Module 5 course1


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Module 5 course1

  1. 1. DistributionA path through which goods and services flow in one direction (from vendor to the consumer),and the paymentsgenerated by them that flow in the opposite direction (from consumer to thevendor).A distribution channel can be as short as being direct from the vendor to the consumer or mayinclude several interconnected intermediaries such as wholesalers,distributors, agents, retailers.Each intermediary receivesthe item at one pricing point and moves it to the next higher pricingpoint until it reaches the final buyer. Also called channel of distribution.Product distribution (or place) is one of the four elements of the marketing mix. An organization or setof organizations (go-between) involved in the process of making a product or service available for use orconsumption by a consumer or business user.Type of marketing channel 1. Intensive distribution - Where the majority of resellers stock the product with convenience products, for example, and particularly the brand leaders in consumer goods markets (price competition may be evident). 2. Selective distribution - This is the normal pattern (in both consumer and industrial markets) where suitable resellers stock the product.In this case retailers can keep the competitors products in their outlets e.g. furniture etc. 3. Exclusive distribution - Only lam-bard specially selected resellers or authorized dealers (typically only one per geographical area) are allowed to sell the product.A channel of distribution consists of three types of flows:-  Downward flow of goods from producers to consumers  Upward flow of cash payments for goods from consumers to producers  Flow of marketing information in both downward and upward direction i.e. Flow of information on new products, new uses of existing products,etc from producers to consumers. And flow of information in the form of feedback on the wants,suggestions,complaints,etc from consumers/users to producers.An entrepreneur has a number of alternative channels available to him for distributing his products. Thesechannels vary in the number and types of middlemen involved. Some channels are short and directly linkproducers with customers. Whereas other channels are long and indirectly link the two through one or moremiddlemen.These channels of distribution are broadly divided into four types:-  Producer-Customer:- This is the simplest and shortest channel in which no middlemen is involved and producers directly sell their products to the consumers. It is fast and economical channel of
  2. 2. distribution. Under it, the producer or entrepreneur performs all the marketing activities himself and has full control over distribution. A producer may sell directly to consumers through door-to-door salesmen, direct mail or through his own retail stores. Big firms adopt this channel to cut distribution costs and to sell industrial products of high value. Small producers and producers of perishable commodities also sell directly to local consumers.  Producer-Retailer-Customer:- This channel of distribution involves only one middlemen called retailer. Under it, the producer sells his product to big retailers (or retailers who buy goods in large quantities) who in turn sell to the ultimate consumers.This channel relieves the manufacturer from burden of selling the goods himself and at the same time gives him control over the process of distribution. This is often suited for distribution of consumer durables and products of high value.  Producer-Wholesaler-Retailer-Customer:- This is the most common and traditional channel of distribution. Under it, two middlemen i.e. wholesalers and retailers are involved. Here, the producer sells his product to wholesalers, who in turn sell it to retailers. And retailers finally sell the product to the ultimate consumers. This channel is suitable for the producers having limited finance, narrow product line and who needed expert services and promotional support of wholesalers. This is mostly used for the products with widely scattered market.  Producer-Agent-Wholesaler-Retailer-Customer:- This is the longest channel of distribution in which three middlemen are involved. This is used when the producer wants to be fully relieved of the problem of distribution and thus hands over his entire output to the selling agents. The agents distribute the product among a few wholesalers. Each wholesaler distribute the product among a number of retailers who finally sell it to the ultimate consumers. This channel is suitable for wider distribution of various industrial products.An entrepreneur has to choose a suitable channel of distribution for his product such that the channelchosen is flexible,effective and consistent with the declared marketing policies and programmes of the firm.While selecting a distribution channel, the entrepreneur should compare the costs,sales volume and profitsexpected from alternative channels of distribution and take into account the following factors:-  Product Consideration:- The type and the nature of products manufactured is one of the important elements in choosing the distribution channel. The major product related factors are:- Products of low unit value and of common use are generally sold through middlemen. Whereas,expensive consumer goods and industrial products are sold directly by the producer himself. Perishable products; products subjected to frequent changes in fashion or style as well as heavy and bulky products follow relatively shorter routes and are generally distributed directly to minimise costs. Industrial products requiring demonstration, installation and aftersale service are often sold directly to the consumers. While the consumer products of technical nature are generally sold through retailers. An entrepreneur producing a wide range of products may find it economical to set up his own retail outlets and sell directly to the consumers. On the other hand, firms producing a narrow range of products may their products distribute through wholesalers and retailers. A new product needs greater promotional efforts in the initial stages and hence few middlemen may be required.
