mk0012
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Master of Business Administration – MBA Semester 3
MK0012 – Retail Marketing - 4 Credit Assignment Set – 1
Note: Each question carries 10 Marks. Answer all the questions.
Q.1 What is Retailing? Explain the retailing management decision process.
What is retailing?
Retailing involves selling products and services to consumers for their personal or family
use. Department stores, like Burdines and Macy's, discount stores like Wal-Mart and K-
Mart, and specialty stores like The Gap, Zales Jewelers and Toys 'R' Us, are all examples of
retail stores. Service providers, like dentists, hotels and hair salons, and on-line stores, like
Amazon.com, are also retailers.
Many businesses, like Home Depot, are both wholesalers and retailers because they sell to
consumers and building contractors. Other businesses, like The Limited, are both
manufactures and retailers. Regardless of other functions these businesses perform, they
are still retailers when they interact with the final user of the product or service.
Retailing Management Decision Process
The decision-making process describes the elements of the retail organization that accepts
and processes information inputs and transforms them into useful conclusions. These
conclusions help in selecting a desirable course of action which, when implemented, will
provide a solution to a management problem.
The process is as follows:
1. Identification of the problem: The first step in the decision-making process is
recognizing a problem. Problems generally arise because of disparity between what is and
what should be. To identify the gaps between the current and desired state of affairs,
managers should look for problems that need solving. Identification of the real problem is
important; otherwise, the manager may be reacting to symptoms and fire fighting rather
than dealing with the root cause of the problem.
2. Identify the objectives: It is important at this stage to identify the objective of the
decision. In other words, the manager must determine what is to be accomplished by the
decision.
3. Gather and evaluate the data: This step of the decision making process involves
gathering information relevant to the problem. The manager must pull together sufficient
information about why the problem occurred. This includes conducting a thorough
diagnosis of the situation and undertaking a fact-finding exercise.
4. Evaluating alternative courses of action: The fourth step is listing and evaluating
alternative courses of action. During this step, a thorough "what if" analysis should also be
conducted to determine the various factors that could influence the outcome. It is important
to generate a wide range of options and creative solutions in order to be able to move on to
the next step. In this step, the decision maker tries to outline the advantages and
disadvantages of each alternative. The consequences of each alternative would also be
considered. Sometimes the alternatives developed may meet internal demands but may fail
to meet the environmental conditions. While evaluating the available alternatives, the
decision maker should try to visualize both the desirable and undesirable characteristics.
All pertinent facts must be collected, they must be classified, the pros and cons must be
considered and the important points must be distinguished from trivial or peripheral
matters. The attempt is made chiefly to limit the alternatives to a manageable and
economically feasible number.
5. Selection of the best alternative: In this step, the decision maker merely selects the
alternative that will maximize the results in terms of existing objectives. If the problem has
been diagnosed correctly and sufficient alternatives have been identified, this step is much
easier. Peter Drucker has offered the following four criteria for making the right choice
among available alternatives.
(a) Risk: The decision maker has to weigh the risk of each course of action against the
expected gains.
(b) Economy of effort: The alternative that will give the greatest output for the least inputs in
terms of material and human resources is obviously the one to be selected.
(c) Timing: If the situation is extremely urgent, the best alternative is one that dramatizes
the decision and serves notice on the organization that something important is happening.
On the other hand, if consistent effort is needed, a slow start that gathers momentum may
be preferable.
(d) Limitation of resources: Physical, financial and human resources impose a limitation on
the choice of selection. Of these, the most important resources whose limitations have to be
considered are the human beings who will carry out the decision. No decision can be better
than the people who have to carry out the decision.
6. Implementation and follow up: Finally, the solution is implemented. The situation must
then be monitored to see whether the decision meets its objectives. Consistent monitoring
and periodic feedback is an essential part of the follow-up process. Feedback allows
managers to become aware of the recent problems associated with the solution. It permits
managers to monitor the effects of their acts to gauge their success. They can also take the
opportunity to evaluate their own decision-making abilities.
