UNIT-III ENTERPRISE MARKETING

SYNOPSIS-II MARKETING STRATEGY

Meaning of Marketing Strategy: Firstly we need to understand the word Marketing
Marketing= Goods and Services - Money/ Something valuable [-means process of
exchange] so marketing strategy means a comprehensive plan to facilitate and promote
exchange of goods and services.
David Aaker’s Definition "a process that can allow an organization to concentrate its resources on
the optimal opportunities with the goals of increasing sales and achieving a sustainable competitive
advantage."

What does the Marketing strategy of a company include? 1. long-term activities in the
field of marketing that deal with the analysis of the strategic initial situation of a company.2.
formulation, evaluation and selection of market-oriented strategies and therefore contributes
to the goals of the company and its marketing objectives. A marketing strategy is composed
of several strategies for growth as well as interrelated components called the marketing mix.

According to W. J. Stanton, "Marketing mix is the term used to describe the

combination of the four inputs which constitute the core of a company's marketing
system: the product, the price structure, the promotional activities, and the
distribution system."
According to Philip Kotler, "A Marketing mix is the mixture of controllable marketing
variables that the firm uses to pursue the sought level of sales in the target market."

Your Product/service should answer

What does the customer want from the
product/service? What needs does it satisfy?
What features does it have to meet these needs?
o Are there any features you've missed out?
o Are you including costly features that the
customer won't actually use?
How and where will the customer use it?
What does it look like? How will customers
experience it?
What size(s), color(s), and so on, should it be?
What is it to be called?
How is it branded?
How is it differentiated from the competitors?
 Hello dear XII remember 4 P’s of M.Mix

Product: The Feature and appearance of

goods and services.
Price: How much Customer pay for a product
or service
Promotion: How customers are informed
about the product
Place: The point where products are made
available to customers.
Pakaging,Positioning,People and Politics are
another 4 p’s

Now let’s understand the first aspect

Product: It refers to goods or services or anything of value which is offered in
the market for exchange. It can be tangible or intangible that is required to
satisfy the needs and aspiration of a consumer.
So most important is to planning and developing the right type of product and
this process is PRODUCT MIX

PRODUCT MIX = BRANDING (Logo and Taglines) + LABELING + PACKAGING

"BRANDR", Norwegian word
meaning "to burn" led to the origin
of the word "Brand". In olden
days, the farmers used to put some
kind of an identification mark
(using burning hot iron) on the
body of the livestock to
distinguish their possession from
that of others.
Similarly, marketers started
resorting to branding in order to
distinguish their offerings from
that of their competitors.
Branding
Introduction
We know, a product is anything that can be offered to a market for attention, acquisition, or
consumption. It includes physical objects, services, personalities, places, organisations and
ideas.
The character of the product may be seen differently by the buyer and the seller.
As a product is any tangible and/or intangible offering that is required to satisfy the needs
or aspirations of a consumer, thus it is important to understand:
a) the "underlying motives" behind "buying" of the product,
b) to ascertain whether the buyer is really satisfied by having the same product.
Reason behind Branding:
Alternatively, one may say that, a product satisfies a 'generic' requirement. Generic
requirement is the core benefit, a product offers to the customer.
For example: a refrigerator offers the generic benefits of storing, preserving and cooling food
or similar items. Also, the cell phone is a device used to facilitate communication. If
products were sold by generic names, it would be very difficult for the marketers to
distinguish their products from that of competitors. Therefore, most marketers give a
"name" (brand) to their products, which helps in identifying and distinguishing their
products from that of the competitors. Thus, branding is an effective differentiation strategy
commonly adopted by marketers when dealing with the products which cannot be easily
distinguished in terms of tangible features.

