Reavis Cox, Wroe Alderson and Stanley J. Shapiro (eds.), Theory in Marketing (2nd series; Homewood, Illinois: Richard D. Irwin, Inc., 1964), pp. 176-189 and Helmy H. Baligh, "A Theoretical Framework for Channel Choice" in Peter D. Bennett (ed.), Marketing and Economic Development (Chicago: American Marketing Association, 1965), pp. 631-65“. 27Philip McVey, "Are Channels of Distribution What the Textbooks Say?," Journal of Marketing, (January, 1960), 61-65. 11 to channel operations is over—emphasized "the assumption is all too often made that what is good for the system as a whole will be just as good for each link in the system."28 Clearly, what one member of a channel might consider "good" need not be as important to another member. Con- sider, for example, a typical distributor handling the products of several manufacturers. Each of these manu- facturers has some ideal design for his distributive net— work. They strive to affect the operations of this 29 Each of them hopes to maximize distributor accordingly. the selling efforts and effectiveness of this distributor in behalf of their particular products. The distributor, on the other hand, attempts to Optimize the number of products he carries and the allo— cation of his efforts across this product line. He evaluates his relationship with each of his suppliers in the light of his own objectives and problems. The support he seeks from these manufacturers takes a variety 30 of forms. Under these conditions, there is a fine line 28Warren J. Wittreich, "Misunderstanding the Re- tailer," Harvard Business Review, (May-June, 1962), 1A7—155. 29For examples of how several firms view this task, see "Building a Sound Distributor Organization," Experi- ence in Marketing Management, No. 6 (New York: National Industrial Conference Board, Inc., 1964). 30Carl Marshall, "What Distributors Want from Manufacturers," Industrial Marketing, (September, 1957), 202-207. This is a good representation of the distri— butor point of view. 12 between "manufacturer assistance" and "distributor resistance." When a channel contains such independently owned and Operated "links," influence and persuasion are more appropriate than control and direction in describing a manufacturer's efforts to integrate a channel—wide marketing front. Yet, if any measure of unity is to exist within a channel, there must be some degree of leadership undertaken by one member and accepted by 31 other members. Furthermore, as part of a firm's total marketing mix, channel activities need to be coordinated with other elements in the firm's over-all strategy.32 In seeking to describe and explain channel oper- ations, investigators have focused on conflict and control as central variables in the unification of inter- firm relationships.33 Mallen discusses patterns of 31McCarthy has coined the term "channel captain" to describe the firm which directs activities and sets policies for the whole channel. See E. Jerome McCarthy, Basic Marketing: A Managerial Approach (Homewood, Illinois: Richard D. Irwin, Inc., revised edition, 196“), pp. A60-A62. 32William R. Davidson, "Channels of Distribution --One Aspect of Marketing Strategy," Business Horizons, (February, Special Issue, 1961), pp. 84—90. 33See Bruce Mallen, "Conflict and Cooperation in Marketing Channels" in L. George Smith (ed.), Reflections on Progress in Marketing (Chicago: American Marketing Association, 1965), pp. 65—85 and Louis W. Stern, "Channel Control and Inter-Organization Management" in Peter D. Bennett (ed.), Marketing and Economic Develop- ment (Chicago: American Marketing Association, 19657: pp. 655-6650 13 adjustment to the conflicting-cooperating channel environ- ment.3u He supports channel leadership based on demo- 35 Stern speaks of the "balance cratic relationships. of channel power" and wisely points out that, in some cases, the existence of channel control may inhibit 36 channel performance. He believes channel leadership calls for a broadened managerial philosophy on the part of one member. Redirection of individual organization efforts and objectives are considered requirements for effective over-all performance by the channel.37 Along the same vein, Valentine Ridgway, in his article discussing manufacturer-dealer systems, suggested that the provision of mutually satisfying roles for mem- bers constitutes a major administrative responsibility for any effective leader.38 His analysis underscored mutual expectations, the nature and extent of decision making, communications, performance standards, and methods of appraisal as dimensions of dependency between firms in manufacturer-dealer systems.39 When such systems are 3“Mallen, op. cit. 35Ibid. 36Stern, op. cit. 37Ibid. 38 Valentine F. Ridgway, "Administration of Manu- facturer—Dealer Systems," Administrative Science Quarterly, (Spring, 1956), pp. MAS—A83. 39Valentine F. Ridgway, "The Administration of Manufacturer-Dealer Systems," (unpublished Ph.D. disser- tation, Cornell University, 1963). 1A viewed as integrated organizational entities, they become a most appropriate subject for furhter study by students of administrative theory.”0 In the interim, however, different products, different markets and different competitive settings add innumerable complexities to the search for improved channel-wide effectiveness. In most marketing channels the gap between "ideal" condi— tions and "real" conditions remains wide. More is to be gained from OOOperation than conflict, but the formula for harmony remains elusive. There is little to be gained, on the other hand, from considering the marketing activities of manufacturers and their intermediaries as separate, incremental oper- ations. To be sure, several facets of an intermediaty's competitive stance are not subject to the control of manufacturers he represents. The fact remains, however, that many of these competitive inputs appear to have con- siderable relevance to the marketing effectiveness of the channel. Chamberlin pointed out that a retailer's potential dimensions of differential include "the general tone or character of his establishment, his way of doing business, his reputation for fail dealing, courtesy, efficiency, and all the personal likes which attach his customers either to himself or those employed by him."ul “Gib d. ulChamberlin, Op. cit., p. 56. 15 Clark, in turn, added "convenience and accessibility of distributors' facilities, the method and effectiveness of display, and information, demonstration, or persuasion offered by the salesman" as factors contributing to the images of competing products in the potential consumer's mind.“2 These are among the attributes manufacturers look for when evaluating firms in their distributive net- work]43 They are often the subject of manufacturers' efforts to improve distributor operations.“I Some of these factors would exist in the absence of any one manufacturer among those represented by a given distributor. However, every manufacturer utilizing this distributor is capable of either strengthening or limiting many of these elements. Seldom could a competi- tive advantage be sustained by either the manufacturer or the distributor without influencing or being influenced by marketing activities of the "partner" firm. Any lasting competitive advantage would appear to depend upon a delicate blend of control, influence and cooperation designed to minimize the limitations of individual channel “2John M. Clark, Competition as a Dynamic Process (Washington, D. C.: The Brookings Institution, 1961), p. 221. I43See "Selecting and Evaluating Distributors," Studies in Business Policy, No. 116 (New York: National Industrial Conference Board, Inc., 1965). uuSee "Training Dealers," Studies in Business Policy, NO. 48 (New York: National Industrial Conference Board, Inc., 1950). 16 members and maximize their collective competitive strength. As Bruce Mallen concluded, "For maximization of channel profits and customer satisfaction, the channel must act as a unit."u5 The Channel as a Competitive Unit: A Rationale for Research This prefatory discussion has dealt with the nature of differential advantages and marketing channels as integrated systems of OOOperative action by member firms. In the literature of marketing these two concepts are implicitly connected. That is, if a channel is to offer a unified, coordinated marketing effort, it is assumed that the effectiveness of this effort will be a function of one or more competitive advantages. In this context, the channel becomes the "competitive unit," and the bases for these potential advantages range over all facets of the combined marketing activities of channel members. Their contributions to this combined effort are not al- ways equal, but in the absence of mutual agreement and cooperation their competitive effectiveness may be limited in both an individual and collective sense. In an article entitled, "The Channel of Marketing as a Unit of Competition," Reavis Cox wrote: Effective competition for an individual enter- prise means participating in the work of a channel that competes effectively as a whole uSBerg, Op. cit., p. 85. 17 at the crucial point where the ultimate buyer makes his choice among the offerings laid before him.46 Cox's words serve as a reminder that there is much more we need to know about why some channels or "competitive units" compete more effectively than others in the same competitive setting. Most discussions of channel effectiveness are presented in descriptive frameworks based on normative judgments. The need for empirical investigation remains strong. This thesis presents the results of research designed to help meet this need. Despite the theoretical tenor of much of his writing, Alderson said, "Marketing is a very pragmatic discipline and the chief incentive for improving market- ing technique is the need to solve marketing problems.”7 Throughout this chapter it has been suggested that an on-going problem for every marketing manager is the recognition, development and maintenance of one or more competitive advantages. When these managers are associ- ated in a marketing channel, their problems surrounding competitive advantages and channel-wide strategies are more complex. In this sense, this thesis offers a basis for improved marketing technique. In a broader sense, usReavis Cox, "The Channel Of Marketing as a Unit of Competition" in W. David Robbins (ed.), Successful Marketing at Home and Abroad (Chicago: American Market- ing Association, 1958), p. 211. U7 p. 209. Alderson, Dynamic Marketing Behavior, pp. cit., 18 it is designed to add some empirical "planks" to the unfinished "bridge" connecting the conceptual to the operational. CHAPTER II THE RESEARCH PROBLEM, DESIGN AND METHODOLOGY The Research Problem: Scope and Focus The background discussion of the preceding chapter centered on two concepts--differential advantage and marketing channels as competitive entities. It was sug- gested that these concepts are implicitly connected in much of the marketing literature. ~This research effort is designed to analyze and evaluate this "conceptual marriage" within a Specific competitive environment. When channel members' marketing activities are viewed collectively, the number and variety of possible differential advantages increases considerably. Broadly interpreted, this would include all facets of their collective competitive effort that might serve as bases for buyer discriminations in their favor. Clearly, how- ever, their reliance upon each other in this joint effort is not always balanced. For example, Ridgway's thesis considered independent dealers allied with a single manufacturer.1 These manufacturers delegate "a little 1Ridgway,'The Administration of Manufacturer- Dealer Systems,"op. cit. The interested reader is directed particularly to pp. 22-31. 19 20 product differentiation, some price competition, and much selling effort"2 to their dealers. Control in this type of channel rests essentially with manufacturers. In most channels the source and extent of control is not so easily identified. Division of intrachannel responsibilities is often not clear. Managers with different firms within a channel may put different priorities on various aspects of their com— bined marketing effort. What one may view as a distinct competitive advantage another may consider irrelevant. Loyalty to each other is subordinate to concern for their individual problems. Their goals are Often incongruent. To the manufacturer it may be a matter of developing strong brand allegiance across a national market. To wholesalers or retailers it may be a matter of meeting the particular needs of clearly identified local markets and establishing sustained customer loyalties. Their relationships are characterized by bargaining, concessions and compromises. At the same time, the common ingredients of inter— dependence and mutual benefit can not be ignored. Alder- son once described channel members as "a loose coalition engaged in exploiting joint Opportunity in the market."3 2Ibid., p. 28. 