Marketing Channel Management at Village Roadshow Films

Marketing Channel Management at Village Roadshow Films Kirrin Vlotis, Suzannah Hollott, Angela Yoo, Kimberley Lee University of Technology, Sydney Executive Summary Village Roadshow entered the film distribution business in the 60 s, followed by film production in the 70 s. They commenced film distribution under the Roadshow brand in 1970, in 2007 Roadshow Films because a wholly owned subsidiary of Village Roadshow. Currently, Roadshow Films distributos films to cinema, DVD & Bluray, Pay Television and Free to Air Televion outlets across Australia and New Zealand. They also hold the exclusive distribution rights for movies produced by Village Roadshow Pictures as well as contracts to distribute films for Warner Bros, The Weinstein Company and many other independent production houses. (www.villageroadshow.com.au) Roadshow Films currently services three distinctive channels; Mass, Grocery and Speciality. The Speciality channel is split into two channel segments: Rental and Retail. Rental refers to the Video Rental stores across Australia and these channel members include: Video Ezy, Civic Video, Blockbuster, Network Video, and Leading Edge Video. Retail refers to speciality retail outlets across Australia and these channel members include: Sanity, JB Hi-fi, and Leading Edge Music. This report focuses on the Speciality Channel. An analysis of the Roadshow business and its end-users indicated that the consumer s service output demands for Rental and Retail were identical and rated High for Bulk-breaking, Delivery/waiting time and Assortment/Variety. Further analysis of the channel and its flows revealed that physical possession costs are passed onto the channel member (Speciality) who takes the title to goods on delivery. Roadshow utilises personal selling, media advertising, sales promotions (both trade and consumer) publicity and public relations. Roadshow offers warranties and exchange or credit on faulty product to channel members. The Financial flow from Roadshow to the channel is in the form of terms of sale. Roadshow does not offer discounts for early payment but offer a price incentive for channel members to take up the product. This flow is pushed back from the channel members to Roadshow. The Equity Principal (Coughlan et al, 2010) states that it is appropriate to reward each channel member in accordance with the value that that member creates in the channel. Otherwise channel members are open to disagreements about the value that each one actually adds to channel performance. It was found that the Roadshow Specialist channel is far from being zero-based, and the gaps that exist are predominantly supply-side in regards to logistics/supply chain management. Three gaps were identified: 1. There was no back ordering system at Roadshow. 1

2. Lack of control of third party delivery company Toll IPEC 3. Inefficient reverse logistics and slow refunds. Most importantly, all channel members are experiencing sales losses as a result of stock shortages. With the exclusivity Village Roadshow has with the distribution of films under their own brand, the retailers are completely dependent on them for deliverer of specific products. Village Roadshow clearly wields the power in the channel. According to the power framework developed by French and Raven (1959), Village Roadshow exercise Reward Power by providing incentives for channel members (rebates, point of sale items, coop-advertising). However their service is failing through ineffective ordering, reverse logistics and deliveries. The imbalance of channel power will undoubtedly lead to greater channel negativity and conflict. Confidence in Village Roadshow has been eroded by unreliable performance and retailer s needs are being disregarded. In order to optimize profits for all members and meet service output demands for consumers, Village Roadshow should focus on restoring balance to the channel and cultivating relationships. 1.1 History Village Roadshow commenced its operations in 1954 by owning one of the first drive in cinemas in Australia and continued to expand its cinema circuit with the addition of more traditional or hard top cinemas throughout major cities across Australia. In order to strengthen its position through business diversification they entered the vertically related business of film distribution in 60 s followed by film production in the 70 s. (www.villageroadshow.com.au) Throughout the 1980 s, Village Roadshow was a pioneer in the development of multiples cinema complexes across Australia. These complexes raised the bar on cinema exhibition standards to new levels by utilising stadium seating, the latest surround systems and advanced projection technologies. (www.villageroadshow.com.au) Moving into the 90 s, they sought to further strengthen their position by diversifying into media and entertainment businesses to complement their core business. This diversification included the purchase and development of theme parks Wet n Wild, Warner Bros Movie World, Sea World and the Australian Outback Spectacular, they also purchased the Triple M radio network and subsequently integrated it to create the Austereo Group. This is a separately listed company in which Village Roadshow has a majority shareholding. In 1970 the Company commenced distributing films using the Roadshow brand and in mid 2007 Roadshow Films got absorbed by Village Roadshow, becoming a wholly owned subsidiary. (www.villageroadshow.com.au) 1.2 Products and Services 1.2.1 Cinema Exhibition 2

