WEEK 6: PLACE AND DEVELOPMENT OF CHANNEL SYSTEMS

1. Place: Making goods and services available in the right quantities and locations
when customers want them.

2. Channel of distribution: Any series of firms or individuals who participate in the flow
of products from producer to final user or consumer.

3. Direct marketing: Direct communication between a seller and an individual

customer using a promotion method other than face-to-face personal selling.

4. Bulk-breaking: involves dividing larger quantities into smaller quantities as products

get closer to the final market.

5. Sorting means separating products into grades and qualities desired by different
target markets.

6. Assorting means putting together a variety of products to give a target market what
it wants.

CHANNEL SYSTEMS
Some Reasons For Choosing Direct Channels:
•Greater Control.
•Lower Cost.
•E-commerce Makes Direct Distribution Easier.
•Direct Contact with Customers.
•No Suitable Intermediaries
DESIGN CHANNELS THAT SATISFY CONSUMERS AND OUTPERFORM THE COMPETITION
STEP 1:
Specify the function of the distribution.
1. channel strategy
2. marketing objectives are reviewed
3. functions assigned to the product
4. price and the promotion

STEP 2:
Select the type of channel.
Whether to employ intermediaries in its channel and, what type of intermediaries.

STEP 3:
Determine the intensity of the distribution.
Number of intermediaries to be employed at the wholesale and retail sales levels in a
particular territory

STEP 4:
Choose specific channel members

DISTRIBUTION CHANNELS ACCORDING TO CONSUMER GOODS

● Producer → consumer. The shortest and simplest distribution channel for

consumer goods has no intermediaries. The producer can sell door to door or
by mail.

● Producer → retailer → consumer. Many large retailers buy directly from

manufacturers and agricultural producers. To the anger of various wholesale
intermediaries, Wal-Mart increased its direct dealings with producers.

● Producer → wholesaler → retailer → consumer. If there is a traditional

channel for consumer goods, this is it. Small retailers and manufacturers find
this channel the only economically viable option.
 ● Producer → agent → retailer → consumer. Rather than employing
wholesalers, many producers prefer to use middlemen to reach the retail
market, especially large-scale retailers.

● Producer → agent → wholesaler → retailer → consumer. To reach small

retailers, producers sometimes use intermediary agents, who in turn visit
wholesalers who sell to large chains or small retail stores.

DISTRIBUTION CHANNELS ACCORDING TO SERVICE

● Producer → consumer. Since the service is intangible, the production process

or the sales activity often requires personal contact between the producer and
the customer. So a direct channel is used.
● Producer → agent → consumer. Although direct distribution is often required
to perform a service, producer-customer contact may not be required for
distribution activities. Agents often assist a service producer with the transfer
of ownership (the sales job).

FACTORS THAT AFFECT THE CHOICE OF CHANNELS ACCORDING TO THE

MARKET
•
● Type of market (Since end consumers behave differently)
● Number of potential clients.A manufacturer with few potential customers
(companies or industries) can employ its own sales force to sell directly to end
consumers or business users.
● Geographical concentration of the market When the majority of a
company's prospective customers are concentrated in a few geographic
areas, direct selling is practical.
● Size of the order When order size or total business volume is large, direct
distribution is economical.

FACTORS THAT AFFECT THE CHOICE OF CHANNELS ACCORDING TO THE

PRODUCT
● Unit value. The price assigned to each unit of a product affects the amount of
funds available for distribution.
● Perishable character.Some assets, including many agricultural products,
physically deteriorate extremely quickly; others, like clothing, perish in the
fashion sense.

FACTORS THAT AFFECT THE CHOICE OF CHANNELS ACCORDING TO THE

INTERMEDIARIES
 ● Services provided by intermediaries. Each producer must select
intermediaries who offer those marketing services that the former is unable to
provide or cannot economically carry out.

● Availability of the desired intermediaries. Producer's preferred

intermediaries may not be available; They may be responsible for competing
products so they don't want to add another line.

