Friday, July 31, 2009

Place Management

Marketing channel are set of interdependent organization involved in the process of making a product or service available for use of consumption. Marketing channel decision is among the most critical decision facing management. The Channel chosen intimately affect all the other marketing decisions. Marketing channel make the product available to the customer. Physical distribution makes the product accessible to the channel members and customers. Organization often goes through tough time while deciding about channel. Hence, it has to properly designed the channel decision.

Channel Design Decision:
A new firm often starts with as a local operation selling in a limited market, using existing intermediaries. All the intermediaries must be local and linked with the manufacturer. Deciding about best channel might not be a problem.If the firm is successful, it might branch into few markets. It might have to use different channel in different markets. In small market, the firm might sell directly to retailers, in large market, it might sell through distributors.

While managing intermediaries, company uses push and pull marketing. A Push strategy manufacture uses its sales force and promotion budget to induce intermediaries. Push strategy is approximate where brand loyalty is low; brand choice is made at store etc. A Pull strategy manufacture uses the promotion and advertising to induce consumers to ask intermediate is for the product. This strategy is appropriate when there is high brand loyalty and when people choose the brand before go the shopping.

Designing a channel system involves four steps

1. Analyzing Customers desired service output levels
2. Establish objective and constraints
3. Identifying major channel alternative
4. Evaluating major channel alternative

Analyze Customers desired service output levels:

In designing the marketing channel, the marketer must understand the service output levels desired by target customers. Channel produce five service output

a) Lot Size
b) Waiting time
c) spatial Convenience
d) Product Variety
e) Service backup

A) Establishing Objective and Constraints

Channel objective vary with product characteristics. Base on product design and its use and sales, organization has to establish the channel objective. In same manner, channel design must take in account the strength and weakness of different type of intermediaries.

B) Identify major Channel alternative

Organization can use various channel intermediaries, sales force, wholesaler, dealers, agent, direct mail etc. Each channel has it own strength and weakness. Hence, it can decide by using three step while deciding abut channel

Type of Intermediaries:

Number of intermediaries:
Exclusive distribution, Selective distribution, Intensive distribution

Terms and responsibility of channel member:

Price policy, Condition of sales, Distributors territorial right

c) Evaluate the major alternatives:
Each channel alternative needs to be evaluated against economics, control and adaptive criteria. To evaluate, we can use two major criteria, which are Economics and Control Adaptive Criteria.

Economic Criteria:

Each channel alternative will produce a different level of sales and cost. As indicated on below mention figure. Seller would try to replace high cost channels with low cost channels when the value added per sales was sufficient. When seller discovers a continent lower cost channels they try their customer to use it.

Channel Management:

After a company has chosen alternative, individual intermediaries must be selected, trained, motivated and evaluated. Channel arrangement must be modified over time.

Selecting channel members:

Channel members are the key player between manufacturer and customer. To customer, the channel member is the company. Any negative impression by channel member toward manufacturer will affect the consumers buying decision. While deciding about recruit intermediaries, they should at least determine what characteristic distinguish the better intermediaries.
They should evaluate the number of years in business, other lines carried, growth and profit record, financial strength, cooperativeness and service reputation. If the intermediaries are sales agents, producer should evaluate the number and character of other line carried and the size and quality of sales force.

Training Channel Member:

Manufacturer need to plan and implement careful training program for their intermediaries, because they will viewed as the company by the end users. Channel intermediaries consist of Distributors, distributor’s sales force, Sales Agent, Sales Representative, Sale Person, manufactures sale force etc. Proper presentation by this group to end user will reflect the real impact or mirror of the manufacture to the end user. Hence, proper training to channel member is necessary to bring product close to reality.

Motivating Channel Member:

Manufacturer need to understand that channel intermediaries as important as the end users. The manufacturer needs to provide training program, market research program and other capability building program to improve intermediary’s performance. The company must communicate its vies that the intermediaries are partners in a joint effort to satisfy end user of the product.

Evaluating Channel members:

Manufacturer need to evaluate its channel member periodically , it can manage it evaluation base performance against such standards as sales quota attainment, average inventory levels, customers delivery time, treatment of damaged and lost goods and cooperation in promotion and training program.
Channel Dynamics

Product innovation developments are the key reason for the channel dynamics. New wholesaling and retailing institutions emerge, and new channel systems evolve.

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