MARKETI

NGMANAGEMENT

UNI
T3PRI
CING

Meani
ngAndDef
ini
ti
onOfPr
ici
ng

Accordi
ngtoPhi
l
ipKot
ler“
Pri
cei
stheamountofmoneychar
gedf
orapr
oductor
ser
vice."

Broadl
y,Pr
icei
sthetotal
amountthatbei
ngexchangebyt
hecust
omert
oobt
aina
benefi
toft
heproductorser
viceowni
ng.

Pr
ici
ngpol
i
cy

Pri
cingpol
icyofacompanyset soutthepr i
cesoft hei
rproductsorser vi
ces.Pri
cing
poli
cymayv ar
ydependingonregion,salesvolume( wholesalevs.Retail
)andthelike.
Everybusi
nessorent
repreneurconsciously(orsometimesunconsci ously)set
soutand
deploysomeprici
ngpol
icyinsomeway ,thatistosay,determinesprices,di
scounts,
whoandunderwhatcondi t
ionscanappl ythediscountsandsoon.

Whatdoespr
ici
ngpol
i
cyi
nvol
ve?

Def
ini
ngt
hepr
ices(
pri
cing)ofgoodsandser
vices–t
hepr
icel
evel

Pri
ceuni
for
mit
yordi
ssi
mil
ari
ti
esf
ordi
ff
erentt
ypesofcust
omer
s,l
ocat
ionsand
segment
s

Pr
icetr
ends,changeinpr
iceov
ert
ime-i
ntr
oduct
orypr
ici
ng,
seasonal
pri
ces,
sal
es,
di
scountsandtheli
ke

Reasonsforpr
icechanges-whatst
rat
egi
cgoal
sshoul
dbeachi
evedbypr
icel
evel
adj
ustmentorpri
cechanges

Obj
ect
ivesOfPr
ici
ngPol
i
cy

Pr
ici
ngpol
i
ciespr
ovidesguidancet
odecisi
onmakersinfor
mulat
ingpr
icepol
ici
es,
pl
anni
ngpr
ici
ngstr
ategiesandsett
ingact
ualpr
icesofpr
oduct
sorserv
ices.

(
i)Pr
ice-
Prof
itSat
isf
act
ion:

Thef i
rmsareint
erest
edinkeepi
ngt
hei
rpri
cesst
ablewit
hincer
tai
nper
iodofti
me
i
rrespect
iveofchangesi
ndemandandcosts,
sothatt
heymaygettheexpect
edpr
ofi
t.

(
ii
)Sal
esMaxi
mizat
ionandGr
owt
h:

Af
ir
m hast
osetapr
icewhi
chassur
esmaxi
mum sal
esoft
hepr
oduct
.Fi
rmssetapr
ice
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 MARKETI
NGMANAGEMENT

whi
chwoul
denhancet
hesal
eoft
heent
ir
epr
oductl
i
ne.I
tisonl
ythen,
itcanachi
eve
gr
owth.

(
ii
i)Maki
ngMoney
:

Somefir
mswanttousethei
rspeci
alposi
ti
oni
ntheindust
rybysel
l
ingpr
oductata
premi
um andmakequi
ckprofi
tasmuchaspossi
ble.

(
iv)Pr
event
ingCompet
it
ion:

Unrest
ri
ctedcompeti
ti
onandlackofpl
anningcanresul
tinwaste­fuldupli
cationof
resour
ces.Thepri
cesyst
em i
nacompet i
ti
veeconomymi ghtnotref
lectsoci
ety’sr
eal
needs.Byadopt
ingasuit
abl
epricepol
i
cythefir
m canrestr
ictt
heentryofriv
als.

(
v)Mar
ketShar
e:

Thefir
m want stosecur
eal argeshareint
hemarketbyfol
l
owingasuit
ablepr
icepol
icy
.
Itwantstoacquireadominatingleader
shi
pposi
ti
oninthemarket
.Manymanagers
beli
evethatrevenuemaximizati
onwi l
ll
eadtol
ongrunprof
itmaxi
mizat
ionandmarket
sharegrowth.

(
vi)Sur
viv
al:

Int hesedaysofsever
ecompet i
ti
onandbusinessuncert
ainti
es,
thefi
rm mustseta
pricewhichwouldsafeguardt
hewel f
areofthefi
rm.Af i
rmisalwaysi
nitssurv
ival
stage.Forthesakeofitscont
inuedexist
ence,
itmusttoler
ateal
lki
ndsofobstaclesand
chal l
engesfr
om theri
vals.

(
vii
)Mar
ketPenet
rat
ion:

Somecompani eswantt omaximizeuni tsales.Theybel

ievethatahighersalesvolume
wil
lleadt
ol owerunitcost
sandhi gherlongr unprof
it
.Theysetthelowestpr i
ce,
assumingthemar ketispr
icesensit
ive.Thisiscall
edmar ketpenet
rati
onpricing.

(
vii
i
)Mar
ket
ingSki
mmi
ng:

Manycompaniesfavorsett
inghi
ghpr i
cest
o‘ski
m’ t
hemarket
.DuPontisaprime
pr
acti
ti
onerofmarketskimmingpri
cing.Wi
theachinnov
ati
on,i
testi
matesthehighest
pr
icei
tcanchargegiventhecomparati
vebenefi
tsofi
tsnewproductver
susthe
av
ail
ablesubst
it
utes.

(
ix)Ear
lyCashRecov
ery
:

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 MARKETI
NGMANAGEMENT

Somef i
rmssetapri
cewhi
chwi
l
lcreat
eamadr ushf
ortheproductandrecov
ercash
ear
ly.Theymayal
sosetal
owpri
ceasacaut
ionagai
nstuncert
aint
yofthefutur
e.

(
x)Sat
isf
act
oryRat
eofRet
urn:

Manycompaniestr
ytosetthepri
cethatwil
lmaxi
mi zecurrentpr
ofi
ts.Toesti
matet
he
demandandcostsassoci
atedwit
halter
nati
vepri
ces,theychoosethepri
cethat
producesmaxi
mum curr
entprof
it
,cashfl
oworrateofr et
urnoninvestment.

