The channels also often help in the design of these communication messages. A channel of distribution is an organized network or system of institutions or agencies, which, in combination, perform all the activities required to link the producers and final users. Production technology is moving in the direction of ‘flexible automation’ where different models can be produced on the same assembly line with a very little cost of changeover and in a very short time. In carrying out their specialised roles and functions, channel members may cooperate, conflict and compete with one another. Create an efficient channel – improve channel performance by modifying various flow mechanisms. In managing its intermediaries, the firm must decide how much effort to devote to push versus pull marketing. Consumer goods channels take many forms. A channel comprises several intermediaries. A few are extremely large, having sales of $500,000 or more on a single day. 4. 3. A channel’s horizontal dimension (width) is determined by the number of participants of any one type on the same level in the channel. Such intermediaries, through their experience, specialization, contacts and scale of operation, offer other channel members more than they can achieve on their own. Depending on the product being sold and ultimate end user, companies can choose a marketing channel strategy that involves utilizing distribution centers (wholesalers) or moving their products directly to a store, or retailer. Service support required by buyers may vary from product to product and market to market. And, who are our ultimate users and buyers? Strength and weakness of intermediaries. They try to forge a marketing channel (or distribution channel)—a set of interdependent organizations that help make a product or service available for use or consumption by the consumer or business user. i. 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. This is an very simple means to specifically acquire guide by on-line. Although some retailers prefer to buy directly from the manufacturer, others would rather buy from local distributors who have lenient credit terms and offer a wide array of merchandise. The attitudes, perceptions, lifestyles and shopping patterns of the target consumer are critical. You'll also see that once you have one channel built, you can use that to build more. Marketing channels from the soul of the marketing function. Wholesale volume is greater than that of retail because it includes sales to industrial users as well as merchandise sold to retailers for resale. A ‘push’ strategy uses the manufacturer’s sales force, trade promotional money, or other means to induce intermediaries to carry, promote, and sell the product to end-users. Market Segment Sizing Channel length can vary from zero to n in case of consumer goods. 2. A Vertical Marketing System (VMS) comprises of the manufacturer, wholesaler and retailer, all acting as a unified system as against the conventional marketing channel system in which each of the channel members are a separate entity. Again, both models can work, but clarity in that is very, very important. As a result, they can set retail prices that are lower than those of their small competitors, and thereby increase their share of the market. Horizontal channel conflicts exist when there is conflict between the members at the same level within the channel. Sometimes, it may be worthwhile to deviate from what competitors do. Some manufacturers have different products that require separate distribution channels. It is worthwhile to see what the competitors do before designing a distribution system. Economic Criteria – Each alternative channel design will result in different levels of sales and cost as shown in Figure 10.3. As such, the use of intermediaries is mainly to make the goods available and accessible to target markets. The two important lessons that this model teaches us are as follows: i. Example- Bata, Titan, Reebok. Convenience goods such as salt, sugar, cookies, etc., are good examples of products suitable for this type of distribution. Uploader Agreement. Is that the responsibility of you, or of your channel partner? 1. b. Plagiarism Prevention 5. The firm must also understand the buying specifications of the retailers themselves. Prohibited Content 3. Such retailers would rather buy from local distributors who have lenient credit terms and offer a wide assortment of merchandise. Factors Determining the Length of the Channel 5. Marketing channels can make the services “available” and “accessible” to the target customers. This requires that a manufacturer contemplating distribution through particular types of retailers become intimately familiar with the precise location and performance characteristics of those being considered. Depending on customer needs, marketing channel strategies can utilize distribution centers or move products directly to a store. 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. Content Filtration 6. Inventory Control and Order Processing – keeping track of the physical inventory, managing its composition and level, and processing transactions to insure a smooth flow of merchandise from producers to buyers and payment back to the producers. Report a Violation 11. This is the most popular choice and is used by both small and big companies alike. Given the complex nature of multiple segments that are tapped, multi-channel marketing has become the order of the day. (b) Manufacturers – Wholesaler – Retailer – Consumer – 2 Levels. There are many different types of channel strategy to consider depending on the kind of business that you run, and the customers you need to serve. Promotion:The activities that communicate the product’s features and benefits and persuade customers to purchase the product. The factors responsible for the success of mail-order distribution, or remote selling as it is sometimes called, are – (i) minimized perceived risk, and (ii) a smooth transit. The discounts substantially lower their cost compared to costs of single unit retailers. 3.1 (a) depicts three producers, each using direct marketing to reach three consumers. (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. Once the customer places an order with a store, his bank account gets debited and the same amount gets credited to the stores’ account. Improved transportation facilities have helped many companies to avoid or reduce a number of intermediaries. For example, Automative tyres. He can even see through his video monitor the size, shape, color, etc., of products from different angles and then place an order. Retailer Co-operatives – In this case, the retailers come together to take up the task of wholesaling or even manufacturing in some cases. And, who are our ultimate users and buyers? Channels for Consumer Goods, Industrial Goods and Services 10. While middlemen can also be won over to carry a company’s product line if the company is willing to pay more commission than its competitors, the power might shift to the channel. Strategy Marketing Channel Strategy Getting the books marketing channel strategy now is not type of challenging means. Mostly direct channel, i.e. We will look at the changing channel dynamics with regards to the recent channel developments like the Vertical, Horizontal and Multi-channel Marketing Systems. Merchandise assortments are generally broad, including both hard and soft goods, but assortments are typically limited to the most popular items, colors, and sizes. The title may be transferred directly, as and when the commodity is bought or sold outright, or indirectly, as and when the transaction is negotiated through a functional middleman such as an agent or broker who does not take