How do you design the firms marketing channels 4. For example, a sizeable sale of cars for Tamil Nadu takes place in Pondicherry due to sales tax concessions available there. Marketing Mathematics. Channel objectives are based on the requirements of the purchasers and users, the overall marketing strategy, and the long-run goals of the corporation. The immediate and ultimate customers may be identical or quite separate, depending on the type of product, functions performed in the channel, and location in the channel. Various channel patterns are discussed below: For example, cosmetics, farm products like fresh fruits, vegetables, encyclopaedia, many innovative products through home shopping, etc. Consider a product of customer’s choice made by a manufacturer at the right price. Save Question 5 (1 point) Sales tax variations from state to state may have been taken into consideration while deciding on retail out­lets or showrooms for certain products for which the tax variation is large. 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. The fol­lowing factors influence the design and selection of marketing channels: Usually, perishable products have a short channel. Generally shorter channels are observed. Before uploading and sharing your knowledge on this site, please read the following pages: 1. He can even see through his video monitor the size, shape, color, etc., of products from differ­ent angles and then place an order. b. A channel is a type of social system in which each member is expected to fulfil certain roles and perform certain functions. Selective distribution focuses on narrowing down the number of channels within the distribution strategy, but not the overall volume of goods sold through those channels. Selecting the best marketing channel is critical because it can mean the success or failure of your product. Conflict. Plagiarism Prevention 5. Intermediaries of a channel specialize in more than one function. Given the complex nature of multiple segments that are tapped, multi-channel marketing has become the order of the day. In order to be heard inside a factory, one will have to shout louder than the noise-level of the ma­chines. Disclaimer 8. 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. One has to take into account government regulations while deciding on the marketing channels. An intensive distribution approach will take advantage of as many sales outlets, distributors, and direct selling opportunities the organization can identify and justify (at a given volume). e. Direct mail order business. You'll also see that once you have one channel built, you can use that to build more. Now when a customer wants to buy the product, he will have to locate a manufacturer who may be in a different region. These developments, and improved transportation facilities, add to the possibility of producing items to suit individual requirements at moderate costs. For example, if the channel member is an exclusive dealer, he may have to comply with all the manufacturer’s terms, even if he does not want to. The functions of the distribution channels are: a. All sizes | Walmart | Flickr - Photo Sharing!. Channel Co-Operation, Conflict and Competition: Marketing channels involve a number of channel intermediaries, and this is always likely to result in a conflict of interests. All goods go through channels of distribution, and marketing depends on the way goods are distributed. The two important lessons that this model teaches us are as follows: i. This strategy of distribution, coupled with the packaging (similar to the twist-wrapped style for hard-boiled sweets) contributed to the success of Halls. For example, farm products like food grains, fruits, vegetables, etc. Each channel alternative can be evaluated against the following criteria: i. 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. Channel selection refers to selecting individual channel members. Retailer Co-operatives – In this case, the retailers come together to take up the task of wholesaling or even manufacturing in some cases. Again, both models can work, but clarity in that is very, very important. That is why manufacturers of consumer durables, like fans and refriger­ators, use sales representatives for institutional buyers and a dealer network for individual buyers. Channel objectives are based on the requirements of the purchasers and users, the overall marketing strategy, and the … If companies want better control, they can go for direct distribution. Manufacturer – Agents – Consumer – 1 Level. For example, vacuum cleaner, water cooler, etc. Considering the vastness of the internet, however, being found by consumers who are not yet aware of your product becomes difficult. 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. But when the level of sales increases above the level X1, the company’s sales force will be more economical. This is common for goods such as soda, snacks, household items, and other common low cost goods. Department Stores – Department stores are characterized by their very wide product mixes. Each channel system has a different potential for creating sales and producing costs. The channels also often help in the design of these communication messages. Purchased only from a well-established, reputable dealer. In managing its intermediaries, the firm must decide how much effort to devote to push versus pull marketing. Channel choice is also greatly influenced by channel objectives. Example- Biscuits and chocolates, soaps, shampoos, Parle-g etc. Hence intermediaries are not much useful. A marketing channel consists of individuals and firms involved in the process of making a product or service available for use or consumption by consumers or industrial users. In any case channel length does not exceed 1 level. Thus, it is a red good which needs a very extensive distribution network. This activity contains 16 questions. Drive is a basic instinct. Once the customer places an order with a store, his bank account gets debited and the same amount gets credited to the stores’ account. All goods go through channels of distribution, and marketing depends on the way goods are distributed. A product that is perishable in nature would need a shorter channel. It is particularly useful with convenience goods. Most services are sold directly from provider to the consumer or industrial buyer. Order lot size – If the average order lot size is smaller, transportation costs increase. 