Channel Management

Product distribution (or place) is one of the
four elements of the marketing mix .
Distribution is the process of making a product
or service available for use or consumption by
a consumer or business user, using direct
means, or using indirect means with
intermediaries.
The other three parts of the marketing mix are
product , pricing and promotion.
Channels and intermediaries
Distribution of products takes place by means
of channels. Channels are sets of
interdependent organizations (called
intermediaries) involved in making the product
available for consumption.[1] Merchants are
intermediaries that buy and resell products.
Agents and brokers are intermediaries that act
on behalf of the producer but do not take title
to the products.
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Channel design
A firm can design any number of channels.
Channels are classified by the number of
intermediaries between producer and
consumer. [1] A level zero channel has no
intermediaries. This is typical of direct
marketing . A level one channel has a single
intermediary. This flow is typically from
manufacturer to retailer to consumer.
Types
Category
Definition
Intensive distribution
the producer's products are stocked in the
majority of outlets. [1] This strategy is
common for basic supplies, snack foods,
magazines and soft drink beverages.
Selective distribution
means that the producer relies on a few
intermediaries to carry their product. [1] This
strategy is commonly observed for more
specialised goods that are carried through
specialist dealers, for example, brands of
craft tools, or large appliances.
Exclusive distribution
means that the producer selects only very few
intermediaries. [1] Exclusive distribution is
often characterised by exclusive dealing where
the reseller carries only that producer's
products to the exclusion of all others. This
strategy is typical of luxury goods retailers
such as Gucci.
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Channel mix
In practice, many organizations use a mix of
different channels; in particular, they may
complement a direct sales-force, calling on the
larger accounts, with agents, covering the
smaller customers and prospects. In addition,
online retailing or e-commerce is leading to
disintermediation. Retailing via smartphone or
m-commerce is also a growing area.
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Managing channels
The firm's marketing department needs to
design the most suitable channels for the
firm's products, then select appropriate
channel members or intermediaries. The firm
needs to train staff of intermediaries and
motivate the intermediary to sell the firm's
products. The firm should monitor the
channel's performance over time and modify
the channel to enhance performance.
Channel motivation
To motivate intermediaries the firm can use
positive actions, such as offering higher
margins to the intermediary, special deals,
premiums and allowances for advertising or
display.[1] On the other hand, negative actions
may be necessary, such as threatening to cut
back on margin, or hold back delivery of
product.
Channel conflict
Channel conflict can arise when one
intermediary's actions prevent another
intermediary from achieving their objectives.
[1] Vertical channel conflict occurs between
the levels within a channel and horizontal
channel conflict occurs between intermediaries
at the same level within a channel.

Functions of Channel Members

Functions of channel Members

There are numerous functions performed by
channel members. All of these function utilize
scarce resources of the organization.
Furthermore, these functions can be better
performed through specialization in the
function or through expertise of the function.
And on top of it each function can be
transferred within the various channel
members.
Main functions of channel members in channel
distribution are
1. Risk taking – Assuming the risk connected
with carrying out channel work or being
a part of a channel
2. Financing – Acquiring funds to finance
for inventories
3. Physical distribution of goods – Storage
and movement of physical goods
4. Negotiations – Reaching an agreement on
pricing and other terms which may be a
part of the transaction
5. Matching – Placing order with the
manufacturers and matching the orders
to the actual requirement.
6. Contacts – Maintaining contacts with
existing customers as well establishing
contacts with potential customers and
maintaining the same with the regulatory
bodies
7. Promotions – Carrying out effective
communications to stimulate purchasing
8. Information – Gathering information
about potential customers, competition
as well as tracking the environmental
factors
As we can see, the more specialized a channel
member is, the better he will perform in any
of the above given functions. Also the
functions are such that they can be shifted
within various channel members.