Village Roadshow operates approximately 600 cinemas across three countries. As it stands, Cinema Exhibition remains a core division of the group and is continually developing one of the world s highest quality cinema network that generates strong returns for the firm. In the Australian market, Village Cinemas is one of the biggest cinema operators, with cinema screens in every Australian state. (www.villageroadshow.com.au) 1.2.2 Film Distribution Roadshow Films distributos films to cinema, DVD & Bluray, Pay Television and Free to Air Televion outlets across Australia and New Zealand. They also hold the exclusive distribution rights for movies produced by Village Roadshow Pictures as well as contracts to distribute films for Warner Bros, The Weinstein Company and many other independent production houses. Roadshow Films has also strongly supported the local film industry in Australia, distributing and releasing movies, including Bad Eggs, Crackerjack, Wolf Creek, Jindabyne, Boytown, 2:37 and Mao s Last Dancer. (www.villageroadshow.com.au) Roadshow Entertainment, part of the distribution division is the leading independent distributor of films on DVD and Bluray to both retail and rental chains across Australia and New Zealand. In addition to feature films, Roadshow Entertainment has the exclusive rights to distribute television product from the ABC and BBC, Hi- 5 and sports in association with Channel 9. (www.villageroadshow.com.au) 1.2.3 Theme Park Operations Village Roadshow is also an operator of theme parks. In fact it is Australia's operator in this industry. Its operations include Warner Bros. Movie World, Sea World, Wet n Wild Water World, Paradise Country - Aussie Farm Tour experience and Australian Outback Spectacular. The Group also has interests in hotels, owning Sea World Resort, a large hotel next to Sea World. (www.villageroadshow.com.au) 1.3 Village Roadshow Strategic Intent Village Roadshow owns strong and well known brands across its various strategic business units. As well it is well positioned strategically; having recently been considering potential water park opportunities both in Australia and in the United States, along with potential new partners in VREG and Gold Class USA. (www.villageroadshow.com.au) 3

1.4 Roadshow Film Business Model 1.4.1 Infrastructure Roadshow has its own distribution centre that it uses to house and distribute their own titles as well as distributes and invoices products for Paramount Home Entertainment Australia, Warner Home Video and Reel DVD. They currently outsource all replication to a third party operator. 1.4.2 Offer Within their category, Roadshow remains a major force in film distribution across many mediums in Australia. They enjoy long standing distribution arrangements with key film producers such as Warner Bros, ABC, BBC, The Weinstein Company and Village Roadshow Pictures. Roadshow also distributes film products to Pay TV and free-to-air networks in Australia and New Zealand and is Australia s leading distributor of DVD s in retail sales. (Hill, 2011) 1.4.3 Customers Roadshow uses an intensive distribution model that allows their product to be purchased through many of the possible outlets in a trading area. Roadshow s Films customers for physical products are split into three hannels: Mass Merchants: K-Mart, Target and Big W Grocery: Woolworths and Coles 4

Speciality: Retail and Rental The Speciality channel is split into two channel segments: Rental and Retail. These two segments are separated as they have two distinctive business models and their usage of the products differs. Rental refers to the Video Rental stores across Australia and these channel members include Video Ezy, Civic Video, Blockbuster, Network Video, and Leading Edge Video. Retail refers to speciality retail outlets across Australia and these channel members include Sanity, JB Hi-fi, and Leading Edge Music. This paper focuses on the Speciality channel. 2 Roadshow Films Channel Environment 2.1 Government Legislation that regulates the category and Roadshow is the Trade Practices Act 1974. This covers almost all aspects of the marketplace such as, relationships among suppliers, wholesalers, retailers, competitors and customers. The act covers anti-competitive conduct, unfair market practices, industry codes, mergers and acquisitions of companies, product safety, product labelling, and price monitoring. (www.accc.gov.au) 2.1.1. Regulations Under the Trade Practices Act 1974 it is unlawful for a supplier to attempt directly or indirectly to interfere with the freedom of buyers to buy from other suppliers or to sell to whom they choose. Furthermore, buyers can t impose any restrictions on the freedom of suppliers to sell their products or services as they wish, if such conduct has the purpose or effect of substantially lessening competition. (www.accc.gov.au) 2.1.2. Price Controls Within Australia price fixing is illegal under the Trade Practices Act, which is similar to the US and Canada. The Act is enforced by the ACCC (Australian Competition and Consumer Commission. (www.accc.gov.au). 2.1.3. Laws Regulating the Channel The channel is regulated by the The Classification (Publications, Films and Computer Games) Act 1995, which contributes to the National Classification Scheme. The Act provides allows the Classification Board to classify films, computer games and certain publications. The Classification Board is an independent body which make the classification decisions on films, computer games and publications.. Films for sale or hire in Australia must be classified by the Classification Board before they can be sold or hired. (www.classification.gov.au) 5