3Alderson, "The DevelOpment of Marketing Channels," op. cit., p. 30. 21 Successful exploitation of this opportunity is clearly related to the impact of channel members' combined marketing efforts. . These efforts are an amalgam of competitive inputs. Individually and collectively they constitute dimensions of differential advantage. Emphasis placed on any one of them by marketing personnel throughout the channel would appear to be a function of three factors: (1) their evaluation of its impact on the buyer's purchase- decision process, (2) their evaluation of its strength relative to competitor's efforts, (3) the extent of their control and influence over its development. Intrachannel congruency regarding such emphasis is a likely prerequisite for improved channel effectiveness as a competitive unit. The effect would be more unified, complementary channel relationships. The result would be a more productive channel-wide matching of effort with opportunity. These conjectural assertions need empirical exami- nation. The framework for investigation must include a delineation of potential differential advantages, an analysis of competitive evaluations of these advantages by members of competing channel units, and measures of intra- and interchannel congruency among these evalu- ations. The nature Of this congruency and its relation- ship to the competitive standing of channel units con- stitutes the scope of this research problem. 22 Statement of the Problem The problem is best stated as a question: Is intrachannel agreement on the competitive strength of selected elements of channel-wide marketing effort significantly related to the channel's marketing effectiveness? An additional question concerning possible oper- ational applications that might result from findings re- lated to the central research problem is: DO appraisals of these elements, as competitive advantages or dis- advantages, by marketing personnel at various levels within competing channel units provide a basis for im- proving channel-wide strategy formulation? As posed above, the problem centers on the relation- ship between two variables.' Specifically, these variables are the extent of agreement concerning marketing activities within channels and the marketing effectiveness of these channels. The key variable in this research framework, however, is the channel itself. Because the term market- ing channel is categorically applied to any and all insti- tutional alignments that move products and services from manufacturers to utlimate users, the number and types of firms making up channels represent a wide, complex range of variations. Their functions and marketing activities are equally varied. There is, of course, no universal "average" channel. Although many industries 23 exhibit traditional interfirm distributive alignments, generalizations across industries or product classes must be made with care. No single research undertaking could include all possible types of channel formations and functions. It is difficult to defend any grouping of channel types as a "representative" sample. The delicate balance between universal and unique channel properties needs careful consideration. Many practitioners, however, tend to over-emphasize what they consider to be the unique problems and unique solutions of their industries. Although this research is focused on a specific type of channel in a specific competitive setting, hopefully, many of the findings are generally applicable and tend to counteract the delusion of uniqueness that persists among many marketing managers. The Investigative Setting The specific focus of this research is on marketing activities within channels—-viewed as competitive units-- made up of selected competing manufacturers of heavy construction equipment and the independent distributor firms that function as their exclusive representatives in various market areas. At the manufacturing level, this industry comprises establishments "primarily engaged in manufacturing heavy machinery and equipment used by the construction in- dustries, such as bulldozers; concrete mixers; cranes 2A A V . . . pavers, and power shovels." The 1963 Census of Manufacturers indicates that shipments of the 617 manu- facturers in this industry totaled 2.696 billion dollars.5 This represents approximately a 6 per cent increase in the number of manufacturers, and a 27 per cent increase in the value of total industry shipments over the pre— vious census. These manufacturers, with few exceptions, market their products through independently owned and Operated construction equipment distributor firms. Such distri- butors are "primarily engaged in marketing cranes, exca- vating machinery and equipment, power shovels, road con— struction and maintenance machinery, tractor mounted equipment, and other machinery and equipment."7 The most recent census lists 2,358 construction equipment distributor firms.8 Their combined total sales of 2.612 billion dollars represented a 30.2 per cent increase over the 1958 Census of Business finding.9 The number of A _ U. S. Department of Commerce, Census of Manu- facturers, Bureau of the Census, 1963,TVol. II, Part 2, p. 35B-1. These firms are included under SIC Code 353l--Construction Machinery and Equipment. 5Ibid., p. 35B-8. 6Ibid. 7U. S. Department of Commerce, Census of Business, Bureau of the Census, 1958, Vol. III, p. APP-ll. 8 U. S. Department of Commerce, Census of Business, Bureau of the Census, 1963, Vol. IV, Part 1, pp. 1-13. 9 Ibid., p. xxi. 25 distributor firms increased by about 10 per cent over the same period.10 The market for construction equipment and allied supplies includes contractors, industrial producers, public utilities, mining and logging firms and govern— mental bodies at local, state and federal levels. The "core" of the market is made up of approximately 25,000 contractors engaged in heavy construction and highway building.ll Through contract agreements, these distributors buy and stock equipment, parts, and supplies from specific manufacturers. For the most part, construction equipment distributors are granted exclusive territorial coverage by manufacturers of the non-competing lines of equipment and supplies they carry. Distributors sell, rent, service and repair this equipment. One relatively recent study revealed that distributor sales volume is "typically" divided among new equipment sales, 51 per cent; parts 18 per cent; used equipment, 10 per cent; supplies, 8 per cent; rentals, 6 per cent; service, 5 per cent; and other sources, 2 per cent.12 10Ibid., pp. 1-13. ll"Highway/Heavy Construction Contractor Profile," (A Roads & Streets Marketing Report), Roads & Streets A Ruben H. Donnelley Magazine, Chicago, 1966 and "A Profile of the Heavy Construction Industry," Contractors and Engineers (New York: Buttenheim Publishing Cor— poration, 1966). 12"How to Improve Construction Equipment 26 Although the number of manufacturers represented in a distributor's product line varies with the size and extent of distributor operations, top equipment lines in terms of sales volume tend to be tractors, cranes and shovels, air compressors, tractor loaders and graders.l3 Larger distributor firms function as exclusive outlets for major equipment manufacturers across all or parts of several adjacent states. They operate several branch sales and service facilities throughout their assigned market areas. Often distributors are classified for pur— poses of performance comparisons into those with and those without a major tractor account in their product line. In 1965, the median sales volume for all distributors was $2.573 million.lu For non—tractor account distributors the median was $2.029 million, compared to $5.052 million among distributors with a tractor account.15 A "typical" distributor firm handles four major equipment lines, twelve lesser equipment lines, and Manufacturer-Distributor Relations for Greater Profit," Construction Equipment and Materials (New York: A Con— over-Mast Publication, 1961), p. 61. l31bid., p. 6. 1“Cost of Doing Business, (AED's 1966 Survey), Associated Equipment Distributors, 615 West 22nd Street, Oak Brook, Illinois, p. 10. 15Ibid. 27 seventeen supply item lines. The efforts of a nine man sales force and accounting, parts, and service personnel are directed by three men in managerial positions. Sales of major equipment lines account for the most significant portion of the firm's approximate annual volume of 2 million dollars.16 Therefore, among the thirty or more manufacturers a distributor firm may represent, relation- ships with major equipment producers are viewed by distributor managers as first priority components of effective, profitable operations. The nature of these relationships is formally detailed in manufacturer-distributor contracts. Among the items typically included are those pertaining to the exclusive territorial coverage assigned the distributor, responsibilities regarding types and amounts of infor- mation exchanges, stocking requirements, responsibilities for accpeting orders and making deliveries, display and storage requirements, warranty coverage and adminis— tration responsibilities, discounts and payment terms, and sales aids and advertising to be furnished by the manufacturer.17 16M. B. Jaeger, "Manufacturer Views Dealer Sales Motivation as--a Chain Reaction," Construction Equipment News, (July, 1962), pp. 31-33. l7"Manufacturer-Distributor Relations," Construction Equipment News, (December, 196“), pp. 19 and 22. 28 Within this specific competitive context, align- ments of competing manufacturers of construction equip— ment and their respective distributors provide an in- vestigative focus for analyzing the relationships posed in the foregoing statement of the research problem. In any given metropolitan market area, for example, com— peting channel units are formed by rival manufacturers and their individual exclusive distributors covering this area. Various factors included in the joint market- ing efforts of these competing manufacturer-distributor units can be itemized in the form of potential differ- ential advantages. Evaluations of the comparative competitive strength of these factors may be requested of marketing personnel at both the manufacturer and distributor levels. Patterns of congruency among these judgments may then be related to measures of the relative marketing effectiveness of these competing channel units. Such is the setting and focus of this study. Research Objectives Against this investigative framework, specific research objectives of this study are as follows: 1. To develop a comprehensive delineation of dimensions of potential differential ad- vantages which represent points of competitive comparison among construction equipment manufacturer-distributor units. 29 2. To underscore areas of congruency and vari- ance among competitive evaluations placed on these variables by management and field sales personnel at both manufacturer and distri— butor levels of operation. 