Decision making can be stressful. Managers must make decisions with significant risk and
uncertainty, and often without full information. They must trust and rely on others in
arriving at their decisions, but they are ultimately responsible. And often, they meet with
considerable criticism.
Q2.Mention the types of retailer with examples .
Ans. Retail consists of the sale of goods or merchandise from a fixed location, such as a department store, boutique or kiosk, or by mail, in small or individual lots for direct consumption by the purchaser.[1] Retailing may include subordinated services, such as delivery. Purchasers may be individuals or businesses. In commerce, a "retailer" buys goods or products in large quantities from manufacturers or importers, either directly or through a wholesaler, and then sells smaller quantities to the end-user. Retail establishments are often called shops or stores. Retailers are at the end of the supply chain. Manufacturing marketers see the process of retailing as a necessary part of their overall distribution
strategy. The term "retailer" is also applied where a service provider services the needs of a large number of individuals, such as a public utility, like electric power.
Shops may be on residential streets, shopping streets with few or no houses or in a shopping mall. Shopping streets may be for pedestrians only. Sometimes a shopping street has a partial or full roof to protect customers from precipitation. Online retailing, a type of electronic commerce used for business-to-consumer (B2C) transactions and mail order, are forms of non-shop retailing.
Shopping generally refers to the act of buying products. Sometimes this is done to obtain necessities such as food and clothing; sometimes it is done as a recreational activity. Recreational shopping often involves window shopping (just looking, not buying) and browsing and does not always result in a purchase.
The world's only Garmin retail location is located on the Magnificent Mile in Chicago.
Retail comes from the Old French word retailer (compare modern French retailler), which means "to cut off, clip, pare, divide" in terms of tailoring (1365[citation needed]). It was first recorded as a noun with the meaning of a "sale in small quantities" in 1433[citation needed] (from the Middle French retail, "piece cut off, shred, scrap, paring").[2] Like the French, the word retail in both Dutch and German (detailhandel and Einzelhandel, respectively) also refers to the sale of small quantities of items.
Types of retail outlets
A marketplace is a location where goods and services are exchanged. The traditional market square is a city square where traders set up stalls and buyers browse the merchandise. This kind of market is very old, and countless such markets are still in operation around the whole world.
In some parts of the world, the retail business is still dominated by small family-run stores, but this market is increasingly being taken over by large retail chains.
Retail is usually classified by type of products as follows:
Food products Hard goods ("hardline retailers") - appliances, electronics, furniture, sporting goods,
etc. Soft goods - clothing, apparel, and other fabrics.
There are the following types of retailers by marketing strategy:
Department stores - very large stores offering a huge assortment of "soft" and "hard goods; often bear a resemblance to a collection of specialty stores. A retailer of such
store carries variety of categories and has broad assortment at average price. They offer considerable customer service.
Discount stores - tend to offer a wide array of products and services, but they compete mainly on price offers extensive assortment of merchandise at affordable and cut-rate prices. Normally retailers sell less fashion-oriented brands.
Supermarkets - sell mostly food products; Warehouse stores - warehouses that offer low-cost, often high-quantity goods piled
on pallets or steel shelves; warehouse clubs charge a membership fee; Variety stores or "dollar stores" - these offer extremely low-cost goods, with limited
selection; Demographic - retailers that aim at one particular segment (e.g., high-end retailers
focusing on wealthy individuals). Mom-And-Pop : is a retail outlet that is owned and operated by individuals. The
range of products are very selective and few in numbers. These stores are seen in local community often are family-run businesses. The square feet area of the store depends on the store holder.
Specialty stores : A typical speciality store gives attention to a particular category and provides high level of service to the customers. A pet store that specializes in selling dog food would be regarded as a specialty store. However, branded stores also come under this format. For example if a customer visits a Reebok or Gap store then they find just Reebok and Gap products in the respective stores.
