All goods go through channels of distribution, and marketing depends on the way goods are distributed. Here’s how in two sentences. These are professionally managed and centrally programmed networks that are established to achieve operating economies and maximum market impact. Control and Adaptive Criteria – The channel alternatives are evaluated in terms of companies having better control and more adaptable channels. The channel objectives are conditioned by the particular characteristics of customers, products, middlemen, competitors and environment. Maintenance or improvement of market share – educate or assist channel components in their efforts to increase the amount of product they handle. The services ex­pected can be home delivery, availability of all products under one roof, credit facilities, short lead-time, i.e. h. Payment – The channel members also assume responsibility for the buyers honouring their payments to the sellers through banks and other financial instruments. However, most companies prefer distribution through middle­men as against direct distribution, to economize on costs. It is particularly useful with convenience goods. There are only two common channels used for services. Selecting the best marketing channel is critical because it can mean the success or failure of your product. 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. According to psychological theory, a consumer goes through a chain of stages while making a pur­chase. Vending machines. Choice of a channel of distribution involves the selection of the best possible combination of middlemen or intermediaries. Marketing strategy is a long-term, forward-looking approach and an overall game plan of any organization or any business with the fundamental goal of achieving a sustainable competitive advantage by understanding the needs and wants of customers.. Scholars like Philip Kotler continue to debate the precise meaning of marketing strategy. zero level is used. Good distribution strategies can contribute a strongly to customer value and to create a competitive advantage for a firm. Examples of this type of channel include door-to-door sales, mail order, telemarketing, TV selling, and manufacturer-owned stores. The government has restrictions on the distribution of a num­ber of products, like coal, paper, fertilizer and sugar. But when the level of sales increases above the level X1, the company’s sales force will be more economical. In cases when a company is just getting started, or an older company is trying to carve out a new market niche, the channel objectives may be the dominant force on channel choice. For Example Javed Habib give franchise of his flagship brand HABIB on contractual basis. "We consider this to be one level above trusted adviser level." Differentiate between different distribution intensity strategies, incorporating the modern digital storefronts into this consideration. Functions 4. Example- Biscuits and chocolates, soaps, shampoos, Parle-g etc. Account Disable 12. After the basic design of the channel is determined, the firm faces the task of effective channel management. On the other hand we can see in Fig. There are channels with different number of levels: a. Setting up exclusive retail stores for marketing of small products like chocolates would not be a feasible idea. A wrong choice of distribution channel ultimately increases the price of the product. This is common for goods such as soda, snacks, household items, and other common low cost goods. It involves a careful study and consideration of many factors stated below. It has to periodically evaluate the performance of individual channel members against their own past sales and other channel members’ sales. Exclusive distribution works off the idea that scarcity can add value. The vast majority of all goods produced in an advanced economy have wholesaling involved in their marketing. In this way we can see that intermediaries reduce the work of the producers. 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. That is, they carry many different types of merchandise that may include hardware, clothing, and appliances. Weighing the pros and cons of various channels, both in terms of the number of channels and the volume within each channel, can have a significant strategic impact on a firm’s position in a market. Vending machines are used in the developed countries to sell a number of products. 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. Cues to reach the goal may be situational (available at that point of time and place) or in memory (residing in memory). Promotion:The activities that communicate the product’s features and benefits and persuade customers to purchase the product. There are many different kinds of retailers, including: In order to decide on the types of retailers to include in its marketing channel, a firm must first understand the buying specifications of its consumers. Example- Pepsi and Coke. That is why manufacturers of consumer durables, like fans and refriger­ators, use sales representatives for institutional buyers and a dealer network for individual buyers. Marketing Channel Choice and Marketing Efficiency Assessment in Agribusiness RAJEEV KUMAR PANDA National Institute of Technology, Rourkela, India Given the lower return on investments in the retail business, organisations would be better off investing their money in their main business rather than taking up retailing or other channel functions. Retailers are found only in consumer goods channels. Department Stores – Department stores are characterized by their very wide product mixes. Channel strategy is relevant to all six of the basic distribution decisions faced by firms: 