MARKETING

The management process through which goods and services move from concept to the customer. It
includes the coordination of the P's of marketing:

(1) identification, selection and development of a product,

(2) determination of its price,

(3) selection of a distribution channel to reach the customer's place, and

(4) development and implementation of a promotional strategy.

(5) the skills and qualities of the people needed to ensure its success.

(6) the processes involved in a product’s delivery.

(7) the physical context and paraphernalia that come along with the product.

Marketing Concept

The marketing concept is the philosophy that firms should analyze the needs of their customers and
then make decisions to satisfy those needs, better than the competition. Today most firms have adopted
the marketing concept, but this has not always been the case.

The marketing concept is the strategy that firms implement to satisfy customers’ needs, increase sales,
maximize profit and beat the competition. There are five marketing concepts that organizations adopt and
execute.

A. Production Concept
The idea of production concept – “Consumers will favor products that are available and highly affordable”.
This concept is one of the oldest Marketing management orientations that guide sellers. Companies
adopting this orientation run a major risk of focusing too narrowly on their own operations and losing sight
of the real objective. Most times; the production concept can lead to marketing myopia. Management
focuses on improving production and distribution efficiency. Although; in some situations; the production
concept is still a useful philosophy.

B. Product Concept
The product concept holds that the consumers will favor products that offer the most in quality,
performance and innovative features. Here; under this concept, marketing strategies are focused on
making continuous product improvements. Product quality and improvement are important parts of
marketing strategies, sometimes the only part. Targeting only on the company’s products could also lead
to marketing myopia. For example; Suppose a company makes the best quality Floppy disk. But a
customer does really need a floppy disk? She or he needs something that can be used to store the data.
It can be achieved by a USB Flash drive, SD memory cards, portable hard disks, and etc. So that
company should not look to make the best floppy disk. They should focus to meet the customer’s data
storage needs.

C. Selling Concept
The selling concept holds the idea- “consumers will not buy enough of the firm’s products unless it
undertakes a large-scale selling and promotion effort”. Here the management focuses on creating sales
transactions rather than on building long-term, profitable customer relationships. In other words; The aim
is to sell what the company makes rather than making what the market wants. Such aggressive selling
program carries very high risks. In selling concept the marketer assumes that customers will be coaxed
into buying the product will like it, if they don’t like it, they will possibly forget their disappointment and buy
it again later. This is usually very poor and costly assumption. Typically the selling concept is practiced
with unsought goods. Unsought goods are that buyers do not normally think of buying, such as insurance
or blood donations. These industries must be good at tracking down prospects and selling them on a
product’s benefits.

D. Marketing Concept
The marketing concept holds- “achieving organizational goals depends on knowing the needs and wants
of target markets and delivering the desired satisfactions better than competitors do”. Here marketing
management takes a “customer first” approach. Under the marketing concept, customer focus and value
are the routes to achieve sales and profits. The marketing concept is a customer-centered “sense and
responds” philosophy. The job is not to find the right customers for your product but to find the right
products for your customers. The marketing concept and the selling concepts are two extreme concepts
and totally different from each other.

E. SOCIETAL MARKETING CONCEPT

Societal marketing concept questions whether the pure marketing concept overlooks possible conflicts
between consumer short-run wants and consumer long-run welfare. The societal marketing concept holds
“marketing strategy should deliver value to customers in a way that maintains or improves both the
consumer’s and society’s well-being”. It calls for sustainable marketing, socially and environmentally
responsible marketing that meets the present needs of consumers and businesses while also preserving
or enhancing the ability of future generations to meet their needs. The Societal Marketing Concept puts
the Human welfare on top before profits and satisfying the wants. The global warming panic button is
pushed and a revelation is required in the way we use our resources. So companies are slowly either fully
or partially trying to implement the societal marketing concept.

The P’s of Marketing

1. Product
The product should do what the customer wants or needs it to do. Whether it’s a CPG product (Consumer
Packaged Goods), a luxury item, a digital service or anything else, it should live up to the expected level
of quality. In order to design or identify a suitable product, the business should conduct thorough research
into the tastes, requirements and buying habits of its target audience. This research-backed approach
provides a surer path to commercial success than simply creating a product under the assumption it will
find its place in the market.

