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INTRODUCTION
The primary purpose of any channel of distribution is to bridge the gap between the producer of
a product and its user.
Functions of a Channel
The primary purpose of any channel of distribution is to bridge the gap between the producer of
a product and the user of it, whether the parties are located in the same community or in different
countries thousands of miles apart. The channel of distribution is defined as the most efficient
and effective manner in which to place a product into the hands of the customer. The channel is
composed of different institutions that facilitate the transaction and the physical exchange.
A channel performs three important functions. Not all channel members perform the same
function. The functions are:
These functions are necessary for the effective flow of product and title to the customer and
payment back to the producer.
Characteristics of a Channel
First, although you can eliminate or substitute channel institutions, the functions that these
institutions perform cannot be eliminated. Typically, if a wholesaler or a retailer is removed from
the channel, its function will either shift forward to a retailer or the consumer, or shift backward
to a wholesaler or the manufacturer.
Second, all channel institutional members are part of many channel transactions at any given
point in time. As a result, the complexity of all transactions may be quite overwhelming.
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Consider how many different products you purchase in a single year and the vast number of
channel mechanisms you use.
Third, the fact that you are able to complete all these transactions to your satisfaction, as well as
to the satisfaction of the other channel members, is due to the routinization benefits provided
through the channel.
what to make, when to make it, and how many units to make.
Fourth, there are instances when the best channel arrangement is direct, from the producer to the
ultimate user. This is particularly true when available middlemen are incompetent or unavailable,
or the producer feels he or she can perform the tasks better. Similarly, it may be important for the
producer to maintain direct contact with customers so quick and accurate adjustments can be
made.
Direct selling;
Selling through intermediaries;
Dual distribution; and
Reverse channels.
Essentially, a channel might be a retail store, a web site, a mail order catalogue, or direct
personal communications by a letter, email or text message. Here’s a bit of information about
each one.
Direct Selling
Direct selling is the marketing and selling of products directly to consumers away from a fixed
retail location. Peddling is the oldest form of direct selling.
Modern direct selling includes sales made through the party plan, one-on-one demonstrations,
personal contact arrangements as well as internet sales.
A textbook definition is: “The direct personal presentation, demonstration, and sale of products
and services to consumers, usually in their homes or at their jobs. ”
A marketing channel where intermediaries such as wholesalers and retailers are utilized to make
a product available to the customer is called an indirect channel.
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The most indirect channel you can use (Producer/manufacturer –> agent –> wholesaler –>
retailer –> consumer) is used when there are many small manufacturers and many small retailers
and an agent is used to help coordinate a large supply of the product.
Dual Distribution
Dual distribution describes a wide variety of marketing arrangements by which the manufacturer
or wholesalers uses more than one channel simultaneously to reach the end user. They may sell
directly to the end users as well as sell to other companies for resale. Using two or more channels
to attract the same target market can sometimes lead to channel conflict.
An example of dual distribution is business format franchising, where the franchisors, license the
operation of some of its units to franchisees while simultaneously owning and operating some
units themselves.
Reverse Channels
If you’ve read about the other three channels, you would have noticed that they have one thing in
common — the flow. Each one flows from producer to intermediary (if there is one) to
consumer.
Technology, however, has made another flow possible. This one goes in the reverse direction
and may go — from consumer to intermediary to beneficiary. Think of making money from the
resale of a product or recycling.
Strategic selection of marketing channels can impact an organization’s brand, profitability, and
overall scale of operations for a given line of products or services.
Before selecting which marketing channels are ideal for a given organization, it’s important to
understand the underlying role of channels in marketing strategy. Channels influence:
Channel Selection
Consumer Preferences
First and foremost, the consumer’s habits and behaviors determine channel strategy more than
anything else. If all of an organization’s consumers love to shop at Walmart, then it may be a
smart idea to begin stocking Walmart shelves with products. If consumers have a strong desire to
find a given good in a given channel, organizations should strive to make that happen (as long as
the opportunity costs down exceed the potential benefits).
Another good example of consumer preferences would be digital storefronts. If a record label
manages a few bands, and almost all of those fans are on Spotify, it may be practical to begin
using this digital distribution system. If a movie studio knows that the majority of their
demographic rents films via iTunes, they may want to create a strategic alliance with Apple.
Cost
Some channels will be more costly than others. Low cost goods function best at low cost retail
outlets. Better yet, directly selling eliminates organizations between the user and the producer,
and therefore can be even lower cost (albeit, shipping, storing and other logistics must be
considered). Wholesalers are willing to buy large shipments of goods, but usually at a significant
discount. In many cases, the overall revenue maximizing curve will be a useful tool in
determining the optimal volume at the optimal price for a firm to satiate a given market demand.
