Marketing Channels and Retail Supply - Marketing Essay Example
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Different companies use different marketing methods and techniques to boost their sales. The marketing basically creates awareness among the people about the product that product is available in the market for the end users. After the production, when the product reached to its finished good. Then the companies adopt different strategies to dispatch the product. Companies never directly approach to the market to sell their product or services. There are some intermediaries performing different functions.
“Marketing channel are sets of interdependent organizations involved in the process of marketing a product or services available for use or consumption. They are the set of path ways a product or service follows after production, culminating in purchase and use by the final end user.” (Kotler et al 2006)
Marketing Channel involves different intermediaries that takes product from the warehouse to the market to resell them in the market i.e. retailers, wholesalers, and distributors. Apart from them, there are agents. Agents personally approach to people, other words they act as a producer. He negotiates with them and makes them to buy the product. Other marketing channels help to “assist in the distribution process but neither take title to goods nor negotiate purchase or sales; they are called facilitators”. (Kotler and Lane, 2006) Proper marketing channel ensures that the product is reaching to its proper place and in right hands. Marketing can be direct from producer to the consumers or it can be intermediaries involve in the process. “The physical distribution structure that moves a product from the manufacturer to the consumer or user and the marketing structure that is established as a part of the channel of distribution to ensure the manufacturer that all marketing objectives are accomplished”. (Mccalley, 1992)
Process Involve In Marketing Channel
According to Russell during marketing channels, different actions are evolving. Those actions are commonly present in every marketing process. They are:
1. Communication: The interaction with the people during marking refers as a communication. It can be mailing, phoning, interacting with the individuals during selling the product. Through better communication producer can come to the evaluation that his product can do better in the market and will provide profit in the future. “Channel communications are a two-way system, with information also flowing from the user all the way back to the manufacturer”. (Mccalley, 1992)
2. Selling: Selling is the most important part of marketing channel. Firms are just producing the products in order to sell them and gain their profits. Selling the product is the basic motive of every producer. From the producer till the seller all are involve in this process.
3. Storing: the finished goods have to be transfer to the safe or public place from where wholesalers or distributors dispatch the product. The companies mostly hire warehouses or stores where they store the product through transportation or shipping. “Shipping and storing of products take place at every level of the channel, with the general exception of the user. In some specific situations, product handling, transporting, and storage may also
be performed by users of industrial products”. (Mccalley, 1992)
4. Customer Services: from the last few years companies totally changes their hierarchy. The main top level of hierarchy consists of valued-customers. Mostly the companies’ first priority is to satisfy their customers at any level.
Importance of Channels
Marketing channel is the process that involves different individuals at a same time. This system is assigned by the company and effective marketing channel system reflects the good decision-making power of the manager. Around the world companies are paying a high salary to the marketing managers. “In the United States, channel members collectively earn margins that account for 30 to 50 percent of the ultimate selling price” (Kotler and Lane, 2006)
Marketing channel is a process that involves very high cost. All over the world big companies are spending millions and billions on their marking. Like Nike, dell, Mc Donalds. Cost of marketing depends on type of marketing channel the companies are adopting. The lowest cost of marketing is on the internet.
There are two main types of marking strategies that companies cater while adopting marketing channel. The strategies are:
1. Push Strategy: involves when the producer advertise, market it products to create awareness among the people about the product. Push strategy works on the places where there is low brand loyalty and mostly they are impulse items or everyday product.
2. Pull Strategy: involve where customers are highly brand loyal and ask for the product. In this scenario the product advertise it product in such a manner that intermediaries crave to buy it from the producer.
When the company jumps into the market as a new firm, it uses the direct selling strategy to market it product. Because the market is limited and the people are not aware of the company. The middlemen already exist in every market like wholesalers, retailers and distributors. Choosing best channel is not a problem for the firm but to offer the middlemen to be a part of an organization and handle the firm’s line is a great problem for the company. (Kotler and Lane, 2006)
Gradually if the company started moving better in the market it will exaggerate it marketing channel and will use retailers for small markets, distributors for large markets.
Different companies are using multiple ways to market the product. Now a day’s companies are also using hybrid channels. Hybrid channel is a new way of doing business. If companies are going towards this channel it should keep a track to watch that channels are working properly together and “match each target customer preferred ways of doing business”. (Kotler and Lane, 2006) Channel integration is one of the other ways which the customer wants from the companies to offer that. Featuring:
· The customer can use the internet to buy the product and he can easily hold the product from the company’s nearest retail outlet.