2.2 Competition Roadshow competitors include other major studios and independent distributors. With over 130 DVD titles being released each month Roadshow must compete to grab the attention of retailers to ensure that they support and order the products from them rather than from the competitors. Major studios include: Paramount Home Entertainment, Warner Home Video, Sony Pictures, Icon Film, and Universal Pictures. 3 Roadshow Films Channel Profile 3.1 Segmentation Segmentation of a market is defined as the splitting of a market into groups of end-users who are maximally similar within each group and maximally different between groups (Coughlan et al, 2006). Primary research that has been conducted through an interview with a Roadshow Film division manager indicated the company has two types of end users which fall under the Specialist channel: the retail and the rental consumer. These segments are best defined on the basis of demands for the outputs of the marketing channel (Coughlan et al, 2006). The retail and rental end-users have different service output demands which include bulk-breaking, spatial convenience, waiting and delivery time, product variety, customer service and information provision. SERVICE OUTPUT DEMAND Segment Bulk Breaking Spatial Convenience Delivery/ waiting time Assortment/ Variety Customer Service Information Provision Which Channel 1 DVD Buyer High Medium High High Low Low Retailer 2 DVD Renter High High High High Medium-high High Rental 3.2 Service Outputs 3.2.1 Bulk Breaking Bulk-breaking refers to the end-users ability to buy their desired number of units of a product or service even though they may be originally produced in large production lot sizes (Coughlan et al, 2006). The need for bulk-breaking for both the DVD buyer and DVD rental consumer is high as typically end users purchase single units. As a result, by offering high bulk-breaking services to consumers, Roadshow Films are able to charge higher prices per unit to cover the costs of providing small lot sizes. 6

3.2.2 Spatial Convenience Spatial convenience is provided by the market s decentralisation of wholesale and retail outlets which then increases consumers satisfaction by decreasing transportation requirements and search costs (Coughlan et al, 2006). For the DVD buyer, spatial convenience is medium as they may be willing to travel distances to obtain a particular title from a specialty retailer. On the other hand, the spatial convenience for the rental channel is high because the rental channels are located in various community shopping centres and local suburbs Thus, it is much more convenient for consumers to rent DVDs and the transportation costs can be minimised. 3.2.3 Waiting / Delivery Time The waiting/delivery time service output refers to the time period that the end-users must wait between ordering and receiving the goods or post sale services (Coughlan et al, 2006). It will be less convenient for the consumers if waiting time increases and they are more likely to source other alternatives if the product is out of stock. The waiting and delivery time service output for the retail and rental end-users is high as consumers do not want to wait long to obtain their desired product. The expectation for consumers is that the DVD of their choice is readily available on the. Given the immediacy of the consumers need retailers are under pressure to ensure stock is available. 3.2.4 Product Variety The rental and retail channels provide a high level of product variety with various categories of DVDs available. However, if the retailers are out of stock or waiting on product deliveries from Roadshow, the variety for consumers will be less. Furthermore, the wider the product variety, the greater the overall distribution costs as this typically translates to high inventories. 3.2.5 Customer Service Customer service refers to all aspects of easing the shopping and purchase process for end-users as they communicate with retailers (Coughlan et al, 2006). The customer service levels vary between the rental and retail stores due to their sales training, size and resources. Of particular importance however is how Roadshow can directly, negatively affect the customer service levels in these stores if stock is not available or not on time. 3.2.6 Information Provision The information provision service output is defined as educating the end-users on product attributes, pre purchase and post purchase services. The retail channels typically have low levels of information provision for their consumers as retailers often have only a few staff to assist with consumer queries. In comparison, 7