General store - a rural store that supplies the main needs for the local community; Convenience stores : is essentially found in residential areas. They provide limited
amount of merchandise at more than average prices with a speedy checkout. This store is ideal for emergency and immediate purchases.
Hypermarkets : provides variety and huge volumes of exclusive merchandise at low margins. The operating cost is comparatively less than other retail formats. *Supermarkets: is a self service store consisting mainly of grocery and limited products on non food items. They may adopt a Hi-Lo or an EDLP strategy for pricing. The supermarkets can be anywhere between 20,000-40,000 square feet. Example: SPAR™ supermarket.
Malls : has a range of retail shops at a single outlet. They endow with products, food and entertainment under a roof.
Category killers or Category Specialist: By supplying wide assortment in a single category for lower prices a retailer can "kill" that category for other retailers. For few categories, such as electronics, the products are displayed at the centre of the store and sales person will be available to address customer queries and give suggestions when required. Other retail format stores are forced to reduce the prices if a category specialist retail store is present in the vicinity.
E-tailers : The customer can shop and order through internet and the merchandise are dropped at the customer's doorstep. Here the retailers use drop shipping technique. They accept the payment for the product but the customer receives the product directly from the manufacturer or a wholesaler. This format is ideal for customers who do not want to travel to retail stores and are interested in home shopping. However it is important for the customer to be wary about defective products and non secure credit card transaction. Example: Amazon, Pennyful and Ebay.
Vending Machines : This is an automated piece of equipment wherein customers can drop in the money in machine and acquire the products.
Some stores take a no frills approach, while others are "mid-range" or "high end", depending on what income level they target.
Other types of retail store include:
Automated Retail stores are self service, robotic kiosks located in airports, malls and grocery stores. The stores accept credit cards and are usually open 24/7. Examples include ZoomShops and Redbox.
Big-box stores encompass larger department, discount, general merchandise, and warehouse stores.
Convenience store - a small store often with extended hours, stocking everyday or roadside items;
General store - a store which sells most goods needed, typically in a rural area;
Retailers can opt for a format as each provides different retail mix to its customers based on their customer demographics, lifestyle and purchase behaviour. A good format will lend
Q3.Discruss the theories of retailing with your conclusion.
Ans. Theories of Retailing
Retailing theories help us understand the concept of retailing in a better manner. Some of
the important retailing theories are discussed in subsequent sub-sections.
Wheel of retailing theory
According to a better-known theory of retailing wheel of retailing proposed by Malcomb
McNair new retailers often enter the marketplace with low prices, margins, and status. The
low prices are usually the result of some innovative cost-cutting procedures and soon
attract competitors. With the passage of time, these businesses strive to broaden their
customer base and increase sales. Their operations and facilities increase and become more
expensive. They may move to better up-market locations, start carrying higher-quality
products, or add services and ultimately emerge as a high cost-price-service retailer. By this
time newer competitors as low-price,
low-margin, low-status emerge and these competitors too follow the same evolutionary
process. The wheel keeps on turning and department stores, supermarkets, and mass
merchandisers went through this cycle. Figure 2.1 depicts the wheel of retailing.
Figure 2.1: The Wheel of Retailing
Accordion theory
The accordion theory of retailing suggests that retailers initially enter a market as a general
retailer and then with experience they focus down on particular groups. Over time they
begin to diversify their offer in order to grow, but again would revert to specialization. Thus
retail accordion is based on cyclical functioning in variety and adjustment. Hollander (1966)
proposed the Retail Accordion theory, which explained retail evolution as a cyclical trend in
terms of the number of merchandise categories (i.e., product assortment).
In this theory, at the beginning of operation, a retail institution carries a broad assortment
of merchandise (i.e., various types of products or product classifications) but does not carry
a deep assortment (i.e., various styles within one product classification). At this early stage,
the retail institution is a general store. As time passes, the retail institution becomes
specialized by carrying a limited line of merchandise with a deep assortment. At this point,
the retail institution is a specialty store. At some point, every retail institution returns to the
inventory profile of the old operation with a broad assortment of many lines of
merchandise.