Fact
orsi
nfl
uenci
ngpr
ici
ngdeci
sionsi
nter
nal
fact
orsandf
act
ors

1.Internalf
actor
s:Internalf
act
orsaret hoseonwhichtheMarket
ingfir
m hascontr
ol,
thesefactor
sandf orcescanbemodi fiedinordert
oprovi
decompl et
ecustomer
sati
sfacti
on.Howev er,whil
etheorganizati
onmayhavecontr
ol ov
erthesefact
ors
makingaqui ckchangei snotalwaysreali
sti
c.

b.Or
gani
zat
ional
consi
der
ati
on

Severalstudiesshowt hatfactor
slinkedtot heorganizationplayani mpor t
antr olein
pri
cingdeci si
ons, organizat
ionalf
actorsincludest r
ongl eadership, avail
abi
lityof
Technologygoodsal espersonneladequatef unding,f
unct i
onal areasandt heov eral
l
decisionmaki ngpr ocess.Prici
ngdecisi
onsar ecombi nedeffortofpr oductionand
mar keti
ngspeci al
istwhousesv ari
ousf i
nanci alt
oolstosett hepr icei nthi
scont ext
propercoor di
nationi srequir
edamongstv ariousdepar t
ment sforar ri
vi
ngatt hepr i
ce.
Furtherdecisionsf acedbyt opmanagementandmar ketingmanager spert
ai ningt o
compet it
ion,cost,adv ert
isi
ng,andsalespr omot i
onalsoi mpact spr ici
ngdeci sions.

c.Mar
ket
ingmi
xst
rat
egy

Priceisonlyoneoft hemar ket i

ngmi xtoolsthatacompanyusest oachieveits
mar keti
ngobjectives, mar keti
ngmi xisacombi nati
onofproduct,comacommaand
prici
ngstrategiesdesi gnedt opr oducesat i
sfyingexchangeswi thpredefi
ned
consumer s.Therefor epr i
cedeci sionsmustbecoor di
natedwithproductmanagement ,
distr
ibuti
onandpr omot ioni nor dert oeff
ectivelydeterminepri
cingpolicy.Otherwords
themar ketermustconsi dert het otal market
ingmi xwhensetti
ngpr i
cesaspr i
ce
changesandl oandoesnoti nfluenceconsumerbuy i
ngdecisi
onbutot herfactorssuch
assal espromot i
on,aggr essivedi stri
buti
onandi nnovati
veproductscanqui cklycat
ch
theat t
enti
onoft heconsumer s.

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d.Pr
oductuni
queness

Thet er
m pr oductuniquenessi ndicateshowdi ff
erentt hepr oducti ncompar isonwit
hit
s
compet i
tor si
s.Productuni quenessf ocusesondev elopingauni quev al
uepr oposi
ti
on
tocreateast rongdifferent
ialfrom compet i
tors,f
irmsam atat tr
act i
ngmor econsumers
andachi evingabet t
erpositioningont hecompet iti
vemar ket.Cust omer sarealways
wil
li
ngt opaymor ethant heywoul dl i
keforuniquepr oduct s.Productuni quenessand
dif
ferentiati
onhelpfirmst oincreaset heperceiv
edv alueoft hepr oductsandat tr
act
consumer stoenterintoar el
ationshipwiththefirm.Apr oductoraser v
iceisunique
wheni thasdi ff
erentproductorser v
icefeat
urest hi
smeanst hatproductorser vi
ce
customizedpr operti
eswhi chcani nfl
uencecustomerpr eferences.

e.Costofpr
oduct
ion

Beforemar keterscandet ermineprice,i

tisimportanttoestabli
shr el
ati
onshipofcost,
demandandr ev enueforthepr oduct.Costofproducingapr oductplaysabigr ol
ewhen
fi
rmsdecidewhatt ochargeforit.Producti
oncostcombi nest art
upcost svari
able
costsinordert oascertaincostofpr oducti
onperuni t
,thecostofpr oducti
onisdivi
ded
bythenumberofuni t
spr oduced.Iftheproductsell
ingpriceislowerthanthecostt o
produceit
,t hefirm wil
llosemoney .

f
.St
ageofpr
oductl
i
fecy
cle

Pricingpol i
cymusti ncorpor atepr i
cingstrategieschangesov erthelifeofthepr oduct.
Int heintroduct i
onst agepr i
cingi saimedatbal ancingt hecost sandcompet i
ti
ve
pressur e.Ifthecust omer sar einsensi t
ivetoprice,pricesar esethai tor ecover
i
nv estmentandgener at
ehi ghpr ofit
st ofuelgrowt h.Ifthecust omer sar esensiti
veto
price,pricessetl owert hancompet i
torstogai naf ootholdi nthemar ket.Growthstage
pricesar emai ntainedatahi ghl evelifdemandi shike,orr educedt ocapt ureadditi
onal
cust omer s.I
nmat uritystagepr icesar ereducedI nresponset ocompet iti
onwhi l
e
avoi di
ngapr icewar .Indeclinest agepr i
cesar eusual lyloweredt oliquidateInventoryof
discont i
nuedpr oduct sorpr icesar emai ntai
nedf orcont i
nuedpr oduct sservingamar ket
.

g.Pr
ici
ngobj
ect
ives

Prici
ngobj ectivesprovi
desdirect
iontothewhol
eprici
ngprocess, theseobj ecti
ves
providegui dancet odeci
sionmakersinformul
ati
ngpri
cepolicies.Pr i
cingobjecti
vesas
selectedov erthebusinessandf i
nanci
algoal
sinmind.Manypr ici
ngobj ecti
vesare
avail
abl eforcar ef
ulconsi
derati
onsuchasprofi
tmaximizat
ioni ntheshor tt
erm,prof
it
Opt i
mi sat
ionint helongrunandmai nt
enanceofmarketshare.Ther eforechoiceof

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 MARKETI
NGMANAGEMENT

pri
cingobj
ect
ivedeci
dedbyt
hemanagementaut
hor
it
ydi
rect
lyi
nfl
uencest
hepr
ici
ng
pol
icy.

h.Dept
hofdi
str
ibut
ionchannel

Distr
ibuti
onchanneli
sthenetworkofi nter
mediari
es,eachpassingtheproductdown
thechaintothenextorgani
zati
on,beforeitfi
nal
lyreachestheconsumerorenduser .
Typicall
ydist
ri
buti
onchannelcomprisesofmanuf acturertodi
stri
but
or,wholesal
erand
retai
ler
.Therefor
e,di
str
ibut
ionchannel i
nfl
uencesthepr i
ceoftheproduct.