rental channel staff are able to provide more information through personal recommendations and information rich content such as magazines which review and further inform consumers regarding new release titles. The promotional efforts of Roadshow improve information provision for these two channels and equip the stores with marketing material. 3.3 Channel Structure 3.3.1 Physical Possession & Ownership Physical possession costs are passed onto the channel member (Speciality) who takes the title of products on delivery. These incur delivery costs which are passed on to the channel member. All possession and ownership moves together. Roadshow holds the largest inventory costs, as they have capital tied up in products. 3.3.2 Negotiation Negotiation flows between Roadshow and Speciality channel members include negotiating the terms of trade and the nature of the ongoing business relationship. This includes price discounts, marketing support and other terms of business. The costs attributed to this are personnel time and the cost of legal counsel when negotiating and formalising trading terms. 3.3.3 Promotion Below-the-line promotional flows from Roadshow to retailers centre on presenting upcoming releases and sales promotions to assist with driving demand. This is complemented by an overarching above-the-line marketing push to consumers within stores to increase demand (pull strategy). 8

Roadshow utilises personal selling, media advertising, sales promotions (both trade and consumer) and public relations. The aim is to raise awareness of products, educate potential buyers as to the features and benefits and to create urgency with purchases. 3.3.4 Risking Roadshow offers warranties and exchange or credit on faulty product to channel members. 3.3.5 Financing This flow is from Roadshow to the channel in the form of terms of sale. These terms of sale include payment terms of 30 days from issue of the statement. Roadshow does not offer discounts for early payment but offers a price incentive for channel members to acquire the products. In this case Roadshow is effectively financing the buyer s purchase for a maximum of 30 days. 3.3.6 Ordering & Payment This flow is pushed back from the channel member to Roadshow. Roadshow incur an order-processing cost which is attributed to contact centre resources and technology costs when an order has been processed and sent to the warehouse for packing and shipping. 3.4 Efficiency Template Proportional Flow Performance of Weights for flows Channel Member Costs Benefit Potential Final End (high, medium Roadshow Retailer Weight User or low) Total Physical Possession 30 high 35 60 30 10 100 Ownership 12 medium 15 30 40 30 100 Promotion 15 high 20 60 40 0 100 Negotiation 5 low/medium 5 40 60 0 100 Financing 19 low 17 60 40 0 100 Risking 5 low 2 70 30 0 100 Ordering 7 high 2 60 40 0 100 Payment 7 low 4 60 40 0 100 Total 100 N/A 100 N/A N/A N/A N/A Normative Profit Share N/A N/A N/A 35% 55% 10% 100 The normative profit shares calculated from the efficiency template provide a measure of the share of total channel profits each channel member s efforts are responsible for generating. The Equity Principal (Coughlan et al, 2010) states that it is appropriate to reward each channel member in accordance with the value that that member created in the channel. Doing so creates the right incentives among channel members to continue to generate that value in the future. Conversely, trying to deprive a channel member 9

of its rewards for effort expended and value created can result in under performance of the necessary channel flows. In order to apply the Equity Principle (Coughlan et al, 2006) Roadshow must know what costs they have actually incurred and agree upon the estimated value created in the channel. Otherwise channel members are open to disagreements about the value each one actually contributes to channel performance. 4 Gap Analysis After reviewing the Service Output Demands and Efficiency Template, a channel analysis was conducted in terms of the ideal zero-based channel (Coughlan et al 2006). The Roadshow DVD Specialist channel is far from being zero-based, and the gaps that exist are predominantly supply-side in regards to ordering and logistics/supply chain management. In fact, the demand-side gaps are minimal and only a product of supply-side gaps. 4.1 Supply-side Gaps From in-depth interviews and the review of the channel structure and members, three main supply-side gaps have been uncovered that are eroding profits, increasing costs and damaging channel relationships. 4.1.1 Gap 1: No back-ordering system at Roadshow When a specialty retailer such as Leading Edge or JB HiFi place an order for a range of Roadshow DVDs, they forecast from past sales data the number of units needed (eg. 1000 units of the Avatar DVD) and order that amount from Roadshow. If one particular title is out of stock at the warehouse, instead of being back-ordered the order simply drops out of the system and is ignored by Roadshow. It is only when the retailer receives the order delivery (at Head Office or store level) that they discover the title was out of stock at the warehouse and is therefore delayed, or missing altogether. This inefficient way of handling out of stock items not only creates conflict between Roadshow and the retailers, but also has a compound effect where the channel is not able to meet the customers service output demand of Delivery/Waiting Time, Spatial Convenience and Assortment/Variety. From the SOD table above, it is obvious that the immediacy of the customer need is strong (customers visit a specialty store to purchase a certain DVD quickly). If a product is out of stock at the warehouse and not delivered without the retailer having prior notice, this will eventually result in negative reactions towards that particular retailer and increase the likelihood of switching to a competitor (Fitzsimons 2000). It also represents a block in information-flow between the inventories held at the Roadshow warehouse/distribution centre in Prospect, Sydney and the numerous retailers across Australia. Sources of Gaps: Managerial Bounds 10