Natural selection theory (Environmental theory)
The Environmental theory explains how variables in the environment affect retail
evolution; however, it does not explain patterns of change or changes over extended time,
as do the two previous primary theories. The basic notion of the natural selection theory is
that retailers that successfully adapt to changing lifestyles of the consumers and other
environments will survive the longest. According to this theory, formats best able to adapt
are most likely to survive e.g., current supermarket trends and department store trends are
attempts to adapt and survive; stores that originally resisted the Internet channel, are now
benefiting from it.
Dialectic process
Many researchers have proposed some form of a Conflict theory to explain retail evolution
(e.g., Berens, 1980; Bliss, 1967; Cauwe, 1979; Gist, 1968; Oxenfeldt, 1960; Schumpeter,
1947; Thomas, 1970). Research in this area, as with the cyclical theories, has been done
primarily in Europe and the United States based on observations of retail operations.
Among these researchers, Gist (1968) proposed the Dialectic theory, a well-known Conflict
theory that has been the basis for the common concepts of many conflict theories. The
Dialectic theory is based on Karl Marxs Theory of Evolution.
According to this theory, retailing evolves through synthesis of two opposing store types
into a superior form. This theory suggests how the original forms of retailers change into
new forms. Figure 2.2 shows this dialectic process.
Figure 2.3: Dialectic Process
Q4.Dots Ltd. Manufactures variety of packaged food. They are also keen to enter fast food
sector and want to open up small restaurants in certain regions. What considerations do
you think the company has to keep in mind while maintaining their food retailing and
before entering service retailing?
Ans. Selection of region
Generally, a country is divided into regions on the basis of directions (east, west, north and
south) or political boundaries. Therefore, after selecting the country, the second step is to
decide on the right region based on comparative cost advantages available out of the
possible regions.
Proximity to the market
Infrastructural facilities
Transport facility
Climatic conditions
Government policy
Subsidies and sales tax exemptions
Selection of the locality/community
After selecting the region, the third step in deciding on the store location is to select a
particular locality or community within the selected region. It means taking decisions
regarding:
Urban area
Rural area
Suburban area
The selection of a locality in a particular region is determined by the following factors:
Labour and wages
Community facilities
Community attitudes
Banking facilities
Existence of supporting stores
Local taxes and restrictions
Water supply
Personal and emotional factors
Historical issues
Traffic flow
Urban area
An urban area is a term used to define a geographical area that is highly populated and
constitutes a city or town.
Suburban area
As the name implies, it is a compromise between the urban and rural areas. It is generally
located at the outskirts of the city. Suburban areas, being located at the outer rim of the city,
provide comparative advantages of both the locations, for instance, Bawana, Nangloi,
Mangolpuri, Badarpur, Narela are the suburban areas of National Capital Region of Delhi.
Rural area
By definition, a rural area is an area outside cities and towns. Generally no retailer would
like to set up a store in a rural area but due to problems of urban area and government
restrictions on urban area construction, rural areas have become an attractive place for new
retail stores. A rural area is blessed with these merits.
Trade Area Analysis
A through analysis of trade area is necessary to estimate market potential, understand
customer profile, competition, develop merchandising plan, and focus promotional
activities. Increasingly, retailers are using Geographic Information System (GIS) software in
their trade area delineation and analysis. GIS combine digitized mapping with key locational
data to graphically depict such trade area characteristics as the demographic attributes of
the population, data on customer purchases, and listing of current, proposed and
competitors locations.
Market Potential
In estimating the market demand potential, retailers consider factors that are specific to
their product line. Hence, often there is a variable in the criterion used by retailers for
market estimation. Some of the important indicators of market demand are as follows:
Population characteristics and its trends
Population characteristics such as geo-demographics, psychographic, and behavioural
characteristics are used to segment markets. Considerable information about an areas
population characteristics can be acquired from secondary sources. Retailers can access
data regarding population size, population density, and number of households, income
distribution, sex, education, age, occupation and mobility.