2. Price
The product should be sold at a price which the target audience deems to be good value-for-money.
When calculating a product’s price, we must take into account all the costs entailed in producing,
promoting and delivering that product. If production and promotion are set to carry relatively high costs,
this should be reflected in an appropriately high price.
Effective pricing is not a simple matter of offering a cheaper alternative to the competition. Imagine you’re
in a supermarket, browsing the wine section. Whether consciously or not, you will likely select a bottle
within a quite specific price range, which is habitual to you. You’re highly unlikely to consider the bottles
well outside of your habitual price range – even if a cheaper alternative is in-fact better suited to your
taste. Thus, the cut-price vintner’s under-pricing of the product causes them to miss out on a sale.
The superior approach, then, is to identify the price your target customer is used to paying for products
similar to your own, taking into account your costs and the profit margin required.

3. Place
The product should be available where the customer expects to find it, e.g. in supermarkets, at boutiques,
or online. Let’s say you’ve got an amazing sandwich bar in the making, and you decide to place it in a top
restaurant district. This would be a serious misplacement, as you’d be targeting the wrong market.
Further, we must identify how the product should be presented in each context. For example, which aisle
of a supermarket should a CPG product be stocked in? Should it be sold in a trade promotion? In which
contexts should it appear as an online ad?
Place also takes into account the logistical factors affecting a product’s profitability, such as storage and
distribution. This is as true of digital products as it is of traditional ones, with factors such as website
design and hosting costs to consider.
In ecommerce, the device type preferences of the target audience should also be factored into your
planning. Your customers’ desktop, tablet and mobile usage habits should determine the level of priority
you give to each device in your digital marketing.
4. Promotion
The product should be promoted to the appropriate audience via appropriate channels, using advertising
methods which resonate with that audience. These channels may include (and are not limited to):
 branding
 advertising
 PR
 corporate identity
 social media
 content marketing
 influencer marketing
 sales management
 promotions
 exhibitions
The product/service benefits and features highlighted through promotion should align with the audience’s
most compelling requirements. Promotion may differ somewhat in tone and content from channel to
channel – but never in such a way as to create contradictions.
 5. People
The team involved in the delivery of the project should possess the skills and qualities needed to ensure
its success (barring unforeseen mishaps).
This is perhaps especially true of customer-facing staff, whose communication and behaviour will greatly
impact the audience’s perception of the brand. You could well have developed the best product of its kind
– but if your customer-facing people are off-putting to customers, the project will not reach its full
commercial potential.
As such, marketing teams must put in place processes and best practices for how customer-facing team
members behave publicly and communicate with customers. Methods for doing this include distributing
a social media policy, paying attention to communication skills when hiring customer-facing staff,
providing training on good communication, and imposing disciplinary measures to deter misbehaviour.

6. Processes
The processes involved in a product’s delivery will significantly affect the customer’s experience, level of
satisfaction, and lifetime value to your business. These processes may include (and are not limited to):
 Website user experience
 Delivery time
 Delivery methods and service
 In-store wait time
 Communicating with customer support
 Aftercare
In addition to the processes used to deliver a product or service, we must also have processes in
place for when something goes wrong – for example, the allocation of appropriate compensatory gifts
for customers who’ve had a bad experience.

7. Physical evidence
The final P refers to the physical context and paraphernalia (such as receipts, “thanks for ordering” cards,
confirmation emails and PDF invoices) that come along with the product. In order to reinforce the
product’s and the seller’s credibility, these components should exhibit the qualities customers expect of
them, based on up-to-date industry standards.
For example, precious jewelry might be displayed within a locked cabinet; ethical supermarkets might
choose to use as little print as possible on their receipts (or offer digital receipts as an alternative), and
doctors’ surgeries should look suitably clinical. In a nutshell, “Physical evidence” is all about ensuring
every component involved with the product adheres to the same brand values as the product itself. This
creates a consistent, convincing experience for the customer.
Product Classification – Types of Products

There are three fundamental types of product classification which are durable and non durable products
and pure services. Durable products are those products, which are used for longer period of time, such
as Freezer, Car, Mobile Phones, Shoes, and TV, etc. Non durable products are those products, which we
need to use quickly as these products expired after some specific period of time. Such as all the
vegetables, fruits, and juices, etc.

Pure services include those benefits that are intangible or inseparable in nature and are offered for sale to
customers. Ownership of nothing is transferred because these products are experiential in nature.
Accountant, Doctors, Lawyer, and Teaching, etc are the best examples that indicates the term pure
services.

