How to design a Marketing Channel System
SOURCE:CODIFYD.COM
To Design a marketing channel system we have to look into factors like analysing the needs of the customers,established channel objectives, identification of major channel alternatives, and evaluating these channel alternatives for further amendments.
Analysing the needs of the Customers
The marketer must estimate the service output levels which the target customers wants. Channels produce five service outputs which are mentioned below,
Lot size: It calculates the number of units which a channel allows a particular customer can buy at one time.
Waiting and delivery time: It allows to know the average time which consumers of that channel has to wait for receipt of the goods. The Customers prefer faster and timely delivery channel.
Spatial convenience: It reveals the extent to which the marketing channels facilitates the customers to obtain the needed products.
Product variety: It is the variety which is provided by the channels. Usually, the consumers prefer greater collections, which will enhance the chance of finding what are the needs of the customers.
Service backup: The add-on services like credit, delivery, installation, repairs etc which are provided by the channel.
Greater service outputs denotes increased channel costs and consequently higher prices for customers. The triumph of discount resellers(online or offline) designate that many consumers does not accept lower outputs if they want to save money.
Establishing Objectives and Constraints
Another factor in designing a marketing channel system is that marketers must declare their channel objectives in terms of targeted service output levels. In competitive conditions, channel institutions should coordinate their functional tasks to reduce total channel costs and still offer desired levels of service outputs. Generally, planners can recognize several market segments that want different service levels. Successful planning needs to determine which market segments to serve and the best channels for each. Channel objectives differ with product characteristics. Channel design is also affected by numerous environmental factors as competitors’ channels, monetary conditions, and legal regulations and limitations.
Identify Major Channel Alternatives
Source:pininterest.com
Other factors which affects decisions in developing market channel is to recognize alternatives available. Companies may select various number of channels to approach customers, and each of which will have distinctive strengths as well as limitations.
Channel alternatives are explained by
(i) the type of available intermediaries
(ii) the number of intermediaries needed for business; and
(iii) the terms and responsibilities of each member of the channel.
Type of Intermediaries allows a firm needs to discover the types of intermediaries available to exploit to run its channel works. Some intermediary merchants like wholesalers and retailers buy, take title,and resell the products in the market.
Middle Agents such as brokers, manufacturers’ representatives,and sales agents who chase customers and may bargain on the producer’s behalf, do not take title to the merchandise. Available Facilitators, including transportation companies, independent warehouses, banks, advertising agencies etc helps in the distribution process but doesnt take any title to goods nor negotiate the purchases or sales.
Companies should recognize which are the pioneering marketing channels.
The Number of Intermediaries indicates how to choose intermediaries,
Companies can adopt one of three strategies:
Exclusive distribution means limiting the number of intermediaries available.
Selective distribution depends on more than a few but less than all of the intermediaries who are willing to carry a particular product in the markets.
In intensive distribution, the producer will place the goods or services in as many outlets as can be possible. This strategy is useful for items such as snacks, newspapers etc.
Terms and Responsibilities of Channel Members signifies that each channel member of the channel must be treated courteously and given opportunities to be lucrative as per their needs.
The main constituent in the “trade-relations mix” are pricing policy, conditions for sale, territorial rights of each member, and specific services to be performed by each member. Price policy assists the producer to decide upon a price list and schedule of discounts and allowances which the intermediaries see as sufficient and equivalent.
Evaluating the various Major Alternatives
The Company must be able to assess each alternative against all economic, control, and adaptive criterias. The firm should verify ,whether its own sales force or a sales agency will create more returns and it estimate the cost of selling different quantities of goods through each channel.
Managing of Marketing Channel
So as to maximize profit, companies must manage their marketing channels in an effective manner. Management of marketing channel refers to the whole process of analysing, planning, organizing and controlling its marketing channels.
In marketing channel two different activities occurs.
One is the establishment of a sustainable physical distribution system and
other is management of it as per the marketing objectives.
Management of marketing channels involves functions of marketing mix which include product, price, distribution, program and people.Physical distribution system and channel structure is established along which products flow in the marketing channel.