Purchase power and its distribution
The average household purchasing power and distribution of household income can
significantly influence selection of a particular retail area. Thus, as purchasing power rises,
the population is likely to exhibit an increased demand for luxury goods and more
sophisticated demand for necessities.
Business climate
Retailers should take into account the employment trends of the market because a high
level of employment drives up the purchasing power. It is in the interest of retailers and
developers to determine which geographical areas are growing rapidly and why.
Competition
The level and nature of competition in an area also influence the selection of a particular
retail location. On the basis of levels of competition, trade area can be classified into three
types
A saturated trade area offers customers a wide variety of merchandise, which also ensures
impressive profits for retailers in the market. Customers tend to prefer these areas because
of the variety of merchandise offered and competitive pricing. for its educational books and
stationery products.
Peer pressure and competition
The importance of support of public and the already existing business in adjoining area is
evident from the following example. Sonepat-Delhi national highway is one of the busiest
highways in the country; therefore, it has immense economic potential for dhabas. An entire
stretch of one kilometer on this highway near Delhi has no outlet serving non-vegetarian.
Social norms have ensured that non-vegetarian outlets do not set shops on this stretch.
Competitors location
The type and number of competitors is another important factor. The presence of major
retail centres, industrial parks, franchisee chains, and department stores should be noted.
Intense competition in the area shows that new businesses will have to divide the market
with exiting businesses.
Ease of traffic flow and accessibility
These two factors are more important to some businesses than others. Consider the nature
of the business you are planning to open and your potential customers. Retailers selling
convenience goods must attract business from the existing flow of traffic. Studying the flow
of traffic, noting one-way streets, street widths, and parking lots, is hence important.
Parking major thoroughfares
Parking is another site characteristic that is especially a cause for concern in densely
populated areas. When evaluating the parking that exists at a retail site, there are two
considerations, parking capacity, and parking configuration. There are several ratios that
are generally used to determine the adequacy of a parking lot. While different ratios exist
for different types of retailers or service providers the ideal ratio for food stores is in the
magnitude of 7-8 cars per 1,000 square feet of food store.
Market trends
Evaluate the community from a broad, futuristic perspective. Local newspapers are a good
source of information. Discussions with business owners and officials in the area can also
help. Make use of information available through the chamber of commerce. Is the
community receptive to change and will a new business be welcome? Does the community
depend on a single firm of industry? If so, is it prospering? Is there sufficient demand in the
local market to support a new business?
Visibility
Visibility has a varied impact on a stores sales potential. It is important when a shopper is
trying to find the store for the first or second time. Once the shopper has become a regular
customer, visibility no longer matters. Another
Q5.Eleborate on the role played by advertising in retail business ?
Ans. Advertising
American Marketing Association defines advertising as, any paid form of non-personal
presentation and promotion of ideas, goods or services by an identifiable sponsor.
In the subsequent sections, we will discuss some important aspects of advertising.
7.7.1 Characteristics of advertisement
Advertising is a promotion tool, which is non-personal and is paid for by the sponsor who is
easy to be identified, whose aim is to disseminate detailed information about the product to
the target audience. At this point, it is important to go into the details of what are the
various characteristics of advertising.
Paid form: Advertising is a tool of promotion, which is paid for by the advertiser.
Provide some information: Advertising is informative and provides valuable information
to the consumers.
Motivation of sales: Advertising inspires the consumers for purchase of a product. It lures
the consumers for the purchase of the product by enticing them to possess it.
Non-personal presentation: Advertising is addressed to mass-audience.
Promotion: The aim of advertising is to persuade people to buy products and services or to
accept ideas, which are being advertised.
Identifiable sponsor: The sponsor is the person or group, which is paying for the
advertisement. In case of advertisement, it can be easily identified as to what is the source
of advertising message.