3. To determine the magnitude and significance of the relationship between these evaluations and the competitive standings of various combi- nations of selected competing manufacturers and their respective distributors. A. To utilize the findings of this research as a frame of reference for recommendations designed to: a. provide manufacturers and distributors with a broadened perspective of construction equipment marketing and an increased capa- city to combine strategically all elements of their marketing activities for improved sales results, and b. delineate possible applications of the findings to alignments of manufacturers, distributors and/or wholesalers in other types of industrial products distribution. The primary area of potential application of findings from this study is, of course, within the specific com- petitive setting investigated—-the heavy construction equipment industry. The 617 manufacturers and 2,358 30 distributor firms accounting for over $2.6 billion in sales comprise one of the fastest growing segments of industrial marketing. Since the first Business Census in 1929, construction machinery and equipment distributor sales have increased approximately A550 per cent! This is the largest percentage rate of sales growth among all wholesale trade categories included in the Census of Business.18 There are more than 302,000 wholesale trade establishments handling $358 billion in sales in the United States.19 These firms and the variety of manu- facturers aligned with them constitute a vast realm for potential improvements in marketing channel operations. Clearly, any attempt to apply the findings from this study across all these channel informations uncritically would be unwise. Nevertheless, the conceptual framework of the study does not preclude some degree of reasonable gener- alization based on its results. There is considerable comparability between the type of channel investigated here and channels including many of the 209,000 merchant wholesalers Operating within our distributive structure.2O Although they typically 18 U. S. Department of Commerce, Bureau of the Census, Census of Business, 1958, Vol. III, p. 6 and Census of Business, 1963, Vol. IV, Part 1, p. xxi. 19U. S. Department of Commerce, Bureau of the Census, Census of Business, 1963, Vol. IV, Part 1, p. xv. 2O Ibid., p. xix. 31 handle the products of a number of manufacturers, they buy and sell this merchandise on their own account. Distributors, wholesalers, jobbers and other inter- mediaries in this classification have total sales in excess of $157 billion.21 They represent a signifi- cant portion of industrial distribution where the findings of this research effort may have considerable universal utility. The Research Design: Manufacturers, Middlemen and—Market Areas There are, of course, many types and models of heavy construction equipment. Some manufacturers specialize within a narrow range of products. Others offer more inclusive lines. Consequently, not all manu— facturers in this industry are direct competitors. The same is true of distributors in any given area. Only large distributor firms carry a full range of heavy equipment items. An analysis of the marketing activities of directly competing manufacturer-distributor units in this setting requires the selection of a "representative" piece of equipment and a careful matching of competing manu- facturers with their respective distributor firms. The piece of equipment selected-—wheel-mounted tractor shovel— loaders--is "representative" of most major equipment 21Ibid., p. xv. 32 items in terms of its price range, the extent of personal selling involved, the importance of demonstrations, availability of service, credit arrangements, and other aspects of the impact of combined manufacturer-distri- butor marketing activities on individuals who influence or make tractor purchase decisions. Although most tractor manufacturers also produce other types of heavy construction equipment, tractors are the major item in their product lines. There are fourteen manufacturing establishments producing wheel- mounted and/or track laying tractor shovel-loaders (SIC Product Class Code 35317). Approximately 45 per cent of their total value of shipments is accounted for by 4— and 2-wheel drive tractor shovel-loader sales.22 In addition, tractors are a prime account among larger distributor firms. As estimated 30 per cent of con— struction equipment distributors handle tractors and tractor mounted equipment. Approximately 30 per cent of their sales volume is related to this equipment.23 Sample Selection and Composition By focusing on tractor manufacturers and the distributor firms representing them in various areas, 22U. S. Department of Commerce, Bureau of the Census, Census of Manufacturers, 1963, Vol. II, Part 2, pp. 358-16, 21 and 38. 23U. S. Department of Commerce, Bureau of the Census, Census of Business, 1958, Vol. III, pp. 6-12. 33 directly competing sets of manufacturer-distributor units were identified. The seven competing manu- facturers of wheel-mounted tractor shovel-loaders were matched with the independently owned and operated distri- butor firms handling their tractors on an exclusive basis in nine different major metrOpolitan market areas. The seven participating manufacturers were: Trojan Division, Eaton Yale & Towne, Inc. Allis-Chalmers Manufacturing Company's Construction Machinery Division International Harvester Company's Construction Equipment Division Clark Equipment Company's Construction Machinery Division Euclid Division of General Motors Corporation Caterpillar Tractor Company Thew-Lorain Division of Koehring Corporation Nearly 15,000 4- and 2-wheel drive tractor shovel- 1oaders were sold in 1965, with the total value of ship- ments approaching $180 million excluding exports.2u The seven manufacturers participating in this study account for approximately 85 per cent of this total market.25 2LI"America's Construction Market--l966/67," Con— struction Methods and Equipment (New York: A McGraw- Hill Publication, 1966), p. 7. 25This figure is based on the collective estimates of several manufacturer marketing and sales managers, distributor principals, and trade association adminis- trative and staff personnel. 34 Through the OOOperation of Associated Equipment Distributors, the national association of construction equipment distributors, names and addresses of distri- butor firms representing the seven manufacturers in nine major metropolitan areas were made available. The specific market areas were: Atlanta, Boston, Denver, Indianapolis, Kansas City, Louisville, Miami, Salt Lake City, and St. Louis. Associated Equipment Distributor officials also Offered considerable assistance in meeting various criteria for selecting market areas for this study. The nine geo- graphical areas eventually selected, which correspond closely to Standard MetrOpolitan Statistical Areas, in— clude a full spectrum of tractor buyers and users. Among them are heavy highway construction contractors, a wide variety of industrial buyers, mining firms, and commercial building contractors. Variations in the terrain, weather conditions and other factors influencing performance re- quirements are included within these geographical settings. Irregular territorial coverages assigned distri- butors by the competing manufacturers precluded the in- clusion of some cities. For example, in some locations one distributor might cover an area that includes only a portion of the territory covered by distributors repre- senting the other manufacturers. For comparative pur- poses, only alignments of manufacturers and distributors 35 covering closely corresponding market areas were in- cluded. The selection of a single piece of equipment-- tractor shovel-loaders--provided a means for identifying and aligning directly competing manufacturer-distributor units. It also provided a common source of product- related points of comparison among competitors. The product alone, however, is an insufficient basis for any complete comparison of the combined marketing effort of these competing units. A framework for such a comparison was developed in the form of a comprehensive collection of factors of potential competitive or differential advantages, each of which serves as a point of comparison among the com- peting units. In its final form this delineation included six major elements of the total manufacturer-distributor marketing mix. These elements covered the product, ser- vice, personal selling, promotional, personnel and finan— cial aspects of their inter-related and inter—dependent marketing efforts. Each element was, in turn, broken into ten sub-topics which represent individual bases of potential competitive advantage. The list of sixty items covers a full range of factors that may contribute indi- vidually or in a variety of combinations to the relative competitive standings of manufacturer-distributor units included in the study. Items included in this list are 36 detailed in the section of this chapter discussing data collection. Perceptions of the competitive strength of each of these items were obtained from individuals at four differ- ent positions within the manufacturer—distributor units. Management and field sales personnel at both manufacturer and distributor levels were included. Respondents in- cluded a division level marketing manager with each of the manufacturers. Despite such different titles as Manager of Distributor Sales, Sales Manager, and Manager of Dealer Administration, each of these men is directly concerned with all facets of marketing-related cooperation and communication between their firm and distributors carrying their products. They are responsible for main- taining an informed, aggressive, and effective sales ef- fort throughout a network of distributor firms reaching a national market. Factory field sales personnel are key contact agents in the relationship between each manufacturer and their distributors. These men, called district repre- sentatives in this industry, call on every distributor carrying their firm's products within their assigned multi-state territories. Often the district representa- tive is the only contact between manufacturer and distri- butor for months at a time. Their task is essentially one of informing, advising, assisting, training and 37 persuading distributor management and sales personnel in a manner that helps each distributor firm Obtain a larger share of the tractor sales in their area.26 District representatives function as vital links in the two-way communications between manufacturer manage— ment and distributor management. Operational problems involving price changes, delivery dates and warranty coverage are resolved by the district representative or through his contact with manufacturer headquarters. They often set sales objectives with distributor management and frequently make joint calls with distributor field salesmen. Equipment demonstrations for prospective buyers are frequently arranged with their help. Sales meetings they conduct for distributor salesmen include sessions on product knowledge, discussion of area sales potential, competitive product comparisons, and allied topics. Clearly, district representatives can be instrumental in transforming manufacturer-distributor alignments into effectively competing units. They are in a position to make complete comparisons of the joint marketing activities of manufacturer-distributor units competing for tractor sales within their territories. In this connection, each manufacturer manager provided the name and address of 26"The Role of the D. R.," Fourth Report, Committee on Distribution Practices, Associated Equipment Distri— butors, 615 West 22nd Street, Oak Brook, Illinois, October, 1963. 38 their district representative covering each of the nine metropolitan market areas. These representatives com— prise the second segment of respondents at the manu— facturer level of operations. Appraisals of competing manufacturer-distributor units within each of the nine market areas were also requested from managerial and field sales personnel with distributor firms in the sample. At the managerial level respondents were principals, presidents or general mana- gers. The nature and extent of combined manufacturer- distributor marketing success is clearly influenced by policies and procedures implemented by these managers. They are responsible for all phases of distributor firm operations. They influence both the amount and type of marketing effort allocated to tractors, as well as all other equipment and supply items in their product lines. Every distributor manager evaluates his relationship with the tractor manufacturer he represents in terms of the competitive problems and Operational objectives he feels are most relevant in his own market area. Perhaps the most important contributions to the marketing success of manufacturer-distributor units are made by distributor field salesmen. These men represent the complete unit-wide marketing effort in person. They must have thorough knowledge of the features and performance capabilities of products in their lines. 39 They need to recognize the needs, problems and potential Of individual customers and prospects in their territory. Any lasting competitive advantage a manufacturer-distribu- tor team might develop is ultimately dependent upon the performance of distributor salesmen. The fourth segment of respondents is comprised of salesmen who call on cus- tomers and prospects in their territory every day. Al- though distributor salesmen sell all the equipment and supply items their firms carry, they allocate a considera- ble portion of time and effort to tractor sales.27 Two field salesmen with each distributor firm were asked to participate. With the addition of distributor salesmen, respondents influencing nearly every phase of manu- facturer-distributor marketing relations are included in the sample. To summarize, seven tractor manufacturers were selected and matched with distributor firms carrying their equipment in nine large cities. Seven directly competing manufacturer—distributor units in each of the cities chosen comprised a total of sixty-three individual manu- facturer and distributor alignments. Assessments of competitors and evaluations of possible competitive ad- vantages covering unit-wide efforts were requested from 27One recent study revealed that salesmen with 214 different distributor firms average 17 calls per week for wheel-mounted tractor shovel-loaders. See "Con- struction Machinery Distributors Study--l966," Construction Methods and Equipment (New York: A McGraw—Hill Publication, 1966), p. 17. 