These all products are purchased by either industrial buyer or final consumer. The consumer products are
purchased by final consumers for personal consumption. The industrial products are purchased by the
organizations for their usage in the processing operations & administration. Moreover the industrial
products are used mostly which includes consumables like raw materials or paper clips that can be
transformed into finished products.

Product classification that is also known as different types of products. These types of products or product
classification are as below in three different forms.

1. Consumer Products
2. Industrial Products
3. Persons, Organizations, Ideas & Places

1. Consumer Products

Those products that are purchased by final consumers for personal consumption are called consumer
products. The way of purchasing these products provides the basis for the marketer to further classify
these products. The following is an important classification of these consumer products on the basis of
the manner of purchase & manner of marketing.

 Convenience Products

Those consumer products that are purchased immediately & frequently with little efforts and comparison
are called convenience products. Examples of convenience products include the following: candy,
newspapers, soap, fast food etc. The convenience products are placed at the front locations of the stores
in abundance quantity so that they are easily available to the customers. The price of these products is
kept lower.

 Shopping Products:

This type of product is purchased less frequently & careful comparison is made by the customer on the
price, quality, sustainability & style. In case of purchase of shopping products, increased time & effort is
made by the customers in collection of information & comparison making. Following are some of
examples of shopping products: clothing, furniture, major appliances, used cars, hotel and motel services.
These products are distributed in fewer outlets by the marketer along with the strong sales support
services that assist customers in their comparison making.

 Specialty Products:

Specialty products are those consumer products that have brand identification or unique characteristics
and an important group of customers are happy to purchase these products. Following are some of
examples of specialty products: specific brand and kinds of cars, photographic equipment with high price,
designer clothes, the services of legal or medical specialist. The customers of such products can make
enough effort with them for reaching relevant dealers. However, they do not compare the specialty
products normally.

 Unsought Products:

Those consumer products that are either not known to the customers or they are known, but customers
do not usually consider them to purchase. The important innovations are usually included in the category
of unsought products because the customers get the awareness through advertisement. Following are
the examples of unsought products: life insurance, blood donation to Red Cross. A lot of personal selling,
advertising & marketing efforts are required for unsought products.

2. Industrial Products:

Those products that are purchased that are buying for further processing or for use in operating a
business are called industrial products. So the main difference between industrial and consumer product
is based on the purpose of purchase of the product. For example, if a lawn mower product is purchased
for use around the house, then this lawn mower is categorized in the consumer product. But if the same
lawn mower is purchased for use in landscaping business, then this is categorized as an industrial
product. Following are some of the three product classification of industrial products.

 Material & Parts:

Raw materials, natural products & manufactured materials are included in the category of material &
parts. Farm products & natural products are included in raw material part like cotton, wheat, vegetables,
fruits, fish, crude petroleum, iron etc. Component materials & component parts are included in the
manufactured area like yarn, wires, cement, iron, tires, small motors etc. Manufactured material & parts
are mostly sold to the industrial users directly. Major marketing factors employed in this category are price
& service. The advertising & branding is not so much important. Also the demand of the industrial
products is derived demand, which is derived from the consumer demand.

 Capital Items:

Those industrial products that assist the production & operation of customer are called capital items like
accessory equipment’s & installations. Building & fixed equipment’s are included in the installations.
Office equipment & portable factory equipment are included in the accessory equipment. Accessory
equipment’s have much shorter lifetimes & they are only helpful in the process of production.

 Supplies & Services:

Supplies contain repair & maintenance items and operating supplies like nails, paint, lubricants, pencil,
paper, coal etc. The supplies are regarded as the industrial convenience products because they are
purchased with little effort & time. Business advisory services and repair & maintenance services are
included in business services category. These services are given under some contract.

3. Persons, Organizations, Ideas & Places:

The marketing entities named persons, organizations, ideas & places are also included in the category of
products recently. The organization sells itself by carrying out certain activities like creating, maintaining &
changing the behavior & attitude of customers for an organization. Similarly, people also perform certain
activities for development, maintenance & change of behavior & attitude towards certain people through
person marketing. Similarly the ideas & places are also regarded as products.