1) the role of distribution in the firm’s overall objectives and strategies, 2) the role of distribution in the marketing mix, 3) the design of marketing channels, 4) the selection of channel members, 5) management of the channel, and 6) evaluation of channel member performances. For example, if the manufacturers prefer to have lower prices and larger volumes whereas the dealers want higher prices and medium volumes, it can lead to a conflict. g. Ordering – This function is with regards to the communication of channel members regarding the intention to purchase. The Fig. Furthermore, chains are able to attract many customers because of their convenient locations, made possible by their financial resources and expertise in selecting locations. Here, two or more companies join hands to exploit a marketing opportunity. Marketing distribution channel | TikZ example. Many environmental factors such as technol­ogy, economy conditions and government regulations affect the choice of distribution channels. 3.1 (b) three producers contacting three consumers through one distributor. Most services are sold directly from provider to the consumer or industrial buyer. From the buyer’s perspective, the wholesaler typically brings together a wide assortment of products and lessens the need to deal directly with a large number or producers. Example: – Bata, Corona etc. Various channel patterns are discussed below: For example, cosmetics, farm products like fresh fruits, vegetables, encyclopaedia, many innovative products through home shopping, etc. Some big and reputed service providers train the individuals to perform a service and franchise their services, e.g., employment Agencies, Travel Agencies, etc. The factors motivating horizontal integration are rapidly changing markets, racing competition, swift pace of technology, excess capacity, seasonal and cyclical changes in consumer demand and the risks involved in accepting financial risks single-handedly. iii. These companies also spend heavily on advertising and use the ‘market pull’ strategy. Marketing Channel Decisions and Dynamics 11. The route that the product takes on its way from production to the consumer is important because a marketer must decide which route or channel is best for his particular product. Here the indirect channel is more economical. Economic Criteria – Each alternative channel design will result in different levels of sales and cost as shown in Figure 10.3. On the other hand, there are small companies which cater to small regions, like Ponvandu Soap, and prefer to have direct distribution to retail outlets for two reasons – (i) their overheads will be less, and (ii) they can use direct distribution as a strategic tool to get competitive advan­tage. Purchased only after extended conversations involving all interested parties – including dealer, users, and purchasers. Factors Influencing Design and Selection 9. Basic Push Promotional Strategies in Marketing Channels Promotional strategies emphasizing the push approach initiated by the manufacturer but requiring channel member support and follow-through can take many forms. Channels are distribution are different than channel marketing. 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). Deciding a proper channel of distribution is not an easy task. Optimum Sleep (C) Optimum Sleep :: Geograph Britain and Ireland. In order to decide on the types of retailers to include in its marketing channel, a firm must first understand the buying specifications of its consumers and the retailers themselves. Because of the features like intangibility, perishability, inseparability, distribution of services becomes critical. This works well for institutional consumers such as colleges, hospitals, schools clubs, government agencies, business houses, religious institutions etc. Wholesalers perform a number of useful functions within the channel of distributions. Copyright 10. Now when a customer wants to buy the product, he will have to locate a manufacturer who may be in a different region. How do you design the firms marketing channels 4. A marketing channel is the series of interdependent marketing institutions that facilitate transfer of title to a product as it moves from producer to ultimate consumer or industrial user. i. And, who are our ultimate users and buyers? The firm must also understand the buying specifications of the retailers themselves. A Horizontal Marketing System (HMS) involves cooperation between two or more organisations on the same level of distribution to accomplish a common goal. And unless a specific and stronger incentive is offered by a com­petitor, she remains loyal. Organizations must understand the competitive environment of the industry, particularly how to use a variety of marketing channels to get their products in front of their core target market at the right time and place. Marketing Strategy: Key Concepts 4. Producers of services also need to think about distributing, i.e., making their services available to their customers. 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. (a) Exclusive distribution – Here the distributor has an exclusive relation with the producer and is not allowed to keep competitors’ products and brands. (b) Selective distribution – Here the distributors can keep products of very few limited producers and generally of one category of products such as home appliances. They keep changing with regards to their structures, functions, and their business arenas. If companies want better control, they can go for direct distribution. What makes your product/service different from everyone else's? Influential digital storefronts are key strategic partners in the modern economy. The two important lessons that this model teaches us are as follows: i. 4. 