Advertising is not the guarantee of sales: One of the features of advertisement is that it
stands alone for promotion. It does not guarantee increase in the sales.
7.7.2 Advertising creativity
In advertising, creativity plays a very important role. Creativity is the ability to generate
fresh, unique and appropriate ideas that can be used as a solution to problems. To be to the
point and at the same time being effective, a creative idea must be relevant to the target
audience. Developing advertisement that is creative and different yet communicates
relevant information to the target audience is important.
People who work for the creative team in advertising, must take all the research, creative
briefs; strategy statements, communications objectives and other input and transform them
into an advertising message. Rather than simply stating the features or benefits of a product
or service, the advertising message must be put into a form that will engage the audiences
interest and make the ads memorable.
Every marketing situation is different and each campaign or advertisement may require a
different creative approach.
7.7.3 Advertising appeals
The advertising appeal refers to the approach used to attract the attention of consumers
and/or to influence their feelings toward the product, service or cause. The appeals are
generally broken into two categories: informational/rational appeals and motivational
appeals.
Informational/rational appeals
Informational/Rational Appeals focus on consumers practical, functional or utilitarian need
for the product or service and/or the benefits or reasons for owning or using a particular
brand. The main aim of these messages is, to emphasize facts, learning, and the logic of
persuasion. Their objective is to persuade the target audience to buy the brand because it is
the best available or does a better job of meeting consumers needs.
Emotional appeals
Emotional Appeals relate to the customers social and/or psychological needs for purchasing
a product or service. Many consumers motives are important than knowledge of its features
or attributes.
Table 7.1 lists feelings or needs that can serve as the basis for advertising appeals designed
to influence consumers on an emotional level.
Table 7.1: Basis for Emotional Appeals
In many advertising situations, the decision facing the creative specialist is not whether to
choose an emotional or rational appeal but rather determining how to combine the two
approaches. Consumer purchase decisions are often made on the basis of both emotional
and rational motives and attention must be given to both elements in developing effective
advertising.
The most basic idea is to find out how consumers think about brands in respect of product
benefits. This occurs, for the most part, through a rational learning process. Marketers can
measure the effectiveness of an appeal by how well advertising communicates product
information. Consumers at this stage are not very brand loyal and brand switching is very
common.
At the next stage, the consumer assigns a personality to a brand. For example a brand may
be thought of as self assured, aggressive and adventurous as opposed to complaint and
timid. The consumers judgment of the brand has moved beyond its attributes or delivery or
product/service benefits. In most instances, consumers judge the personality of a brand on
the basis of an assessment of overt or covert cases found in its advertising.
Consumers develop three levels of relationships with brands, as shown in Figure 7.1.
Figure 7.1: Level of Relationships with Brands
Consumers develop emotional bonds with certain brands, which result in positive
psychological movement toward them. The marketers goal is to develop the greatest
emotional linkage between its brand and the consumer.
Q6.How to develop marketing channel strategies for retail ? Explain.
Ans. Developing the Marketing Channel Strategy
Developing a viable marketing channel strategy involves some important decisions. These
are discussed in subsequent sub-sections.
Channel design
Designing of the distribution channels deals with the decisions that are associated with
forming a new distribution channel or modifying an existing. In designing marketing
channels, manufacturers have to decide what is ideal, what is feasible, and what is available.
A new firm typically starts as a local operation selling in a limited market. Since it has
limited capital, it usually uses existing intermediates. The number of intermediaries in any
local market is apt to be limited.
Designing a channel system calls for analyzing customer needs, establishing channel
objectives, and identifying and evaluating the major channel alternatives.
Analyzing customers desired service output levels
Lot Size: Lot size refers to the total number of units of products that a customer acquires
during a transaction period.
Waiting Time: Waiting time is the average time that customers of that channel wait for
receipt of the goods. Customer normally prefers fast delivery channels. For example,
Withdraw the money from ATM, Sending money to other stations. You need not step into
the bank and fall into the line to with draw for above-mentioned things.