2.Exter
nalfact
ors:Theexter
nalfact
orsauditexaminethebroadr angeofinfluencing
fact
orswhichcannotbecontroll
edbyt hemarketerbutwil
limpactpr i
cingdecisions.
Underst
andingthesefact
orsrequir
est hef
ormal r
esearchtomoni torwhatishappeni ng
i
neachmar ketthecompanyser vessincetheeff
ectofthesefactorscanv arybymar ket

a.Pr
oductsuppl
yanddemand

Thebasiclawsofsuppl yanddemandhav eanobv iousinfl

uenceonpr i
cingst rat
egy.I
n
par
ticul
ar,i
tiscri
ti
caltounderstandwhetherachangei npri
cewi l
lhaveal argeorsmall
i
mpactondemand.Thehi gherthepri
ceofapar ti
cularproductthelowerwi l
l bethe
demandf ori
tandt hehigherthepri
ce,thegreaterthequantit
ythatsupplierswi l
lbe
wil
l
ingtosupplytot hemar ket
.Theref
oreinverserelat
ionshi
pbet weenPr i
ceand
Demandi swellknownandunder st
oodaspr i
cegoesup, demandgoesdown.

b.Degr
eeofcompet
it
ion

Competi
torspr
icingwi t
hinacat egoryhasdirectimpactoneachot hersurpri
sing,
competi
ti
onusual l
yresult
swhent wopr oductshavesi mil
arf eat
ures,butarepr oduced
bydif
fer
entcompani es.Whenmar ketiscontinuouslylowerpr i
cest oundercutthe
competi
ti
on,pr
icingwarbegi ns.Accountoft hesepr icewasmar keter
saref orcedto
fol
lowcompeti
tiv
epr ici
ng.Incompet iti
vepricingmet hodpriceofapr oductorser vi
ce
basedonwhatthecompet i
torischar gi
ng.Soi tisveryimportanttounderstandwhot he
competi
tor
sare?Anal yzi
ngcl oselywill
helpinf r
ami ngpri
cingpol i
cieseff
ect i
vely
.

c.Economi
csi
tuat
ion

Economygoest hr
oughaser iesofsituati
onassociatedwithgeneral bonesandslumsi
n
economicact
ivi
ty.Thebusinesscycle,infl
ati
on,economicgrowth, andconsumer
confi
dencedi
rectl
yinf
luencesprici
ngst rat
egy.Ingeneral
,duri
ngr ecessions,
consumersgrowmor epricesensit
ive.Thiswhichbrandstogetabet terpri
ceand
patr
onizeddi
scountstor
esandwar ehouseout l
ets.Aperi
odofpr osper i
tybri
ngs

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 MARKETI
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monetarysati
sfact
iont
opeopl e,ther
eisal soarisei
nthest
andar dofl
i
vingandthi
s
dr
ivespeopletobuymor eresult
inginincreaseddemand.Othereconomicchangest
hat
af
fectspri
cingincl
udechangesint heinterestr
ateandwagerates.

d.Gov
ernmentr
egul
ati
ons

Anotherimpor t
antfact
ori
ntheenvironmentt hatinfluenceshowmar keti
sdev eloped
pri
cingst r
ategi
esisgover
nmentregulati
ons.Pr i
cer egulati
onscancomef r
om anyl evel
ofGov ernmentandv ar
ywidel
yintheirr
equirement s.Freeexampl e,
inSomei ndustri
es,
governmentr egul
ati
onsetpri
ceceil
ings(highpr i
cemaybeset )whil
einotherIndir
a
I
ndust r
iestheremaybepricefl
oors(lowpricemay beset )
.

e.Suppl
i
ers

Supplier
sar epartofthesupplychainmanagementwhosuppl iest
her esourcesneeded
bythef i
rmt oproducei t
sgoodsandser vi
ces,thisincludesmanuf acturers,import
ers,
wholesalers,r
etai
ler
sandhi recompani es.Suppliersinputsl i
kerawmat erialscan
i
nfluencet hepri
ceoft heproduct
, t
hesuppl ydecr eases,priceswil
lmov ehi gher
becauset heproductismor escarce.Assuppl yincreases, pri
ceswill
mov elower
becauset heproductisreadil
yavail
able.Ifthepriceishi gherthanthesuppl ier
sitwil
l
makemor emoneyperuni tandbemot ivatedtosuppl ymor eofthem.

f
.Consumerbehav
ior

Humanbehav ioristhestart
ingpointforallmarketi
ngplanni
ng.Pr i
cinginfl
uences
buyi
ngbehav i
orandhel psusi nunderst
andingwhatmakespeopl ebuy ,andbuyagain
underdif
fer
entpr i
cingconditi
ons.Useapr oductspricet
odet ermineiftheproductis
aff
ordabl
eandal souseapr oductpriceasameasur eofthepr oductsquali
ty.Consumer
oft
enassumest hatahi gherproductpri
ceindicatesahigherlevelofquali
tyandv i
ce
ver
sa.Thepricesetf oraproductorservicehasav erysi
gnifi
canteffectonhowt he
consumerbehav es.

METHODSOFPRI
CINGSTRATEGI
ESANDTACTI
CS

A.Basedoncust
omer

1.Oddev
enpr
ici
ng

Theoddevenpri
ci
ngmethodistheroundedapriceofapr
oductbyapaiseorso,which
peopl
epercei
veassi
gni
fi
cant
lyl
owerthantheroundeduppri
ce.Fr
eeexample,i
fthe
toppr
icer
angeforaj
eanspanti
srupees500thent hemar
ket
erwouldprobabl
yreduce

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 MARKETI
NGMANAGEMENT

i
ttorupees40099.95becausemostcust
omer st
hinkthi
spr i
cei
smuchcheaper.
Assumingthatcust
omersarepri
cesensi
ti
ve,t
heybuymor eofthel
ower
-pr
icedproduct
,
eventhoughthepri
cedi
ffer
enceamountisbyonl
yf ewpaise.

2.Psy
chol
ogi
cal
pri
cing

Psychologyplaysabi grolei nt heprocessofsettingforchangingpriceofproductor

serv
ice,howcust omer sper ceiv et
hepr i
cecanhav easignif
icantimpactonlevelof
sal
es.Inpsychologycal lpri
ci ngmar keterusesthecust omersemot ionalr
esponseto
encouragesales.Bi pri
cingpr oductst at
ical
ly
,mar ketMei ni
ncreasesaleswithout
si
gnifi
cantl
yreducingpr ices.I nsomecases, ahi gherpricei
sact ual
lymoreli
kelyto
i
ncreasesales.Pricinginfl
uencesbuy ingbehav i
orandhel psusi nunderst
andingwhat
makespeopl ebuy ,andbuyagai nunderdiff
erentprici
ngcondi t
ions.

3.Pr
est
igepr
ici
ng

Prest i
gepr i
cing,al
soknownaspr emium pri
cing,i
nPr est
igepri
cingstrategypricesare
sethi gherthannormal tocreateanimageofsuper iorquali
tyandsocialstatus..Behind
Prest i
gepr i
cingisnotti
edtoi tsquali
tybutmor et
oi t
simage.Pr emi
um pr ici
ngcan
representPr esti
geforconsumer s,homemadebyt heproductsforqualit
ies.Drawback
ofpr esti
gepr ici
ngistheproblem withlogi
cbecauset hecostdoesnotal way srepresent
thequal it
y.