Thus, a brand is "a name, term, sign, symbol, or design or a combination of them which is
intended to identify the goods or services of one seller or group of sellers and to differentiate
them from those of the competitors."
Ponder over this
Generic Name Brand Names
Detergents Nirma, Suf, Ariel, Rin etc. Pen Parker, Rottomac, Cello, Reynold etc. Car BMW,
Honda, Maruti, etc. Refrigerator LG, Whirlpool, Godrej, etc. Television Sony, LG, Videocon,
Samsung, etc. Milk products Amul, Saras, Mother Diary etc. Cosmetics Ponds, Lakme,
Revlon, etc. So, the minute a brand name is used, identification of the product becomes easy.
Various terms relating to branding
Definition: 'Branding' is a process, a tool, a strategy, an orientation whereby a name, a sign,
or a symbol etc. is given to a product by the entrepreneur so as to differentiate his/her
product from the rival products. Once a brand name is established in the market, then it
becomes difficult to compete with it. Common terms related to branding are:
Brand
'Brand' is a comprehensive term. It is used to denote a name, term, sign, symbol, design or
combination of them to:
1) Identify the products of one firm, and
2) Differentiate them from those of the competitors.
Brand has three components
a) Brand name
A brand name is "that part of a brand which can be vocalized i.e. can be spoken. It is like
naming a newborn child. Mercedes, Woodland, Asian Paints, Pepsi, Maggie, Uncle Chips
etc. are few examples of the brand names.
b) Brand mark
A brand mark is that part of a brand which can be recognized but cannot be vocalized i.e.
is non-utterable. It appears in the form of a symbol, design or distinct colour scheme. For
example:
'Girl’ of Amul, 'Maharaja' of Air India, 'Ronald' of McDonald etc.
c) Trade mark
A brand or part of a brand that is given legal protection against its use by other firms is
called a trade mark. Thus, a trade mark is essentially a legal term, protecting the seller's
exclusive right to use the brand name/mark.
Qualities of a good brand
A good brand name should basically possess qualities of distinctiveness. It should have the
capability to stand out amongst a host of competing names.
Thus, in selecting a brand name, entrepreneur should ask himself/herself what he/she
wants to achieve from it. While selecting a brand name, entrepreneur should choose a name
which is :
a) Short, simple and easy to pronounce.
b) Noticeable, easy to recognize and remember.
c) Pleasing, impressive when uttered.
d) Neither obscene, negative, offensive or vulgar.
e) Adaptable to packaging, labelling requirements, to different advertising media and
languages.
f) Linked to product, symbolically eye catching.
g) Contemporary, capable of being registered and protected legally.

Short, sweet and catchy!!!!!