40 men in managerial and field sales positions with both firms in each manufacturer—distributor unit. The following section deals with the form and content of questionnaires used to obtain these judgments. The Data Gathering Instruments Questionnaires were forwarded to seven marketing managers and fifty-nine district representatives with the competing tractor manufacturers. Packets containing three questionnaires were mailed to fifty-nine managers of the distributor firms representing the seven manufacturers in the nine metropolitan market areas.28 Each packet in- cluded a questionnaire for the manager and two others which field salesmen with his firm were to complete. Exhibits 1 through 6 in Appendix I include copies of cover letters, instructions and questionnaires. Each questionnaire was coded so that respondents were identified by position, market area and manufacturer alignment. Essentially, the questionnaires consisted of two parts. Part A varied somewhat depending upon the re- spondent's position. Specifically, each manufacturer manager was asked to: (1) rank the tractor manufacturers his firm competes against from 1 (strongest competitor) 28There were four instances where recently expired contract agreements between a manufacturer and a distri- butor were not renewed. Consequently, the sample of distributor firms was reduced to fifty-nine from sixty- three before the questionnaires were put in the mail. 41 to 7 (least strong competitor),29 (2) indicate which manu- facturer he feels is his firm's strongest competitor in each of the nine metropolitan market areas, and (3) esti- mate the percentage of tractor sales his firm attains in each of the nine metrOpolitan market areas (see Exhibit 3A). Manufacturer district representatives also ranked the tractor manufacturers from 1 (strongest competitor) to 7 (least strong competitor). Unlike their managers at divisional level headquarters, however, district representatives based their ranking on competitive strengths within the specific metropolitan market areas they cover. The seven manufacturer marketing managers, on the other hand, ranked the strength of competitors on an overall or national basis. Part A of questionnaires sent to district representatives also requested their estimate of the percentage Of tractor sales their firm holds in the specific metropolitan market area included in their territory (see Exhibit 3B). Distributor managers and salesmen were asked to select their strongest com- petitive tractor manufacturer and estimate the percentage of total tractor loader sales their firm enjoys within the specific metropolitan market areas they serve (see Exhibit 30). 29Although their firm is listed among the competing tractor manufacturers, Pettibone Mulliken Corporation's management elected not to participate. 42 It is clear that the competitive strength of the seven tractor manufacturers rests in great measure with their distributors. When the seven marketing managers made their evaluative judgments they were including not only the other manufacturers but the manufacturer- distributor channels as well. Similarly, when district representatives and distributor personnel identified a manufacturer as their strongest competitor, they were including in their evaluative judgments the competing distributors in their market area. In Part B of the questionnaires each manufacturer manager compared the marketing efforts of distributors representing his firm with those Offered by distributors representing the manufacturer he ranked first among the competing tractor producers (see exhibit 4A). Within each market area district representatives compared the market- ing efforts of the distributorship representing their firm with those offered by the distributor representing the competitive manufacturer they ranked first (see Exhibit 4B). Similarly, distributor managers and salesmen compared the marketing efforts of their firm with those offered by the distributor firm aligned with the manu- facturer they feel is the strongest competitor for tractor sales in their respective market areas. These comparisons of combined manufacturer-distri- butor effort centered on sixty items which individually and collectively represent the bases for competitive 43 advantages available to manufacturer—distributor partner— ships competing for tractor loader sales. Table 1 pre— sents an abridged version of the detailed listing and description of these items included in Sections I through VI of Exhibit 5, Delineation of Potential Competitive Advantages, in Appendix I. These six sections were identical in all questionnaires regardless of the re- spondent's position. In effect, the respondents compared the manufacturer-distributor partnerships in which they take an active part with the competitive partnerships they rated as their strongest rivals for tractor loader sales. Although competitive product comparisons were re- stricted to wheel-mounted tractor shovel-loaders as a "representative" piece of heavy construction equipment, items listed under the PRODUCT element cover a range of features, performance capabilities and cost-related bene- fits that are generally associated with competitive offer- ings of many other heavy construction equipment products. It was suggested earlier that lasting competitive effectiveness likely results from some delicate blend of control, influence and cooperation which may contribute to the collective competitive strength of both partners in manufacturer-distributor units. Many items listed under the SERVICE, FINANCIAL, PERSONAL SELLING, PROMOTION and PERSONNEL elements are controlled more directly by the manufacturer than any distributor. For others the TABLE l.--Sources of possible competitive advantage for manufacturer-distributor units. PRODUCT Versatility Durability Mobility Economy Attachments Variety Operator Benefits Engineering Design Warranty Provisions 00 mfl O\U‘I JI'LA) [\J I—’ vvvvvvvvvv AAA/\AAAAAA FINANCIAL (21) Prices (22) Credit Availability (23) Credit Terms (24) Service Charges (25) Trade-in Policy (26) Rental and/or Lease Contracts 7) Manufacturer Support 8) Operating Capital 9) 0) Cost Control Billing PROMOTION (41) Sales Aids (42) Sales Promotion (43) Manufacturer's Advertising (44) Distributor Adver- tising 45) Direct Mail Visual Aids Customer Referrals 46) 47) 48) Publicity 49) 50) Personal Contacts Demonstration Proficiency SERVICE (11) Delivery (12) Availability of Parts (13) Proficiency (14) Efficiency (15) Customer Education (16) Shop Facilities (17) Customer Complaints (18) Warranty Fulfillment (19) Field Service (20) Personnel PERSONAL SELLING (31) Product Knowledge (32) "People" Knowledge (33) Strategy Formulation (34) Tactical Adjustment (35) Communicative Ability (36) Source of Information (37) Market Knowledge (38) Reputation (39) Experience and Training (40) Planning PERSONNEL (51) Executive Leadership (52) Sales Supervision Service Supervision Employee Morale Technical Assistance Industry Relations Manufacturer's Representatives Interpersonal Skills Teamwork Experience AAA/\A O‘\U1U'l U'IKJTUTKJ'IKH O\Om NONW kw VVV VVVVV AAA 45 reverse is true. Still others are more clearly a matter of mutual development. No attempt was made to weight individual items or elements in terms of their impact on purchasers of construction equipment. Likewise no at- tempt was made to apportion reSponsibility for these competitive "inputs" between manufacturers and distri- butors. The objective was merely one of developing an inclusive, if not exhaustive, list of factors that may contribute to some measure of buyer discrimination be- tween manufacturer-distributor units competing directly for construction equipment sales. The eventual list was distilled from a longer list develOped after discussions of the research project with industry trade association staff members, correspondence and conversations with managerial and sales personnel with manufacturing and distributor firms, and examination of many company, trade association, and media studies cover- ing various aspects of construction equipment marketing. Several managers and salesmen with non-participating dis- tributors critically appraised the meaning and selection of words used in earlier drafts of the questionnaires. Members of the Associated Equipment Distributors adminis- trative staff also offered helpful suggestions in this connection. The eventual form and wording of the data gathering instruments also incorporated changes resulting from detailed discussions of the research project, the sampling technique, and the questionnaires with selected 46 managerial personnel experienced at both manufacturer and distributor levels of Operation within the construction equipment industry. Respondents compared the marketing effort of their manufacturer—distributor unit against the effort of the unit they identified as their strongest rival for tractor sales. Comparisons were made for each of the sixty bases of possible competitive strength. Judgments were regis- tered on a five-point scale. Gradational adjectives de- scribing competitive advantages and disadvantages were assigned values in the following manner: Questionnaire Converted Scale Scale -2 a significant disadvantage l —l a slight disadvantage 2 0 neither advantage nor disadvantage (equal) 3 +1 a slight advantage 4 +2 a significant advantage 5 For example, if a respondent circled code number +1 after contrasting the Versatility of his line of tractor shovels with the strongest competitor's line (Item 1 in the PRO— DUCT section), he feels his firm enjoys a slight advantage over its strongest competitor on this particular point of comparison. Although the negative and positive numbers 30 facilitated competitive comparisons, the analysis was 3ORobert Ferber, "Gradational Adjectives in Market Surveys," Journal of Applied Psychology, (June, 1955), 73-77. 47 facilitated by converting the scale to all positive numbers as shown above. Six of the seven managers with the competing tractor manufacturers were interviewed by the writer. Interviews covered the objectives, design and methodology of the re- search project. Each manager was asked to complete a questionnaire and provide the names and addresses of district representatives covering the nine metropolitan areas for their firm. The same request was made of the seventh manager through the mail. Questionnaires were mailed to fifty-nine district representatives and packets containing three question— naires were mailed to the fifty-nine distributor principals. Managers and salesmen with distributor firms were urged to complete and return their questionnaires without consulting one another regarding their evaluation of competitors and the various components of competitive effort. Four weeks later a second mailing of questionnaires was directed at all non-respondents. In several cases where distributor managers had returned their questionnaire but their sales- men had not, letters and additional questionnaires were forwarded to the manager requesting his cooperation in Obtaining a complete "set" of questionnaires from his firm. Addressed, return postage paid envelopes were in- cluded with each questionnaire in both mailings. Several days prior to the first mailing of question- naires each distributor manager in the sample received a 48 letter from Mr. P. D. Hermann, Executive Director of Associated Equipment Distributors, urging his cooper- ation in the research project. It is very likely this expression of interest and support from the association's national headquarters had considerable impact on distri- butor principals.31 In addition to the seven manufacturer managerS‘ (100%), fifty-six district representatives (94.9%), thirty-seven distributor principals (62.7%), and seventy- three distributor salesmen (61.8%) returned completed questionnaires. Table 2 summarizes the overall pattern of response to the requests for data. Terms,fiSymbols and Definitions The following chapters include analyses of the data and presentation of the findings. To facilitate this discussion, and to prevent the identity of firms, indi- viduals and specific market areas, various terms and symbols are utilized. The following symtols are used to denote the positions of respondents: Symbol Position MMGR Manufacturer Marketing Manager MDR Manufacturer District Representative DMGR Distributor Manager DSM Distributor Salesman 31See James E. Stafford, "Influence of Preliminary Contact on Mail Returns," Journal of Marketing Research, (November, 1966), 410-11. 