4.Dual
pri
cing

I
ndi
anpr i
cingmarketerssel
lthesameoridenti
cal
productatdi
fferentpri
cesindi
ff
erent
market
s.Dualpr
icingisnotnecessar
il
yandill
egalpr
ici
ngpract
iceasi tdonewit
han
obj
ecti
veofdumpingi ndif
fer
entmarketsorduetogovernmentregulati
ons.

5.Pr
icel
i
ning

Li
ning,al
soreferr
edtoasproductl
inepri
cing,isprici
ngprocesswhereinpricesareset
wit
hcer t
ainpri
cepoint
sbeli
evedtobeat t
racti
vet ocustomer.Theobject
ivebehindt
his
i
stoappeal todif
fer
entsegmentsofthemar ket.Forexample,acarsell
ersinIndi
a
comeup3v ari
antsi
nthesamemodel t
hatisav aluemodel,astandardmodel and
l
imitedmodel.

B.BASEDONCOMPETI
TION

1.Penet
rat
ionpr
ici
ng

Pr
ici
ngst
rat
egyi
nwhi
chaf
ir
mint
roducesanewpr
oductatav
eryl
owpr
icet
o
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 MARKETI
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encouragef orcustomerstopurchasei
t .Thestr
ategyaimstoencouragecust
omerst o
switchtothenewpr oductbecauseofthelowerpriceandal
soincreasingmar
ketshare
thr
oughsal esv ol
ume.Bestexampl eofpenetrat
ionprici
ngi
sanewspaper scompanies,
whoi nt
roducedt heproducttothecust
omer s,orenter
sanewGeogr aphi
cmarketwit
h
verylowpricing.

Themajordrawbackofthi
spr
ici
ngstr
ategyi
sthati
tcreat
esanexpect
ati
onof
per
manentlylowpri
cesamongstcust
omers,
makingitdif
fi
cul
tfort
hemarket
erst
o
i
ncreaset
hepr i
cesi
nfutur
e.

2.Ski
mmedpr
ici
ng

Priceski mmi ngisapr ici

ngstrategyinwhi chamar ket
erchargesav eryhighpr emium
pricef oragivenpr oductorservice.Thepr oductorser
viceisini
ti
all
yofferedatt he
highestpr icethatcustomer swillpay,andt hepri
ceisi
ncreasedment all
ydr oppeduntili
t
reachesal eveldesignedtobev iableforthelongterm.Acresinmost l
ytechnol ogical
mar ket sthatishomeappl iances, el
ectr
onicgadgetsasf i
rmssetahi ghpr i
cedur i
ngthe
fi
rstst ageoft heproductlifecycle.Thetopsegmentoft hemar ketwhichar ewi l
li
ngto
payt hehi ghestpri
cear escaredoff ir
stwhent heproductentersmaturit
yt hepr i
ceis
l
ower ed.

3.Monopol
ypr
ici
ng

AMonopol yi
swhenabusi nessdomi natestheenti
rebusi
nesssegmentwi t hno
compet i
tors,
monopol iesareusuallybadforaneconomybecauset herear
est ri
ctfree
trade,
whi chall
owst hemar ketit
selft
osetpr i
ces.Monopolypri
cingisapricingstrategy
i
nwhi chamar ket
erpricesapr oducttomaximizeprof
itsundertheassumpt iontherei s
noneedt owor ryaboutcompet it
ion.Usuall
ytheMonopolypriceishighert
hant hepr ice
thatwouldprev ai
li
fcompet it
ionexisted.

C.Basedoncostanddemand

1.Costpl
uspr
ici
ngmet
hod

Inthi
smet hodofsetti
ngpricesi nwhicht hesel l
ertotal
sall
thecostf ort
heproductand
thenaddsanamountt oarr
iveatt hesell
ingpr ice.Tocalcul
ateproductpri
ceitmust
i
ncludethecostofbusiness,whi chcouldi ncl
uder awmat eri
als,
transpor
tat
ion,
advert
isi
ng,wages,rentandot hercostincur r
edi nproduci
ngthepr oduct
.Oncethebase
costisestabl
i
shed, t
henprofitlevel
ofpr ofiti
saddedt odotheproductcostssubtot
al
todetermineproductpri
ce.

AFI
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 MARKETI
NGMANAGEMENT

2.Demandbasedpr
ici
ngmet
hod

I
nthi
smethodpr
icesar
ebasedondemandf
ortheproduct
,ift
hedemandi
shi
ght
hen
t
hepri
cesar
erai
sedandift
hedemandi
slowthepri
cesarecutof
f.

D.BASEDONGEOGRAPHI
CALLOCATI
ON

Ingeographi
calpr
ici
ngmar ket
ersdeci
deprici
ngont hebasisgeographiclocat
ionofthe
buyer.I
notherwordscustomersormarketdistanceort
ransport
ationcostincurr
edis
essenti
all
ytakeni
ntoconsider
ati
onaft
erincorporati
ngcostofShippingtodiff
erent
l
ocations.

1.Fr
eeonboar
dpr
ici
ng

FOBPrici
ngmeansapr i
cewhichi
ncludesgoodspl ustheservi
cesofloadi
ngthose
goodssomev ehi
cleorvessel
atanamedl ocat
ion.Ownershi
poft hegoodsis
tr
ansf
erredt
ot hebuyerassoonasitleavesthepointofori
gin.

2.Zonepr
ici
ng

zoneprici
ngstrat
egyinvolvessetti
ngpri
cesofgoodsorser vi
cesbasedonthelocat
ion
wheretheywil
lbeoff
eredf orsaletocustomer s.Zonepri
cingprovi
desaconst
ant
del
iver
edpricetobuyersinallGeographi
cl ocati
onswithi
nazone.Howev er
,pr
ices
i
ncreaseasshippi
ngdistanceincreasesfrom theplaceofproductmanuf
actur
e.

MULTIPRODUCTPRI
CING

Mult
ipl
epri
cingr
efer
stot
hepr
act
iceofof
fer
ingmor
ethanonepr
icef
ort
hesame
pr
oduct.

Thesuppl
i
erchar
gesdi
ff
erentpr
icesbasedon:

 Or
der
edquant
it
y

 Ty
peofcust
omer

 Del
i
ver
yti
me

 Pay
mentt
ermset
c.

PHYSI
CALDI
STRI
BUTI
ON

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 MARKETI
NGMANAGEMENT

Phy
sical
distr
ibut
ioninmarketi
ngi
mpli
estosetofact
ivi
ti
esdeal
i
ngwi t
hhandli
ng,
movement,andstorageofgoodsf
rom t
hepoi
ntofori
gintot
hepointofconsumpt
ion.