Brand names like, Lux, Vim, Rin, VIP, Amul, Titan, Konica, Sx, Liv52, Quickfix, Band-aid,
Sunflame, Surf, Dalda and many more have earned a reputation for good quality.
Entrepreneur's perspective on brand name
Entrepreneur can follow different policies in choosing brand name keeping in mind the
range of products offered by him/her. The new product is given a name so that it can get
public attention. Thus, as, the whole meaning and direction of a company can be explained
through its brand management strategy, an entrepreneur should be very careful in
deciding/in choosing its brand strategy. Various types of brands available are:
1) Individual brand name
Here entrepreneur can choose distinct names for each of his offering, i.e. every product is
promoted on the basis of a separate brand name.
Hindustan Unilever Ltd. has been concentrating on its core business areas i.e. soaps and
detergents, and has emerged as the clear leader in the toilet soap industry. The company
has launched many line extensions and variants to LEVERAGE THE HIGH BRAND
EQUITY of its POWERFUL BRAND NAMES, viz....
Lifebuoy — brand standing for 'Good health' Lifebuoy liquid, Lifebuoy Personal,
Lifebuoy Plus and Lifebuoy Gold to cover various price sub-segments in
the health segment.
Liril — brand name with the "freshness" concept.
Lux — brand name for "beauty soap for film stars"
Thus, HUL has ensured for itself a presence in all segments using new brand launches.
2) Family brand name
Entrepreneur can opt to use a common or successful family name for their several
products. Either the entrepreneur's name or the company's name may be used for all the
products. It is even referred as Umbrella branding.
PONDS, is a mother brand name used for shampoos, talcum powder, cold creams, soaps
etc. MAGGI, is brand name for noodles, sauces, masalas etc.
AMUL, has been used to market a large variety of dairy products viz. milk, ghee, butter,
chocolates etc.
3) Corporate names
Entrepreneur can choose to utilise their corporate name or logo together with some brand
names of individual products for example, Godrej, Tata, Bajaj, etc.
4) Alpha-numeric names
In many industrial products, an alpha-numeric name often signifies its physical
characteristics, thus creating a distinctive identify of the product. Entrepreneur has an
option available to brand his/her products alpha-numerically too. For example, SX4,
Liv52, ANX Grindlay, i10, i20, etc.
Popular brands are susceptible to imitation. Thus, to be on the safer side, the entrepreneur
should legally protect his/her brand name or mark through trade mark. A trade mark is
meant to guard against ditto imitations.
The best way for a new brand to succeed is to carry the mantle from the old brand, if any.
Logos and tag lines
McDonald's golden arch (M) is a famous logo. When people see the golden (yellowish)
arches, they expect fast service, inexpensive prices, and a specific type of food around the
corner.
This logo gives McDonald's restaurants a competitive advantage over less recognizable
restaurants.
Customers head for the golden arches because they know what to expect there.
The entrepreneur, through his diverse and coordinated actions, tries to influence and impart
a distinct identity to his own brand, to make it stand out among the competitors. For this,
he/she strongly makes use of:
a) Logo
b) Tagline
a) Logo
'Logo' (Short for Logotype) is an identifying symbol for a product or business. It can be
any distinctive design, mark, sign which stands associated with the entrepreneur's
offering. 'Logo' is an important feature or part of branding.
Thus, a logo is a graphic mark or emblem commonly used by commercial enterprises,
organisations and even individuals to aid and promote instant public recognition. Logos
are either purely graphic (symbols/icons) or are composed of the name of the organisation
(a logotype or word mark).
Purpose
1) Logos are a critical aspect of business marketing. As the company's major graphical
representation, a logo anchors company's brand.
2) Corporate Logo are intended to be the "Identity" of an enterprise because of
displaying graphically enterprise's uniqueness.
3) Through a set color combination, fonts, images, impression and/or pattern, logos
provide essential information about a company that allows customers to relate with
the enterprise's core brand.
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4) Enterprises normally resort to logos' as a short path for advertising and other
marketing materials.
5) Logos act as the key visual component of an enterprise's overall brand identify.
b) Tagline
Magical Slogan
Balsara Hygiene products, launched their 'Promise toothpaste in 1978 and took an
aggressive
stand against all multinationals and Colgate Palmolive in particular.
Soon, it commanded the second highest market share. Could you assess the reason — It
was theslogan (tagline) - "The unique toothpaste with time-tested clove-oil."
As clove oil in India is a traditional and herbal remedy for the prevention of dental ailments
and toothaches. This powerful connotation succeeded.
'Tagline', 'tag line' and 'tag' are American terms. In U.K., they are called 'end lines',
'endlines', or 'straplines'. Germans call them as 'Claims', French refer them as 'Signatures'
while, Belgians call them 'baselines'.
By whatever name they are referred, taglines are basically simple but powerful messages
that help to communicate an enterprise's goals, mission, distinct qualities and so much
more. Thus, a 'tagline' is a small amount of text which serves to clarify a thought and is
designed with a dramatic effect. They can come in the form of:
Questions
Statements
Exclamations
The whole idea behind the concept is to create a memorable dramatic phrase that will sum
up the product.
They do interest us
Amul's message — "A gift for someone you love."
Rasna — "I love you, Rasna."
"I‘m lovin it" – McDonald
Weekender — "Wear your attitude."
Raymond's Suiting — "The complete man."
Yamaha Bike — "The rugged personality."
Savdhan India – "India fights back."