49 m.ow w.am >.mm m.:m pmcpzpmm ammo pom ow m: mm m mpCOUCOQmmmlcoz ova mm Fm mm mpcmpcoammm "proe m.mm :.mH :.Hm m.ws OOCESBOm unto pom :m w , w Ha OOCLSpOm no mm mm :H pmaamz "mmHHHmz Usoomm H.0m m.mm m.mm m.©s posssoom some tea are so am we poensoom emm was mm mm oofiaoz "wdaaaez oases Hmpoe cosmoamm mammmcwz mo>Hpmpcmmostm LOpzoahpmfio mousnfippmflo poempmfim cofipfimom .mwcaafims omfimccoapmosu on oncommomll.m mqm pmpamcov smmoco>flpommmm .mpcosoam Ammv :mpHcD mammamc< mcfipmxpmz: m on» mo comm homunmampoe O>Hpfipmasoos OHdoomOLOHz .msoea on one no A>H tendency zwcfipcwpm some QOMIIQOHpmH>mQ ppmpsmpm va smCOApmcfinEoo mfimzawc< m>HpHpOQEooz mmsmpfi om onp mo nowm pomllcmmz m>fiufipmdsooz OHdoomomomz .m>onw mmz mm oEwm Amnv Ema .m>onm mm: mm osmm Aumv mwzo .msmpH om on» mo some now IIAN+.H+.O.HI.NIV msoaosoaaomaa owmucmopom can zosozvmsm MQOHpmH>OQ psmpcmpm Mame: Ammv mm: .osooa on one mo AHHH soodesov some aoeuuAm+.H+.o.HI.muv mamaaesa soapsnflppmfio owmusoohom mcmoz va mozz O>Hpmthmw¢ mmooosm O>Hpapmasoo mo xmch moapwfipmpm mmaosmmunsm ommnm .moapmfipmpm can mucosmmm HwOszamnm mo assessmnl.m mqm¢a 54 Macroscopic Analysis.--Each of the seven sub-samples comprised p11_managerial and field sales personnel either employed by or aligned with an individual tractor manu— facturer. For example, "Competitive Combination A" is made up of the marketing manager with Manufacturer A, the district representatives employed by Manufacturer A, and the principals and salesmen with distributor firms carry— ing Manufacturer A's tractors. The collective evaluations that each combination assigned various dimensions of marketing activity were computed, ranked from highest to lowest, and compared with "competitive standing" rankings. Microscopic Analysis.--Sub-samples were made up Of managerial and field sales personnel within individual manufacturer-distributor units. For example, "Competitive Unit Cl" includes Manu- facturer C's marketing manager, the district representative covering Area 1 for Manufacturer C, and the principal and two salesmen with Manufacturer C's distributorship in Area 1. A complete "set" of three questionnaires was obtained from only twenty-five of the fifty—nine distributor firms. Therefore, this is the only basis of segmentation that does not utilize all the available data. An approximate market share percentage was computed for each unit. Total unit-wide scores assigned to each 55 of the sixty items of possible competitive advantage were determined. These scores were then ranked and compared with the unit market share figures. Statistics and Statistical seize. Throughout most of the analysis mean scores repre- sent the collective evaluation placed on each item by sample members. Standard deviations measure the disper- sion of their individual scores around the means. It is perhaps unnecessary to point out that the precision of computations performed on numerical values assigned to an ordinal measurement scale is lessened if the successive intervals on the scale are not equal. The intervals on the scale used to gather data can not be viewed as equal, but computations of these values can be viewed as meaning- ful approximations of sample—wide evaluations. Means computed for scores assigned to a five-point scale are also subject to some distortion due to extreme individual evaluations. Variations in sample sizes add to this possibility. If the percentage of group members selecting each point on the scale for each item were used, distortions could be minimized. On the other hand, this would make any comparison of the evaluations of sixty different items by several groups nearly unmanageable. The scale does provide some measure of the extent of per- ceived advantages or disadvantages and, at the same time, 56 a range of only five points restricts somewhat the possi— ble distortion imposed by extreme individual scores. The analysis of interposition evaluations does in— clude frequency distributions of scores assigned to each point on the scale for each item in addition to mean scores for each item. The frequencies are, in turn, converted to percentages. The microscopic phase of analysis centers on a large number of groups, but each group includes only five men. At this point sums of the five scores assigned each item are used for comparative purposes. Frequently group mean or standard deviation scores for ten individual items are summed to obtain element totals. For example, the sum of mean scores on items 1 (versatility) through 10 (warranty Provisions) would represent the total weight assigned to product-related components of competitive effort by any given segment of respondents. Element totals, in turn, are summed to ob- tain overall measures of the group members' perception of their competitive relationship to their strongest rival for tractor loader sales. The seven firms included in the study account for approximately 85 per cent of the total United States pro- duction of wheel-based shovel-loaders. They do not constitute a representative sample of all manufacturers of heavy road-building equipment. The nine trading areas 57 were chosen as reasonably representative of the total United States market for loaders but an additional se— lection criterion was that all seven firms were competing in each area. Despite these limitations it seems reason- able to suppose that the research findings will have at least general application within the industry. The statistical treatment of the data must be considered in light of these sampling restraints. The Kolmogorov—Smirnow two-sample test and the Spearman rank correlation coefficient,both nonparametric sta- tistics, were applied in specific portions of the analysis. Some of the resulting D values and rank correlation co- efficients are cited as being statistically significant at the .05 and .01 levels. However, any inferential ex- tension of the results of these tests to populations larger than the samples must rest on the tenuous assumption that the data were obtained from a randomly selected sam- ple of respondents from these larger populations. The Kolmogorov-Smirnow two-sample test was utilized in the aggregative analysis phase to test for significant interposition differences in responses to each of the sixty items. This test is concerned with the agreement between the two cumulative distributions of scores assigned to the five points on the measurement scale by the members of two samples (positions). A large enough deviation be- tween the two sample cumulative distributions is evidence 58 for rejecting the null hypothesis that there is no sig- -nificant difference in the scores assigned the item of competitive comparison by members of both samples.32 Spearman rank correlation coefficients were computed in both the macroscopic and microscopic phases of the analysis. In the macroscopic phase the seven "Competitive Combinations" were ranked according to two variables. One variable was the total score they assigned to each of the six elements which cover all of the sixty bases of possi— ble competitive advantage. The second variable was their "competitive standing" score, the index of competitive success based on the manufacturer managers' overall ranking of tractor producers. Similarly, in the microscopic phase the twenty-five "Competitive Units" were ranked according to two variables. One was the sum of their scores on each of the six elements and the other was their "marketing effectiveness" score, or the unit-wide estimations of mar- ket share. The rank correlation coefficients are, of course, measures of the association between the two variables. Statistically significant coefficients are evidence for rejecting the null hypothesis that the two variables under study are not associated in the population from which the 32See Sidney Siegel, Nonparametric Statistics: For the Behavioral Sciences (New York: McGraw-Hill Book Company, 1956), pp. 127-136. 59 samples were drawn.33 The reader is reminded again that inferences extended to a pOpulation as a result of these statistics are not supported by the data from a non-random sample. Despite this qualification, the statistical tests provided considerable insight into the specific competi- tive setting investigated. The analytical methodology remains well within a range of rigor which meets the re- search objectives listed previously in this chapter. Limitations of the Study The qualifying factors center on the above mentioned absence of probability sampling and the application of numerical values to an ordinal scale. There are also the other problems, always present but sometimes underemphasized, that surround any attempt to measure a psychological pro- perty. Some respondents may have endorsed all items en— thusiastically; others possibly reacted with considerable indifference. The data collection instruments do not pro- vide a measure of intensity of feeling or conviction. In addition, interpretations of a "slight" or "significant" advantage or disadvantage may have varied with the nature of the item being compared. The overall response rate exceeded 70 per cent. However, nonresponse was not investigated thoroughly. This factor, along with the implicit assumption that data returned from the first mailing did not differ from data 331bid., pp. 202—213. 60 returned after the second mailing, may have introduced some bias into the results. Despite these inherent sampling and procedural limitations, the three-phased analysis of the data forms a basis for greater understanding of the multi-dimen— sional relationship between manufacturers and distri- butors in their combined competitive efforts. It should be kept in mind that the design and methodology of the study were develOped for the expressed purpose of attain- ing research Objectives specifically related to heavy construction equipment marketing. At the same time, however, many of the findings appear to warrant some application in a variety of other interfirm alliances for industrial distribution purposes. CHAPTER III AGGREGATIVE ANALYSIS: COMPARISON OF INTERPOSITION PERCEPTIONS OF MARKETING EFFORT The findings of all three phases of analysis con- tribute to a better understanding of the basic research problem. However, because each phase includes different units of analysis, the presentation and discussion of findings becomes more meaningful when prefaced by a brief summary of premises which influenced the develop- ment of the overall study. It was suggested that despite the seemingly inherent sources of potential conflict in channel arrangements, two common ingredients--interdependence and mutual benefit—- characterize nearly all interfirm distributive relation- ships. In the absence of cooperation and complementarity it is unlikely that any significant degree of channel-wide efficiency could be sustained by the member firms. Like- wise, without this efficiency it is doubtful if the de- sired mutual benefit, in the form of profits, could be attained. If the channel-wide division of profits is not satisfactory, a primary reason for the initial for— mation of the channel is removed. 61 62 From a marketing point of view then, the success Of most channels stems from a unified direction of joint marketing activities toward joint opportunities in given markets. Consequently, it is not unrealistic to con- ceptualize channels as competitive entities. Partici— pants in any competitive setting strive to develop and sustain a total market offering which yields lasting allegiance from current and prospective buyers. It was argued that when the channel, rather than individual member firms, is viewed as the competing unit, this de- sired allegiance may be influenced by a wide variety of factors ranging over the entire channel-wide marketing effort. Each of these factors is a source of potential differential competitive advantage. Individually, or in some combination, they constitute the principal basis for buyer discriminations among competing sellers. Given these premises, the research problem concerns the relationship between intrachannel evaluations of these potential competitive advantages and the relative marketing effectiveness of competing channel units. Essentially, the analysis is designed to determine if, how, and to what extent the judgments of men in more successful manufacturer-distributor units differ from those of men in less successful units.l 1Successful unit is defined operationally in terms of amount of market share. 