· If the customer wouldn’t like the product or want to exchange the product, he can conveniently do that through nearest retail store.
· Customers want to get discounts on whatever product they buy.
Types of Channel Distribution
There are different levels of channel distribution. In channel distribution diverse interdependent organizations are involved. But in every level producer and end consumer involved.
· Channel A: It involves producer and consumer. Producer directly approach to the consumer to offer it goods and services. It consist of door to door selling, Telemarketing, e-commerce etc. Many companies adopt this type of marketing by selling their product online, or through visiting personally. Channel A is like:
Producer ————————————————> Consumer
· Channel B: It involves middleman i.e. Retailer. The retailer buys the product from the producer and resells it to the end consumer.
Producer —————–à Retailers ——————–à Consumer
· Channel C: This level consist of two middlemen i.e. wholesaler and retailer.
Producer ———-à Wholesaler ——-à Retailer ——–à Consumer
· Channel D: Te number of mediators increases in this level. Now it involves Agents Wholesalers and retailers. This kind of channel distribution specially works in meat markets.
Producer—–à Agents —-à Wholesalers —-à Retailers —–à Consumers
Retailing involves all the actions in selling a product and service. Retailing can be done by wholesaler or can be done through agents. Each process through which consumers are getting the product is related to retailing. “A Retailer must derive more than 1/2 of their sales from the ultimate consumer of the product to be classified a retailer” (http://www.udel.edu/alex/chapt17.html)
Types of Retailers
People mostly shop on the big stores and want to buy a better product. Retailers are the organizations. They want to fulfill the needs of the consumers. The major retail types are:
Specialty stores, departmental stores, superstores, convenience stores, discount stores, off-price retailers, super markets, and catalog showrooms. The retail stores took a long period to get into the phase of maturity.
Level of Service
Different retailers provide different level of services. Some retail stores increase their way of providing service to the customers and also boost the prices of the product and cover the cost from there. On the other hand, some retailers lower the prices and quality both.
High | Price Department Stores
| Specialty Stores
Discount Stores |
Factory Outlets |
Retailers level them selves through different type of services:
Self-service: It is the foundation of discounts offer on various retail shops.
Self-selection: Customer approaches to their desire product by themselves or take a help to guide them.
Limited Service: These kinds of retailers buy product from all over the world for their customers and want customers to inform them about the product because those customers are the product and knowledge seekers.
Full service: this is high cost retailing, in which they are paying high salary to there staff members. Customers enjoy shopping these types of stores and giving priority to such stores.
Strategic Issues in Retailing
“Consumer purchases are often the results of social influences and psychological factors. Need to create marketing strategies to increase store patronage”. (http://www.udel.edu/alex/chapt17.html)
Target Market: the retail companies should first have to decide its target market. Targeting the market help the company in advertising, selling and in store decors.
Product Assortment: the retailers have to decide itself how the company can assort it products. Customers expect variety in the store. There are different ways of assortment like deep or narrow, broad or shallow, broad or deep.
Procurement: the procurement is the important process through which retailer’s selects product in which they are fully sure that the customers will buy them. In this stage the retailers make strategies, polices that will they merchandise the product.
· Services and store atmosphere: the retailers should take a deep look in the pre-purchase, post purchase services. Retailers should provide a good atmosphere in the store so that customer will stay and shop. “Supermarkets have found that varying the tempo of music affects the average time spent in the store and the average expenditure”. (Kotler and Lane, 2006)
Store Image: “Mental picture that a retailer tries to project to the consumer. To a consumer, it is a person’s attitude towards a store. Need to project an image, a functional and psychological image in consumer’s minds that is acceptable to the target market. Depends on the atmospherics, reputation, number of services offered, product mix, pricing etc.” (http://www.udel.edu/alex/chapt17.html)
Chapter 17, Retailing, Class Notes
<http://www.udel.edu/alex/chapt17.html> Accessed on October 20, 2006
Chapter 15, Class Notes
<http://www.udel.edu/alex/chapt15.html> Accessed on October 20, 2006
Philip Kotler and Keller Kevin lane. (2006) Marketing Management. Pearson Education (Singapore) Pte. Ltd., Indian Branch.482 F.I.F patparganj, Dehli, India. Twelfth Edition. (12e) pages 432- 479
Russell W. Mccalley. (1992) Marketing Channel Development and Management. Publisher: Quorum Books. Westport, CT, 1992
Rosemary Varley. Retail Product Management Buying and Merchandising. Routledge, London, 2001
William Lazer. Marketing Management A Systems Perspective. John Wiley & Sons, Inc. New York, 1971