  3. 3.  Market Consideration:- Another important factor influencing the choice of distribution channel is the nature of the target market. Some of the important features in this respect are:- If the market for the product is meant for industrial users, the channel of distribution will not need any middlemen because they buy the product in large quantities. short one and may as they buy in a large quantity. While in the case of the goods meant for domestic consumers, middlemen may have to be involved. If the number of prospective customers is small or the market for the product is geographically located in a limited area, direct selling is more suitable. While in case of a large number of potential customers, use of middlemen becomes necessary. If the customers place order for the product in big lots, direct selling is preferred. But,if the product is sold in small quantities, middlemen are used to distribute such products.  Other Considerations:- There are several other factors that an entrepreneur must take into account while choosing a distribution channel. Some of these are as follows:- A new business firm may need to involve one or more middlemen in order to promote its product, while a well established firm with a good market standing may sell its product directly to the consumers. A small firm which cannot invest in setting up its own distribution network has to depend on middlemen for selling its product. On the other hand, a large firm can establish its own retail outlets. The distribution costs of each channel is also an important factor because it affects the price of the final product. Generally,a less expensive channel is preferred. But sometimes, a channel which is more convenient to the customers is preferred even if it is more expensive. If the demand for the product is high,more number of channels may be used to profitably distribute the product to maximum number of customers. But, if the demand is low only a few channels would be sufficient. The nature and the type of the middlemen required by the firm and its availability also affects the choice of the distribution channel. A company prefers a middlemen who can maximise the volume of sales of their product and also offers other services like storage, promotion as well as aftersale services. When the desired type of middlemen are not available, the manufacturer will have to establish his own distribution network.All these factors or considerations affecting the choice of a distribution channel are inter-related andinterdependent. Hence, an entrepreneur must choose the most efficient and cost effective channel ofdistribution by taking into account all these factors as a whole in the light of the prevailing economicconditions. Such a decision is very important for a business to sustain long term profitability.Channel ManagementThe process by which a producer or supplier directsmarketing activity by involvingand motivating partiescomprising its channel of distribution.Channel management, as a process by which a company creates formalized programs for selling andservicing customers within a specific channel, can really impact your business—and in a positive way!To get started, first segment your channels by like characteristics (their needs, buying patterns,success factors, etc.) and then customize a channel management program that includes: 1. Goals. Define the specific goals you have for each channel segment. Consider your goals for the channel as a whole as well as individual accounts. And, remember to consider your goals for both acquisition and retention.
