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Transcript
Distribution Channel • Distribution role within a marketing mix is getting the product to • • • • Target Market A middlemen is a business that renders services related directly to sale/purchase of a product as it moves from producer to consumer. Normally middlemen are classified on the basis of whether they own /take title of products being distributed or not. Merchant middlemen take title of product ( Wholesalers & retailers ) Agent middlemen never actually own the product but do arrange the transfer of title. Real estate brokers, manufacturers agents ,travel agents. Factors affecting choice of channel Market Considerations • Type of Market. Reaching ultimate consumers & business users may be different depending upon their individual characteristics. Wholesaler may be for business & retailer for ultimate consumer. Number of potential customers: For few customers company sales might be used, may be for business users. More middlemen to reach big number of customers. Geographic concentration of Market: Direct sale or lesser no. of middlemen for concentrated market More channels for dispersed customer base. Order Size: Direct sales to super markets to serve big orders & wholesalers to sell to grocery stores Product considerations Unit Value: Company can afford to sell caterpillar or nuclear reactor directly to customer than to reach household to sell ball point. Perishability: Quicker pershability requires direct or minimum distribution channel. Technical nature of product: Technically complexed product may require company sales force to explain product features & use to business users. Middlemen Considerations • Services provided by middlemen: Each producer should select middlemen offering services which producer either can’t provide or can’t economically perform. Like promotion & explaining product features to customers. Availability of desired middlemen: Producer’s desired middlemen may not be available so may choose middlemen having distributed focus among different competing brands. Producer & Middlemen Policies: A middlemen may accept products of a brand only after assurance that the same brand will not be given to other middlemen Credit dealing may also be a matter of choice. Company Considerations • Desire for Channel control: • Some producers use lesser channel levels to have more control over product performance in the market. • Ability of Management: Some producers lacking marketing expertise may completely rely on middlemen for distribution & promotion of their products. Financial resources: A company with adequate finances may afford direct distribution channel. Selecting type of Channel Distribution of Consumer Goods • Producer ______Consumer Producer______Retailers_______Consumers Producer___Distributor Wholesalers____Retailers_____Consumers Distribution of Business Goods • Producer_____User ( For very highly priced goods ) • Producer_________Industrial distributor _________User For small accessory equipment Printer cartridges Distribution of Services • Producer_____Consumer ( Haircut, weight losing councelling ). • Producer_______Agent_________Consumer • (Advertising / Entertainment ) A producer may use multiple channels to reach different market segments Intensity of Distribution • Intensive Distribution : • For convenience goods, making available at every retail store • Selective : • Selling to Few Middle men: • May be due to better control over middlemen • Exclusive: • Selling through one distributor Channel Management Decisions • Selecting Channel Members Producers vary in their ability to attract qualified marketing intermediaries. • Motivating Channel Members. • The company must not sell through the intermediaries, but to them. Positive motivators may include higher margins, cooperative adv. Allowance e.t.c. In case of-non-compliance, threat to reduce margins & delay in delivery may be used. Channel Management Decisions • Evaluating Channel Members. The producer should monitor performance of intermediaries against sales quota, average inventory level, customer delivery time, treatment of damaged & lost goods, cooperation in company promotion e.t.c Horizontal Conflict • Wholesaler with Wholesaler or Retailer with Retailer Vertical Conflict • Producer with Wholesaler • Producer with Retailer Conventional Marketing System • It consists of one or more independent producer, wholesalers and retailers. • Each is separate business seeking to maximize its own profits, even at the expense of profit for the system as a whole. • No channel member has much control over the other members. Vertical Marketing System (VMS) • In contrast to conventional distribution channel, it consists of producers , wholesalers & retailers acting as a unified system. • How? • One channel member owns the other or has contracts with them or has so much power that they all cooperate. Types of VMS • Corporate VMS Coordination & conflict management are attained through common ownership at different levels of channels. • Example:Owned by company • Contractual VMS: it consists of independent organizations at different levels of production & distribution, which join together through contracts to obtain economies or sales impact than each would do individually. Coordination & conflict management are attained through legal agreements Example : Franchise ( three types ) Types of Franchise • Manufactured sponsored retailer franchise system. ( Automobile ) • Manufactured sponsored wholesaler franchise system.. ( Pepsi / Coca Cola ) • Service firm sponsored franchise (Mcdonald’s ) Types of VMS • Administered VMS: • It coordinates successive stages of production & • distribution not through common ownership or contractual ties, but through the size & power of the parties. Manufacturers of top brands can obtain such cooperation