Answers to the following five essential questions, asked periodically, will provide clues to gaining advantage over competitors:
- What are our company’s unique strengths or aspects which give us competitive advantage over our close competitors’?
- What are our relative strengths in comparison to our nearest competitors?
- What are our weak flanks which we have to guard?
- What are the weak points of our competitors which we can attack?
- What ideas do the foregoing give us in terms of opportunities?
To do this, it is necessary to make an analysis of the strengths, weaknesses, opportunities and threats (SWOTs) faced by the company and the distributor. Since the market-place, the conditions and the competitors may be different as far as each distributor is concerned, it is important to start afresh in each case. This analysis must be undertaken at least once a year.
Marketing and Channel Flows: The above analysis of a company’s SWOTs must be augmented by similar analyses of the other channel members. The number of members in a particular channel can vary according to the length and width of the channel strategy a company adopts.
A Checklist for Selecting the Most Appropriate Channels
Product Factors
Four product variables must be weighed in channel selection.
- Physical nature: the variations that influence the decision are:
- Perishability of the product, whether physical or due to fashion;
- Seasonal variation, causing inventory problems;
- Unit value of the product;
- Inventory investment required; and
- Customer service requirements.
- Technical nature: whether
- A simple or complex product;
- Advice is needed on product use;
- Installation is needed or
- Special training is needed.
- Length of product line: This consists of a group of products related either from a production or a marketing standpoint. Intermediaries are preferable own sales force when the line is short. Decisions must be made whether’ to use a single channel for the entire line or split the line and use multiple channels.
- Market position: An established product made and promoted by a reputable manufacturer may have a high degree of market acceptance and can be readily sold through more channels than a lesser known product.
Market Factors
- Existing market structure: This includes traditional modes of operation, geographical factors, size and placement of the population, etc.
- Nature of the purchase deliberation: The amount of deliberation by the buyer before purchase differs from product to product. Frequent purchases need more buyer- seller contacts and intermediaries are indicated. Formal specifications and competitive bids may be used in purchasing certain industrial products.
- Availability of the channel: Existing channels may not be interested in new products. The promoter can either persuade them or use aggressive promotion to stimulate consumer demand on the theory that this will force the intermediaries to carry the product in order to satisfy the customers.
Institutional Factors
- Financial ability of channel members: Manufacturers may find it necessary to aid their retailers through direct financing; willingness to extend credit can influence channel acceptance. Conversely, mass retailers sometimes finance their suppliers.
- Promotional ability of channel members: Wholesalers cannot aggressively promote particular products, but exclusive distributors usually join the manufacturer in doing so. Manufacturers assume this function in the case of national brands, while the promotion of private brands usually rests on the mass retailer or wholesaler who establishes the brand name.
- Post-sales service ability: The after-sales service, with or without a warranty, may be performed by the manufacturer, the retail distributor or an independent service organization. This ability affects channel selection.
The channel Decision This is made by a combination of intuition and analysis, and the exercise of judgment. The decision is complicated by the interdependencies existing between relevant factors. While it is difficult to quantify the many trade-offs associated with channel decisions, certain tools can be applied to them. Cost analysis techniques will give reasonable estimates of each channel cost. System analysis involves trade-offs in time, service and costs in order to maximize profits in the long run. Quantitative comparisons are made between alternative production runs, inventory holding levels, transport modes, customer service standards, order transmission, processing systems, etc. This must involve computer-oriented modeling techniques owing to the large number of variables to be considered.
In recent years, significant environmental changes have taken place:
- Trend towards a short-order economy – the increase in inventory has meant that the best decision is to order frequently, forcing the primary supplier to carry the necessary inventory.
- Rapid expansion of product lines – this generates obsolescence and stock availability problems as well as inventory imbalance.
- Price differentials and discounts – legally speaking, these have to be cost-justified.
- Competitive strategies – at one time they centered on product features and price; now the emphasis is on indirect competition such as outperforming competitors on logistic planning and customer service.
The members of a marketing channel are interconnected by several different factors:
- The product line from manufacturer to end-user
- The flow of ownership from member to member
- The cash flow as payments are made by one member to another
- The exchange of information between channel members
- The advertising and sales promotion directed by channel members towards other members or end-users.
- Now we will study how a dealer is selected?
Qualifications/Attributes to be Looked for in Prospective Dealers
| Qualifications/ Attributes to be Looked for in Prospective Dealers | |
| ü Business reputation/standing ü Business capacity ü Salesmanship ü Expertise / experience in the line ü Financial capacity and willingness to invest in the line ü Creditworthiness ü Capacity to offer assortments of products and services required by the customers ü Capacity and willingness to extend credit to customers | ü Capacity to provide storage facilities, showrooms, shops, service workshops, salesmen and service personnel commensurate with the business ü Positive attitude towards the company ü Good relations with: Consumers Opinion leaders in the area Government officials and others (as applicable, depending on the nature of the business. |