Packaging
Packaging is often the key element in assisting, mainly consumer goods companies, to
achieve a comparative advantage.
The critical decisions that must be made on the package are concerned with the functions,
the product pack will perform as well as with the mix of packaging components best able to
perform in different degrees, the particular functions of the packaging.
Labelling
It is the display of information about a product on its container, packaging, or the product
itself.
Importance of Intellectual Property for an entrepreneur
An entrepreneur whilst selecting a product keeping in mind the above mentioned factors
should also understood that he should take care of intellectual property rights.
Intellectual property (IP) rights are the legally recognized exclusive rights to creations of the
mind. Under this law, owners are granted certain exclusive rights to a variety of intangible
assets.
Common types of intellectual property rights include copyrights, trademark, patents,
industrial design rights and trade secrets.
Patents
It grants an inventor the right to exclude others from making, using, selling, offering to sell,
and importing an invention for a limited period of time, in exchange for the public
disclosure of the invention.
Inventions patentable
Art, Process, Method or Manner of manufacture;
Machine, Apparatus or other Articles;
Substances produced by Manufacturing
Computer Software which has Technical application to Industry or is used with Hardware
Product Patent for Food/Chemical/Medicines or Drugs
Copyright
It gives the creator of original work exclusive rights to it, usually for a limited time. It means
apply to a wide range of creative, intellectual or artistic forms or work. For example, musical
composition, literary work such as poems, plays etc.
Industrial design
It protects the visual design of objects that are not purely utilitarian. It can be a two or three
dimensional pattern used to produce a product, industrial commodity or handicraft.
Trademark
It is a recognizable sign, design or expression which distinguished products or services of a
particular trades from the similar products or services of other traders.

Trade Secret
Any confidential business information which provides an enterprise a competitive edge may
be considered a trade secret.
For example, Coca-Cola formula

Price
Price refers to the value that is put on a product. It depends on cost of production, segment
targeted, ability of the market to pay, supply - demand and a host of other direct and
indirect factors. There can be several types of pricing strategies, each tied in with an overall
business plan. Pricing can also be used as a demarcation, to differentiate and enhance the
image of a product. Price is the only revenue generating element among the four Ps, the rest
being cost centres. Some methods of pricing which are used in pricing decisions are as
follows:
1. Cost-plus pricing
The most common technique is cost-plus pricing, where the manufacturer charges a price
to cover the cost of producing a product plus a reasonable profit. The cost-plus method is
simple, but it does not encourage the efficient use of resources.
Cost-plus pricing is typically based on a manufacturing estimate. Estimates of the costs
associated with manufacturing tasks are made for many reasons. For example, to:
justify planned capital expenditure
determine likely production costs for new or modified products
focus attention on areas of high cost
In principle, estimates are made of the resources required (For example, materials, labour
and equipment), the cost of those resources and the time for which they will be used.
From these factors, an estimate of the costs of carrying out a manufacturing process is
made. Accounting methods are usually used for depreciation and cash-flow analysis when
capital-expenditure justifications are to be made.
Advantages of cost plus pricing
1. Biggest advantage of this is that company knows exactly the amount of expenditure
that has incurred on making a product and therefore they can add profit margin
accordingly which helps in achieving the desired revenue for a firm. So, for example
if a company has incurred expenses of ` 1000 and they want to earn profit margin of
10 % than the company will sell the product at ` 1100.
2. It is the simplest method to decide the price for a product because one has just to add
up all the cost and then add profit which you want to earn which will give the price
for a product.
3. Since the company is using its own data for deciding cost which makes it easier for a
company to evaluate the reasons for escalations in expenses and therefore it can take
corrective action immediately.
Disadvantages of cost plus pricing
1. This method does not take into account the future demand for a product which
should be the base before deciding on the price of a product and therefore a serious
limitation of this method.
2. It also does not take into account the competitors actions and their effect on pricing
of the product, because in today's competitive world if one solely depends on cost
plus pricing it can lead to failure of company’s product in the market.
3. It can result in the company overestimating the price of a product because this
method includes sunk cost and ignores opportunity cost also while calculating cost
there is an element of personal bias while deciding the profit margin which is to be
added to a product.
2. Penetration pricing
Penetration pricing is a pricing strategy where the price of a product is initially set at a
price lower than the eventual market price to attract new customers. The strategy works
on the expectations that customers will switch to the new brand because of the lower
price. Penetration pricing is most commonly associated with a marketing objective of
increasing market share or sales volume, rather than to make profit in the short term. The
price will be raised later once this market share is gained. For example, toothpaste sold in
a remote rural area.