SOURCE:CODIFYD.COM
To Design a marketing channel system we have to look into factors like analysing the needs of the customers,established channel objectives, identification of major channel alternatives, and evaluating these channel alternatives for further amendments.
Analysing the needs of the Customers
The marketer must estimate the service output levels which the target customers wants. Channels produce five service outputs which are mentioned below,
Lot size: It calculates the number of units which a channel allows a particular customer can buy at one time.
Waiting and delivery time: It allows to know the average time which consumers of that channel has to wait for receipt of the goods. The Customers prefer faster and timely delivery channel.
Spatial convenience: It reveals the extent to which the marketing channels facilitates the customers to obtain the needed products.
Product variety: It is the variety which is provided by the channels. Usually, the consumers prefer greater collections, which will enhance the chance of finding what are the needs of the customers.
Service backup: The add-on services like credit, delivery, installation, repairs etc which are provided by the channel.
Greater service outputs denotes increased channel costs and consequently higher prices for customers. The triumph of discount resellers(online or offline) designate that many consumers does not accept lower outputs if they want to save money.
Establishing Objectives and Constraints
Another factor in designing a marketing channel system is that marketers must declare their channel objectives in terms of targeted service output levels. In competitive conditions, channel institutions should coordinate their functional tasks to reduce total channel costs and still offer desired levels of service outputs. Generally, planners can recognize several market segments that want different service levels. Successful planning needs to determine which market segments to serve and the best channels for each. Channel objectives differ with product characteristics. Channel design is also affected by numerous environmental factors as competitors’ channels, monetary conditions, and legal regulations and limitations.
Identify Major Channel Alternatives
Source:pininterest.com
Other factors which affects decisions in developing market channel is to recognize alternatives available. Companies may select various number of channels to approach customers, and each of which will have distinctive strengths as well as limitations.
Channel alternatives are explained by
(i) the type of available intermediaries
(ii) the number of intermediaries needed for business; and
(iii) the terms and responsibilities of each member of the channel.
Type of Intermediaries allows a firm needs to discover the types of intermediaries available to exploit to run its channel works. Some intermediary merchants like wholesalers and retailers buy, take title,and resell the products in the market.
Middle Agents such as brokers, manufacturers’ representatives,and sales agents who chase customers and may bargain on the producer’s behalf, do not take title to the merchandise. Available Facilitators, including transportation companies, independent warehouses, banks, advertising agencies etc helps in the distribution process but doesnt take any title to goods nor negotiate the purchases or sales.
Companies should recognize which are the pioneering marketing channels.
The Number of Intermediaries indicates how to choose intermediaries,
Companies can adopt one of three strategies:
- exclusive,
- selective,
- intensive distribution.
Exclusive distribution means limiting the number of intermediaries available.
Selective distribution depends on more than a few but less than all of the intermediaries who are willing to carry a particular product in the markets.
In intensive distribution, the producer will place the goods or services in as many outlets as can be possible. This strategy is useful for items such as snacks, newspapers etc.
Terms and Responsibilities of Channel Members signifies that each channel member of the channel must be treated courteously and given opportunities to be lucrative as per their needs.
The main constituent in the “trade-relations mix” are pricing policy, conditions for sale, territorial rights of each member, and specific services to be performed by each member. Price policy assists the producer to decide upon a price list and schedule of discounts and allowances which the intermediaries see as sufficient and equivalent.
Evaluating the various Major Alternatives
The Company must be able to assess each alternative against all economic, control, and adaptive criterias. The firm should verify ,whether its own sales force or a sales agency will create more returns and it estimate the cost of selling different quantities of goods through each channel.
Managing of Marketing Channel
So as to maximize profit, companies must manage their marketing channels in an effective manner. Management of marketing channel refers to the whole process of analysing, planning, organizing and controlling its marketing channels.
In marketing channel two different activities occurs.
One is the establishment of a sustainable physical distribution system and
other is management of it as per the marketing objectives.
Management of marketing channels involves functions of marketing mix which include product, price, distribution, program and people.Physical distribution system and channel structure is established along which products flow in the marketing channel.
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