  4. 4. 2. Policies. Construct well-defined polices for administering the accounts within this channel. Be sure to keep the unique characteristics of each segment in mind when defining policies for account set up, order management, product fulfillment, etc. 3. Products. Identify which products in your offering are most suited for each segment and create appropriate messaging. Also, determine where your upsell opportunities lie. 4. Sales/Marketing Programs. Design support programs for your channel that meet THEIR needs, not what your idea of their needs are. To do this, you should start by asking your customers within this segment, “how can we best support you in the selling and marketing of our products?” That being said, the standard considerations are product training, co-op advertising, seasonal promotions, and merchandising. Again, this is not a one-size fits all, so be diligent about addressing this segment’s SPECIFIC needs in these areas.physical distributionHandling, movement, and storage of goods from the point of origin to the pointof consumption or use, via variouschannels of distribution. See also business logistics. Direct marketingDirect marketing is a channel-agnostic form of advertising that allows businesses and nonprofits tocommunicate straight to the customer, with advertising techniques such as mobile messaging, email,interactive consumer websites, online display ads, fliers, catalog distribution, promotional letters, andoutdoor advertising.Direct marketing messages emphasize a focus on the customer, data, and accountability. Characteristicsthat distinguish direct marketing are: 1. Marketing messages are addressed directly to customers. Direct marketing relies on being able to address the members of a target market. Addressability comes in a variety of forms including email addresses, mobile phone numbers, Web browser cookies, fax numbers and United States and international postal addresses. 2. Direct marketing seeks to drive a specific "call to action." For example, an advertisement may ask the prospect to call a free phonenumber or click on a link to a website. 3. Direct marketing emphasizes trackable, measurable responses from customers — regardless of medium.Direct Marketing ChannelsAny medium that can be used to deliver a communication to a customer can be employed in directmarketing, including:[edit]Email MarketingSending marketing messages through email is one of the most widely used direct-marketing methods. [12]According to one study, email is used by 94% of marketers, while 86% use direct mail. One reason for
  5. 5. email marketings popularity is that it is relatively inexpensive to design, test, and send an email message.It also allows marketers to deliver messages around the clock, and to accurately measure responses.[edit]Online ToolsWith the expansion of digital technology and tools, direct marketing is increasingly taking place throughonline channels. Most online advertising is delivered to a focused group of customers and has a trackableresponse. Display Ads are interactive ads that appear on the Web next to content on Web pages or Web services. Formats include static banners, pop ups, videos, and floating units. Customers can click on the ad to respond directly to the message or to find more detailed information. According to research [13] by eMarketer, expenditures on online display ads rose 24.5% between 2010 and 2011. Search: 49% of US spending on Internet ads goes to search, in which advertisers pay for prominent placement among listings in search engines whenever a potential customer enters a relevant search term, allowing ads to be delivered to customers based upon their already-indicated search [14] criteria. This paid placement industry generates more than $10 billion dollars for search companies. Marketers also use search engine optimization to drive traffic to their sites. Social Media Sites, such as Facebook and Twitter, also provide opportunities for direct marketers to communicate directly with customers by creating content to which customers can respond.[edit]MobileThrough mobile marketing, marketers engage with prospective customers and donors in an interactivemanner through a mobile device or network, such as a cellphone, smartphone, or tablet. Types of mobilemarketing messages include: SMS: (short message service) — marketing communications are sent in theform of text messages, also known as texting. MMS:(multi-media message service) — These messagesuse elements such as images, video, and audio; Mobile Applications: Smartphone-based mobile appscontain several types of messages. Push Notifications are direct messages sent to a user eitherautomatically or as part of a campaign. They include transactional, marketing, geo-based, and more. RichPush Notifications are full HTML Push Notifications. Mobile apps also contain Interactive ads that appearinside the mobile application or app; Location-Based Marketing: marketing messages delivered directlyto a mobile device based on the users location; QR Codes (quick-response barcodes): This is a type of2D barcode with an encoded link that can be accessed from a smartphone. This technology isincreasingly being used for everything from special offers to product information. Mobile BannerAds: Like standard banner ads for desktop Web pages but smaller to fit on mobile screens and run onthe mobile content network[edit]Direct MailMain article: Advertising mailSee also: Direct mail fundraisingThe term "direct mail" is used to refer to communications sent to potential customers or donors via thepostal service and other delivery services. Direct mail is sent to customers based on criteria such as age,income, location, profession, buying pattern, etc.
