Selecting the distribution strategies [recovered]
- 1. Selecting the Distribution Strategies: Channel selection is a complex and challenging task. It should be based on various strategic consideration. They are - Objective Consideration Market Consideration Product Consideration Channel Consideration Organizational Consideration
- 2. Objective Consideration Distribution objective can be formulated in terms of - control, coverage and cost. Excessive control over channel, achieve larger market coverage and minimize distribution cost are to be considered. Greater degree of control can be exercised in short channel. Long channels are difficult to control. Similarly coverage depends on intensity of distribution. It determines the no. of channel participations. The coverage can be intensive distribution, selective distribution or exclusive distribution
- 3. Market Consideration M.C. consists of type of market and target customers. The market can be consumer or industrial (business). Industrial market channel structure are shorter as compared to consumer market channel structure. Customers characterisitics greatly affect channel selection. If customer no. is small, direct channel can be used. More channel levels may be needed if the customers number are large.
- 4. Product Consideration In product consideration, nature of the product also determine the channel selection strategy. Persishable products (food, short lived products) requires direct or short channel of distribution. Long channel is suitable only for the durable products. If the product has technical complexity, direct channel is used to provide post sales services.
- 5. Channel Consideration C.C. consists of channel available, range of service provided and channel attitudes. The desired channel most be available. The available channel may carry competing products or refused to carry the brand. The channel may not be able to provide the desired range of services. For eg. the wholesaler may be unwilling to provide post sales services. Channel members may not like the manufacturer's policies. Manufacturers or the manufacturing company or industries may not favour the terms and conditions of the middleman.
- 6. Organizational Consideration It includes management capability and financial resources. Organization may lack capability and experiences in marketing. Human resources management may be lacking. Organization may not be able to promote their products; lack of sales promotional tools. Financially stron organization can use direct marketing and other promotional tools. Middlemen are needed if financial position is weak.
- 7. Cost Pricing Method Pricing method can be done on the basis of cost, competition and demand oriented. It can be shown in the chart as below:- As we know that prices are generally sat on the basis of cost. The main focus is cost for selling prices. They are of 3 kinds.
- 8. Cost Oriented Cost Plus Pricing In this method, a desired profit margin is added to the unit cost of a product. Its also known as markup pricing. Suppose, unit cost of any product is Rs 100 and profit margin 20%. So, cost plus pricing = 100 + 20% of 100 = 120
- 10. Breakeven Point/ Pricing/ Analysis Breakeven analysis is done to calculate BEP. The BEP is no profit no loss point where revenue = cost. It can be calculated in sales units or total sales. Simple BE analysis chart can be presented below.
- 11. Competition Oriented They focus on market price. a The price is set in relation to the competition. The main objective can be Meet Competition In this method of pricing, price is set to match the prevailing market price. This method is used when market has many sellers (perfect competition) or few sellers (oligopoly) and the products are similar. This method is popular where cost are difficult to calculate.
- 12. Competition Oriented Below Competition In this method pricing, price is set below the competitor's price level. This method aims to attract more customers. Discount to retailers are used in this methods. Above Competition In this method of pricing, price is set above the competitor's price level. This is generally done for prestige brand or high cost product. Rolex watch, and mercidies, audy, BMW car, etc use this method. Wai-wai noodles are sold at higher price because of the high prestige of the brand. So are Nebico biscuits.
- 13. Demand Oriented Method Demand oriented pricing method focus on customer's value perception. Cost and market prices are not considered. The pricing method can be - Value pricing Perceived value pricing Value Pricing Value is the ratio of benefits to the cost. Low price is changed for high quality product. The price represents high value to the product. This aim to attract a large no. of value concious customers. Perceived Value Pricing Customer's perceived value is used to set the price. Demand and cost are not considered. Customer Perception of product value is found through market research. New products are generally priced by this method.
