Marketing channels are a collection of interdependent businesses that provide the ability to use or consume various goods and services.
The following functions of marketing
channels are distinguished:
Customer satisfaction (supply of
goods and provision of services in the right place, in the right quantity, of
the appropriate quality and at the best price);
Stimulating demand using a variety
of methods to promote goods;
After-sales service.
It is only through marketing
channels that goods and services become available to consumers. To do this, it
is necessary to ensure the convenience of the time, place and method of
purchasing the goods. Otherwise, this product cannot be considered complete.
When choosing a supply channel, the
buyer pays attention to the following characteristics: the duration of the
delivery time of the goods, the order fulfillment system, the level of
technical support, the possibility of repair and after-sales service, the
range, the possibility of returning defective products.
The structure of the marketing
channel is formed under the influence of external changes. This process is
ongoing. All participants in the marketing channel are interdependent in performing
certain tasks that help in achieving the final result. Among the participants
in the marketing channel, it is worth mentioning manufacturers, wholesalers and
retailers, and end consumers.
Each marketing channel has its own boundaries: geographic (market area),
economic (control over the sale of a certain amount of goods or services) and
social (ability to interact). The structure of a marketing channel is partly
determined by the business environment in which the channel operates. All
participants in the marketing channel must adapt to the changing business
environment.
The wider the range of products, the
higher the overall level of service in the marketing channel and the level of
distribution costs, as the expansion of the range will inevitably affect the
volume of inventory.
The structure of the marketing
channel is the result of the interaction between the resources of the
participants in the marketing channel, as well as the requirements of end users
for the overall level of service.
The higher the end-user requirements
for the overall level of service, the higher the costs and prices. Each member
of the marketing channel reserves only those functions that he performs most
effectively.
Specialized resellers provide
additional cost savings. The most sophisticated information systems allow you
to modernize the structure of the marketing channel. Geographic location,
market size, location of production centers and the level of population
concentration affect the structure of the marketing channel.
Effective marketing channel
management can lead to a competitive advantage. Exclusive rights and
privileges (exclusivity) allow the company to regulate the number and type of
intermediaries. But with a sharp increase in demand, the exclusive network may
not be wide enough to meet all the needs of a growing market. Low demand can
create conditions of increased financial risk in the marketing channel.
An enterprise can develop a second
brand name for a marketing channel aimed at a completely different price
category of consumers. But then consumers can switch to a subsidiary brand,
which will lead to lower sales of the main brand.
The creation of a special dealer
network is associated with considerable investment of time and effort, but it
allows you to differentiate the company from competitors.
The participants in the marketing channel are forced to maintain certain
working relationships. Partnerships are built on close interconnection,
collaboration, trust and fulfillment of obligations by the participants of the
marketing channel. Partnerships result in higher volume shipments, reduce
competition, reduce excess inventory, and enable channel members to predict
market conditions.
The development of partnerships
leads to the creation of an integral marketing channel, in which the boundaries
between its participants disappear. There are many levels in each enterprise,
where employees work together with their peers from other channel enterprises
to provide high quality customer service.
If one of the participants in a
marketing channel pursues their own goals to the detriment of the interests of
other channel members, then such a marketing channel is doomed. Ideally,
participants in a marketing channel should strive to align their goals, plans
and programs with each other, thus ensuring the maximum efficiency of the
overall distribution system. Quality customer service is the result of the
entire marketing channel.
Marketing
channel development
Marketing channel development is an
important element of your marketing strategy. It allows you to get answers to
the following questions:
1. What types of services does the marketing channel need to provide to the end
consumer?
2. What steps do you need to take to provide these services?
3. Which businesses are the best at performing these actions?
When developing a marketing channel,
special attention is paid to the quality of work and knowledge of consumer
needs.
The quality of work execution implies providing the consumer with reliable
goods or services at competitive prices, with minimal complications and
inconveniences.
Knowledge of consumer needs is understood as a clear segmentation and planning
of markets with subsequent offers that most fully correspond to these market
niches.
Marketing channel development
includes fourteen stages. It will not be possible to carry out them easily and
quickly. However, mistakes are not allowed here. After all, after the marketing
channel is formed, its change becomes very problematic. Therefore, distribution
decisions are the longest-term marketing decisions for an enterprise.
The formation of the structure of
the marketing channel should be started with a clear strategy of market
behavior and work with goods. After all, a marketing channel is a guide to the
market for goods and services. In addition, it is necessary to clearly define
the market for which the product is intended. Otherwise, all the work of
developing a marketing channel will be wasted.