  6. 6. Direct mail includes advertising circulars, catalogs, free-trial CDs, pre-approved credit card applications,and other unsolicited merchandising invitations delivered by mail to homes and businesses. Bulk mailingsare a particularly popular method of promotion for businesses operating in the financial services, homecomputer, and travel and tourism industries.In many developed countries, direct mail represents such a significant amount of the total volume of mailthat special rate classes have been established. In the United States and United Kingdom, for example,there are bulk mail rates that enable marketers to send mail at rates that are substantially lower thanregular first-class rates. In order to qualify for these rates, marketers must format and sort the mail inparticular ways – which reduces the handling (and therefore costs) required by the postal service. In the [15]US, marketers send over 90 billion pieces of direct mail per yearAdvertisers often refine direct mail practices into targeted mailing, in which mail is sent outfollowing database analysis to select recipients considered most likely to respond positively. For example,a person who has demonstrated an interest in golf may receive direct mail for golf-related products orperhaps for goods and services that are appropriate for golfers. This use of database analysis is a type ofdatabase marketing. The United States Postal Service calls this form of mail "advertising mail" (admail forshort).[edit]TelemarketingAnother common form of direct marketing is telemarketing, in which marketers contact customers byphone. The primary benefit to businesses is increased lead generation, which helps businesses increasesales volume and customer base. The most successful telemarketing service providers focus ongenerating more "qualified" leads that have a higher probability of getting converted into actual sales.The National Do Not Call Registry was created in 2003 to offer consumers a choice whether to receivetelemarketing calls at home. The FTC created the National Do Not Call Registry after a comprehensive [16]review of the Telemarketing Sales Rule (TSR). The do-not-call provisions of the TSR cover any plan,program, or campaign to sell goods or services through interstate phone calls. The provisions do notcover calls from political organizations, charities, telephone surveyors, or companies with which a [17]customer has an existing business relationship.Canada has its own National Do Not Call List (DNCL). In other countries it is voluntary, such as the NewZealand Name Removal Service.[edit]Voicemail MarketingVoicemail marketing emerged out of the market prevalence of personal voice mailboxes, and businessvoicemail systems. Voicemail marketing presented a cost effective means by which to reach peopledirectly, by voice. Abuse of consumer marketing applications of voicemail marketing resulted in anabundance of "voice-spam," and prompted many jurisdictions to pass laws regulating consumer voicemailmarketing. More recently, businesses have utilized guided voicemail (an application where pre-recordedvoicemails are guided by live callers) to accomplish personalized business-to-business marketingformerly reserved for telemarketing. Because guided voicemail is used to contact only businesses, it isexempt from Do Not Call regulations in place for other forms of voicemail marketing. Voicemail courier isa similar form of voicemail marketing with both business-to-business and business-to-consumerapplications.[edit]Broadcast Faxing
  7. 7. [citationBroadcast faxing, in which faxes are sent to multiple recipients, is now less common than in the past.needed] This is partly due to laws in the United States and elsewhere which regulate its use for consumermarketing. In 2005, President Bush signed into law S. 714, the Junk Fax Prevention Act of 2005 (JFPA),which allows marketers to send commercial faxes to those with whom they have an established businessrelationship (EBR), but imposes some new requirements. These requirements include providing an opt-out notice on the first page of faxes and establishing a system to accept opt-outs at any time of the day.Fax senders must begin complying with these new requirements, which are described in this fact sheet. [18]Roughly 2% of direct marketers use fax, mostly for business-to-business marketing campaigns. Also,due to the popularity of a variety of digital communication methods, the overall use of faxes is less than inthe past.[edit]CouponingCouponing is used in print and digital media to elicit a response from the reader. An example is a couponwhich the reader receives through the mail and takes to a stores check-out counter to receive a discount.Digital Coupons: Manufacturers and retailers make coupons available online for electronic orders thatcan be downloaded and printed. Digital coupons are available on company websites, social mediaoutlets, texts, and email alerts. There are an increasing number of mobile phone applications offeringdigital coupons for direct use.Daily Deal Sites offer local and online deals each day, and are becoming increasingly popular. Customerssign up to receive notice of discounts and offers, which are sent daily by email. Purchases are often madeusing a special coupon code or promotional code. The largest of these sites, Groupon, has over 83 [19]million subscribers.