Product Labeling
Labeling a product means giving your product a name that is easily recognizable, distinct and somehow
related to the product's primary purpose or attributes. Naming or labeling your product effectively is critical
to the development of a branding strategy that works. A product name that is marketable is part of the
strategy in creating a label. Companies that make single products often label the product with the
company's name for simplicity. Those that make or resell multiple products have to consider a variety of
factors in labeling.
Labeling Strategy
When considering labels for new products in an evolving product line, companies have a couple
approaches. In some cases, companies choose to maintain a constant naming strategy with successful
brands, while others opt for new names to distinguish new features or benefits. Apple named new
versions of its iPad with names such as "iPad2" and "iPad mini" to promote similar benefits but slightly
different variations. Conversely, Nintendo labeled its family-oriented, active video game system the "Wii",
which is quite distinct from its prior line of traditional game systems, such as the original Nintendo and the
Nintendo64.
Branding
Branding an image around a product name and related symbols is important to a successful product
launch and long-term success. Established companies with strong brand images have an advantage in
carrying over company qualities. Apple is known for mobile technology innovation, which plays well in its
iPhone, iPad and iPod product lines. Conversely, with totally new product launches or unknown brand
images, companies must carve out distinct, impacting brand positions. Keurig made itself a leader in the
single-cup coffee brewing systems with total labeling and branding approach that included "K-Cup" coffee
refills.
Packaging
A key factor the brings together the merits of product labeling and branding is package design. Attractive
product packaging that gets customer attention and clearly identifies the product's core benefits impacts
point-of-sale success. Products made from recycled material are often packaged in green paper or
wrapping and include symbols of environmental responsibility, such as a green leaf. This immediately
conveys the benefits of the brand and product.
Pricing Strategies in Marketing
1. Penetration Pricing or Pricing to Gain Market Share
A few companies adopt these strategies in order to enter the market and to gain market share. Some
companies either provide a few services for free or they keep a low price for their products for a limited
period that is for a few months. This strategy is used by the companies only in order to set up their
customer base in a particular market. For example France telecom gave away free telephone
connections to consumers in order to grab or acquire maximum consumers in a given market. Similarly
the Sky TV gave away their satellite dishes for free in order to set up a market for them. This gives the
companies a start and a consumer base.

In the similar manner there are few companies that keep their product cost low as their introductory offer
that is a way of introducing themselves in the market and creating a consumer base. Similarly when the
companies want to promote a premier product or service they do raise the prices of the products and
services for that particular time.

5. Pricing Optional Products

It is a general approach, if the companies decrease the price of a product or a service they do increase
their price for their other available optional services. Let’s take a very simple and a common example of a
budget airline. The prices of their airfare are low however they will charge you extra if you want to book a
window seat, if you want to travel with your family and want to book an entire row together you might
have to end up paying extra charges as per the their guidelines, in case you have too much of luggage to
carry you will end up paying extra on the same, in fact you will end up paying extra charges even if you
need extra leg space in a budget airlines. You can say that even if the price of the air fare is low you will
end up paying more for the extra yet mandatory services that you will require as you travel.

6. Pricing of Captive Products

Captive products have products that compliment the products without which the main product is of no use
or is useless. For example an inkjet printer is of no use without its cartridge it will not work and have no
value and a plastic razor will have no value without its blades. If the company is manufacturing the inkjet
printer it will have to manufacture its cartridges and if the company is manufacturing a plastic razor it will
have to manufacture blades for the same. For a simple reason that any other company cartridge will not
fit into the inkjet printer and neither will any other companies blade fit into the plastic razor. The consumer
has no other option but to buy the complementary products from of the same company. This increases
the sales and the profit margin of the company anyways.

7. Pricing for promotions

Promotional pricing is very common these days. You will find it almost everywhere. Pricing for promoting
a product is another very useful and helpful strategy. These promotion offers can include, discount offers,
gift or money coupons or vouchers, buy one and get one free, etc. to promote new and even existing
products companies do adopt such strategies where they roll out these offers to promote their products.
An old strategy yet it is one of the most successful pricing strategies till date. Reason of its success is that
the consumer considers buying the product and service for the offer that the consumer receives.

8. Pricing as Per Geographic Locations

For simple reasons such as the geographic location the companies do vary or change the price of the
product. Why does location of the market affect the price of the product? The reasons can be many well
some are scarcity of the product or the raw material of the product, the shipping cost of the product, taxes
differ in a few countries, difference in the currency rate for products, etc.

