Most services are sold directly from provider to the consumer or industrial buyer. All goods go through channels of distribution, and marketing depends on the way goods are distributed. Also, what is promised by the cue must be present in the product, or else it will lead to dissatisfaction in the consumer. Though people are not going to consume it on a regular basis like a cigarette, (i.e., the replacement rate is low), the search time will have to be low as also the time of consumption. Sometimes, it may be worthwhile to deviate from what competitors do. This includes manufacturers who operate sales offices to perform wholesale functions and retailers who operate warehouses or otherwise engage in wholesale activities. Start by identifying the channel that best supports the targeted business objectives — and then take these four steps to optimize your channel strategy: Add and use different channels more frequently as they become more popular and as necessary to reach specific audiences. Distribution channels are also constantly evolving with time. Wholesaling includes all activities required to market goods and services to businesses, institutions, or industrial users. For products such as groceries, ready to eat and ready to cook food products, etc. Producers of services also need to think about distributing, i.e., making their services available to their customers. Conflicts can be functional or dysfunctional. Consumer goods category includes huge array of products. Next we want to very much focus with our channel partners on our roles and responsibilities at different stages of a customer's life cycle. This may be achieved by themselves or by creating an independent unit, for example, Sugar Syndicate of India, Associated Cement Company, etc. Designing the marketing channels is a task in which the manufacturer has to take into consideration several factors. d) Manufacturers – Wholesaler – Consumer: Here, retailers do not exist. These are critical to understand when performing case analysis. This can be adopted in case of consumer durables and consumer non-durables. After having selected the channel alternative, it is time for the organisation to select individual channel members and motivate and evaluate them, and modify the channel arrangements over a period of time to provide better service to the end users. Chapter 4: Digital marketing strategy: Multiple choice questions: Multiple choice questions Try the multiple choice questions below to test your knowledge of this chapter. Disclaimer 8. In total, non-store retailing accounts for a relatively small percentage of total retail sales, but it is growing and very important with certain types of merchandise, such as life insurance, cigarettes, magazines, books, CDs, and clothing. For example, a sizeable sale of cars for Tamil Nadu takes place in Pondicherry due to sales tax concessions available there. Factors Influencing Design and Selection 9. Describe the different functions performed by wholesalers in channel distributions. This activity contains 16 questions. They vary from direct selling, to using one or more intermediaries. Of particular importance is the question, “from whom do my retail outlets prefer to buy? This requires six contacts. Once the customer places an order with a store, his bank account gets debited and the same amount gets credited to the stores’ account. i. Marketing channels from the soul of the marketing function. Channel choices themselves depend on the company’s marketing strategy with respect to segmentation, targeting, and positioning. Chain Stores – Chain stores are able to buy a wide variety of merchandise in large quantity discounts. Furthermore, chains are able to attract many customers because of their convenient locations, made possible by their financial resources and expertise in selecting locations. ii. Again, both models can work, but clarity in that is very, very important. The characteristics could be with regards to the number of years the channel members have been in business, their growth and profit record, their market reputation, and their capabilities to handle the product. Trade channels are classified as conventional and non-conventional with further divisions. Understanding how online marketplaces work, and how to build a presence in this new digital age, is a critical skill set for a strategic marketeer looking at channel strategy. The organisation must periodically evaluate the performance of the channel members against set parameters like the attainment of sales targets, the average inventory levels maintained, the delivery time to customers, and co-operation in promotional and other business aspects. Channel design refers to deciding on the type of distribution channel as well as the number of levels in the channel. The classification of channels are described below: Manufacturers Customers- This is the shortest and simplest choice as goods move directly from the source of manufacture to the ultimate user. How does channel strategy complement/enhance the other elements of the marketing mix 3. There is some freedom in most industries for a firm to determine which channels they will use, and how much volume each channel will receive. Economic Criteria – Each alternative channel design will result in different levels of sales and cost as shown in Figure 10.3. The objective is to secure the largest possible distribution at minimum cost. This is common for goods such as soda, snacks, household items, and other common low cost goods. Although it provides full control, this comes with a huge investment. However, the choice of location for retail outlets, point of purchase displays and advertisements can make the cues stronger. Core Concepts of Marketing by John Burnett. iii. Whether a firm be a one person operation or one that employs thousands of people and generates billions in sales, all are in business to serve the needs of markets. Intensive distribution focuses on delivering a firm’s goods to as many storefronts as possible and maximizing the amount of sales to pursue scale economies. The purpose of a channel strategy In the business-to-business (B2B) world, a channel strategy aims to provide the best way to expose a company's products or services to potential customers. The chosen channel will significantly affect and be affected by the rest of the marketing mix. Distribution intensity plays a significant role in marketing channel strategy. Multi-channel marketing occurs when a single organisation uses two or more marketing channels to reach the same or more than one market segment. A small organization may not be able to afford direct distribution, and it may be better to give that job to some other big company or sole-selling agent. Wholesalers can provide warehousing, inventory control and order processing, transportation, information, and selling functions. Hence, they are bound to be capital intensive; they are designed to achieve technical, managerial and promotional economies through integration, coordination and synchronization of marketing flows from the point of production to the point of final consumption. zero level is used. Copying the competitor’s game plan may be the easiest thing to do. (a) Exclusive distribution – Here the distributor has an exclusive relation with