Brand
Organizations create strategic alliances to build channels for consumers, and these alliances will
reflect on the overall branding initiatives of both partners. If an online retailers stocks a certain
type of item, users of that online retailer will equate the two brands together. This can have an
impact on how those consumers view both companies.
For example, A premium coffee machine manufacturer may not want to be stocked at a discount
retailer, as it will lower the brand’s power in the eyes of the consumer. A high end good being
sold on a low-cost distribution channel can cannibalize sales and reduce profitability through
offering a price point the producer doesn’t believe matches the quality of the produced good.
Localization
In the current global economy, it is also useful to localize and enter new markets through
effective marketing channel selections. A producer of household goods, for example, like
laundry detergent could just as easily sell their goods in Europe as in the United States. The
question for accomplishing this task is which retailers to work with, and how to localize the
brand to be recognized and understood by foreign consumers. Strategic channel selection can
greatly improve an organization’s ability to accomplish this goal.
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RETAILING
What Is Retail?
Retail is the final channel of distribution where small quantities of goods (or services) are sold
directly to the consumer for their own use.
Two key-phrases in this definition that separate retail from wholesale are –
In simple terms, retailing is the transaction of small quantities of goods between a retailer and the
customer where the good is not bought for the resale purpose.
What is A Retailer?
A retailer is a person or a business who sells small quantities of goods to the customers for the
actual use.
Remember –
Retail stores are the places where most of the actual sales to the customers take place. They act
as both a marketing tool for the brands and a support tool for the customers to exchange and
communicate important information.
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Besides this, retailing is a great asset to the economy. It provides jobs, adds to the GDP, and acts
as a preferred shopping channel during the holiday season.
How Retail Works?
Retail works on a simple revenue model of mark-up. The retailers buy the goods at a cost price,
add up the cost of labour, equipment, and distribution to it along with the desired profit margin,
and sell it at a higher price.
Retailing Types
Retailing can be divided into five types. Here are the types of retailing that exists today –
Store retailing: This includes different types of retail stores like department stores,
speciality stores, supermarkets, convenience stores, catalogue showrooms, drug stores,
superstores, discount stores, extreme value stores etc.
Non-store retailing: Non-store retailing is a type of retailing where the transaction
happens outside conventional shops or stores. It is further divided into two types – direct
selling (where the company uses direct methods like door-to-door selling) and automated
vending (installing automated vending machines which sell offer variety of products without
the need of a human retailer).
Corporate retailing: It involves retailing through corporate channels like chain stores,
franchises, and merchandising conglomerates. Corporate retailing focuses on retailing goods
of only the parent or partner brand.
Internet retailing: Internet retailing or online retailing works on a similar concept of
selling small quantities of goods to the final consumer but they serve to a larger market and
doesn’t have a physical retail outlet where the customer can go and touch or try the product.
Service retailing: Retailers not always sell tangible goods, retail offerings also consists
of services. When a retailer deals with services, the process is called service retailing.
Restaurants, hotels, bars, etc. are examples of service retailing.
Characteristics Of Retailing
Retailing can be differentiated from wholesaling or manufacturing because of its certain distinct
characteristics which include –
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Direct contact with the customer – Retailing involves direct contact with the end
customer and are a mediator between the wholesaler and the customer or the manufacturer
and the customer depending upon the distribution channels used.
Relationship with the customers – Retailers form a bond with the customers and help
them decide which products and services they should choose for themselves.
Stock small quantities of goods – Retailers usually stock small quantities of goods
compared to manufacturers and wholesalers.
Stock goods of different brands – Retailers usually stock different goods of different
brands according to the demand in the market.
Customers’ contact with the company – Retailers act as the representatives of the
company to the end customers who give their feedback and suggestions to them.
Have a limited shelf space – Retail stores usually have very limited shelf space and only
stock goods which have good demand.
Sells the goods at maximum prices – Since retailing involves selling the products
directly to the customers, it also witnesses the maximum price of the product.
Functions Of Retailing
Retailers have many important functions to perform to facilitate the sale of the products. These
functions include –
Sorting
Manufacturers produce large quantities of similar goods and like to sell their inventories to few
buyers who buy in lots. While customers desire many varieties of goods from different
manufacturers to choose from. Retailers balance the demands of both sides by collecting and
assorting the goods from different sources and placing them according to the customers’ needs.