- 14. Promotion and Intergrated Marketing Communication
- 15. Promotion: In the word of Philip Kotler, "Promotion includes all the activities the company undertakes to communciate and promote its products to the target market." Promotion is persuasive communication which is highly visible components of marketing mix. It supports the product, price & place mix. It simply known as marketing communication. in modern marketing, promotion is most essential. A good product, an attractive price and selective distribution must be supported by an effective promotion to satisfy customer needs. The promotion mix is the combination of advertising, publicity, public relation, sales promotion, personal selling and direct marketing.
- 16. Integrated Marketing Commn: (IMC) IMC blends various promotional tools and communication, marketing, advertising, services and techniques to maximize the profit. IMC is a term that is related to marketing in the sense that it provides a platform for the blending of different, but related, marketing tools in order to help to make the marketing process easier. The main aim of IMC is the integration of different forms of marketing or promotional tools that ensures the message behind the marketing effort will be disseminated through a wide variety of platform. For eg. IMC will include an analysis of the company's corporate objectives as well as the culture in place in the organization. IMC is not just that the public relation dept and mktng dept need to operate from the same branding strategy, but all that depts ultimately impact how customers view a company. Finally, IMC will involve internal commn that motivates employees and helps them understand the corporate plans of their organization.
- 17. Developing and Selecting Promotional Strategies The promotional strategies provides long-term direction and scope to promotional aspects of marketing. They affect the selection of promotional mix. The promotional strategies can be - Push or Pull Strategy Interpersonal or Mass promotion strategy Product life cycle promotion strategy
- 18. Push or Pull Strategy Push Strategy In this strategy the promotion program is directed at middlemen. The product is pushed through the channels where the channel members are persuaded to order, carry and promote products. The manufacturer promotes their products to wholesaler, the wholesaler promotes to retailer and retailer promotes to customer finally. Personal selling are emphasized in push strategy.
- 19. Push or Pull Strategy Pull Strategy In this strategy, the promotion program is directed at customers. The customers are persuaded to ask the product from the retailers, the retailer ask the product from wholesaler and the wholesaler order the product from the manufacturer. Aggressive advertising and consumer promotion is emphasized in pull strategy. It can be shown as
- 20. Push or Pull Strategy
- 21. Interpersonal or Mass Promotion Strategy Interpersonal strategy emphasizes personal selling as a tool for face to face promotion. In this process, the flow of two ways common must be done. Alternating to interpersonal strategy, mass promotion strategy emphasizes advertising, sales promotion and publicity as a tools for non- personal promotion.
- 22. PLC Strategy This strategy modifies promotion mix at different stages of PLC In introduction stage, advertising publicity, personal selling are emphasized to built product awareness. Promotion budget is high in this stage. In growth stage, Adv is done to built product preference. Sales promotion is done to built brand preference. Promotion budget is increased to pull the customers. In maturity stage, sales promotion is done to encourage brand switching Advertising is done through strengthen brand loyalty. Channel promotions are done to push the product. In decline stage, Adv is done to reenforce loyal customers. However the promotion budget is minimal.
- 23. Competitive Response Strategy The promotion tools and budget are designed with a view to respond to competitor's moves. The strategies can be In meet competition strategy, promotion budget is set to match the competitors budget. The promotion tools used also match the competitor's tools. For eg:- Cokes cap prices are matched by Pepsi's cap-prices, Rumpum's cupoun prices are matched by Tai-pai cupoun prices. In above competition strategy, promotion budget is set above the competitors budget level. For an example - goodlife biscuits entered the Nepalese mkt with much higher promotion budget than that of quality biscuits. In below competition strategy the promotion budget is set below the competition budget level. The promotion tools are directed at the loyal customers. For an eg: Wai-wai, NTC, Nebico Biscuits, etc.
- 24. E-commerce Strategy This strategy uses promotion for direct marketing. Middlemen are not involved. Internet and websites are used for promotion purpose. Its non-personal in nature. The main promotional tools used is internet advertising in different websites. This strategy is gaining importance in modern marketing.