The advantages of penetration pricing to the firm are:

It can result in fast diffusion and adoption. This can achieve high market rates quickly.
This can take the competitors by surprise, not giving them time to react.
It can create goodwill among the early adopters segment. This can create more trade
by word of mouth.
It creates cost control and cost reduction pressures from the start, leading to greater
efficiency.
It discourages the entry of competitors. Low prices act as a barrier to entry
It can create high stock turnover throughout the distribution channel
This can create critically important enthusiasm and support in the channel.
Disadvantages or penetrating price method :
The main disadvantage with penetration pricing is that it establishes long–term price
expectations for the product and image preconceptions for the brand and company. This
makes it difficult to eventually raise prices. Some commentators claim that penetration
pricing attracts only the switchers (bargain hunters), and that they will switch away as
soon as the price rises. There is much controversy over whether it is better to raise prices
gradually over a period of years (so that consumers don’t notice), or employ a single
large price increase. A common solution to this problem is to set the initial price at the
long term market price, but include an initial discount coupon. In this way, the
perceived price points remain high even though the actual selling price is low.
Another potential disadvantage is that the low profit margins may not be sustainable
long enough for the strategy to be effective.
3. Creaming or skimming
In most skimming, goods are sold at higher prices so that fewer sales are needed to break
even. Selling a product at a high price, sacrificing high sales to gain a high profit is
therefore "skimming" the market. Skimming is usually employed to reimburse the cost of
investment of the original research into the product commonly used in electronic markets
when a new range, such as smart phones, are firstly dispatched into the market at a high
price. This strategy is often used to target "early adopters" of a product or service. Early
adopters generally have a relatively lower price-sensitivity. This can be attributed to their
need for the product outweighing their need to economics, a greater understanding of the
product's value, or simply having a higher disposable income.
This strategy is employed only for a limited duration to recover most of the investment
made to build the product. To gain further market share, a seller must use other pricing
tactics such as economy or penetration. This method can have some setbacks as it could
leave the product at a high price against the competition.
Advantages of skimming price
1. Price skimming helps the company in recovering the research and development
costs which are associated with the development of a new product.
2. If the company caters to consumers who are quality conscious rather than price
conscious, then this type of strategy can work in a great way for a company.

Disadvantages of skimming price

1. This strategy can backfire if there are close competitors and they also introduce same
products at lower price then consumers will think that the company always sells the
products at higher prices which will result in consumers abandoning other products
of the company also.
2. Price skimming is not a viable option when there are strict legal and government
regulations regarding consumer rights.
3. If the company has history of price skimming then consumers will never buy a
product when it is newly launched, they would rather wait for a few months and
buy the product at lower price.