Distribution Channels and its Kinds

Marketing channels are the ways that goods
and services are made available for use by the
consumers. All goods go through channels of
distribution, and your marketing will depend
on the way your goods are distributed. 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.
Manufacturer to Customer
Manufacturer makes the goods and sells them
to the consumer directly with no intermediary,
such as a wholesaler, agent or retailer. Goods
come from the manufacturer to the user
without an intermediary. For example, a
farmer may sell some produce directly to
customers. For example, a bakery may sell
cakes and pies directly to customers.
Manufacturer to Retailer to Consumer
Purchases are made by the retailer from the
manufacturer and then the retailer sells the
merchandise to the consumer. This channel is
used by manufacturers that specialize in
producing shopping goods. For example,
clothes, shoes, furniture and fine china. This
merchandise may not be needed immediately
and the consumer may take her time and try
on the items before making a buying decision.
Manufacturers that specialize in producing
shopping goods prefer this method of
distribution.
Manufacturer to Wholesaler to Customer
Consumer’s can buy directly from the
wholesaler. The wholesaler breaks down bulk
packages for resale to the consumer. The
wholesaler reduces some of the cost to the
consumer such as service cost or sales force
cost, which makes the purchase price cheaper
for the consumer. For example, shopping at
some of the warehouse clubs, the customer
may have to buy a membership in order to buy
directly from the wholesaler.
Manufacturer to Agent to Wholesaler to
Retailer to Customer
Distribution that involves more than one
intermediary involves an agent called in to be
the middleman and assist with the sale of the
goods. An agent receives a commission from
the producer. Agents are useful when goods
need to move quickly into the market soon
after the order is placed. For example, a
fishery makes a large catch of seafood; since
fish is perishable it must be disposed of
quickly. It is time consuming for the fishery to
contact many wholesalers all over the country
so he contacts an agent. The agent distributes
the fish to the wholesalers. The wholesalers
sell to retailers and then retailers sell to
consumers.

Personal Selling

Personal selling is where businesses use people
(the “sales force”) to sell the product after
meeting face-to- face with the customer.
The sellers promote the product through their
attitude, appearance and specialist product
knowledge. They aim to inform and encourage
the customer to buy, or at least trial the
product.
A good example of personal selling is found in
department stores on the perfume and
cosmetic counters.
A customer can get advice on how to apply the
product and can try different products.
Products with relatively high prices, or with
complex features, are often sold using
personal selling. Great examples include cars,
office equipment (e.g. photocopiers) and many
products that are sold by businesses to other
industrial customers.
The main advantages and disadvantages of
personal selling can be summarised as follows:
Advantages
Disadvantages
High customer attention
Message is customised
Interactivity
Persuasive impact
Potential for development of relationship
Adaptable
Opportunity to close the sale
High cost
Labour intensive
Expensive
Can only reach a limited number of customers
Point-of-sale merchandising can be said to be a
specialist form of personal selling. POS
merchandising involves face-to-face contact
between sales representatives of producers and
the retail trade.
A merchandiser will visit a range of suitable
retail premises in his/her area and encourage
the retailer to stock products from a range.
The visit also provides the opportunity for the
merchandiser to check on stock levels and to
check whether the product is being displayed
optimally.

Direct Marketing

Direct marketing is a staple for businesses -
especially for nonprofits. If you have ever
been called during the dinner hour by a
telemarketer you have been the target of direct
marketing.
Often considered annoying and invasive by
consumers, direct marketing is an aggressive
form of marketing that only works when
carefully planned and implemented.
1. What is Direct Marketing?
Direct marketing is just what it sounds like -
directly reaching a market (customers and
potential customers) on a personal (phone
calls, private mailings) basis, or mass-media
basis (infomercials, magazine ads, etc.).
Direct marketing is often distinguished by
aggressive tactics that attempt to reach new
customers usually by means of unsolicited
direct communications. But it can also reach
out to existing or past customers. A key factor
in direct marketing is a "call to action." That
is, direct marketing campaigns should offer an
incentive or enticing message to get consumers
to respond (act).
Direct marketing involves the business
attempting to locate, contact, offer, and make
incentive-based information available to
consumers.
2. Types of Direct Marketing
Three main types of direct marketing include:
Other types of direct marketing include:
distributing flyers; door-to-door solicitations;
curbside stands; FAX broadcasting; television
marketing (i.e., infomercials); coupon ads in
print media; and voice mail marketing.
3. Does Direct Marketing Work?
That depends on how you define "work."
Direct marketing does ensure people know
about your business. But aggressive,
misleading, or annoying direct marketing can
leave people with a bad impression about your
business.
Be sure to adhere to privacy and contact laws
because there are stiff fines and penalties for
direct marketers that violate direct marketing
laws.
4. Should I Consider Direct Marketing?
Every business owner should consider direct
marketing. However, the type of direct
marketing that will work for your business
depends on your industry, your business
ethics, and your budget.