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. Each channel system has a different potential for creating sales and producing costs. 4. Here, channel components are owned and operated by the same organisation. On the other hand, without at least some consumer interest, it can be very difficult to gain much channel acceptance and support. For example, Grahak Peth, Apana Bazar, etc. Franchises – Over the years, large chain store retailers have posed a serious competitive threat to small storeowners. Example- Eureka Forbes, Zenith computers. A marketing channel mainly performs the task of moving goods from the producers or manufacturers to the final users. ‘Pull’ strategy is appropriate when there is high brand loyalty and high involvement in the category, when consumers are able to perceive differences between brands, and when they choose the brand before they go to the store. Product variety – When the product variety sought by customers is high, selling through indirect channels is advisable. There is no need for currency notes and coins in this method. However, the choice of location for retail outlets, point of purchase displays and advertisements can make the cues stronger. All goods go through channels of distribution, and marketing depends on the way goods are distributed. Here, the manufacturer sells directly to the customer. For example, farm products like food grains, fruits, vegetables, etc. 2. Marketing channels can make the services “available” and “accessible” to the target customers. Marketing is how you get potential customers to consider buying what you sell. 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. Once you have completed the test, click on 'Submit Answers for Grading' to get your results. 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. Marketing channels are the ways that goods and services are made available for use by the consumers. Distribution channels are also constantly evolving with time. b. For this purpose, marketing channels are used to take the products from the manufacturing organisations to the final consumers. Earlier, fast food chains had emerged to suit the changing life-styles of certain sections of people in society. Online vendors, such as Amazon, or a good example of non-store retailers. 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. Also, there is a mutual benefit to both organisations, which they are otherwise not likely to achieve. It should be consistent with the declared marketing poli­cies and programmes of the firm. Differences in perception about the market requirements and their responses may lead to conflict. This is ideal for consumer non-durables. In case of industrial goods, every customer may have different specifications or need some changes in the standard specifications, i.e., there is a need of customization of the product. For example, industrial supply houses trading fairly standardized industrial goods like lathe machine, grinding machines, electrical supplies, etc. Technology has had a significant impact on marketing channel strategy. A marketing channel is the series of interdependent marketing institutions that facilitate transfer of title to a product as it moves from producer to ultimate consumer or industrial user. f. Physical possession – The channel members also take the responsibility of storage of goods during the successive stages to the final consumers. In fact, this should be your prime consideration. The wholesaler assists the producer by making products more accessible to buyers. 3.1 shows one major source of cost savings affected by using intermediaries/ distributors. For many smaller products, direct marketing may not be feasible considering that exclusive retail outlets for small products may not work, and having to stock other products might end up in having just another grocery or food outlet which would not serve the purpose. Information – supplying information about markets to producers and information about products and suppliers to buyers. Content Guidelines 2. 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. Multi-channel conflict exists when the manufacturer establishes two or more channels that are competing with each other in selling to the same market. Instead, most use intermediaries to bring their products to market. 5. Promotion – Persuasive communication is disseminated through the channels to the customers. Such retailers would rather buy from local distributors who have lenient credit terms and offer a wide assortment of merchandise. Considering nature of industrial goods and the purchase procedure, generally shorter channels (upto length 1) are used. The choice of an appropriate channel of distribution, as an important marketing decision, depends on a variety of considerations like nature and type of products, nature of services to be rendered, stability of production, costs involved, and the type of promotional efforts … The channel system of an organisation evolves in response to local opportunities and conditions. Goods that have a high unit price and a high margin are delivered directly by the manufac­turers. For example, the buying characteristics of the purchaser of a high-end electronics device might be as follows: Knowing the buying specifications of consumers, the channel planner can decide on the type or types of wholesaler and/or retailer through which a product should be sold. Answer: False Page: 61 Level of difficulty: Medium 100. Mostly direct channel, i.e., zero level is used. Channel Choice: Managers have many factors to consider when choosing a product distribution channel. 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