The sources of gaps due to Managerial Bounds include: - Lack of knowledge or indifference regarding issues and costs of not having a back-ordering system and consequent loss of sales due to out of stock situations at retailer level, and how it affects overall profitability. - Lack of updated, automated and modern IT infrastructure that allows for back-ordering and noting of titles that are out of stock to either warn the retailer at ordering stage, or inform the retailer after the order has been processed. - It s too hard attitude to restructure ordering and distribution systems to cater for out of stock titles. - Speculative methods used to ascertain how many units of each DVD title to be produced at Roadshow s manufacturing facility. Although the number is decided from retailer s sales forecasts, competitive trends and comparisons with past titles that were in a similar genre, it is still somewhat of a wait and see approach to units manufactured and inventoried (Stadler 2008). 4.1.2 Gap 2: Lack of control of third-party delivery company Toll IPEC Third-party logistics company Toll IPEC exclusively handles the delivery of all of Roadshow s orders to retailers across Australia. Because of the relative size of Roadshow s operations in Australia, they find it cost-effective to utilize Toll IPEC s supplies of drivers, trucks and couriers (Blois, Ennis & Shaw 2000). Roadshow is apparently finding it difficult however to manage Toll IPEC s unreliable services. Deliveries are often late, missing, or sitting at the back of delivery vehicles. As a result, the costs of multiple incorrect deliveries are increasing, with Roadshow and the retailer s reputations at stake. This creates channel conflicts, hinders the ability of the channel to meet the customer s service output demands, and consequently limits profitability. Sources of gap: Managerial Bounds - Toll IPEC not adhering to delivery terms and policies that may be set by Roadshow - Because they are an exclusive distributer, there is a lack of motivation and/or competition to adhere to delivery targets. Sources of gap: Environmental Bound - There is only one distribution centre to cater to all Australian retailers, and therefore it is difficult for Toll IPEC to develop efficient systems within the limited shipping capacity of the DC (Muckstadt & Roundy 1987). 4.1.3 Gap 3: Inefficient reverse logistics and slow refunds When a retailer returns unsold or faulty DVD units to Roadshow, the response time for account credits takes three to four weeks to be fully processed. Additionally, Roadshow is often the cause of mistaken orders. 11

The delay with account credits is obviously a cause for concern at the retailer s finance departments and can also be a cause for channel conflicts. Sources of gap: Managerial Bounds - Lack of appropriate IT systems to fast-track reverse logistics and account credits for returned items - Lack of managerial awareness on the effects of inefficient reverse logistics on channel members 5 Problems and Recommendations 5.1 Channel Power The Gap Analysis identified three different issues which are having an adverse effect on Village Roadshow and its channel members. The retailers, who are at the front line with the end consumers, bear the brunt of dissatisfied customers upon discovery of out of stock products due to supply-side gaps. Both customers and retailers are left frustrated and helpless. Most importantly, all channel members are experiencing sales losses as a result of stock shortages. El Ansary et al (1972) defined power as the control that one channel member exerts over the selection of particular elements of another s marketing strategy and states that power is the function of dependence of one member on another. Given the exclusivity that Village Roadshow possesses with the distribution of films under their own brand, the retailers are completely dependent on them to deliver specific products. Village Roadshow clearly wield the power in the channel. According to the power framework developed by French and Raven (1959), Village Roadshow exercise Reward Power by providing incentives for channel members (rebates, point of sale items, cooperative advertising). However their service is charactorised by problems like ineffective ordering, reverse logistics and deliveries. Contrary to the theory that non-coercive power is positively correlated with member satisfaction (Hunt and Nevin 1974), it is the third dimension of power developed by Richardson et al (1995) which considers the actual use of power as a critical factor in distributor s satisfaction. Village Roadshow are blatantly exercising their non-coercive power as they recognize that the retailers are held hostage and have no alternative sources given they are the sole distributor of certain products. Further exacerbating the dissatisfaction for retailers is that Village Roadshow appears to be aware of some of the problems but claims to be helpless. Their reluctance to cooperate with channel members and source satisfactory solutions is evident. For example, their call centre staff, in an attempt to satisfy customers (but in a state of powerlessness themselves), allegedly refer frustrated retailers to mass merchants such as Target and BigW to buy their stock instead of Village Roadshow. The imbalance of channel power will undoubtedly lead to greater channel negativity and conflict. Confidence in Village Roadshow has been eroded by unreliable performance, and retailer s needs are allegedly being disregarded. In order to optimize profits for all members and meet service output demands 12