Meani
nganddef
ini
ti
onofphy
sical
dist
ri
but
ion

Accor
dingt
oPhi
li
pKot
ler
,“i
sasetofimpendentandorgani
zat
ionsinv
olv
edi
na
pr
ocessofmaki
ngapr
oductorser
viceav
ail
ableforconsumpt
ion”
.

AmericanMar keti
ngAssoci
ati
onsays,“di
str
ibut
ionchanneli
st hestruct
ureofint
ra
Companyor ganizati
onuni
tsandextr
acompanyagent sanddeal er
s,wholesal
eand
ret
ail
,thr
oughwhi chacommodi t
y,pr
oductorservi
ceismarketed”

Need,
rol
eimpor
tanceofdi
str
ibut
ionchannel

Adi st
ri
butionchannelservesasanetworkthr
oughwhi chproducerputshi sproduct si
n
themar ketandpassesittotheactualuser
s.Di
str
ibut
ionmanagementr emains
essential
lyinvi
si
bletocustomersbecausethepr
ocessoccur sbehindthescenes, each
l
ayerofdi stri
but
ionchannelper
formssomewor kinbri
ngingt heproducttoitsfinal by
yourandt huscreatesabri
dgethatFall
sgapbetweent hepointofproductionandt he
pointofconsumpt i
ontherebycreat
ingti
meplaceandpossessi onutil
i
ties.

Thefoll
owingpoi
ntswi
l
lhel
pinunder
standi
ngt
heneed,
rol
eandi
mpor
tanceof
di
str
ibuti
onchannel

1.Ser
vesasconnect
ingl
i
nkbet
weent
hepr
oducerandconsumer
s.

2.Bri
dgesthegapbetweenthet
imeandpl
acebycr
eat
ingt
imeandpl
aceut
il
it
ies
(pr
oduct
iontoconsumpti
on)

3.Distr
ibut
ionmiddlemenincr
easetheef
fi
ciencyofmarket
ingt
hroughexper
ti
se.
(widecontact
s,exper
tknowledgeandtr
adeexperi
ence)

4.Faci
l
itat
esear
chf
orbuy
ersandsel
l
ersbuti
nter
act
ingwi
thbot
h.

5.Mar
ket
ingchannel
sconv
ertpot
ent
ial
buy
ersi
ntopr
ofi
tabl
eor
der
s.

6.Tipsinreduci
ngt
hecostoft
ransact
ionsandsmoot
handt
hef
lowofgoodsand
servi
ces.

7.Bui
l
drel
ati
onbet
weenmanuf
act
urer
sbr
andandconsumer
.

CHANNELSOFDI
STRI
BUTI
ON

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 MARKETI
NGMANAGEMENT

Producerhasmanyal
ter
nat
ivel
evel
schannelsavai
labl
efordi
str
ibut
ingt
hepr
oducts,
a
channell
evel
sindi
cat
esnumberofdi
sti
nctcategor
iesori
nter
mediari
esi
nadist
ri
buti
on
channel.

Channel
sv er
yi nt
henumberandt ypesofmiddlemeninvolved.Somechannelsareshort
anddir
ectl
yli
nkpr oducerswi
thconsumers.Wher easotherchannelsarel
ongand
i
ndir
ectl
yli
nkt hetwothroughoneormoremi ddlemen.Dist
ribut
ionsarebr
oadlydiv
ided
i
ntofourty
pes.

1.Zer
olev
elchannel
:Pr
oducer
-cust
omer

Azer oLev elchannel compr i

sesofapr oducerandcust omer ,
iti
salsocal l
edadi r
ect
mar keti
ngchannel asther ear
emi ddlemeni nv oltandpr oducersdi
r ectl
ysel lt
heir
productstot hecust omer s.Eventhoughdi rectchannel arenotpopul ar,howev eri
thas
gainedal otofat t
entionrecent l
yduet ointernet.Onli
nemar keti
nghasgr eatl
yincreased
theuseofdi rectchannel s.Further
,mar keterswi l
li
ngtocutcost smayusedi rect
channelst oavoidmi ddlemenCommi ssionont heirproducts.Themaj orexampl esare
doort odoorsal es,homepar t
ies,mailorder,tel
emar keti
ng, TVsell
ing, i
nternetsell
ing,
andmanuf acturerownedst or
es.

2.OneLev
elchannel
:Pr
oducer
-ret
ail
er-cust
omer

onechannel containsonl yonemiddlemancal led'retai

l
er'.Inthi
schannel theproducer
sell
spr oductstor etai
lers,whousuallybuyinbul kquant i
tiesandsel lthesamet o
ulti
mat econsumer sindiffer
entquantit
ies.Thischannel apr oducercangetr el
ieved
from thev er
yofsel fselli
ngandt hi
shelpsi ngainingcont roloverthepr ocessof
distr
ibuti
on.Channel i
sbestsui t
edforpr oductsli
keconsumerdur ables,automobi l
es,
premi um apparelandpr oductsofhighv alue.Customer sar efamil
iarwi thretai
l
ersand
habitreall
yappr oacht hem tobuywhatt heyneed, doesret ai
l
erful
f i
l
lthechannel
functions.

3.Twol
evel
channel
:Pr
oducer
-whol
esal
er-r
etai
l
er-cust
omer

Thisist hemostcommonandt radit

ionalchannelofdistri
bution.Twol evelchannel
containst woint
ermedi aries,namel y'awhol esal
erandr et
ailer'
.Inthischannelthe
producersel l
sproduct stowhol esalerwhousual lybuyinhugequant i
ti
esandsel lthe
samet oretai
ler
.Finallyretai
lersselltheproducttotheul t
imat econsumer s.This
channel isbestsuitedf orproductswi thLimitedr
esourcet hatisfinance,productrange
whoi ntendt oobtai
nt hebestmar ketshar eandalsobyusi ngt hi
schannel producercan
focusonmanuf acturingoft heirproducts.Test2Lev elchannel i
si dealf
orthepr oduct

AFI
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 MARKETI
NGMANAGEMENT

wi
thwi
del
yscat
ter
edmar
ket
.

