Distribution in organisation

Distribution Channel:

A set of interdependent organizations involved in the process of making a product or service available for use or consumption by the consumer or business users.

Distribution Channel Functions:

Information: Gathering and distributing marketing research and intelligence information about actors and forces in the marketing environment needed for planning and aiding exchange.

Promotion: Developing and spreading persuasive communications about an offer.

Contact: Finding and communicating with prospective buyers.

Matching: Shaping and fitting the offer to the buyer’s needs, including activities such as manufacturing, grading, assembling and packaging.

Negotiation: Reaching an agreement on price and other terms of the offer so that ownership or possession can be transferred.

Others help to fulfill the completed transactions:

Physical distribution: Transporting and storing goods.

Financing: Acquiring and using funds to cover the costs of the channel work.

Risk taking: Assuming the risks of carrying out the channel work.

[ Channel level: A layer of intermediaries that performs some work in bringing the product  and its ownership closer to the final buyer.]

Direct marketing channel: A marketing channel that has no intermediary levels.

Indirect marketing channel: Channel containing one or more intermediary levels.

Intensive distribution: Stocking the product in as many outlets as possible.

Exclusive distribution: Giving a limited number of dealers the exclusive right to distribute the company’s products in their territories.

Selective distribution: The use of more than one, but fewer than all, of the intermediaries who are willing to carry the company’s products.

Physical Distribution (or marketing logistics): The tasks involved in planning, implementing and controlling the physical flow of materials, final goods, and related information from points of origin to points of consumption to meet customer requirements at a profit.

Distribution Center: A large, highly automated warehouse designed to receive goods from various plants and suppliers, take orders, fill them efficiently and deliver goods to customers as quickly as possible.

Pricing strategy

a.    Cost-based pricing:

Cost-plus pricing: Adding a standard markup to the cost of the product.

Break-even pricing: Setting price to break even on the costs of making and marketing a product; or setting price to make target profit.

Value-based pricing: Setting price based on buyers perceptions of value rather than on the sellers cost.

Value pricing: Offering just the right combination of quality and good service at a fair price.

Competition-based pricing: Setting prices based on the prices that competitors charge for similar products.

b.    New-product pricing:

Market-skimming pricing: Setting a high price for a new product to skim maximum revenues layer by layer from the segments willing to pay the high price; the company makes fewer but more profitable sales.

Market-penetration pricing: Setting a low price for a new product in order to attract a large number of buyers and a large market share.

c.     Product Mix pricing:

Product line pricing: Setting the price steps between various products in a product line based on cost differences between the products, customers evaluations of different features and competitors prices.

Optional-product pricing: The pricing of optional or accessory products along with a main product.

Captive-product pricing: Setting a price for products that must be used along with a main product, such as blades for a razor and film for a camera.

By-product pricing: Setting a price for by-products in order to make the main products price more competitive.

Product bundle pricing: Combining several products and offering the bundle at a reduced price.

d.    Price-adjustment Strategies:

Discount and allowance pricing:

Cash discount: A price reduction to buyers who pay their bills promptly.

Quantity discount: A price reduction to buyers who buy large volumes.

Functional discount: A price reduction offered by the seller to trade channel members who perform certain functions such as selling, storing and record keeping.

Seasonal discount: A price reduction to buyers who purchase merchandise or services out of season.

Allowance: Promotional money paid by manufacturers to retailers in return for an agreement to feature the manufacturer's products in some way.

Segmented pricing: Selling a product or service at two or more prices, where the difference in prices is not based on differences in costs.

Psychological Pricing: A pricing approach that considers the psychology of prices and not simply the economics, the pricing is used to say something about the product.

Reference prices: Prices that buyer carry in their minds and refer to when they look at a given product.

Promotional pricing: Temporarily pricing products below the list price and sometimes even below cost, to increase short-run sales.

e.    Geographical pricing:

FOB- origin pricing: A geographical pricing strategy in which goods are placed free on board a carrier; the customer pays the freight from the factory to the destination.

Uniform-delivered pricing: A geographical pricing strategy in which the company charges the same price plus freight to all customers, regardless of their location.

Zone pricing: A geographical pricing strategy in which the company sets up two or more zones. All customers within a zone pay the same total price; the more distant the zone, the higher the price.

Basing-point pricing: A geographical pricing strategy in which the seller designates some city as a basing point and charges all customers the freight cost from that city to the customer location, regardless of the city from which the goods are actually shipped.

Freight-absorption pricing: A geographical pricing strategy in which the seller absorbs all or part of the actual freight charges in order to get the desired business.

Segmentation, Targeting and Positioning

Marketing Process:

The process of 

- analysing marketing opportunities

- selecting target markets

- developing the marketing mix, and

- managing the marketing efforts are collectively called marketing process.

To succeed in today's competitive marketplace, companies must be customer centered, winning customers from competitors, then keeping and growing them by delivering greater value. Each company must divide up the total market, choose the best segments, and design strategies for profitably serving chosen segments better than its competitors do. This process involves three steps - market segmentation, market targeting, and market positioning.

Figure: Factors influencing company marketing strategy.

Market segmentation: Dividing a market into distinct groups of buyers on the basis of needs, characteristics or behavior who might require separate products or marketing mixes.