for consumers, Village Roadshow should focus on restoring balance to the channel and cultivating relationships. Cooperation with members is the key to building long term effectiveness through strong alliances. Village Roadshow also needs to indicate that they seek more mutual dependence within the channel in order to develop win-win solutions for all the members, not just themselves. 5.2 Managing Conflict The resulting conflict from the imbalance of power in the channel is perceived by Village Roadshow. However they are more than likely unaware about how quickly this could escalate to create felt or affective conflict of which the symptoms are distrust, anger and tension (Coughlan 2006). The Decision Making Framework tool can be used to ascertain the threats and level of conflict (Bucklin et al 1997) within the channel. DECISION-MAKING FRAMEWORK Importance of threatened channel in terms of current or potential volume or profitability High Low High Act to avert or address Allow threatened channel Prospect of ( fire ) conflict to decline destructive Low Look for opportunities to Do nothing conflict ( smoke ) reassure threatened channel and leverage your power Christine B. Bucklin,Pamela A. Thomas-Graham,and Elizabeth A. Webster Copyright 1997 McKinsey & Company All rights reserved. The prospect of destructive conflict is currently Low as the situation is not extreme. However, the importance of the threatened channel in terms of profitability is High given the fact that both manufacturer and retailers are losing sales during stock shortages. According to the framework, the next step for Village Roadshow would be to seek opportunities to reassure retailers and leverage its own power. In order to reduce conflict, Village Roadshow need not relax its position of power, but rather adjust its use by exerting it in a more understanding, accommodating manner. 5.3 Closing Demand-Side Gaps The demand side gaps are a result of the supply side gaps. For example, an end consumer s demand for quick delivery/no waiting time is being compromised due to the supply side gaps of inefficient ordering and deliveries. Therefore, the focus of this section of the paper is on closing supply-side gaps. 13

5.4 Closing Supply-Side Gaps Methodology An effective channel management strategy would address the issues Village Roadshow is facing with in its relationship with other channel members. The gap analysis highlighted that the company s channel management strategy is either misguided or non-existent. However, the precise source of this problem is not clear. Management may be uninformed due to internal communication issues or informed but unwilling to act. Therefore the first step to closing the gaps needs to be dealt with from the very top with Management. Solutions and implementation then follow. Step 1: Management recognition and awareness of sources and problems using the Decision Making Framework tool to ascertain the threats and level of conflict (Bucklin et al 1997). Step 2: Develop innovative, initiatives to counteract the issues (utilize channel members feedback) and update or develop a forward-thinking channel management strategy. Step 3: Obtain buy in from the firm to support the initiatives to prepare for smooth implementation (Coughlan et al 2006). Step 4: Implementation. As part of the continuing channel management strategy, the following best practices could be adopted (Campbell 2010): 1. Ensure there is ongoing support and interest from the CEO 2. Get buy-in from field-sales (as the front line local relationships need to flourish) 3. Make certain staff are solutions savvy (training to equip sales with solutions-oriented approaches) 4. Cutting the conflict (resolve issues) 5. Communicate (encourage an open door policy with members) 6. Listen to Feedback (find out what the customers want and how products can improve) Techniques for closing gaps Three gaps are identifiablethese are discussed below along with the flows affected, the bounds and the techniques required to close the gaps. Gap 1: No back-ordering system at Roadshow The inability to place an order and being out of stock until Village Roadshow have manufactured more products are the main frustrations and causes of dissatisfaction among retailers. Installing or developing software that would allow retailers to replenish supplies quickly through back-orders would counteract the cause of most of the channel conflict and positively impact the service output demands. 14