4.Thr
eel
evel
channel
:Pr
oducer-
dist
ri
but
or-
ret
ail
er-
cust
omer

Thisisthewi destchannel ofdistr

ibutioninwhi ch3i ntermedi ariesareengaged.
Channel reli
evesthepr oducerf rom thet askofdi st
ributi
onasi tishandov erto
dist
r i
buti
ngagent s.Distribut i
ngagentsi mpl yfacili
tatethepr ocessofsal eanddonot
takepositionorti
t l
eofpr oduct s,andl i
kewhol esalerandr etailerwhophy sicall
ytake
positi
onort it
leofproduct s.Thischannel issuitabl
ef orwidedi stri
buti
onofv ar
ious
Industri
alProducts,howev eriti
ssuf ferfrom fewdr awbackaspr oducersmayf i
nd
extremelydiffi
cul
tinobt aininginformat i
onaboutenduser sandexer cisi
ngcont rolas
thenumberofchannel lev elsaremor e.

Funct
ionsofchannel
int
ermedi
ari
es(
whol
esal
er,
ret
ail
er)

1.Pr
ocur
ementandassembl
i
ng

Ofmer chandi
seisoneoftheimpor tantf
uncti
onsofretai
ler
.Retai
l
ersusuallybuyin
bulkfrom whol
esaler
sandsellthem insmallquant
it
iestocustomers.Assembling
start
safterpr
ocurementofgood, assembli
nginvol
vedcreati
onandmai ntenanceofthe
procuredgoodsfrom di
ff
erentsources.

2.War
ehousi
ngandst
ori
ng

Oncet hestockisprocuredandassembledthenexti
mportantprocessusedtopr eser
ve
thestocksy st
emat i
call
yforwhit
chproperstor
ageandwarehousingisrequi
red.
Processofwar ehousingandstori
ngofstockall
owsforqui
ckavailabi
li
tyoft
hepr oduct
tothecustomer sresult
sinstabi
li
tyofpr
icesandenabl
esthemanuf actur
ertoregulat
e
producti
on.

3.Gr
adi
ngandpacki
ng

Gradi
nginvol
vesclassi
fi
cati
onofst andar
dizedproduct
sint
ocertainwelldefined
cl
assesorgroups.Gradi
ngofpr oductscr
eatesat r
usti
ncustomers.Ret
ailersalso
makearrangementsforproperpackingofproductswhi
charesol
di nsmall quanti
ti
es.

4.Sel
l
ing

Theprimeobj ecti
veofret
ail
marketi
ngistosellMerchandisetocust omers.Spel
li
ngis
concernedwiththePersuasi
onofprospecti
vebuyerstoact ual
lycompl et
ethepurchase
ofaproductorser vi
ce,
inotherwor
dstransferofownership.Thev olumeofsaleshasa
di
rectcorrel
ationwit
htheprophet
softheretail
erandthereforeitplaysanimport
ant
AFI
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 MARKETI
NGMANAGEMENT

r
olei
nreal
i
singt
heul
ti
mat
eai
m ofear
ningpr
ofi
t.

5.Assumpt
ionofr
isk

Retai
lerbuy sinbulkandsalesinsmal lquant
it
iest
hereisalwaysar i
skoff or
ecast
ingof
demandf rom cust omers.Furt
hersuddenchangeinexternalenvi
ronmentwhi ch
i
ncludes,gov ernmentpolici
es,Li
fest
yle,whet
herandTechnologycanr esul
tinhuge
l
ossesi fpropercar ei
nprocurementisnotdoneeffi
cient
ly.Retai
l
erunder t
akestheri
sk
ofphysicalmer chandi
seandf all
invalue.

6.Fi
nanci
ng

Retai
lersomecasesalsohelpinfinancingasalebyar
rangi
ngl
oansf r
om Bank.
Fi
nancingfunct
ionsofret
ail
erfacil
itat
estheflowofpr
oductst
hroughthemarketi
ng
channelandthi
skeepsthedistri
butionchannelmovi
ng.Doesr
etail
erscont
ri
butei
n
fi
nancingthemarket
ingprocess.

7.Adv
ert
isi
ngandcommuni
cat
ion

Advert
isingisoneoft hemaj ortoolsusedi nmar keti
ng.Retai
leratt
emptt oi
nfl
uencethe
customert oproducetheproductorser vicewitht hehelpofpromot i
onand
advert
isementbot hinsi
deandout si
dethest ore.Adverti
singplaysav er
yimport
antrol
e
i
nincreasingthesalesandr evenueandal soactast hechannel ofcommunicati
onand
i
nformationbet weenthewhol esalersorsuppli
ersandt heconsumer s

COMPONENTSOFPHYSI
CALDI
STRI
BUTI
ON:

(
1)Or
derPr
ocessi
ng:

Orderprocessingi sthestart
ingpointofanydist
ributi
onacti
vity
.Orderprocessi
ng
i
ncludesactivi
tieslikerecei
vingtheorder,handl
i
ngt heorder,
grant
ingcredit
,inv
oici
ng,
di
spatching,collecti
ngbill
s,etc.Eachcustomerexpectsthattheorderpl
acedbyhi mis
i
mpl ementedwi thoutdelay,andaspert hespecif
icati
onsoftheorder.

Thus,orderprocessi
ngbecomesv er
yimportant
.Market
ershoul
dmakeef for
tto
maintai
nt heordercycl
eti
mei.
e.Thet i
meper i
odbet
weent heti
meofplacementofan
orderbythecustomertotheti
meofar ri
val
ofgoodsathisdesti
nat
ion.St
andard
procedureshouldbelai
ddownf orpr
ocessi
ngoforder.

(
2)St
orageandWar
ehousi
ng:

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 MARKETI
NGMANAGEMENT

Storagemeansmakingpr
operarr
angement sforret
aini
ngthegoodsinpropercondi
ti
on
ti
l
l t
heyaredemandedbycust
omer s.Therearemanyproductswhichareseasonal
ly
producedbutar
eusedthr
oughoutthey ear
,theycanbestoredandlat
errel
eased.

Simil
arly
,ther
eareproductswhichareproducedthroughoutthey
earbutareseasonall
y
usedlikeumbrel
la,
fans,heat
ers,et
c.Her eal
sostori
ngpl ay
sanimportantr
ole.St
orage
reducestheneedforinst
anttr
ansportat
ionwhichisdiff
icul
tandcost
ly.

Warehousi
ngprovi
desthestor
agefuncti
on.Placeswherethegoodsarest
oredare
knownaswarehouse.Goodsarestor
edinwar ehousestoberel
easedi
ntimeof
demand.Apar
tfrom st
ori
ngfunct
ion,warehousesalsoper
form ot
herf
uncti
onsl
ike,
market
ingandassembli
ngthegoods.

Twot ypesofwar ehousesarethere-Stor

ageWarehousesandDistri
butionWarehouses.
Stor
agewar ehousehelpsinst
oringthegoodforl
ongandmedi um periodofti
met o
ensuremat chingofsupplyanddemand.Di st
ri
but
ionwarehousesfacil
itat
eassembling
theproductandr edi
stri
buti
ngitwithi
nashortperi
odoftime.Theycanal sobe
centr
alized(whenlocatednearfactory
)ordecent
ral
ized(whenlocatednearmarket).