Breaking Bulk
Retailers buy the goods from manufacturers and wholesalers in sufficiently large quantities but
sell to the customers in small quantities.
Channel of Communication
Since retail involves direct contact with the end consumers, it forms a very important channel of
communication for the companies and manufacturers. The manufacturer tries to communicate
the advantages of their products as well as the offers and discounts through retailers.
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Retail also acts as a mediator between the company and the customer and communicates the
feedback given by the customers back to the manufacturer or wholesaler.
Marketing
Retail stores are the final channels where the actual decisions are made. Hence, they act as
important marketing channels for the brands. Smart placements, banners, advertisements, offers,
and other strategies are executed by the manufacturers to increase their sales in retail stores.
Wholesaling
Wholesalers are channel members that buy finished products from manufacturers and sell them
to retailers. Retailers in turn sell the products to consumers.
Wholesalers also sell products to institutions, such as manufacturers, schools, and hospitals, for
use in performing their own missions. A manufacturer, for instance, might buy computer paper
from Nationwide Papers, a wholesaler. A hospital might buy its cleaning supplies from Lagasse
Brothers, one of the nation’s largest wholesalers of janitorial supplies.
Sometimes wholesalers sell products to manufacturers for use in the manufacturing process. A
builder of custom boats, for instance, might buy batteries from a battery wholesaler and switches
from an electrical wholesaler. Some wholesalers even sell to other wholesalers, creating yet
another stage in the distribution channel.
The two main types of wholesalers are merchant wholesalers and agents and brokers. Merchant
wholesalers take title to the product (ownership rights); agents and brokers simply facilitate the
sale of a product from producer to end user.
Merchant Wholesalers
Merchant wholesalers make up 80 percent of all wholesaling establishments and conduct slightly
less than 60 percent of all wholesale sales. A merchant wholesaler is an institution that buys
goods from manufacturers and resells them to businesses, government agencies, other
wholesalers, or retailers. All merchant wholesalers take title to the goods they sell.
Brokers bring buyers and sellers together. Like agents, brokers do not take title to merchandise,
they receive commissions on sales, and they have little say over company sales policies. They
are found in markets where the information that would join buyers and sellers is scarce. These
markets include real estate, agriculture, insurance, and commodities.
organizations that sell tangible goods, such as the jewelry manufacturer who sells its products
directly to the consumer.
Indirect Distribution
Indirect distribution occurs when there are middlemen or intermediaries within the distribution
channel. In the wood example, the intermediaries would be the lumber manufacturer, the
furniture maker, and the retailer. The larger the number of intermediaries within the channel, the
higher the price is likely to be for the final customer. This is because of the value adding that
occurs at each step within the structure.
Direct or indirect distribution structures may include any combination or all of the following
entities:
A wholesaler or distributor
The Internet (direct)
Catalogs (direct)
Sales teams (direct)
The value-added reseller (VAR)
Consultants
Dealers
Retailers
Agents
Some of the identifiable processes involved with sales force management are:
iii. Control processes are achieved within a given time frame and given markets
It is not just about the control systems involved with sales force management process but
Some of the metrics that are implemented in the sales force management processes
are:
i. Time management- measures the tasks and time required for each task
iv. Account management- In case of multiple opportunities with a customer, the account
sales figures
PERSONAL SELLING
Personal selling happens when companies and business firms send out their salesmen to use the sale
force and sell the products and services by meeting the consumer face – to – face. Here, the
producers promote their products, the attitude of the product, appearance and specialist product
knowledge with the help of their agents. They aim to inform and encourage the customer to buy, or
at least trial the product.
It is a two-way communication. So the selling agent can get instant feedback from the
prospective buyer. If it is not according to plan he can even adjust his approach accordingly.
Since it is an interactive form of selling, it helps build trust with the customer. When you
are selling high-value products like cars, it is important that the customer trusts not only the
product but the seller also. This is possible in personal selling.
It also is a more persuasive form of marketing. Since the customer is face to face with the
salesperson it is not easy to dismiss them. The customer at least makes an effort to listen.
Finally, direct selling helps reach the audience that we cannot reach in any other form.
There are sometimes customers that cannot be reached by any other method.
Also, it is an extremely labour intensive method. A large sales force is required to carry
out personal selling successfully.
The training of the salesperson is also a very time consuming and costly.
And the method can only reach a limited number of people. Unlike TV or Radio ads it
does not cover s huge demographic.