SALES PROMOTION

Sales promotion is one of the seven aspects of
the promotional mix. (The other six parts of
the promotional mix are advertising, personal
selling , direct marketing , publicity/public
relations, corporate image and exhibitions.)
Media and non-media marketing
communication are employed for a pre-
determined, limited time to increase consumer
demand, stimulate market demand or improve
product availability. Examples include contests ,
coupons , freebies, loss leaders, point of
purchase displays, premiums , prizes, product
samples , and rebates
Sales promotions can be directed at either the
customer, sales staff, or distribution channel
members (such as retailers ). Sales promotions
targeted at the consumer are called consumer
sales promotions. Sales promotions targeted
at retailers and wholesale are called trade
sales promotions. Some sale promotions,
particularly ones with unusual methods, are
considered gimmicks by many.
Sales promotion includes several
communications activities that attempt to
provide added value or incentives to
consumers, wholesalers, retailers, or other
organizational customers to stimulate
immediate sales. These efforts can attempt to
stimulate product interest, trial, or purchase.
Examples of devices used in sales promotion
include coupons, samples, premiums, point-of-
purchase (POP) displays, contests, rebates, and
sweepstakes.
Consumer sales promotion techniques
Price deal: A temporary reduction in the
price, such as 50% off.
Loyal Reward Program: Consumers collect
points, miles, or credits for purchases and
redeem them for rewards.
Cents-off deal: Offers a brand at a lower
price. Price reduction may be a percentage
marked on the package.
Price-pack deal: The packaging offers a
consumer a certain percentage more of the
product for the same price (for example, 25
percent extra).
Coupons: coupons have become a standard
mechanism for sales promotions.
Loss leader : the price of a popular product
is temporarily reduced in order to stimulate
other profitable sales
Free-standing insert (FSI): A coupon booklet
is inserted into the local newspaper for
delivery.
On-shelf couponing: Coupons are present at
the shelf where the product is available.
Checkout dispensers: On checkout the
customer is given a coupon based on
products purchased.
On-line couponing: Coupons are available
online. Consumers print them out and take
them to the store.
Mobile couponing: Coupons are available on
a mobile phone. Consumers show the offer
on a mobile phone to a salesperson for
redemption.
Online interactive promotion game:
Consumers play an interactive game
associated with the promoted product.
Rebates : Consumers are offered money back
if the receipt and barcode are mailed to the
producer.
Contests/sweepstakes/games: The consumer
is automatically entered into the event by
purchasing the product.
Point-of-sale displays:-
Aisle interrupter: A sign that juts into
the aisle from the shelf.
Dangler: A sign that sways when a
consumer walks by it.
Dump bin: A bin full of products
dumped inside.
Glorifier: A small stage that elevates a
product above other products.
Wobbler: A sign that jiggles.
Lipstick Board: A board on which
messages are written in crayon.
Necker: A coupon placed on the 'neck'
of a bottle.
YES unit: "your extra salesperson" is a
pull-out fact sheet.
Electroluminescent: Solar-powered,
animated light in motion.

Kids eat free specials: Offers a discount on
the total dining bill by offering 1 free kids
meal with each regular meal purchased.
Sampling: Consumers get one sample for
free, after their trial and then could decide
whether to buy or not.
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Trade sales promotion techniques
Trade allowances: short term incentive
offered to induce a retailer to stock up on a
product.
Dealer loader: An incentive given to induce
a retailer to purchase and display a product.
Trade contest: A contest to reward retailers
that sell the most product.
Point-of-purchase displays: Used to create
the urge of "impulse" buying and selling
your product on the spot.
Training programs: dealer employees are
trained in selling the product.
Push money: also known as "spiffs". An
extra commission paid to retail employees
to push products.
Trade discounts (also called functional
discounts): These are payments to distribution
channel members for performing some
function .