(
3)I
nvent
oryCont
rol
:

Inventorycontr
olr
eferstoef f
icientcontr
olofgoodsst oredinwar ehouses.Mai ntaini
ng
adequat elev
elofi
nventoryisv eryessenti
alforsmoot hflowofbusi ness.I
nventoryacts
asabr i
dgebetweentheorder sofcust omersandpr oduction.Theyar ethereservoirof
thegoodshel dinanti
cipat
ionofsal es.Therefore,i
tneedst obepr oper l
ymanagedand
controll
ed.Neit
hertosmall nort oolar
geinventoryshouldbemai nt ained.

(
4)Mat
eri
alHandl
i
ng:

Materi
alhandl
i
ngincl
udesallthoseacti
vi
tieswhichareassociat
edinmovingproduct
s
whenitleav
esthemanufactur
ingplantbutbefor
eitisloadedonthetr
ansport
.This
act
ivi
tyhasbeeninexi
stencesinceveryl
ongperiodoft i
me,andnowithasdeveloped
asasy st
em.

I
tinv olv
esmov i
ngthegoodsf r
om plantt
owar ehousesandf
rom warehousestoplace
ofloadingi ntr
anspor
tmodes.Pr opermanagementofmat er
ialhandl
i
nghelpsin
avoidingunnecessarymovementofgoods, avoidi
ngdamaget othegoods,faci
l
itat
e
orderpr ocessi
ngandeffi
cientmov ementofgoods.

AFI
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 MARKETI
NGMANAGEMENT

Mat er
ialhandli
ngisthesubpar
tofthetotalphysical
dist
ri
buti
onsystem andhel
psin
reducti
onincostandbet t
erser
vicetoconsumer s.Ef
fect
ivemanagementofmaterial
handli
ngsy stem l
eadstoeff
ect
ivenessoftotal
phy si
caldi
str
ibut
ionsyst
em andthereby
makesi teconomical.

(
5)Tr
anspor
tat
ion:

Transportationasacomponentofphy sicaldi
stri
but
ioni
sconcernedwi t
hthe
mov ementofgoodsf rom t
hewar ehouset ocustomerdesti
nati
on.I
tincl
udesloadi
ng
andunl oadingofgoodsandtheirmov ementf r
om oneplacetoanother
.Indoingsoit
provi
dest imeandplaceuti
li
ty.Transportaccountsf
oramaj orport
ionofthe
di
stributi
oncostandofthetotalpriceoftheproduct.

Di
ffer
entmodesoft ranspor
tat
ionar
etherel
ikeRoadtransport
,rai
lways,Air
ways,
Wat
er
t
ransportandpi
peli
nef r
om whichachoi
cehast obemade.Eachhasi tsownshareof
merit
sanddemer i
ts.Normall
yacombinati
onofdiff
erentmodei schosenand
i
ntegrat
edinasequent i
alor
dertomovetheproducteconomical
lyandf ast
er.

RoadTr
anspor
t:

Thisi
sanancientform oft r
anspor tandplaysani mport antroleinmar ket
ing.Road
tr
ansportmaybet hroughdifferentmeansl i
ketranspor tbyani mals(l
ikebullock,camel
),
tr
ansportbyhumanbei ngs( l
ikecooliesorporters),
transpor tbyautomobi l
es( l
ike
scooter
s,aut
orickshaws, cars,tr
uckbuseset c.)
.Roadt ransportisf
lexibl
eand
economical
.Howev er,i
tisunsui t
ableforl
ongdi stances.

Rai
l
way
s:

I
tissuitabl
efortr
ansporti
ngbulkgoodsov erlongdi stances.I
tisaneconomicalmode
becauselargevol
umeoft raf
fi
cishandledov erlargenet workofrail
ways.However
,iti
s
i
nflexi
bleasiti
sunfitt
ot r
ansportgoodstorural areas.Furt
her,i
tinvol
veshuge
mai nt
enanceexpendit
ure.

Wat
erTr
anspor
t:

Waterwayi sanimpor t
antmodeoft ransportforheavyandbulkygoodsi nlarge
quanti
ti
es.Itconsistsofinlandwat ertransportandoceantransport
.Inl
andwat er
tr
ansportisusedf ortransport
inggoodswi thi
ncountyandoceant ransportisusedto
tr
ansportgoodst oot hercountri
es.Wat ertranspor
tisacheapestform oftransport
,
havi
nggr eatcar
ryingcapaci t
yandi shighlysuitabl
eforheavyandbul kygoods,butit
haslowspeedandhi gherdegr eeofr i
skduet oseasonaldif
ficul
ti
es.

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NGMANAGEMENT

Ai
rTr
anspor
t:

Oflat
eairtransporthasassumedsi gnifi
cantimportanceasamodeoft r
ansport
.
Alt
houghitaccount sforasmallpercentageoftransport
ati
on,i
tisusefulforper
ishabl
e
i
tems,overnightpackages,emergencysuppliesetc.Themaindisadvantageofair
tr
ansporti
st hati
thashi ghfr
eightcharges,l
owcar ryi
ngcapaci
tyandtoomuch
dependenceoncl i
mat i
cconditi
ons.

FACTORSAFFECTI
NGJOYSOFDI
STRI
BUTI
ONCHANNEL

1.PRODUCTFACTORS

Productfact
orsrepr
esentsthenature,
quali
ti
estheproductal
lthesef
act
orsinf
luences
channelfordi
str
ibut
ion.Thefoll
owingfact
orsconcer
ningtheproduct
,af
fectt
he
select
ionofthechannelofdist
ri
buti
on

a.Phy
sical
nat
ure

Choi ceofsuitablechannelofdistri
butionalsodependsont henat ureofpr oduct.
Physi calnat
ureoft heproductsignifi
esperishabil
it
ysizesandwei ghtoft heproduct.
Perishableproducts(mi lk,
butter,cheese,fi
sh,etc.
)Shouldhav eashor tdistr
ibuti
on
channel asproduct sgetsdecayorspoi l
edveryfast.Furt
herifthesizeandwei ghti
s
veryl ar
ge(bigI ndustr
ialProductsli
keboi l
ers,gr
indersetc.
),thendirectchannel i
smore
sui
tabl einordertoeliminatechancesofdamageandt r
ansportat
ioncost s.