RECRUITMENT AND SELECTION OF SALES FORCE
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Recruitment is a process of finding and attracting the potential resources for filling up the
vacant positions in an organization. It sources the candidates with the abilities and attitude,
which are required for achieving the objectives of an organization.
Recruitment process is a process of identifying the jobs vacancy, analyzing the job
requirements, reviewing applications, screening, shortlisting and selecting the right candidate.
To increase the efficiency of hiring, it is recommended that the HR team of an organization
follows the five best practices (as shown in the following image). These five practices ensure
successful recruitment without any interruptions. In addition, these practices also ensure
consistency and compliance in the recruitment process.
Recruitment process is the first step in creating a powerful resource base. The process
undergoes a systematic procedure starting from sourcing the resources to arranging and
conducting interviews and finally selecting the right candidates.
Recruitment Planning
Recruitment planning is the first step of the recruitment process, where the vacant positions are
analyzed and described. It includes job specifications and its nature, experience, qualifications
and skills required for the job, etc.
A structured recruitment plan is mandatory to attract potential candidates from a pool of
candidates. The potential candidates should be qualified, experienced with a capability to take
the responsibilities required to achieve the objectives of the organization.
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Identifying Vacancy
The first and foremost process of recruitment plan is identifying the vacancy. This process
begins with receiving the requisition for recruitments from different department of the
organization to the HR Department, which contains −
Job Analysis
Job analysis is a process of identifying, analyzing, and determining the duties, responsibilities,
skills, abilities, and work environment of a specific job. These factors help in identifying what a
job demands and what an employee must possess in performing a job productively.
Job analysis helps in understanding what tasks are important and how to perform them. Its
purpose is to establish and document the job relatedness of employment procedures such as
selection, training, compensation, and performance appraisal.
The following steps are important in analyzing a job −
Job Description
Job description is an important document, which is descriptive in nature and contains the final
statement of the job analysis. This description is very important for a successful recruitment
process.
Job description provides information about the scope of job roles, responsibilities and the
positioning of the job in the organization. And this data gives the employer and the organization
a clear idea of what an employee must do to meet the requirement of his job responsibilities.
Job description is generated for fulfilling the following processes −
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Job Specification
Job specification focuses on the specifications of the candidate, whom the HR team is going to
hire. The first step in job specification is preparing the list of all jobs in the organization and its
locations. The second step is to generate the information of each job.
This information about each job in an organization is as follows −
Physical specifications
Mental specifications
Physical features
Emotional specifications
Behavioral specifications
A job specification document provides information on the following elements −
Qualification
Experiences
Training and development
Skills requirements
Work responsibilities
Emotional characteristics
Planning of career
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Job Evaluation
Job evaluation is a comparative process of analyzing, assessing, and determining the relative
value/worth of a job in relation to the other jobs in an organization.
The main objective of job evaluation is to analyze and determine which job commands how
much pay. There are several methods such as job grading, job classifications, job ranking,
etc., which are involved in job evaluation. Job evaluation forms the basis for salary and wage
negotiations.
Recruitment Strategy
Recruitment strategy is the second step of the recruitment process, where a strategy is prepared
for hiring the resources. After completing the preparation of job descriptions and job
specifications, the next step is to decide which strategy to adopt for recruiting the potential
candidates for the organization.
While preparing a recruitment strategy, the HR team considers the following points −
Training is also necessary when the existing employee is promoted to the higher level or
transferred to another department. Training is also required to equip the old employees with new
Importance of Training:
Training of employees and mangers are absolutely essential in this changing environment. It is
an important activity of HRD which helps in improving the competency of employees. Training
gives a lot of benefits to the employees such as improvement in efficiency and effectiveness,
The stability and progress of the organization always depends on the training imparted to the
employees. Training becomes mandatory under each and every step of expansion and
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diversification. Only training can improve the quality and reduce the wastages to the minimum.
Training and development is also very essential to adapt according to changing environment.
Types of Training:
Various types of training can be given to the employees such as induction training, refresher
training, on the job training, vestibule training, and training for promotions.
ADVERTISEMENTS:
1. Induction training:
Also known as orientation training given for the new recruits in order to make them familiarize
with the internal environment of an organization. It helps the employees to understand the
This training provides an overview about the job and experienced trainers demonstrates the
entire job. Addition training is offered to employees after evaluating their performance if
necessary.
3. Vestibule training:
It is the training on actual work to be done by an employee but conducted away from the work
place.
4. Refresher training:
This type of training is offered in order to incorporate the latest development in a particular field.
This training is imparted to upgrade the skills of employees. This training can also be used for
promoting an employee.
5. Apprenticeship training:
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