Managing Channels of Distribution

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Once a product or service is ready for the marketplace, it is made available to the customer via a distribution channel. A distribution channel is made up of intermediaries who make the product or service available to the ultimate user, the consumer. A channel where there are no intermediaries is termed a direct channel or a zero level channel. In this case, the customer receives the product or service directly from the manufacturer. Hybrid channel systems comprise different channel configurations with the similar aim of making the product or service available to the customer. Intermediaries perform many functions and it’s to the advantage of the manufacturer to have intermediaries take care of the distribution process.

Since channel members can be independent entities with individual goals and profit objectives, it is not unusual for channel conflict to arise. Channel conflict can be resolved with the right incentives and motivations. Channel members have to meet the overall channel goals and objectives, and their performance is reviewed periodically.

Managing Direct Channels: Sales Management and Direct Marketing

An organization’s sales force functions not only as an element of the integrated marketing communication but also as a part of the direct distribution channel.

To be successful, an organization must manage its sales force efficiently. Sales forces can be organized around products, territory and customers, or a combination of these. Salespersons have to be motivated to perform their roles through various incentives. The external competitive environment also impacts sales performance. Not only must a salesperson be cognizant of the competitive prices, but he or she also must be in step with issues such as competitive strategies and new products launches. Typically, a salesperson’s compensation includes a salary and bonuses or commissions.

Pricing

The marketer is tasked with not only making the product available to the consumer but also pricing the product such that the consumer sees value in the product. When setting the price of the product, one has to consider the cost to produce it, the consumer’s willingness to pay that price for it, the competitors’ prices, and the strategy that will be adopted. The marketer must also be aware of the price sensitivity of the target market.

It is not unusual for marketers to offer the same product at different prices to different market segments. With the increasing use of the Internet for online purchases, different prices now can be offered to different individuals based on their purchase history. The Internet makes pricing information very readily available and facilitates the consumers purchase decisions.

Sales Promotion

From time to time, the marketing manager seeks short-term gains. In order to change the consumer’s purchase behavior, short-term incentives such as coupons and samples are offered, or special events such as contests and sweepstakes are organized. These special events are designed to entice the customer over the period of special event to use and perhaps switch to the product.

Sales promotions are not geared solely to the consumer. Marketers design trade promotions as incentives for the channel members. Channels members receive price-related incentives to promote the product. Sales promotions are also targeted at retailers. These promotions include price and special display incentives.

Marketers must track the effectiveness of their sales promotions. Usually, the objective of a sales promotion is to increase sales volume. Hence, sales volume data before the promotion and after the end of the promotion is collected and compared. Usually, the effect of the promotion lasts for sometime after the actual end of the promotion. The marketer must be aware that the data collected is not pristine and can be affected by other extraneous factors.

Reference:

Winer, Russell S. (Eds). (2004). Marketing Management. Upper Saddle River, NJ: Pearson Prentice Hall.