Spatial Convenience: It represents the degree to which the marketing channel makes it
easy for customer to purchase the Product. For example, Booking the Product through E-
Commerce
Selection Utility: The selection utility of a marketing channel refers to the likelihood that
the needs of customers will be exactly satisfied. Marketing channels like super markets
ensure that they not only carry a wider assortment of products but also a greater variety or
breadth of product assortment.
Service Backup: Service back represents the bundle of services offered by the marketer.
Services such as credit facility, free home delivery, Installation free, repairs and so on
enhance the image of the marketer which can facilitate to the marketer to acquaint a certain
percentage of market shares in the market.
Establishing the channel objectives
According to Bucklin, under competitive conditions, channel institutions should arrange
their functional tasks so as to minimize total channel cost with respect to desired levels of
service out puts.
Effective channel planning requires determining which market segment to serve and the
best channels to use in each case. Channel objectives vary with product characteristics
perishable products require more direct marketing because of the dangers associated with
delays and repeated handling. High unit value products such as generators and turbines are
often sold through a company sales force rather than through intermediaries. A
manufacturer, whether big or small, has to conduct a SWOT analysis of the intermediaries in
terms of their strengths and weaknesses in the internal environment and opportunities and
threats in the external environments.
Terms and responsibilities of channel members
The producer must determine the rights and responsibilities of the participating channel
members make sure that each channel member is treated respectfully and given the
opportunity to be profitable.
Distributor territorial rights
Distributors territorial rights are another element in the trade-relations mix distributors
want to know where and under what terms the producer will enfranchise other
distributors. They would also like to receive full credit for all sales taking places to their
territory, whether or not they did the selling.
Motivating channel members
Intermediaries must be continuously motivated to do their best job. The terms that lead
them to join the channel provide some motivation, but these must be supplemented by
training, supervision, and encouragement.
Evaluating channel members
The producer must periodically evaluate intermediaries performance against such
standards as sales-quota attainment, average inventory levels, customer delivery time,
treatment of damaged and lost goods, and cooperation in promotional and training
programs.
Types of intermediaries
Company sales force
The sales force the assets of the organization. Taking the more no of sales force, train them
to fit for the needs of the organization and assign the each territory to them to contribute
the business.
Manufacturers agency
Hire manufacturer agents in different regions or end-use industries to sell the new test
equipment.
Industrial distributors
Find the potential distributors in all regions and endorse the entire fished goods on to them.
Give them the exclusive distribution, adequate margins, Product training to draw he
attention of the customer and promotional support.
Evaluating channel alternatives
Each alternative needs to be evaluated against economic, control and adaptive criteria.
Economic criteria
Most marketing managers believe that a company sales force will sell more. Company sales
representatives concentrate entirely on the companys products. The simple reason can be
customers willingness to deal with sales representatives dealing in several brands of the
same product rather than a specialized sales representative dealing in only a single brand.
Control criteria
A sales agency is an independent business firm seeking to maximize its profits. The
company depends on external services, the less it can control its product and resources.
There fore, while selecting an intermediary, a company has to strike a balance between its
desire to control important functions of the firm, and the need to market coverage with the
help of external agencies.
Adaptive criteria
To develop a channel there should be some agreement on the commitment levels from both
the sides before the actual start of the business. These commitments invariably lead to a
decrease in the producers ability to respond to a changing market place. Channel members
who operate in a highly turbulent atmosphere will try to structure the channel in a way that
will allow them to adapt to the changes by altering their channel strategy.
Modifying channel arrangements
Modification becomes necessary when the original distribution channel is not working as
planned, consumer buying patterns change, the market expands, new competition arises,
innovative distribution channels emerge, and the product moves into later stages in the
product life cycle.
A channel alternative is described by three elements: (1) The types of available business
intermediaries (2) The number of intermediaries needed (3) Terms and responsibilities of
each channel participant.