What
does marketing channel development involve?
Stage 1. Review of available
materials and research of marketing channels.
Stage 2. Study of the distribution
system existing at the enterprise.
Stage 3. Interviewing the
participants of the marketing channel to obtain information about the possible
problems that the company may face in the formation of the marketing channel.
The purpose of these initial steps
is to accurately describe the marketing channel and the market coverage that
channel provides. An overview of the current distribution and sales processes
can help.
External conditions can influence
the marketing channel strategy. It is necessary to analyze macroeconomic
indicators, technologies, competitors' behavior, barriers to market entry,
geographic distribution of end consumers, etc. The more volatile the external
environment is, the more tightly the behavior of the participants in the
marketing channel should be controlled.
Stage 4. Analysis of competitors
'marketing channels. Through seminars, focus groups and interviews with
individuals, it is important to determine the principles of formation of
competitors' marketing channels, their marketing programs and marketing
strategies.
Stage 5. Assessment of immediate
prospects in existing marketing channels.
Step 6: Draw up a short-term plan of
action. It is possible that the information obtained during the initial stages
will serve as a signal for instant changes in a particular strategy, tactics or
policy of the channel.
Stage 7. Qualitative analysis of end
users.
Step 8. Quantify end-users. Find out
what end-users expect from the product (product information, quality assurance,
after-sales service, etc.) and how these preferences can be used to segment the
market.
Once the segments have been
identified, it is necessary to start developing demographic profiles for each
of them. This will help simplify marketing a lot.
Step 9. Analysis of industry
counterparts. Analysis of industry counterparts is especially important when
developing a marketing channel for a new product.
In addition to finding industry analogues, it is necessary to obtain
information from enterprises known for the efficiency of their distribution
system, regardless of their specialization. After all, high quality is not a
characteristic of a single industry.
Step 10. Creation of the ideal distribution
system. At this stage it is necessary to assess whether it is possible to adapt
the characteristics obtained from the statistical data to certain outlets. A
negative result should not be taken as final here.
Estimating the upcoming costs
associated with providing appropriate services to the end user is the main task
at this stage. Now it should be clear (although not completely) how much
energy, effort and money will be required to satisfy the needs of end consumers
for making a purchase by different market segments.
An enterprise can focus its
resources on a number of areas in which it is able to achieve significant
advantages, and to perform other operations, enter into contracts with other
enterprises. There is a kind of division of labor with other participants in
the marketing channel.
Step 11. Consideration of
administrative and other restrictions.
Step 12: Analysis of discrepancies.
At this step, you need to compare three different distribution systems: ideal
(customer-oriented), existing and regulated by the enterprise management (ideal
system, organized taking into account administrative tasks and constraints).
Full compliance, partial compliance and complete non-compliance are possible.
When fully matched, all three
distribution systems are very similar, and the problems are related to the way
the system is managed.
With partial compliance, the
existing distribution system and the distribution system regulated by the
management are very similar to each other, but differ significantly from the ideal
system. In this case, a careful analysis of the feasibility of objectives and
constraints is required.
When completely inconsistent, all three systems differ significantly. The
relaxation of some of the administrative constraints is likely to bring additional
benefits to end users. If the system regulated by the management of the
enterprise differs from the ideal, then the management is ready to sacrifice
the satisfaction of consumer needs for the sake of performing other tasks or
maintaining certain restrictions. In this case, the management of the
enterprise is at great risk.
Stage 13. Identification and
development of strategic decisions. First you need to check the validity of the
preferences of the enterprise management. Then you should compare the cost of
changing the distribution system with the benefits to be derived from that
change. It should also be noted all the possibilities and limitations
associated with the operation of the enterprise in a macroeconomic competitive
environment.
Stage 14. Formation of the optimal
distribution system. After adjusting the ideal distribution system by a number
of tasks and constraints retained or approved by the management of the
enterprise, you should carefully plan how to implement the resulting distribution
system. If this system does not match the ideal, then the enterprise is still
vulnerable to competitors forming a consumer-oriented distribution system. But
the resulting distribution system is likely to be more market-oriented than the
existing distribution system.
Marketing channel development is
time-consuming and expensive. The process can be somewhat accelerated due to
the simultaneous execution of some of the stages. Sometimes it becomes
necessary to repeat the performed actions.
Many contradictions appear, various
requirements are imposed. Often, even strong personalities succumb to economic,
political and social obstacles in the structure of the marketing channel. But
in order to be successful, these obstacles must be overcome.
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