Let’s take a few pricing strategies examples, when a few fruits are not available in a country they are
imported from another country, these fruits are exotic fruits, they are also scarce this increases their value
in the country they are imported to, scarcity, the shipping cost of the imported product along with its
quality increase its price, where as it is much cheaper where it is originally grown. Similarly the
government implies heavy taxes on a few products such as petrol or petroleum products and alcohol to
increase their revenue; hence such products are expensive in a few countries or part of the country
compared to the other parts. Geographic location does create a huge impact on the pricing strategy of a
product as the company has to consider every aspect before they price a product. Hence the price needs
to be perfect and appropriate.

9. Value Pricing a Product

Let me first be clear about what value pricing means, value pricing is reducing the price of a product due
to external factors that can affect the sales of the product for example competition and recession; value
pricing does not mean that the company has added something or increased the value of a product. When
the company is afraid of factors such as competition or recession affecting their sales and profits the
company considers value pricing.

10. Pricing of Premium Products

Well this strategy works just the other way round. Premium products are priced higher due to their unique
branding approach. A high price for premium products is an extensive competitive advantage to the
manufacturer as the high price for these products assures them that they are safe in the market due to
their relatively high price. Premium pricing can be charged for products and services such as precious
jewelry, precious stones, luxurious services, cruses, luxurious hotel rooms, business air travel, etc. The
higher the cost the more will be the value of the product amongst that class of audience.
2. Economy pricing or No Frill Low Price
The pricing Strategies of these products are considered as no frill low prices where the promotion and the
marketing cost of a product are kept to a minimum. Economy pricing is set for a certain time where the
company does not spend more on promoting the product and service. For example the first few seats of
the airlines are sold very cheap in budget airlines in order to fill in the airlines the seats sold in the middle
are the economy seats whereas the seats sold at the end are priced very high as that comes under the
premium price strategy. This strategy sees more economy sales during the time of recession. Economy
pricing can also be termed as or explained as budget pricing of a product or a service.

3. Use of Psychological Pricing Strategies

Psychological pricing Strategy is an approach of gathering the consumer’s emotional respond instead of
his rational respond. For example a company will price its product at Rs 99 instead of Rs 100. The price
of the product is within Rs 100 this makes the customer feel that the product is not very expensive. For
most consumers price is an indicating factor for buying or not buying a product. They do not analyze
everything else that motivates the product. Even if the market is unknown to the consumer he will still use
price as a purchase factor. For example if an ice cream weighted 100 gms for Rs 100 and a lesser quality
ice cream weighted 200 gms is available at Rs 150, the consumer will buy the 200 gms ice cream for Rs
150 because he sees profit in buying the ice cream at lower cost ignoring the quality of the ice cream.
Consumers are not aware price is also an indicator of quality.

4. Pricing Strategies of Product Line

Products line pricing is defined as pricing a single product or service and pricing a range of products. Let
us take and understand this with the help of an example. When you go for a car wash you have an option
of choosing a car wash for Rs 200 or a car wash and a car wax for Rs 400 or the entire package including
a service at Rs 600. This strategy reflects a strategic cost of making a product popular and consumed by
the consumer with a fair increment over the range of the product or the service. In another example if you
buy a pack of chips and chocolate separately you end up paying a separate price for each product;
however of you buy a combo pack of the two you end up paying comparatively less price for both and if
you buy a combo of both in a higher quantity you end up paying even lesser.

For the manufactures of the product manufacturing and marketing of larger pack is much more expensive
as it does not fetch them good amount of profit, however they do the same to attract more consumers and
keep them interest in their products. On the other hand manufacturing smaller packs and lesser quantity
is more beneficial and fetches more profit for the manufacturer of the product.

PLACE – AN INTRODUCTION
In the marketing mix, the process of moving products from the producer to the intended user is
called place. In other words, it is how your product is bought and where it is bought. This movement could
be through a combination of intermediaries such as distributors, wholesalers and retailers. In addition, a
newer method is the internet which itself is a marketplace now.

Through the use of the right place, a company can increase sales and maintain these over a longer
period of time. In turn, this would mean a greater share of the market and increased revenues and profits.

Correct placement is a vital activity that is focused on reaching the right target audience at the right time.
It focuses on where the business is located, where the target market is placed, how best to connect these
two, how to store goods in the interim and how to eventually transport them.