63 The analysis discussed in this chapter, however, centers on "horizontal" segments of data. More specifi- cally, the respondents were grouped into samples corres- ponding to the four positions they occupy in the manu- facturer-distributor channels as shown in Table 4. It should be noted that position, not manufacturer affiliation, is the sole criterion for segmentation. Consequently, this phase of analysis, unlike the "verti— cal" phases, excludes any overall ranking or rating of TABLE 4.--Distribution of respondents by position. Position Number Percentage Manufacturer Manager (MMGR) 7 4.0 Manufacturer District Repre— sentatives (MDR) 56 32.4 Distributor Managers (DMGR) 37 21.4 Distributor Salesmen (DSM) _13 _42;2 173 100.0 the competing tractor manufacturers and their respective distributor firms. It is designed to underscore various points of comparison that tend to be viewed collectively as advantages or disadvantages by all respondents, or by one or more of the above segments of respondents. For example, there are likely to be "typical" differences in the evaluations made by managers and field salesmen, or by manufacturer personnel and distributor personnel. 64 The questionnaires contained no reference to the relative importance of the sixty items in terms of their impact on people influencing or making decisions to pur- chase tractors. This is a question which requires addi- tional research effort beyond the scope of this study. Likewise implications regarding any "correct" division of control or responsibility for the various items be- tween manufacturer and distributor personnel were care- fully avoided. Based on the results of this study, sug- gestions in this connection will be made later, although this facet of channel operations was not a major factor in the research design. It is clear, however, that the extent of control each respondent has over a given item, or the extent to which he is actively involved in its development, varies according to his position in the channel. At the same time, these factors may condition his impression of how important various items are in the buyer's purchase decision process. This, in turn, may influence his evaluation of how individual components of competitive effort compare with the competitor's effort. This chapter focuses on interposition patterns of agreement and dis- agreement among these evaluations. The result is a general profile of competitive strengths and weaknesses as perceived from the four different vantage points within manufacturer-distributor channels. In this 65 sense, the findings discussed in this chapter serve as a frame of reference against which to compare the patterns of intrachannel evaluations discussed in the following two chapters. Data representing the judgments of men within each of the four positions is presented in two lengthy tables in Appendix II. Table 1, Competitive Comparison Item Response Percentages, indicates the percentage of re- sponses assigned to each point on the scale for each of the sixty items. These percentages are shown for all four samples. Frequency distributions corresponding to these percentages are shown in Table 2, Responses to Competitive Comparison Items. Table 22 also includes the mean and standard deviation of values assigned within each sample to each item. After the scale was converted, the numbers 1, 3, and 5 correspond to -2, 0, and +2 on the questionnaire scale. These means may be viewed as approximate measures of the collective evaluation placed on each item by men within each of the four samples. If all members of a given sample felt their firm enjoyed a significant advantage over their leading competitors on one of the sixty items, the sample mean for this item would, Of course, be 5.000. Unanimity at the other end of the scale would yield a sample mean of 1.000. A mean of 3.000 represents the point of equality, where neither advantage nor disadvantage 66 exists in the collective opinion of men making up the sample. Sample mean scores greater than 3.000 repre- sent items where there is general agreement among the men in a given position that they enjoy a competitive advantage on these points of comparison. Similarly, items viewed as disadvantages would have sample mean scores less than 3.000. Table 2 in Appendix II includes four means for each of the sixty items. These are, of course, means of the scores assigned the item by men in each of the four positions. The number of individual scores varies from seven in the case of manufacturer managers (MMGR) to seventy-three in the case of distributor salesmen (DSM). A sample mean in excess Of 3.000 for one of the product-related items in Section I of the questionnaire denotes generally widespread agreement among sample members that their product enjoys an advantage on this particular item. The point that needs emphasis, however, is that not all these men compared the same two brands of tractor loaders. Each man compared his product to the product offered by the competitor he rated as the strongest rival for tractor sales. Consequently, a sample mean greater than 3.000 implies that the predomi- nant view among ell_men in the sample, although they represent seven competing tractor manufacturers, is favorable toward their ppp_product in terms of the item being evaluated. 67 "Universal" Appraisals of Competitive Components Sample means were compared to determine the extent of interposition congruency among judgments of the competitive strength of individual items. As Table 2 in Appendix II shows, all four mean scores for some items were either greater than 3.000 or less than 3.000. The appraisal of these items was "universal" in that there was general agreement among all respondents, re— gradless of their position within the channel or their manufacturer affiliation. Listed below in Table 5 are the items that were "universally" perceived as sources of competitive advantages. These figures clearly suggest that a very sizeable percentage of the respondents feel that their product is better than competitive products in a number of different ways. Eight of the ten items making up the PRODUCT ele— ment of total marketing effort are included in this table. The other item in the table, Warranty Fulfillment, was listed in the SERVICE section of the questionnaires, but it is nonetheless directly related to product comparisons. A widespread, product-oriented perception of com— petitive strength is not surprising in this particular competitive setting. The variety of uses and operating requirements most heavy construction equipment must meet makes this an obvious necessity. Furthermore, a number of studies have shown that industrial goods producers 68 000.0 000.0 000.0 000.0 000.0 000.0 000.0 000.0 00050000000 00200003 00 000.0 000.0 000.0 000.0 000.0 000.0 000.0 000.0 meo0m0>os0 zucchpmz 00 000.0 000.0 000.0 000.0 000.0 000.0 000.0 000.0 000000 0 000.0 000.0 000.0 000.0 000.0 000.0 000.0 000.0 0:0asos0000 0 000.0 000.0 000.0 000.0 000.0 000.0 000.0 000.0 mp0mocom poemmomo 0 000.0 000.0 000.0 000.0 000.0 000.0 000.0 000.0 0sosoom 0 000.0 000.0 000.0 000.0 000.0 000.0 000.0 000.0 00000ooz 0 000.0 000.0 000.0 000.0 000.0 000.0 000.0 000.0 0000000000 0 000.0 000.0 000.0 000.0 000.0 000.0 000.0 000.0 0o000ooaao> 0 COH000>OQ :00000>OQ coapma>om soap00>om pnmpcmpm new: OhmOQMum new: Ohmpnmpm :00: ppmpcmpm new: 0000 A00uzv A00uzv A00uzv A0uzv 200 0020 002 0022 .mowmpcm>pm o>090pmdsoo =00m0o>0£5= mo mommmll.m mqm00000 . ooa>0mm mm 000.0 000.0 000.0 000.0 000.0 000.0 000.0 000 0 0oso0o00o00 £00000pmcoEmQ om 000.0 000.0 000.0 000.0 000.0 000.0 000.0 000.0 000000o0 Hmcom0mm on 000.0 000.0 000.0 000.0 000.0 000.0 000.0 000 0 000000000 00 000.0 000.0 000.0 000.0 000.0 000.0 000.0 000.0 0002 000000 00 000.0 000.0 000.0 000.0 000.0 000.0 000.0 000.0 00000000000 00000000000 00 000.0 000.0 000.0 000.0 000.0 000.0 000.0 000.0 0000000 020000000 mm 000.0 000.0 000.0 000.0 000 0 000.0 000.0 000.0 0000o0 00-00000 00 000.0 000.0 000.0 000.0 000.0 000.0 000.0 000.0 0000000000 0000 00 000.0 000.0 000.0 000.0 000.0 000.0 000.0 000.0 0o0000000 0mEoumso m0 000.0 000.0 000.0 000.0 000.0 000.0 000.0 000.0 00000 0o 000000000000 00 200000>om :00000>OQ :00000>mm £00000>OQ 00000000 0002 00000000 0000 00000000 0002 00000000 0000 000u00 000u00 000uzv 00nzv 0000 200 0020 00:2 .mowmpcm>00000 o>0000¢dsoo =00m0m>0cs= mo mommmll.0 m0mbmm m:m.mm mmm.am mom.mm mmm.am mmo.mm www.mm Hm:.mm noncomm c m m a o m a pcmEmHm cofipmcHQEoo m>HpHquEoo .mHmpOP_ whoom Emma pcmemHm COHPMCHQEOO $0939.“thHUIQmQSPOGQSQMEII.HH MQQ H C.‘ H 0) 0H . m H o m p 4Jb0 Combination p m H asa) -H c -H *4: o o o as: p c m 43H 3 H s OH 0 0 OH WU U > m wri E m an: CLQ o p c bra o p 843 ECU $4 (D or! (DC) $4 (1) OO 04-3 m m m mm m m OB (M) A 5 7 7 6 5 7 7 6 B 1 l 2 l 1 l l l C 3 A 6 3 3 3 3 3 D 7 2 A 7 A A A 5 E 2 3 l 2 2 2 2 2 F 6 5 5 5 7 6 6 7 G A 6 3 A 6 5 5 A Spearman Rank Correlation Coefficients: Product .893** Service .6A3 Financial .679 Personal Selling .858* Promotion .893* Personnel .929** Composite Total .929** *Significant at .05 level. **Significant at .01 level. 101 overall competitive standing of the seven participating tractor producing firms. Spearman rank correlation co- efficients indicating the degree of association between these variables are shown at the bottom of Table 12. Certainly a positive rank correlation between these sets of scores would be anticipated. This is particularly true in light of the method used for "measuring" the marketing effectiveness of the seven tractor producers in this macroscopic context. Clearly, the overall competitive standing scores reflect approxi- mate rather than precise measures of this variable. Likewise the numerical evaluations of intracombination perceptions of competitive advantages and disadvantages were computed from values assigned to points on an ordinal scale. Although ranking these scores removes some of the exactness the numerical figures falsely suggest, the rank order of these scores does not reflect the closeness of some of the mean score totals in that the range is substantially reduced and differences among scores equated. Five of the seven correlation coefficients may be viewed as statistically significant bases for rejecting the null hypotheses that these specific variables are not associated in the population from which the sample was drawn. However, the advisability of such an in- ferential extension of this interpretation is limited by 102 the sampling procedure. Nevertheless the degree of association is both considerable and consistent across all elements of marketing effort. The coefficients clearly signify that among the men participating in this study, respondents positioned throughout the distributive networks of manufacturing firms generally viewed as hav- ing stronger overall competitive positions attributed greater degrees of competitive strength to all elements of joint manufacturer-distributor marketing efforts. To put it another way, whether an element was per- ceived as a source of competitive advantage (PRODUCT) or disadvantage (SERVICE, FINANCIAL, PERSONAL SELLING, PRO- MOTION, PERSONNEL) by men in all or nearly all of the seven combinations, the rank order of scores approxi- mating the extent of these perceived advantages or dis- advantages corresponds closely with a rank order of scores approximating the overall marketing effectiveness of the seven manufacturing firms. Perceptual Congruency Within Competing Combinations The mean scores considered in the previous section represent different points on a scale ranging from 1 (significant disadvantage) to 5 (significant advantage). They approximate the consensus among the managers and field sales personnel within each of the seven combinations. Comparison of mean scores provided a basis for examining 103 the patterns of perceived competitive strengths and weaknesses across the major areas of marketing effort. Mean scores do not, however, reflect the closeness of intracombination agreement regarding these evaluations. To argue that Combination B's higher mean scores for five of the six elements implies closer agreement among the respondents representing this manufacturer is to misinterpret these statistics. There is no reason to presume, on an a priori basis, that higher mean scores are accompanied by lower standard deviation scores, or vice versa. In this section standard deviations are tabulated and ranked in the same manner as means were in the pre— vious section. Standard deviations, of course, are measurements of the dispersion of the individual values coded on a given item by sample members. In this sense they reflect more specifically the differences in per- ceptual congruency within the seven manufacturer-distri- butor combinations. Obviously the lower the standard deviation for any item, the closer the agreement among sample members' assessments of the item as a source of competitive advantage or disadvantage. The standard deviation scores for each item are listed in Table> 2 in.Appendix III. When scores for the ten items comprising an element are summed, the totals are approximate measures of the extent of 10A intracombination perceptual congruency regarding evalu— ations of the six areas of marketing effort. These six totals, along with composite totals, are shown for each manufacturer—distributor combination in Table 13. Combi- nation B has the lowest totals for three of the six ele— ments, namely PRODUCT, PERSONAL SELLING and PROMOTION. Combinations D and F have the lowest totals for the SERVICE and PERSONNEL elements. The fact that Combination E's composite total is less than B's is accounted for by the wide margin of difference in their totals for the FINANCIAL element. Comparing the mean totals in Table 11 with the standard deviation totals in Table 12 does not reveal any pattern of consistency among the "sets" of scores for all seven combinations. For each combination the six element mean score totals (ranked from highest to lowest) were correlated with the six element standard deviation totals (ranked from lowest to highest). The following Spearman rank correlation coefficients indicate the degree of association between these two variables for each combination: 105 :mo.pm moa.am zom.:: mmz.om mam.m: mmm.m: smm.om proe moanedsoo mma.m mmm.m Ham.s mom.m moa.m mm:.s mmm.s Hmscomamm ma:.m Hmm.w 5mm.» mme.m mmm.m owe.» mmo.m soapoeopm mmm.HH :sm.m mm:.s Hmm.m mmfl.m o:m.a mom.m wcHHHmm Hchmbmm opm.m m:m.m m:a.m mom.» :mo.a mmm.m mOH.m Hmaocmcfim mmm.m mfio.m mmz.