credit to it. Answer: False Page: 61 Level of difficulty: Medium 100. This coming together may be on a temporary or permanent basis. On the other hand, without at least some consumer interest, it can be very difficult to gain much channel acceptance and support. The organizations marketing channel strategy should help inform decisions on the following issues. Considering the vastness of the internet, however, being found by consumers who are not yet aware of your product becomes difficult. Purchased only from a well-established, reputable dealer. As organizations develop their marketing channel strategies, an important question arises regarding distribution intensity. Service requirements – A shorter channel is more useful when the level of service requirement is high. Selecting the best marketing channel is critical because it can mean the success or failure of your product. Mostly direct channel, i.e., zero level is used. They keep changing with regards to their structures, functions, and their business arenas. Achieve a pattern of distribution – structure the channel in order to achieve certain time, place, and form utilities. He’s got a knack for writing actionable content (no fluff here) and knows the secrets to growing your traffic. There are no intermediaries in the most direct channel (a zero-level channel). 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. 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. 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. For example, industrial supply houses trading fairly standardized industrial goods like lathe machine, grinding machines, electrical supplies, etc. Type of the product – Depending upon the nature of the product, the length of the channel needs to be decided. Wholesalers can provide warehousing, inventory control and order processing, transportation, information, and selling functions. Distribution channels are also constantly evolving with time. Hence intermediaries are not much useful. Chapter 4: Digital marketing strategy: Multiple choice questions: Multiple choice questions Try the multiple choice questions below to test your knowledge of this chapter. For example, vacuum cleaner, water cooler, etc. Here the indirect channel is more economical. Conflict. For example, industrial tools, Personal Computers, etc. For example, a sizeable sale of cars for Tamil Nadu takes place in Pondicherry due to sales tax concessions available there. Producers of services also need to think about distributing, i.e., making their services available to their customers. Growth in sales – by reaching new markets and/or increasing sales in existing markets. 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. 1. Tyres for replacement for cars on the road are sold mainly through retailers. Hence manufacturers send their sales personnel who can also clarify customers’ technical queries and freeze the product specifications. Written By Nathan Ellering @njellering. d. Three level channel – This type of channel consists of three levels of intermediaries in between the manufacturer and the final consumer. This is common for goods such as soda, snacks, household items, and other common low cost goods. The vast majority of all goods produced in an advanced economy have wholesaling involved in their marketing. (a) Manufacturer – C&F Agent – Redistribution Stockist – Retailer – Consumer – 4 Levels. An example of this type of conflict is if an organisation appoints two agents for the same territory. One level channel – This type of a channel comprises of only one selling intermediary such as a retailer. The Japanese have the ‘just in time’ inventory system by which they have cut down tremendously on inventory holding. The channel must be flexible and efficient. Many environmental factors such as technology, economy conditions and government regulations affect the choice of distribution channels. While selecting channel members, it is essential for the organisation to first establish the characteristics that it seeks in these members. There are three types of Contractual VMS: a. Picking the right marketing communication channel for your message will contribute significantly to the success of … Pick a channel to focus on, build out your program, then move to the next. Promotion – Persuasive communication is disseminated through the channels to the customers. When Vicks cough drops were distributed through chemists’ shops, Warner Hindustan launched another form of lozenges called Halls, and distributed it through all categories of retail outlets, down to cigarette vendors on railway platforms. e. Risk taking – The channel members assume the risk for carrying out the channel work. Many manufacturers find it necessary to use more than one kind of channel for the same market. For level of sales below X1 (as shown in the figure above) provider’s sales agency will have economic advantage over their own sales force. 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. Corporate VMS looks at having the successive stages of manufacturing and distribution under a single ownership. Roses from Kashmir fly to London every day, and milk from Haryana comes to Delhi in refrigerated vans every day. Huge Collection of Essays, Research Papers and Articles on Business Management shared by visitors and users like you. This method of retailing is an efficient way to provide continuous service. Most services are sold directly from provider to the consumer or industrial buyer. What makes your product/service different from everyone else's? 5. Information – supplying information about markets to producers and information about products and suppliers to buyers. The government has restrictions on the distribution of a number of products, like coal, paper, fertilizer and sugar. Finally, some manufacturers find it feasible to use different channels in different parts of the country. d. Factory outlets – small outlet just outside their factory- export factory outlet. 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. are included in this category. Marketers in the present dynamic market should adopt the holistic perspective and ensure that marketing decisions in all these different areas are made to collectively maximize value. h. Payment – The channel members also assume responsibility for the buyers honouring their payments to the sellers through banks and other financial instruments. Make every employee a brand ambassador. An example of this type of conflict is one auto dealer having a conflict with another auto dealer. However, some service providers may take help of agents who can provide the information to the customers, book the orders, and collect the payment on behalf of the service providers. Price:The amount of money paid by customers to purchase the product. Example- Biscuits and chocolates, soaps, shampoos, Parle-g etc. This is also called as symbiotic marketing. Franchising has come about in response to this trend. The Fig. 7. In Japan, food distribution may involve as many as six levels. Marketing Channel Design 8. ‘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. 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. This may be achieved by themselves or by creating an independent unit, for example, Sugar Syndicate of India, Associated Cement Company, etc. Content Guidelines 2. 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. In fact, this should be your prime consideration. 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. Is how you start marketing through the chain of commerce to the target consumer critical. Retailing is an very simple means to specifically acquire guide by on-line and design of these communication.... 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