DISTRIBUTION CHANNELS & INTERMEDIARIES

What is a Distribution Channel?

A distribution channel can be defined as the activities and processes required to move a product from the
producer to the consumer. Also included in the channel are the intermediaries that are involved in this
movement in any capacity. These intermediaries are third party companies that act as wholesalers,
transporters, retailers and provide warehouse facilities.

Types of Distribution Channels

There are four main types of distribution channels. These are:

Direct

Producer------------------------------------------- Consumer
In this channel, the manufacturer directly provides the product to the consumer. In this instance, the
business may own all elements of its distribution channel or sell through a specific retail location. Internet
sales and one on one meetings are also ways to sell directly to the consumer. One benefit of this method
is that the company has complete control over the product, its image at all stages and the user
experience.

Indirect

In this channel, a company will use

an intermediary to sell a product to the consumer. The company may sell to a wholesaler who further
distributes to retail outlets. This may raise product costs since each intermediary will get their percentage
of the profits. This channel may become necessary for large producers who sell through hundreds of
small retailers.

Dual Distribution

In this type of channel, a company may use a combination of direct and indirect selling. The product may
be sold directly to a consumer, while in other cases it may be sold through intermediaries. This type of
channel may help reach more consumers but there may be the danger of channel conflict. The user
experience may vary and an inconsistent image for the product and a related service may begin to take
hold.

Reverse Channels

The last, most non tradition channel allows for the consumer to send a product to the producer. This
reverse flow is what distinguishes this method from the others. An example of this is when a consumer
recycles and makes money from this activity.

Types of Intermediaries

Consumer Products
Producer---------------------------------------------------------------------------------------- Consumer
Producer------------------------------------------------------------Retailer------------------ Consumer
Producer---------------------------------- Wholesaler-----------Retailer------------------ Consumer
Producer------------Agent-------------- Wholesaler-----------Retailer------------------- Consumer

Business Goods
Producer-----------------------------------------------------------------------------------------Business Client
Producer--------------Agent--------------------------------------------------------------------Business Client
Producer----------------------------------------------Wholesaler-----------------------------Business Client
Producer--------------Agent------------------------Wholesaler------------------------------Business Client

Services
Service Provider---------------------------------------------------------------Consumer or Business Client
Service Provider-------------Agent-------------------------------------------Consumer or Business Client

Distribution channel intermediaries are middlemen who play a crucial role in the distribution process.
These middlemen facilitate the distribution process through their experience and expertise. There are four
main types of intermediaries:

1. Agents
The agent is an independent entity who acts as an extension of the producer by representing them to the
user. An agent never actually gains ownership of the product and usually make money from commissions
and fees paid for their services.

2. Wholesalers
Wholesalers are also independent entities. But they actually purchase goods from a producer in bulk and
store them in warehouses. These goods are then resold in smaller amounts at a profit. Wholesalers
seldom sell directly to an end user. Their customers are usually another intermediary such as a retailer.

3. Distributors
Similar to wholesalers, distributors differ in one regard. A wholesaler may carry a variety of competition
brands and product types. A distributor however, will only carry products from a single brand or company.
A distributor may have a close relationship with the producer.
 4. Retailers
Wholesalers and distributors will sell the products that they have acquired to the retailer at a profit.
Retailers will then stock the goods and sell them to the ultimate end user at a profit.

Importance of Distribution Channels

It may seem simplistically possible and smarter for a company to directly distribute its own products
without the help of a channel and intermediaries. This is especially so because the internet allows sellers
and buyers to interact in real time. But in actual practice it may not make business sense for a company
to set up its own distribution operation. Large scale producers of consumer goods for example, need to
stock items of basic necessity such as soap, toilet paper and toothpaste in as many small and large
stores in as many locations as possible. These locations may be as close together as two on the same
street. They may also be remote rural convenience stores, rest stops and petrol stations. It would be
counterproductive and costly for the company to attempt to achieve this without a detailed distribution
channel.

Even in cases where a company does sell directly, there remain activities that are performed by an
outside company. A laptop may be sold from a company website to a consumer directly, but it will be sent
out using an existing courier service. This is why, in some form or the other, all producers must rely on a
distribution channel.

MAKING CHANNEL DECISIONS

Setting Goals and Direction

The first step to deciding the best distribution channel to use, a company needs to:

 Analyze the customer and understand their needs

 Discuss and finalize channel objectives

 Work out distribution tasks and processes.