The incorporation of back-ordering software would also provide direct benefits for Village Roadshow, namely the ability to track demand, therefore improving inventory forecasting. The advantages of better forecasting results in other benefits outlined by Stadler (2008) including customer satisfaction levels, increased availability of merchandise, optimised inventory levels, automated ordering processes, reduced capital costs and processes that are streamlined. Gap 2: Lack of control of third-party delivery company Toll IPEC Reward power-style techniques may be required if Toll Ipec are not delivering as needed. The types of incentives and amounts of incentive amounts should be developed and negotiated with the supplier. For example, performance-based rewards could encourage optimal service delivery. As there is only one Village Roadshow warehouse in Australia consideration needs to be given to shipping capacity limitations and speed of delivery to distant destinations. Given this situation, it is paramount that shipments to the retailers are scheduled with this constraint in mind (Muckstadt 1987). Gap 3: Inefficient reverse logistics and slow refunds A two-pronged approach applies to the third gap. Firstly, a reverse logistics specialist could be hired to develop efficiencies in processing and ensure timely refunds to retailers. Secondly, to prevent mistakes in orders by Village Roadshow staff in the first place, additional training would assist with avoiding costly returns. 6 Conclusion From the above analysis of Roadshow Film s marketing channels three supply side gaps have been identified and potential solutions to close these gaps have been provided.. In order to improve profit margins, mend channel member relations and strive toward a zero-based channel, Roadshow management are encouraged to: - Invest in ordering system software, to address the back-order drop out issue, - Incentivise Toll IPEC to uphold delivery standards or consider backward integration of delivery logistics, and - Utilise the experience and knowledge of reverse logistics management specialists to consult on current practices, to improve the current delayed wait time on returns. 7 Reference List Books 15

Blois K, Shaw S, Ennis S. 2000. Oxford Textbook of Marketing. Oxford university press. UK Coughlan, Anne, Erin Anderson, Louis W Stern and Adel El-Ansary (2006), Marketing Channels. 7 th edn, Prentice Hall Journals Brown J.R, Lusch R.F, Muehling D.D. (1983) Conflict and power-dependence relations in retailersupplier channels. in Journal of Retailing. Vol 59, No.4. Campbell S. (2010) Ten Rules For A Channel Playbook. Channel Chiefs CRN El-Ansary A I, Stern L W (1972) Power measurement in the distribution channel in Journal of Marketing Research. Vol. 9. pp 47-52. Fitzsimons G J. 2000. Consumer Response to Stockouts. in Journal of Consumer Research; Sep 2000, Vol. 27 Issue 2, p249-266. French, J.R.P., & Raven, B. (1959). 'The bases of social power,' in D. Cartwright (ed.) Studies in Social Power. Ann Arbor, MI: University of Michigan Press Hennig-Thurau T, Henning V, Sattler H, Eggers F, & Houston M B. (2007) The Last Picture Show? Timing and Order of Movie Distribution Channels In Journal of Marketing Vol.71 October 2007. Hunt S D and Nevin J R (1974) Power in a channel of distribution: Sources and consequences in Journal of Marketing Research. May, Vol. XI, pp 186-93. Muckstadt J & Roundy R. (1987) Multi-item, one-warehouse, multi-retailer distribution systems in Management Science. Vol 33, No 12, December USA Richardson L D, Swan J E and Hutton J D. (1995) The effects of the presence and use of channel power sources on distributor satisfaction in The International Review of Retail, Distribution and Consumer Research. May edition. Stadler K. 1998. Minimizing Out-Of-Stocks in Food Logistics. Jul/Aug2008. Issue 106. p42-42 Websites Village Roadshow, www.villageroadshow.com.au Australian Competitor & Consumer Commission, www.accc.gov.au Office of Film & Literature Classification, www.classification.gov.au Personal Interviews Brandon Hill, Sales Director, Roadshow Films 16