b.Techni
cal
i
tyofpr
oduct

Thetechni
cali
tyrequi
rementdef
inesspeci altrai
ningandexper t
iset
opracti
call
yhandle
andusethepr oduct
s.Ther
efor
epr oductwi t
ht echnicalnatureareusual
lysolddir
ect
ly
bytheproducertoconsumerswithoutusinganyi nter mediary
,howeverproducer
appoi
ntsasalesengineert
osellandSer v
iceI ndustrialequipmentandotherproduct
sof
Techni
calnature.

c.Pr
oductr
ange

Apr oductvar
ietyisthesameproductplat
for
mt hatappealt
odifferentmar
ket
segment smanuf act
uredbyasingl
ecompany .Incaseproducerofferanar
rowpr
oduct
rangetheniti
si dealtodi
str
ibut
ethroughwholesal
ersandretai
lers.I
ncaseofawider
productrangeitiseconomicalt
osetupi t
sownr et
ailout
let
s.

d.Pr
oductpr
ice

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 MARKETI
NGMANAGEMENT

Productswit
hlowunitpri
ce(sal
t,sugar,
wheat,
riceet c.
)Aregeneral
lyconsumedon
veryl
argescaleandther
eforei
tshouldbesoldthroughmi ddlemenasproducercannot
barethecostofdir
ectsel
li
ng.Ontheotherhandpr oductswithhi
ghunitpri
ce(gold,
sil
ver
)invol
veslowturnoverandtheyforasmallerdistr
ibut
ionchanneli
srequi
red.

2.MARKETFACTORS

Marketf
act
orsrepr
esentt
henat
ureandext
entofmar
ket
,thef
oll
owi
ngar
ethemai
n
el
ementsconcer
nedwitht
hemarket
.

a.Composi
ti
onoft
argetmar
ket

Ift
hecust omersarev erylar
ge,thenthi
srequiresservi
cesofmi ddl
emen.I ncont
rast
Limitedcustomerbaser equir
esdi r
ectmarketingasiti
seasyt omanageLi mited
customers.Thereiftargetcustomersareindustri
alorcommer cial
establ
ishmentsthen
goodscanbesol ddi
r ect
lyorthroughagents,asindustr
ialusesbuyinlar
gequant i
ty
andt heproducercaneasilyestabli
shadirectcontactwiththem.

b.Av
ail
abi
l
ityofchannel

Fi
nal l
ythechoi ceofachannel isal
soi nfl
uencedbytheav ai
l
abi
lit
yofdi st
ri
but
ion
partners.Onaccountofnonav ail
abili
tyofdesir
edselfowneddistri
buti
onsystem.Some
commonr easonforshortageofmi ddlemanincludeatt
it
udeofmi ddlementowardsthe
producer spoli
cies,di
si
nterestofmi ddleminttoaddproductst
ot hei
reggsexist
ing
productpor tf
olioandfearofhandlingcompet i
tivepr
oducts.

c.Buy
ersbehav
ior

Understandi
ngconsumerneedsandcr i
ter
iaforbuyingal
sohel psindeter
mi ni
ng
channelofdist
ri
bution.Buyersmaynoti nt
endt oapplyti
meandef f
ortonshopping,
buyershavediff
erentExpectationsli
kepersonalat
tenti
on,onestopshoppi ng,
customizedservi
ce,credi
tfacili
ti
esandsomepr ef
erself
-ser
vice.Dependingonthis
expectati
onthemostappr opriatetr
adechannelshouldbeselected.

3.I
nst
it
uti
onal
fact
ors

I
nsti
tut
ionalf
actor
srevol
vesaroundt
heconsi
derati
onofi
nter
medi
ari
es,
thef
oll
owi
ng
ar
ethemai nfact
orsconcer
nedwitht
hei
ntermediar
ies

a.Pr
omot
ional
abi
l
ityofi
nter
medi
ari
es

I
ncaseofnewpr
oduct
sspeci
alat
tent
ioni
sneedt
opr
omot
esal
esf
ort
his

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 MARKETI
NGMANAGEMENT

i
nter
mediar
ieshel
pcanbesoughtt
opromotetheproduct
.Bestuseofint
ermediat
e
t
reesarepr
ofi
tabl
efort
hepr
oduceracoat
ingproducer
sproduct
sindependent
lyor
j
oint
ly.

b.Af
terSal
esSer
vice

Ev enafterSalesServ
iceandsuppor tpl
aysanimportantpar tintheexperi
enceof
customer s,
mostcompani esli
keaft
ersalesoper
ati
onst hatr eal
l
yaddv alue.I
nor derto
tacklethi
sintermedi
ariesplayavit
alrol
e,consumerusuallyexpectr et
ail
erstorepairor
replacethedur i
ngandafterawarrantyperi
odastheyarecl osetot hem.

c.Channel
cost

Whyt heselect
ingt
hechannelofdi
str
ibut
iont
hecostofdistr
ibuti
onandt heserv
ices
provi
dedbyt hemiddl
emenoragentstomustbekeptintoconsiderati
on.Choi
ceofa
channelshouldbemadeaftercompari
ngthecostofdi
stri
buti
onthr oughal
ter
nati
ve
channels.

4.Or
gani
zat
ional
fact
ors

Organizati
onalorcompanyfact
orssi
gni
fiesthenatur
eofthebusiness,
mar keti
ngknow
-howmanager i
al compet
enceandexper
ience,managementstyl
eandpol i
cies.The
foll
owingarethekeyorgani
zati
onalf
act
or st
hatinf
luencet
heselecti
onofachannel of
dist
ribut
ion.

a.Fi
nanci
alr
esour
ces

From thef i
nanci
alpointofyou,af
inanci
all
ystrongcompanyneedsmiddl
emanless
than1, whichisf
inancial
lyweak.Afi
nancial
lypowerf
ulbusi
nessest
abli
shesi
tsown
Salesf
or ceandretai
li
ngoutlet
s.

b.Reput
ati
on

Well
establ
i
shedcompanieswi t
hgoodreputati
onint
hemarkethol
dagreat
erbrand
l
oyal
tyandcust
omeracceptanceandtherefor
etheycanel
i
minatemiddl
emen,however
t
hismaynotbepossi
bleforlesspopul
arfir
ms.

c.Mar
ket
ingpol
i
cies

Marketi
ngpoli
ciessuchaslar
gescaleorsmallpr
oduction,ext
entofmarketcontr
ol
desi
redbythemar ket
erandpromoti
onalpol
ici
esalsoinfl
uenceschoi
ceofdistri
buti
on
channel
.Forexample,acompanythati
swill
i
ngt ospendhugef undsonadverti
sement

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 MARKETI
NGMANAGEMENT

Mei
noptf
ordi
rectmar
ket
ingchannel
tosuppor
tpr
oductpr
omot
ion.

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