[edit]Direct Response TVDirect marketing via television (commonly referred to as DRTV) has two basic forms: long form (usuallyhalf-hour or hour-long segments that explain a product in detail and are commonly referred to asinfomercials) and short form, which refers to typical 30-second or 60-second commercials that askviewers for an immediate response (typically to call a phone number on screen or go to a website). TV-response marketing — i.e. infomercials — can be considered a form of direct marketing, since responsesare in the form of calls to telephone numbers given on-air. This allows marketers to reasonably concludethat the calls are due to a particular campaign, and enables them to obtain customers phone numbers astargets for telemarketing. One of the most famous DRTV commercials was for Ginsu Knives by GinsuProducts, Inc. of RI. Several aspects of ad, such as its use of adding items to the offer and the guaranteeof satisfaction were much copied, and came to be considered part of the formula for success with short-form direct-response TV ads (DRTV)[edit]Direct Response RadioIn direct response radio, ads contain a call to action with a specific tracking mechanism. Often, thistracking mechanism is a "call now" prompt with a toll-free phone number or a unique Web URL. Resultsof the ad can be tracked in terms of calls, orders, customers, leads, sales, revenue, and profits that resultfrom the airing of those ads.[edit]Insert MediaAnother form of direct marketing, insert media are marketing materials that are inserted into othercommunications, such as a catalog, newspaper, magazine, package, or bill. Coop or shared mail, where
  8. 8. marketing offers from several companies are delivered via a single envelope, is also considered insertmedia.[edit]Out-of-HomeOut of home direct marketing refers to a wide array of media designed to reach the consumer outside thehome, including transit, bus shelters, bus benches, aerials, airports, in-flight, in-store, movies, collegecampus/high schools, hotels, shopping malls, sport facilities, stadiums, taxis — that contain a call-to-action for the customer to respond.[edit]Direct Response Magazines and NewspapersMagazine and newspaper ads often include a direct response call-to-action, such as a toll-free number, acoupon redeemable at a brick-and-mortar store, or a QR code that can be scanned by a mobile device —these methods are all forms of direct marketing, because they elicit a direct and measurable action fromthe customer.[edit]Direct SellingDirect selling is the sale of products by face-to-face contact with the customer, either by havingsalespeople approach potential customers in person, or through indirect means suchasTupperware parties.[edit]Grassroots/Community MarketingThe door-to-door distribution of flyers and leaflets within a local community is a business-to-consumerform of direct marketing used extensively by restaurants, fast food companies, and many other businessfocusing on a local catchment. Similar to direct mail marketing, this method is targeted purely by area andcommunity, and costs a fraction of the amount of a mailshot, since it is not necessary to purchasestamps, envelopes, or address lists with the names of home occupants.1. What is Direct Marketing?Direct marketing is just what it sounds like - directly reaching a market (customers and potential customers) on a personal (phonecalls, private mailings) basis, or mass-media basis (infomercials, magazine ads, etc.).Direct marketing is often distinguished by aggressive tactics that attempt to reach new customers usually by means of unsoliciteddirect communications. But it can also reach out to existing or past customers. A key factor in direct marketing is a "call toaction." That is, direct marketing campaigns should offer an incentive or enticing message to get consumers to respond (act).Direct marketing involves the business attempting to locate, contact, offer, and make incentive-based information available toconsumers.2. Types of Direct MarketingThree main types of direct marketing include: Telemarketing: Direct marketing that involves calling people at home or work to ask for donations, an opinion, or for sales purposes. Email Direct Marketing: This form of direct marketing targets consumers through their Email accounts. Email addresses can be harvested from websites, forums, or purchased. Some companies require you to receive announcements to use their websites. Direct Mail Marketing: Advertising material sent directly to home and business addresses.Other types of direct marketing include: distributing flyers; door-to-door solicitations; curbside stands; FAX broadcasting;television marketing (i.e., infomercials); coupon ads in print media; and voice mail marketing.
  9. 9. 3. Does Direct Marketing Work?That depends on how you define "work." Direct marketing does ensure people know about your business. But aggressive,misleading, or annoying direct marketing can leave people with a bad impression about your business.Be sure to adhere to privacy and contact laws because there are stiff fines and penalties for direct marketers that violate directmarketing laws.4. Should I Consider Direct Marketing?Every business owner should consider direct marketing. However, the type of direct marketing that will work for your businessdepends on your industry, your business ethics, and your budget.