Market segment: A group of consumers who respond in a similar way to a given set of marketing efforts.

Market targeting: The process of evaluating each market segment's attractiveness and selecting one or more segments to enter.

Market positioning: Arranging for a product to occupy a clear, distinctive and desirable place relative to competing products in the minds of target consumers.

Marketing Management

Marketing Management: The analysis, planning, implementation, and control of programs designed to create, build, and maintain beneficial exchanges with target buyers for the purpose of achieving organisational objectives.

Marketing management seeks to affect the level, timing, and nature of demand in a way that helps the organisation achieve its objectives. In other word marketing management is demand management. Demarketing is one of the tool of marketing management.

Demarketing: Marketing to reduce demand temporarily. The aim is not to destroy demand, but only to reduce or shift it.

e.g. Advertising to reduce the use of electricity or gas.

Marketing Management Philosophies:

there are five alternative concepts under which organisations conduct their marketing activities. They are-

Production, Product, Selling, Marketing and societal marketing concepts.

Production Concept:

The philosophy that consumers will favour products that are available and highly affordable and that management should therefore focus on improving production and distribution efficiency.

e.g. Henry Ford's whole philosophy was to perfect the production of the Model T so that its cost could be reduced and more people could afford it.

Product Concept:

The idea that consumers will favour products that offer the most quality, performance, and features and that the organisation should therefore devote its energy to making continuous product improvements. A detailed version of the new-product idea stated in meaningful consumer terms.

 

Figure: Selling and Marketing concepts contrasted

Selling Concept:

The idea that consumers will not buy enough of the organisation's products unless the organisation undertakes a large-scale selling and promotion effort.

Most firms practice the selling concept when they have overcapacity. Their aim is to sell what they make rather than make what the market wants.

Marketing Concept:

The marketing management philosophy that holds that achieving organisational goals depends on determining the needs and wants of target markets and delivering the desired satisfactions more effectively and efficiently than competitors do.

Societal Marketing Concept:

The idea that the organisation should determine the needs, wants and interests of target markets and deliver the desired satisfactions more effectively and efficiently than do competitors in a way that maintains or improves the consumer's and society's well being.

Figure: Societal Marketing Concept

Market

Market: The set of all actual and potential buyers of a product or service.

The size of market depends on the number of people who exhibit the need, have resources to engage in exchange and are willing to offer these resources in exchange for what they want.

A simple marketing system consists of sellers and buyers. Sellers and the buyers are connected by four flows (see the figure below). 

Figure: A simple marketing system

- The seller sends products, services and communications to the market (buyer), 

- The market (buyer) sends money and information to the seller.

Marketers are keenly interested in markets. Their goal is to understand the need and wants of specific markets and to select the markets that they can serve vest. In turn, they can develop products and services that will create value and satisfaction for customers in the respective markets, resulting in sales and profits for the company.

Exchange, Transactions and Relationships

Exchange, Transactions and Relationships:

Exchange: The act of obtaining a desired object from someone by offering something in return.

e.g. 

Hungry people could find food by hunting, fishing, or gathering fruit. They could beg for food or take food from someone else. Or they could offer money, another good, or a service in return for food.

Transaction: A trade between two parties that involves at least two things of value, agreed-upon conditions, a time of agreement, and a place of agreement.

e.g.

One party gives X to another party and gets Y in return. Sara pays 600 Pound to "Currys" to purchase a television.

Relationship marketing: The process of creating, maintaining, and enhancing strong, value-laden relationships with customers and other stakeholders.

Beyond creating short-term transactions, marketers need to build long-term relationship with valued customers, distributors, dealers, and suppliers. They want to build strong economic and social connections by promising and consistently delivering high-quality products, good service,and fair prices to maximise profit. A marketing network is required for better relationship marketing.

Marketing Network: It consists of the company and all its supporting stakeholders: customers, employees, suppliers, distributors, retailers, ad agencies, and other with whom it has built mutually profitable business relationships.

Customer value, satisfaction and quality

Customer Value, Satisfaction and Quality:

Customer Value: The difference between the values the customer gains from owning and using a product and the costs of obtaining the product.

e.g. 

McDonald's is an well known brand for it's fast paced service. For buying McDonald's food, customer will think about food content, and the values against the money, effort and compare McDonald's with BurgerKing and Subway - and select the one that gives them the greatest delivered value.

Customer Satisfaction: The extent to which a product's perceived performance matches a buyer's expectations. Customer might be dissatisfied or satisfied.

-         If the product's performance falls short of expectations, the buyer is dissatisfied. 

-         If performance matches or exceeds expectations, the buyer is satisfied or delighted.

Customer satisfaction depends on a product's perceived performance in delivering value relative to a buyer's expectation. Smart companies aim to delight customers by promising only what they can deliver, then delivering more than they promise.

e.g.

A customer of McDonald's expects quality food within short period of time after placing their order. If they get their food in hand within their expected time then they become satisfied. Otherwise, dissatisfied.

Total Quality Management: Programs designed to constantly improve the quality of products, services, and marketing processes.

  

A company achieves total quality only when its products or services meet or exceed customer expectations. Thus the fundamental aim of today's total quality movement has become total customer satisfaction. Quality begins with customer needs and ends with customer satisfaction.