~ :mm.m mma.w mmo.a mam.m mofi>pmm :oa.oa mms.m mms.s oam.m om».a mmm.m. mma.aA nonconm o m m o o m < pamEmHm coflpmcfinsoo m>fiufipoQEoo .mePOP COHDGH>¢U Uhdfiflwpm Pflmgmflm COHDNCHQEOO .HOPSQHLPmHUIhmHSPOmrHZQQSIIeMH mqmdwe 106 ' Combination S399 A .658 B .372 C .658 D -.028 E .372 F -.A28 G -.31A It is evident from these coefficients that respondents in some combinations, notably A and C, tended to agree more closely when assigning relatively higher scores to items; respondents in other combinations, especially F and G, agreed more closely when assigning relatively lower scores to items. In any event, the more relevant question with re- gard to these totals concerns the correlation between standard deviation totals and the "competitive standing" of the seven tractor producers. Specifically, is there closer agreement regarding the competitive strength of all items among respondents throughout the distributive networks of the manufacturing firms deemed to be stronger overall competitors? An answer to this question is pro- vided in Table 1A. The format for showing ranks and correlation coefficients computed from element standard deviation totals in Table 1A is identical to that used for element mean score totals in Table 12. Of course the 107 TABLE lA.--Rank correlation of combination element standard deviation score totals and competitive standing. Rankings 8 Competitive g .-4 g ‘3', £3 33' w Combination p m -H wtfl *1 c -H *42 o o o 2:: .p c m +>H :3 H S: O H O O O H a) 'U o > m mH E m mm a: o L s pra o p 543 5:6 9 m r1 a)o a m c>o o4: ~m m m v ace. 64 a. VC)B .oco A 3 7 A 3 5 A A 6 B l 2 7 l l 2 2 1 C 2 A 2 6 3 5 3 3 D 6 1 3 5 6 7 5 5 E A 3 l 2 2 3 l 2 F 5 5 6 A. 7 l 6 7 G 7 6 5 7 A 6 7 A Spearman Rank Correlation Coefficients: Product .500 Service .500 Financial .lA3 Personal Selling .358 Promotion .965** Personnel .036 Composite Total .715* *Significant at .05 level. **Significant at .01 level. 108 rank order of standard deviation totals is the opposite of that used to rank the mean score totals. The ele- ment and composite totals in Table 13 were ranked from 1 (lowest total) to 7 (highest total). Each of these seven sets of ranks was then correlated with the set of ranks representing the overall competitive standing of the seven participating tractor manufacturers. The resulting Spearman rank correlation coefficients are shown at the bottom of Table 1A. Clearly these coefficients are not nearly as pro- nounced as those computed from the mean score ranks. They do, however, suggest that respondents throughout the distributive networks of the competitively "stronger" tractor producing firms tended to agree more closely in theirindividual evaluations of items than respondents representing the firms judged to be "weaker" overall competitors. This was particularly the case with items included in the PRODUCT, SERVICE and PROMOTION areas, as well as a measure of the overall agreement surrounding all sixty items of joint manufacturer-distributor market- ing effort. The statistical significance attached to the correlation coefficients for two of these variables is, of course, subject to the previously discussed quali- fied interpretation of the sampling procedure. 109 Dimensions of Competitive Effectiveness There can be little doubt that Firm B and its distri- butor firm in each of the nine metropolitan market areas comprises the most effective manufacturer-distributor net— work in the opinion of a large majority of men located throughout the other six networks included in the study. Men marketing Firm B's line of tractors obviously agree with this judgment. Their evaluations of the sixty items resulted in scores representing significant advantages in nearly all areas of combined manufacturer-distributor marketing effort. The extent of this perceived competitive strength is clearly underscored by the data in Table 15, which shows frequency and percentage distributions of item mean scores among the seven combinations. Figures for Combi- nation B show that "advantages" were assigned to fifty- four, or 90 per cent, of the items. Nearly half of Combination B's item mean scores exceeded A.000, while evaluations among all the other six combinations resulted in only five item mean scores this large. Examination of item mean scores listed in Table l in Appendix III re— veals that B is the only combination with a score greater than 3.000 for twenty-two different items. These items, which account for 36.7 per cent of the sixty separate 3 bases of comparison, are listed below: 3This list includes nine of the eleven items categorized as "universal" competitive disadvantages in Chapter III. 110 mam. c.00H om: w.s mm mNH m.m HH m.um mzm m.H w mepoe o.ooH om II II m.mm 2H >.m : m.mm H: >.H H u 0.00H cm II II m.mm :H m.m m 0.0» m: m.m m m 0.03 om o.m m 9m: em I: In 0.0m om I: .... m o.QOH om II II m.Hm mH N.m : >.Hn ms II I: Q 0.00H om N.H H m.mm mm In I: 0.0m mm >.H H o o.ooH om n.02 mm m.m: mm II II m.m m m.H H m o.ooH om N.H H o.mH m N.H H m.mw m: o.m m < a .Umpm u .vmhm m .Uopm a .Umpm R ..vwhm & .Uohm Hmpoe Hmm.z|ooo.: wwm.mlmmo.m ooo.m mom.mnmmo.m ooo.m|wmm.H COHpmcHQEoo =mmprcm>o<= zmmwmpcm>ommHo= .mGOHpmcHQEoo wchmQEoo wzoEm monoom some EmpH mo COHpanMpmHoln.mH mam<9 111 Element Item SERVICE Availability of Parts Customer Education ShOp Facilities AAA IHFJH Ocn ounn) FINANCIAL Operating Capital Billing ttttttI—‘E erwuow DON PERSONAL SELLING Strategy Formulation Source of Information Market Knowledge Experience and Training Planning O\D\10\UU AAA/\A VVVVVVVV VVVVV VV VVV PROMOTION Sales Aids Manufacturer's Advertising Distributor Advertising Direct Mail Visual Aids Customer Referrals Publicity Personal Contacts AAAAAAAA PERSONNEL Executive Leadership Service Supervision Teamwork Experience O\OUU}—’ \OCDNOU'l-II'UUH AAAA C\U"|U'IU'I VVVV A recent study indicated that sales effort, includ- ing sales management, personal selling, advertising and other promotional programs, were perceived as the most important elements of competitive strategy formulation by managers with A85 manufacturing firms.“ Of course no attempt was made to determine the degree of importance that members of the competing combinations attached to the sixty items, but the favorable differentiation men “Jon G. Udell, "The Perceived Importance of the Elements of Strategy," Journal of Marketing, (January, 1968), 3A—A0. 112 affiliated with Firm B feel they enjoy is particularly strong in these areas of marketing effort. Only six out of the sixty item scores for Combi- nation B are below 3.000 and hence may be classified as "disadvantages." Five of these are listed under the FINANCIAL element. The low scores for items (23), Credit Terms, (25), Trade~in Policy and (26), Rental and/ or Lease Contracts, are not nearly as notable as the 2.A67 score for item (27), Manufacturer Support, and the 1.733 score for item (21), Prices. There is only one figure lower than Combination B's score for Prices among the A20 item mean scores in Table l. in Appendix III. All nine respondents on the manufacturer level in Combination B circled -1, or "slight disadvantage," after comparing their product line prices with those of their strongest competitors. Four distributor principals and seven distributor salesmen circled -2, or "significant disadvantage" on this item. Furthermore, Combination B's mean score for item (27), Manufacturer Support, is the lowest among the seven combination scores for this item--2.A67. Only six of the thirty-one men representing the manufacturing firm rated as the strongest overall competitor evaluated this item as a source of competitive advantage. The data suggest that the competitive dominance of Firm B and its allied distributor firms in this macroscopic 113 context results from consistent and considerable channel- wide strength in the SERVICE, PERSONAL SELLING, PROMOTION and PERSONNEL area of joint manufacturer-distributor marketing effort. If competitive effectiveness is merely a matter of offering a "better" product at the "best" price it is not likely that the margin of leadership accorded Firm B by participants in this study would be so pronounced. There were widespread claims of product superiority among all_manufacturer and distributor per- sonnel and men aligned with Firm B viewed the comparative product line prices of the seven competitors as the most significant source of disadvantage. In contrast to these negative appraisals on this point, men in Combinations E (3.A83) and G (3.667) feel they have decided price ad- vantages in addition to favorable product-related points of comparison. Clearly, nonproduct and nonprice dimen- sions of marketing effort account for substantial contri- butions to the competitive effectiveness of Firm B and its network of distributors. Summary of Macrosc0pic Analysis The analysis of seven "vertical" segments of data, each representing the collective judgments of the manager, district representatives, distributor principals and field salesmen affiliated with one of the competing tractor producers provided some insight into the relation— ship between perceptions of marketing effort and the 11A relative effectiveness of competing manufacturer- distributor alliances. The perceived advantage or disadvantage associated with each of the sixty items by members of each manu— facturer-distributor combination were approximated by mean scores. The closeness of agreement, or perceptual congruency, regarding these advantages and disadvantages was reflected in standard deviations computed from the individual values assigned each item by all respondents in each combination. Mean and standard deviation scores were correlated with "competitive standing" scores com- puted from the rankings assigned to competitors by mana- gers with the seven manufacturing firms. The index of "competitive standing" provided an estimate of the manu— facturing firms' overall marketing effectivness. Analysis of the segments of data representing appraisals of competitive effort by men in the seven manufacturer—distributor alliances revealed: (1) a pattern of perceived advantages across five of the six major elements of marketing effort among men in Combination B, (2) a concentration on product-related items as sources of competitive strength among men in all of the combinations, (3) a large number of items which represent points of comparable competitive strength among five (A) (5) (6) 115 of the combinations in that appraisals of these items, relative to Combination B's effort, yielded five mean scores which were quite close, a positive correlation between intracombination evaluations of competitive strength in all six elements and measures of the overall "competi- tive standing" of the rival tractor producing firms, a tendency toward closer agreement in the assessment of both competitive advantages and disadvantages among men in the distributive networks of manufacturing firms rated as stronger overall competitors, and a profile of competitive effectiveness charac- terized by nonproduct and nonprice