the producer and is not allowed to keep competitors’ products and brands. Achieve a pattern of distribution – structure the channel in order to achieve certain time, place, and form utilities. To motivate channel members to perform, the organisation must ensure that they help the intermediaries with the training of the personnel, supervision and encouragement. Many environmental factors such as technology, economy conditions and government regulations affect the choice of distribution channels. During a period of inflation, cost reduction becomes a paramount task and a company may have to phase out C-class markets (i.e., markets having a very low sales volume). Thus, it is a red good which needs a very extensive distribution network. Wholesaling includes all activities required to market goods and services to businesses, institutions, or industrial users who are motivated to buy for resale or to produce and market other products and services. It has to further periodically evaluate the performance of individual channel members against their own past sales, the sales of other channel members, and, possibly, sales targets. Other channel members can be useful to the producer in designing the product, packaging it, pricing it, promoting it, and distributing it through the most effective channels. Here the indirect channel is more economical. Type of the product – Depending upon the nature of the product, the length of the channel needs to be decided. It’s essential to employ a digital marketing strategy to work in concert with your other promotions (such as brochures and live events). Vertical channel conflicts exist when there is conflict between different levels within the same channel. Channel choice begins with two questions: to whom shall we sell this merchandise immediately? h. Payment – The channel members also assume responsibility for the buyers honouring their payments to the sellers through banks and other financial instruments. Many manufacturers find it necessary to use more than one kind of channel for the same market. It is best that we first identify the traits of the ultimate user, since the results of this evaluation might determine the other channel institutions we would use to meet these needs. The choice and design of a marketing channel have to take into account such service requirements. The industry’s output which is sold for OEM is distributed direct from tyre factories to manufacturers. The channel objectives are conditioned by the particular characteristics of customers, products, middlemen, competitors and environment. A conflict may arise on account of unclear roles and rights. The organizations marketing channel strategy should help inform decisions on the following issues. Product:The goods and/or services offered by a company to its customers. Channel Strategy refers to the activities carried out by organization so as to pass the product or service from production stage to end users hands. The channel is instrumental in overcoming the gaps between the producers and consumers in terms of time, place and possession or ownership. In many instances, it is the expertise and availability of other channel institutions that make it possible for a producer/manufacturer to even participate in a particular market. For example, food products, garments, clothing, etc. Contractual VMS involves independent organisations at different stages of manufacturing and distribution and integrates their efforts on a contractual basis to obtain more economies of scale than would be possible for them to do individually. Marketing distribution channel | TikZ example. Picking the right marketing communication channel for your message will contribute significantly to the success of … Common channels in these circumstances are channels where the firm can maintain strategic control of how the products are sold, at what price, and in which regions. Roses from Kashmir fly to London every day, and milk from Haryana comes to Delhi in refrigerated vans every day. There are three types of Contractual VMS: a. Once you have completed the test, click on 'Submit Answers for Grading' to get your results. Just making enquiries about the product, getting it, etc. However, they are not concerned about transportation, warehousing, inventory, etc. If everyone had the same high fashion item, it would no longer be a high fashion item. But, in such cases, problems such as the distribution staff forming unions, increase in the cost of maintaining infrastructure, and wage rise, might hamper the organization. the time between placing the order and receipt of the product, help during installation of the product, and after-sales service. g. Channel of distribution for services – Generally services differ from physical goods in the sense that they are intangible and hence distribution of services poses special challenges. 2. Industrial market is made up of a smaller number of relatively large buyers compared to consumer market and the buyers are not scattered over a wide area rather they are concentrated. Here, two or more companies join hands to exploit a marketing opportunity. Intermediaries, because of their specialisation, experience, and scale of operations, are able to achieve more than what the organisation can in terms of reaching to the target markets. Vending machines are another type of non-store retailing. Example- Eureka Forbes, Zenith computers. Title – The channel members facilitate actual transfer of ownership from one organisation or person to the other. 4. Given this, there is also a greater possibility of channel competition and conflict. This does not mean that perishables can be sold only in areas close to the place of production. b. The agent middlemen may be commission agents, export merchants who manage trade on behalf of the manufacturer. For example, complex technical products, large capital equipments, etc. What role does distribution play in the firm's overall objectives and strategy 2. Marketing channels are the ways that goods and services are made available for use by the consumers. For example, automobiles. Aspinwall has given a color classification to products, based on their rating on five factors, which greatly helps us in deciding on the length of the channel for different product categories. (c) Manufacturer – Manufacturers’ Agents – Consumers – 1 Level, (d) Manufacturer – Large retailer/consumer cooperatives – Consumer – 1 Level. Considering the vastness of the internet, however, being found by consumers who are not yet aware of your product becomes difficult. Channel Choice: Managers have many factors to consider when choosing a product distribution channel. Selecting the best marketing channel is critical because it can mean the success or failure of your product. Such intermediaries, through their experience, specialization, contacts and scale of operation, offer other channel members more than they can achieve on their own. i. Channel length can vary from zero to n in case of consumer goods. In contrast to a traditional channel that focuses mainly on the independence of channel members, a VMS focuses on their interdependence. Deciding on the marketing channel is among the most complex and challenging tasks facing a firm. 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