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. 3. Selling – personal contact with buyers to sell products and service. For example, Automative tyres. Terms of Service 7. This works well for institutional consumers such as colleges, hospitals, schools clubs, government agencies, business houses, religious institutions etc. In fact, this should be your prime consideration. Non-store Retailing – Non-store retailing describes sales made to ultimate consumers outside of a traditional retail store setting. In much the same way that buying specifications of ultimate users are determined, the manufacturers must also discover buying specifications of resellers. 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. Marketing activities directed towards the channel as part of ‘push’ strategy are more effective when accompanied by a well-designed and well-executed ‘pull’ strategy that activates consumer demand. Marketing strategy of any organization refers to the broad principals by which its business units expects to achieve the marketing objectives for the target market. The industry’s output which is sold for OEM is distributed direct from tyre factories to manufacturers. 3.1 shows one major source of cost savings affected by using intermediaries/ distributors. Gone are the days when organisations sold to a single target market through a single channel. Marketing Channel Decisions and Dynamics 11. 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. Example- Bata, Titan, Reebok. Channels are distribution are different than channel marketing. For example, complex technical products, large capital equipments, etc. One level channel – This type of a channel comprises of only one selling intermediary such as a retailer. Wholesale volume is greater than that of retail because it includes sales to industrial users as well as merchandise sold to retailers for resale. Influential digital storefronts are key strategic partners in the modern economy. Example- Pepsi and Coke. Answer: False Page: 61 Level of difficulty: Medium 100. Most producing and manufacturing firms are not in a favorable position to perform all the tasks that would be necessary to distribute their products directly to their final user markets. This is a popular in case of consumer durables such as textiles, readymade garments, etc. Mostly direct channel, i.e. Many manufacturers find it necessary to use more than one kind of channel for the same market. This is another marketing System emerging in which two or more unrelated organisations come together and pool their resources to exploit a marketing opportunity. In managing the intermediaries, the firm must also decide on the emphasis given to the ‘push’ versus ‘pull’ marketing strategy. Marketing channels from the soul of the marketing function. The chosen channel will significantly affect and be affected by the rest of the marketing mix. Their inclusion primarily depends on their superior efficiency in the performance of basic marketing tasks. Improved transportation facilities have helped many compa­nies to avoid or reduce a number of intermediaries. For example, FMCG, hardware parts, drugs, etc. Rationale behind Using Marketing Channels 3. An individual firm's success depends not only on how well it performs but also on how well its entire marketing channels compete with competitor channels. Convenience goods such as salt, sugar, cookies, etc., are good examples of products suitable for this type of distribution. Account Disable 12. 4. Channels for Consumer Goods, Industrial Goods and Services 10. He’s got a knack for writing actionable content (no fluff here) and knows the secrets to growing your traffic. Many environmental factors such as technol­ogy, economy conditions and government regulations affect the choice of distribution channels. e. More than three levels – In some cases, one can observe longer marketing channels, that is, channels that have more than three intermediaries. Recent advancements in the field of electronics is bring­ing a lot of changes in the way business is conducted. Everything you need to know about marketing channels. Good distribution strategies can contribute a strongly to customer value and to create a competitive advantage for a firm. g. Ordering – This function is with regards to the communication of channel members regarding the intention to purchase. These are critical to understand when performing case analysis. The situation varies considerably from one line of goods to another. Promotion:The activities that communicate the product’s features and benefits and persuade customers to purchase the product. 3.1 (a) depicts three producers, each using direct marketing to reach three consumers. 3. Product:The goods and/or services offered by a company to its customers. Companies can choose from a wide variety of channels for reaching customers – from sales forces to agents, distributors, dealers, direct mail, etc. More the spread of the market, more expensive it becomes to serve the market directly. 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