Some key questions to ask in finalizing these three areas include:

 Where do users seek to purchase the product?

 If is a physical store, is it a supermarket or a specialist store? Is it an online store or a catalogue?

 What is the access available to the right distribution channels?

 What are competitors doing? Are they successful? Can best practices be used in making channel
decisions?

Selecting Distribution Strategies

A company may need to use different strategies for different types of products. Three main strategies that
can be used are:

 Intensive Distribution – This strategy may be used to distribute lower prices products that may be
impulse purchases. Items are stocked at a large number of outlets and may include things such as mints,
gum or candy as well as basic supplies and necessities.

 Selective Distribution – In this strategy, a product may be sold at a selective number or outlets. These
may include items such as computers or household appliances that are costly but need to be somewhat
widely available to allow a consumer to compare.

 Exclusive Distribution – A higher priced item may be sold at a single outlet. This is exclusive
distribution. Cars may be an example of this type of strategy.

Assessing Benefits of Distribution Channels

While making channel decisions, a company may need to weigh the benefits of a partner with the
associated costs. Some potential benefits to look out for include:

1. Specialists – Since intermediaries are experts at what they do, they can perform the task better and
more cost effectively than a company itself.
2. Quick Exchange time – Being specialists and using established processes, intermediaries are able to
ensure deliveries faster and on time.

3. Variety for the Consumers – By selling through retailers, consumers are able to choose between a
varieties of products without having to visit multiple stores belonging to each individual producer.

4. Small Quantities – Intermediaries allow the cost of transportation to be divided and this in turn allows
consumers to buy small quantities of a product rather than having to make bulk purchases. This is
possible when a wholesaler buys in bulk, stores the product in a warehouse and then provides the
product to retailers located close by at lower transportation costs.

5. Sales Creation – Since retailers and wholesalers have their own stakes in the product, they may have
their own advertising or promotions efforts that help generate sales.

6. Payment Options – Retailers may create payment plans and options for customers allowing easier
purchases.

7. Information – The distribution channel can provide valuable information on the product and its
acceptability, allowing product development as well as an idea of emerging consumer trends and
behaviors.

Assessing Possible Channel Costs

With the benefits in mind, here are some costs that a producer may have to weigh in order to make
channel decisions

1. Lost Revenue – Because intermediaries need to be either paid for their services or allowed to resell at a
higher price, the company may lose out on revenue. Pricing needs to stay consistent, so the company will
have to reduce its profit margin to give a cut to the intermediary.

2. Lost Communication Control – Along with revenue, the message being received by the consumer is
also in the hands of the intermediary. There is a danger of wrong information being communicated to the
customer regarding product features and benefits which can lead to dissatisfaction.

3. Lost Product Importance – When a product is handed over to an intermediary, how much importance it
gets is now out of the company’s hand. The intermediary may have incentives to push another product
first at the expense of others.
MANAGING DISTRIBUTION CHANNELS
Channel management is an essential activity for the manufacturer. Intermediaries need to be kept
motivated and offered incentives to ensure timely and efficient delivery of products and services. Clear
messages regarding products and their functionalities need to be passed on to attempt to keep clear
communication regarding a product or brand all the way to the end user.

Channel Segmentation
Just as a customer base is segmented and addressed according to their specific needs and
requirements, distribution channels can also be segmented. Now all intermediaries or the markets they
serve will be similar. There may be a need to foster stronger relationships with a retailer that sells in a
knowledgeable and discerning urban market with high competition. Similarly, if a product is expensive
and highly specialized, a retailer may need to be trained and given the relevant information.

Benefits of Channel Segmentation

A company may achieve one of more of the following benefits through channel segmentation:

 Product Management – Relevant products may be provided to the right channel which can help reduce
cost of irrelevant stock as well as unnecessary logistical arrangements.

 Price Management – Local price differentiation may be possible.

 Promotion Management – More targeted and relevant promotional activities may be possible with more
clear and consistent marketing messages.

 Efficiency in Operations – Time and resource wastage through the channel can be removed.
Development needs of every channel segment can be addressed separately, in a more targeted manner.
IMPACT OF MARKETING MIX ON PLACE
No element of the marketing mix works in isolation. Information from each of them acts as input to the
others. This is why when shaping a distribution strategy, input needs to be taken from all other elements
of the mix and any considerations need to be addressed or incorporated. Product, price and promotion
may have the following impacts on the distribution strategy:

Impact of Product Issues

The type of product being manufactured is often the deciding factor in distribution decisions. A delicate or
perishable product will need special arrangements while sturdy or durable products will not require such
delicate handling.