4. Variable price method

Variable pricing is a marketing approach that permits different rates to be extended to
different customers for the same goods or services. The approach is often employed in
cultures where dickering over the price of goods is considered the norm, or potential
buyers are allowed to participate in a bidding situation, such as in an auction. Even in
countries where fixed pricing is the standard, variable pricing may come into play when
the customer is committing to the purchase of large volumes of goods or services. When
this is the case, the customer must usually comply with specific criteria in order to enjoy
pricing that varies from the standard cost.
One of the classic examples of the use of variable pricing has to do with street vendors
who sell various types of small goods. Often, there is a standard price posted for each item
on sale. If the vendor really wants to sell an item, and determines that a prospective buyer
is not willing to pay the posted price, he or she may engage the individual in a negotiation
of the sale price. Sometimes referred to as dickering, the buyer and seller make offers back
and forth until they can settle on a price that both believe is fair. Throughout the process,
the buyer tries to drive the price down as much as possible, while the seller attempts to
obtain the highest possible return from the sale.
The real estate market also functions with the use of variable pricing. Prospective home–
owners will often submit bids for properties that are less than the posted asking prices, in
the hopes that the owners will accept a smaller amount. This often leads to a series of
offers and counteroffers that sometimes results in a sale taking place. At other times, the
two parties are unable to come to terms, and no sale takes place.
Examples:
1. Difference in order size by the customers
The soft drink bottle of 200 ml of a company is placed at Rs.8, while a 2000 ml/2
litre bottle is placed at Rs. 55.
2. Difference in the anticipated business from different customers
The school fee for the second child and other siblings are charged at a lower rate by
the schools.
3. Difference in the bargaining power of the customer
The price of unbranded/assembled items of computers are charged differently
depending upon the awareness and bargaining power of the customers.
4. Difference in the ability of the consumers to pay
Different price is charged by the public distribution shops run by the government for
wheat, rice and other variety of food items depending on the income groups.
Variable pricing does provide some benefits, but also has the potential for drawbacks. On
one hand, sellers can use this pricing strategy to move goods or services that have failed to
perform as originally anticipated, allowing them to earn a modest profit or at least recoup
their investment in the products. A possible down side to variable pricing is that it can
lead to losing other customers who paid full price for their purchases, if they find out that
a more recent customer was able to receive a lower price.
Place: refers to the point of sale. In every industry, catching the eye of the consumer and
making it easy for her to buy is the main aim of a good distribution or 'place' strategy.
Retailers pay a premium for the right location. In fact, the mantra of a successful retail
business is 'location, location, location'.
Place mix (distribution)
A channel of distribution or trade channel is defined as the path or route along which goods
move from producers or manufacturers to ultimate consumers or industrial users. In other
words, it is a distribution network through which the producer puts his products in the
market and passes it to the actual users. This channel consists of: producers, consumers or
users and the various middlemen like wholesalers, selling agents and retailers (dealers) who
intervene between the producers and consumers. Therefore, the channel serves to bridge the
gap between the point of production and the point of consumption thereby creating time,
place and possession utilities.

A channel of distribution consists of three types of flows:

Downward flow of goods from producers to consumers
Upward flow of cash payments for goods from consumers to producers
Flow of marketing information in both downward and upward direction i.e. Flow of
information on new products, new uses of existing products, etc from producers to
consumers. And flow of information in the form of feedback on the wants, suggestions,
complaints, etc from consumers/users to producers.
An entrepreneur has a number of alternative channels available to him for distributing his
products. These channels vary in the number and types of middlemen involved. Some
channels are short and directly link producers with customers whereas other channels are
long and indirectly link the two through one or more middlemen.

These channels of distribution are broadly divided into four types:

Producer-customer (Direct channel-zero level): This is the simplest and shortest
channel in which no middlemen is involved and producers directly sell their products to the
consumers. It is fast and economical channel of distribution. Under it, the producer or
entrepreneur performs all the marketing activities himself and has full control over
distribution. A producer may sell directly to consumers through door-to-door sales persons,
direct mail or through his own retail stores. Big firms adopt this channel to cut distribution
costs and to sell industrial products of high value. Small producers and producers of
perishable commodities also sell directly to local consumers. Can also refer to the case study
of Satya Barta Dey - SHREE LEATHERS Unit 2, sub–heading 'Cut out the middle man' to
understand the importance of zero level channel of distribution.
Producer-retailer-customer (Indirect-one level): This channel of distribution involves
only one middlemen called 'retailer'. Under it, the producer sells his/ her product to big
retailers (or retailers who buy goods in large quantities) who in turn sell to the ultimate
consumers.
This channel relieves the manufacturer from burden of selling the goods himself and at the
same time gives him control over the process of distribution. This is often suited for
distribution of consumer durables and products of high value.
Producer-wholesaler-retailer-customer (Two levels): This is the most common and
traditional channel of distribution. Under it, two middlemen i.e. wholesalers and retailers
are involved. Here, the producer sells his product to wholesalers, who in turn sell it to
retailers. And, retailers finally sell the product to the ultimate consumers. This channel is
suitable for the producers who have limited finance, narrow product line and need expert
services and promotional support of wholesalers. This is mostly used for the products with
widely scattered market.
Producer-agent-wholesaler-retailer-customer (Three levels): This is the longest channel
of distribution in which three middlemen are involved. This is used when the producer
wants to be fully relieved of the problem of distribution and thus hands over his/her entire
output to the selling agents. The agents distribute the product among a few wholesalers.
Each wholesaler distributes the product among a number of retailers who finally sell it to
the ultimate consumers. This channel is suitable for wider distribution of various industrial
products.
An entrepreneur has to choose a suitable channel of distribution for his/her product such
that the channel chosen is flexible, effective and consistent with the declared marketing
policies and programmes of the firm. While selecting a distribution channel, the
entrepreneur should compare the costs, sales volume and profits expected from alternative
channels of distribution and take into account the following factors:
I) Considerations related to product
When a manufacturer selects some channel of distribution he/she should take care of such
factors which are related to the quality and nature of the product. They are as follows:
1. Unit value of the product
When the product is very costly it is best to use a small distribution channel. For
example, industrial machinery or gold ornaments are very costly products that is
why for their distribution small distribution channel is used. On the other hand, for
less costly products long distribution channel is used.
2. Standardised or customised product
Standardised products are those for which cost is pre-determined and there is no
scope for alteration. For example: utensils of MILTON. To sell this long distribution
channel is used.
On the other hand, customised products are those which are made according to the
discretion of the consumer and also there is a scope for alteration, for example;
furniture. For such products face-to-face interaction between the manufacturer and
the consumer is essential. So for these direct sales is a good option.
3. Perishability
A manufacturer should choose minimum or no middlemen as channel of
distribution for such an item or product which is of highly perishable nature. On the
contrary, a long distribution channel can be selected for durable goods.
4. Technical nature
If a product is of technical nature, then it is better to supply it directly to the
consumer. This will help the user to know the necessary technicalities of the product.
II) Considerations related to market
Market considerations are given below
1. Number of buyers
If the number of buyers is large then it is better to take the services of middlemen for
the distribution of the goods. On the contrary, the distribution should be done by the
manufacturer directly if the number of buyers is less.

2. Types of buyers
Buyers can be of two types: General Buyers and Industrial Buyers. If the more
buyers of the product belong to general category then there can be more middlemen.
But in case of industrial buyers there can be fewer middlemen.
3. Buying habits
A manufacturer should take the services of middlemen if his/her financial position
does not permit him/her to sell goods on credit to those consumers who are in the
habit of purchasing goods on credit.
4. Buying quantity
It is useful for the manufacturer to rely on the services of middlemen if the goods are
bought in smaller quantity.
5. Size of market
If the market area of the product is scattered fairly, then the producer must take the
help of middlemen.
III) Considerations related to manufacturer/company

Considerations related to manufacturer are given below:

1. Goodwill
Manufacturer’s goodwill also affects the selection of channel of distribution. A
manufacturer enjoying good reputation need not depend on the middlemen as he
can open his own branches easily.

2. Desire to control the channel of distribution

A manufacturer’s ambition to control the channel of distribution affects its selection.
Consumers should be approached directly by such type of manufacturer. For
example, electronic goods sector with a motive to control the service levels provided
to the customers at the point of sale are resorting to company owned retail counters.

3. Financial strength
A company which has a strong financial base can evolve its own channels. On the
other hand, financially weak companies would have to depend upon middlemen.

IV) Considerations related to government

Considerations related to the government also affect the selection of channel of
distribution. For example, only a license holder can sell medicines in the market according
to the law of the government.
In this situation, the manufacturer of medicines should take care that the distribution of
his product takes place only through such middlemen who have the relevant license.

V) Others
1. Cost
A manufacturer should select such a channel of distribution which is less costly and
also useful from other angles.
2. Availability
Sometimes some other channel of distribution can be selected if the desired one is
not available.
3. Possibilities of sales
Such a channel which has a possibility of large sale should be given weightage. The
challenges that an Entrepreneur faces are many in taking the great idea or invention
all the way to a finished product. Many hurdles are in the way such as patents,
financing, marketing, trademarks, product branding, manufacture and distribution.

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