dimensions of differentiation. CHAPTER V MICROSCOPIC ANALYSIS: CORRELATES OF MARKETING EFFECTIVENESS AMONG MANUFACTURER-DISTRIBUTOR UNITS This chapter includes a discussion of the third and final phase of analysis. The focus is on twenty- five manufacturer-distributor units, the competitive entities formed by the tractor producing firms and their distributors in the nine metropolitan competitive settings. While manufacturer-distributor combinations were viewed as marketing channels in a macroscopic sense, manufacturer-distributor units may be viewed as marketing channels in a microscopic sense in that each of these units includes only those respondents who in- fluence a given tractor manufacturer's competitive strength in a single metropolitan market area. These micrOSCOpic segments of data reflect the advantages or disadvantages associated with the sixty bases of competitive differentiation by five men. These men exert varying degrees of influence on many facets of the coordination, c00peration and communication 116 117 which contribute to the marketing effort of a specific manufactuer-distributor unit. From "top to bottom" in the "vertical" alignment of the two firms, they are the division level sales or marketing manager with the manufacturing firm, the district representative in the given area, and the principal and two field salesmen with the distributor firm which carries the manufacturer's line of tractors in the area. Completed questionnaires were returned from each of these men in twenty—five of the fifty-nine manufacturer- distributor units studied. Consequently this phase of the analysis, unlike the macrosc0pic phase, excludes some of the data. The twenty-five units account for 107, or 61.8 per cent, of the 173 men who participated in the study. The number and percentage of respondents in each of the four positions who are included in this microscopic phase are shown below. Position N (Macro) N (Micro) Percentage MMGR 7 7 100.0 MDR 56 25 AA.6 DMGR 37 25 67.5 DSM _7_3_ _s_o. .6312 173 107 61.8 The twenty-five units comprise a total of 107 instead of 125 men because the seven manufacturer marketing managers were considered to be members of the unit their firm 118 comprises with its distributor in each of the nine metropolitan competitive settings. The reason for this classification is the responsibility men in this posi- tion have for maintaining an informed and aggressive sales effort throughout the network of distributor oper- ations in reaching a national market. The numbers 1 through 9 were randomly assigned to the nine market areas, just as the letters A through G were used to conceal the identity of the manufacturing firms. Therefore the manufacturer-distributor unit identified as C1 includes Firm C's marketing manager (MMGR), the district representative covering Area 1 for Firm C (MDR), and the manager (DMGR) and two field sales- men (DSM) with the distributor firm which serves as C's exclusive distributive outlet throughout Area 1. Table 16 shows the distribution of the twenty-five units across the nine metropolitan market areas. As an example of the "multiple memberships" accorded the seven marketing managers, it should be noted that the appraisal of market- ing effort by Firm C's marketing manager is included in three of the units-—Cl, C8 and C9. Grouping the respondents into these segments pro- vides a framework for additional consideration of the basic research question regarding intrachannel agreement and its relationship to the marketing effectiveness of channels. The four respondents operating at the "local" level in each group identified the unit they feel is the 119 TABLE l6.--Distribution of competing manufacturer— distributor units. Area Units Number Percentage 1 C1,El 2 8.0 2 B2,F2 2 8.0 A3,B3,D3,E3,G3 5 20.0 AA,BA,EA 3 12.0 5 D5 1 A.O 6 G6 1 A.0 7 B7,G7 2 8.0 8 B8,C8,E8,F8 A 16.0 9 A9,B9,C9,E9,F9 _§_ _gglg 25 100.0 Strongest rival their unit competes with for tractor sales in this area. Values assigned to each of the sixty items by these men reflect their perceptions of the source and extent of differences in the competitive ef- forts of these directly competing manufacturer—distributor units. Each of these segments of data was supplemented by the scores assigned to the sixty items by the appropri- ate division level marketing manager. Unlike the men in the other positions, these managers did not confine their comparisons of marketing effort to a single market area. They compared the combined marketing efforts of their firm and all its distributors with those offered by 120 their strongest rival tractor producer and all the distributor firms carrying this competitive line of tractors. The scores these managers assigned each of the items were determined within this more inclusive frame of reference. The resulting patterns of scores for each of the twenty-five units reflect perceptions of marketing effort among five men who contribute to a given manufacturer's success in a given metropolitan market area. Following a format comparable to that used in analyzing the macrosc0pic segments of data, this phase of analysis centers on the degree of competitive strength assigned the items of comparison. It also centers on measures of the extent of intra-unit agreement regard- ing the advantages or disadvantages associated with each basis of possible competitive differentiation. Likewise both of these variables are correlated with a measure of the "marketing effectiveness" of the twenty—five units. An index of this "marketing effectiveness," based on the respondents' estimates of market shares, was developed for each metropolitan market area. Estimates of the share of the market for wheel-mounted tractors with shovel-loaders that their firm enjoys in each of the market areas were made by the marketing managers with the seven manufacturing firms. District representatives, distributor managers, and field salesmen also estimated 121 the share of the market for tractor shovel—loaders in their respective areas which is accounted for by sales of their brand of tractors. The estimates made by all 173 respondents were first divided into nine groups, each group including assessments of market shares within a marketing area. Each of these groups was further divided into seven groups representing the estimates of the share of tractor sales held by each manufacturer in the marketing area. An average of the estimates of market share enjoyed by each manufacturer in each market area was computed. In three instances where the seven average market share figures for a single area exceeded 100 per cent, each figure was adjusted downward by a percentage equal to the amount by which the original total exceeded 100 per cent. Although the use of aver- ages introduces some obvious limitations, these figures approximate the relative competitive accomplishments of the manufacturer—distributor units within the nine metro— politan market areas. In the preceding chapter means and standard devi- ations were computed from segments of data representing the competitive advantages and disadvantages associated with the six elements or areas of marketing effort. The focus in this chapter is on a larger number of segments, but each segment reflects the judgments of only five re- spondents. Therefore raw score totals are used as 122 descriptive devices to compare perceptions of competitive strength associated with the six elements of marketing effort by members of each manufacturer-distributor unit. Specifically, for each unit the five scores assigned each item were totaled. The totals for the ten items comprising each of the six elements were summed to ob- tain total scores for each element. Tables 17 and 18 show totals of the scores assigned to each of the ele- ments of marketing effort by members of each unit. Table 19 includes the composite scores, or sums of the six element totals, for these twenty—five units along with the market share approximations discussed above. Element Evaluations Among Competitive Units When unit total scores rather than means are viewed as approximations of the extent of favorable or unfavorable strength assigned to the six areas of marketing effort, the range of possible total scores for each element ex- tends from 50 to 250. If all five men in a unit assigned "significant disadvantages" (l) to all ten items included in the element, an element total score of 50 would re- sult. If, on the other hand, there was complete agree- ment that a "significant advantage" (5) is enjoyed on each of the ten points of comparison, the resulting ele- ment total score would be 250. 123 TABLE 17.--Competitive unit element score-totals-- product, service and financial. Unit Code Product Service Financial Score Score Score Cl 188 1A1 1A0 El 152 1A9 160 B2 186 216 15A F2 156 132 117 A3 171 15A 1A8 B3 192 20A 135 D3 1314 158 155 E3 1’49 1145 150 G3 173 120 1A1 A” 160 13A 13),; BA 20A 211 1A9 EA 179 126 152 D5 1A5 129 126 G6 193 125 1A2 B7 197 196 1A3 G7 1A3 11o 1A2 B8 200 229 1u7 08 181 157 155 E8 196 1A1 1A2 F8 187 136 1A9 A9 16A 121 1AA B9 203 206 171 c9 187 151 156 E9 180 1A0 1AA F9 156 125 1AA 12A TABLE l8.--Competitive unit element score totals-- personal selling, promotion and personnel. Unit Personal Promotion Personnel Code Selling Score Score Score Cl 157 ‘ 155 150 El 1A8 132 160 B2 206 21A 206 F2 139 119 131 A3 1A2 123 13A B3 201 193 195 D3 156 139 157 E3 1A5 137 151 G3 1A1 123 13A AA 1A0 1A0 1A3 BA 208 196 217 EA 15A 1A9 1A5 D5 122 115 122 G6 117 120 1A5 B7 189 193 19A G7 119 117 130 B8 198 202 202 C8 1AA 1A8 1A9 E8 1A2 15A 1A7 F8 1A5 115 13A A9 135 121 133 B9 208 212 216 C9 129 1A1 122 E9 153 151 150 F9 125 119 133 125 TABLE 19.--Competitive unit composite score totals and market share percentages. Composite Market Share Unit Code Score Percentage Cl 931 2A E1 911 18 B2 1183 30 F2 82A 5 A3 872 2A B3 1120 25 D3 899 6 E3 907 27 G3 832 5 AA 851 8 BA 1185 25 EA 915 23 D5 759 7 G6 8A2 3 B7 1112 - A9 G7 761 3 B8 1178 A2 C8 93A 23 E8 922 19 F8 866 2— A9 818 A B9 1216 35 C9 886 21 E9 918 18 F9 802 l 126 An element total score of 150 is the midpoint of the scale ranging from 50 to 250 and hence, by definition, is the "neutral" point. However, given the limited pre- cision of these totals as measures of perceived advantages and disadvantages, the range of element totals between 1A1 and 159 was arbitrarily defined as a "neutral zone." Total scores equal to or greater than 160 represent favorable unit-wide comparisons or "competitive advan- tages"; total scores equal to or less than 1A0 represent unfavorable comparisons or "competitive disadvantages." There are six element scores for each of the twenty- five units, or 150 separate totals in Tables 17 and 18. Forty-seven of these totals represent advantages with scores ranging from 160 to 229; forty-six of these totals represent disadvantages with scores ranging from 110 to 1A0. The remaining fifty-seven totals fall within the range of scores indicating reasonably comparable competi- tive strengths--the "neutral zone." The strong tendency among all respondents to view product-related points of comparison as sources of decided advantages resulted in ineteen, or 76 per cent, of the twenty-five unit totals for the PRODUCT element which equal or exceed 160. Only one unit score, D3's total of 13A, fell within the range of scores which represents an unfavorable comparison of product lines. Scores assigned the PRODUCT element by members of the four 127 units in Area 8 are typical. Unit B8's total of 200 is the largest, but Unit E8's total of 196 is nearly as great. Members of the other two units in this area, C8 and F8, also feel their line of tractors is competitively superior as the scores of 181 and 186 indicate. These figures are especially interesting because fourteen of the fifteen men included in units C8, E8 and F8 compared their tractors with those produced by Firm B. Although B8 was a near unanimous choice as the strongest competi- tive unit in this area, members of the other three units regularly assigned competitive advantages to their own product lines. As might be expected in light of findings dis- cussed in the previous chapter, scores representing com- petitive advantages in the nonproduct areas of marketing effort are almost exclusively accounted for by the six units formed by Firm B and its distributor firms in Areas 2, 3, A, 7, 8 and 9. The extent of advantages men in these units--covering six different metropolitan market areas--associate with nonproduct related activi— ties is clearly underscored by the figures in Table 20. This table lists all nonproduct element totals which are significantly high or low enough to represent advantages or disadvantages. 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