● Policies of producers and intermediaries. When intermediaries do not want

to join a channel because they consider a producer's policy unacceptable, the
producer has fewer channel options.

FACTORS THAT AFFECT THE CHOICE OF CHANNELS ACCORDING TO THE

COMPANY

● Desire to have control of the channel. Some producers establish direct

channels because they want to control the distribution of their product, even
though a direct arrangement may be more expensive than an indirect one. By
controlling the channel, producers achieve a more aggressive promotion

● Services provided by the seller. Some producers make decisions about

their channels based on the distribution functions that intermediaries want
(and sometimes demand). For example, many retail chains will not supply a
product unless it is prevented through intense advertising by the producer.

WEEK 11: PRICE

● PRICE: THE AMOUNT OF MONEY THAT IS CHARGED FOR "SOMETHING" OF

VALUE
● The business model is a conceptual representation of the company’s revenue
streams,Any significant changes in the price will affect its viability

A well-chosen price should accomplish three goals:

1. financial goals (profitability)
2. (customers are willing and able to pay the set price)
3. Support a product’s positioning and be consistent with the other variables in the
marketing mix (product quality, distribution issues, promotion challenges)

There are different methods of determining the price for products.

1. Cost + profit margin: Add a profit margin percentage to the costs associated with
producing and distributing the product.
2. Rate of return and break-even point: Calculate the unit price: price = unit cost +
[(rate of return× investment)÷ quantity sold]. Then determine the break-even point:
the level at which sales figures cover related fixed and variable costs.
 3. Market price: Set the price according to the main competitor’s price.
4. Bidding price: Set the price according to available information about competitor bids
and the customers’ opinion of the product’s advantages.
5. Comparison with substitute products: Set the price relative to products for which it
will substitute.
6. Value-based pricing: Set the price based on how the customer values the product.

PRICING OBJECTIVES
PROFIT
● Target return objective: sets specific guidelines for a level of profit,satisfactory
profits that ensure the firm’s survival and provide adequate returns to shareholders.
● Profit maximization objective: the firm sets prices to seek as much profit as
possible.
SALES
● Sales growth: doesn’t necessarily mean big profits, because marketers may
overlook the costs associated with delivering those sales.
● Market share growth objectives a long-run view of the overall market growth rate
and attention to costs.
STATUS QUO
● Meeting competition stabilizes market prices because no firm benefits from raising
or lowering prices.
● With nonprice competition, aggressive action is taken in the other three areas of
the 4 Ps, staying clear of price as a competitive “battleground.”

PRICE-LEVEL POLICIES AND THE PRODUCT LIFE CYCLE

● For a new product with few (or no) direct substitute marketing mixes, price
level decision should focus first on the nature of market demand
.
● A high price may lead to higher profit from each sale, but also to fewer units
sold.

● A low price might appeal to more potential customers.

● Introductory price dealing uses a temporary low price to attract customers to

new product launches or new versions of products.

WEEK 12: PROMOTION

The Promotion Mix refers to the blend of several promotional tools used by the business to
create, maintain and increase the demand for goods and services. (Advertising, Personal
Selling, Sales Promotion, Public Relations and Direct Marketing)

PERSONAL SELLING: Direct spoken communication between sellers and potential

customers, usually in person but sometimes over the telephone.
•Requires strategy decisions.
•Salespeople can be strategy planners.
•Sales force provides market information.
•Salespeople represent the whole company and customers.
•Helping to buy is good selling.

Mass selling: Communicating with large numbers of potential customers

SALES PROMOTION: Short term incentives given to the customers to have an increased
sale for a given period. (Discounts, Coupons, Payback offers, Freebies).

ADVERTISING: any paid form of nonpersonal presentation and promotion of goods and
services by the identified sponsor in the exchange of a fee.
•Position Brands.
•Introducing New Products.
•Obtain Outlets.
•Ongoing Contact.
•Support Sales Force.
•Get Immediate Action.
•Maintain Relationships.

PUBLIC RELATIONS: build a favourable image in the market by creating relations with the
general public.

DIRECT MARKETING: The e-mails, text messages, Fax.