Impact of Pricing Issues

An assessment of the right price for a product is made by the marketing team. This is the price at which
the customer will be willing to make the purchase. This price will often help decide the type of distribution
channel. If this price does not allow a high margin, then a company may choose to use less
intermediaries in its channel to ensure that everyone gets their cut at a reasonable cost to the
manufacturer.

Impact of Promotion Issues

The nature of the product also has an impact on the type of promotions required to sell it. These
promotion decisions will in turn directly affect the distribution decisions. Disposable goods or those of
everyday use do not require too many special channels. But for a car, there needs to be extensive
salesperson and user interaction. For this type of product, a specialist channel may be needed.

Promotional Mix Methods

Types of Promotion Explanation

Advertising Communication through mass media, the

firm will usually pay for this type of
communication.

Public Relations Developing a positive relationship

between the organisation and the media
and the public. Good public relationships
involves not only creating favourable
publicity through the media but also
involves minimising the impact of negative
situations.

Sales Promotion Promotions designed to create a short

term increase in sales. Examples of sales
promotion include money off coupons,
discount codes and "flash sales".

Personal Selling Sales interaction between the firm's

representative and a consumer on a one
to one basis.

Direct Mail (post and e-mail) This involves sending marketing to a

named individual or organisation. Firms
often buy lists of names, e-mails and
postal addresses for this purpose. This
can be highly effective when the direct
mail recipients are within the firm's target
market.

Internet Marketing Placing adverts on internet pages through

programmes such as Google's AdWords.

Social Media Firms place daily messages on social

media such as Facebook and Twitter to
keep customers interested in their
organisation. They may even run
promotions, flash sales and discounts just
for their social media readers.
Types of Promotion Explanation

Sponsorship An organisation or event is paid to use

your branding and logos. Sponsorship is
commonly used in sporting events;
player's clothing and stadiums will be
covered in the firm's branding and even
the tournament may be named after the
firm. Although effective sponsorship
requires a large audience you may get
smaller firms interested in local business
sponsoring small events in their area e.g.
school fairs.

Message Strategy - What Message Will The Promotion Conveying?

Firms need to carefully consider the message that their promotion strategy will be conveying to their
target audience. What message will promotion activity send to the target audience and how will it impact
on the firm's reputation?

The promotion's message should reinforce product benefits and help the firm to develop a positioning
strategy for their products. Apples message strategy reinforces the quality that they are trying to create
about their brand. Mcdonalds message strategy is about the convenience of their products and the value
they offer.

Media Strategy And How Will Promotion Help Deliver The Message

Media strategy refers to how the organisation is going to deliver its message. What aspects of the
promotional mix will the company use to implement their media strategy. Where will they promote it?
Clearly the company must take into account the readership and general behaviour of their target
audience before they select their media strategy. What newspapers do their target market read? What TV
programmes do they watch? Targeting through effective media campaigns could save the company
valuable financial resources. Amazon is a good example of an organisation that uses a varied
promotional mix, which includes, TV, online and print. Amazons media strategy reflects the diversity of
their customers.

Promotion Through The Product Life Cycle

As products move through the four stages of the product life cycle different promotional strategies should
be employed at these stages to ensure the healthy success and life of the product.

Promotion strategies that can be employed at each stage of the Product Life Cycle are as follows:

 Introduction
When a product is new the organisation's objective will be to inform the target audience of its entry.
Television, radio, magazine, coupons etc may be used to push the product through the introduction stage
of the life cycle. Push and Pull Strategies will be used at this crucial stage.

 Growth

As the product becomes accepted by the target market (at this stage of the life cycle) the organisation will
employ strategy to increase brand awareness and customer loyalty.

 Maturity

At this stage of the life cycle the product will be experiencing increased competition and will need
persuasive tactics to encourage consumers to choose their product over their rivals. Any differential
advantage/benefit will be need to be clearly communicated to the target audience.

 Decline

As the product reaches the decline stage of its life cycle, all the organisation can do is use strategy to
remind consumers about the product in a bid to slow the inevitable.