Formation distribution channels
The main marketing strategy is the formation of the distribution channels. The importance of this issue by the following factors:
- Selected distribution channel gives a fundamental impact on almost all the marketing program of the company;
- Formation channel of distribution involves making long-term commercial agreements with its subjects, which are then very difficult to change, even if they are false;
- Channels between actors often conflicts arise that are not reflected in the sales results of the company;
- User distribution channels (producer of goods) are often some extent lose direct control over the markets.
On this basis, the formation of distribution channels should carry out carefully following the established practice proven algorithm.
Thus, creating distribution channels of its products, the company is to find answers to three questions.
The first of these is the question about what the distribution channel provide the widest coverage of the target market.
To achieve the widest coverage of the target market, determine the density and types of intermediaries, which will attract to the retail sale of goods.
There are three types of density distribution catalog of enterprise:
- Intense - the goods are placed wherever possible (generally mass consumer goods);
- Selective (selective) - goods placed only a few commercial enterprises in the area or city, and one of them may be provided advantages or benefits (so-called right of "first hand");
- Exclusive (exclusive) - The goods are placed on a single commercial enterprise in the region or city (cars, luxuries, expensive clothes or perfumes).
The second is the question about what the distribution channel will best meet the needs of the target market of consumers. This is ensured by meeting the needs of the relevant information, ease of contact, a variety range of goods and services trade enterprises.
Thus, the availability of information creates knowledge of customers about products, their properties. Properly selected intermediaries can provide customers with necessary information by carrying out effective presentation of products, exhibitions, demonstrations, personal selling.
Ease of contact for customers is also important. Properly selected mediator should always customer service, saving the last, eliminate obstacles in the process of buying and selling, easier access to consumer product offerings.
The variety of the range must match the nature of the interest of buyers in competing products and complementary products, from which they can always choose the right.
Services of qualified vendors is especially important to sales of new products, as well as those that are technically complex, require special packaging, rules knowledge exploitation.
Finally, the third question is what kind channel will provide the company's largest profit. This profit is defined outside the yield and cost of each type of channel, type its subjects. The cost of feed - critical value. It includes the cost of marketing, advertising, sales and so on. The extent to which each subject channel assumes these costs determines the profitability of each of them and the channel as a whole.
Thus, creating distribution channels, determine first of a
- The nature of the distribution system (private or independent, direct or indirect);
- The number of channels, their length and width;
- The form of trade (wholesale or retail);
- Place of storage of goods, the accumulation of reserves;
- The range of products for each intermediary;
- A list of service functions;
- The level of discounts and commissions;
- The form of remuneration of sales representatives;
-type intermediaries, their availability;
- The system of privileges for intermediaries;
- Order the distribution of roles and responsibilities between the actors of these channels.
Direct distribution channels forming process may include the following steps (Fig. 52).
The initial phase of the process - understanding the need for forming a channel of distribution. This need arises when a company can not own efforts to achieve appropriate distribution purposes (to sell their products, reach your target market, receive appropriate income, etc.). Background of this need include:
- Manufacture and market introduction of new products;
- Development of new target markets or regions;
- Changes in the structure of marketing (eg, lower prices for goods often require the use of other than still, retail stores);
- The creation of a new company or reorganization;
- Changes in the policies of intermediaries current distribution channels;
- Changes in the structure of the current system of intermediary companies and organizations;
- Changes in the business environment;
- Conflicts between actors and channels of distribution now.
The decision can be taken on as a fundamentally new distribution channels and to transform existing ones.
Realizing the problem (the formation of new or reform existing distribution channel), you must clearly define the purpose of distribution, align them with other marketing goals and objectives, and policies of the company as a whole. To do this:
First, find out the aims and objectives as the enterprise as a whole, and its marketing;
secondly, to formulate goals clearly and specifically distribution; Third, check whether the objectives division goals and objectives as marketing activities, and the enterprise as a whole and, if necessary, adjust first.
Examples specify the purposes of distribution: - commodity footwear for young women - to ensure that every woman between the ages of 18 and 25 living in Kiev could buy shoes at visiting two stores the company;
-tovarovyrobnyk shampoo for children - to create the conditions so that young parents were able to buy shampoo for children when visiting their nearest supermarket.
After determining the purposes of distribution and their coordination is necessary to define the tasks (functions) that has created a distribution channel to perform.
The specification of these tasks must have specific practical because it depends on the needs of consumers, distribution characteristics of different products and features enterprise-producers perform such operations on their own. We are talking primarily about the transportation of goods, handling, providing consumers with manufacturing, information, counseling and other services, staffing party supplies, packaging, storage, inventory accumulation and more.
Number of levels in the distribution channels can vary from zero (direct channel: consumer-commodity) to five or more. Thus, the distribution channels in India, usually consist of four levels (commodity - commercial agent - broker - a major wholesaler - retailer - consumer). In Japan, frequent shestyrivnevi channels (commodity - the main wholesaler - chief specialist wholesaler - wholesaler specialized - regional wholesaler - a local wholesaler - retailer - consumer). In Europe, usually the channels of distribution of consumer goods consisting of two or three levels.
Number of alternative distribution channels for equal Neva structure limited to two or three options.
The second variable, which is considered in the design of possible alternative distribution channels structure - the width (intensity) channel. Species distribution (intensive, selective and exclusive) must comply with the company and the type of product that is offered market.
Determining what types of intermediary companies and organizations participating in the channel, pay attention to their ability to meet the needs of various market segments, and provide appropriate income producers.
Considering these three variables that affect the structure of the distribution channel causes the emergence of a significant number of options for the channel. Thus, if the number of alternatives regarding tiered structure - three intensity - three, and types of intermediaries - five, the total number of options equal distribution channel 45 (3 x 3 x 5).
Almost thoroughly analyze each and every alternative is simply impossible. And so after a priori assessment of existing restrictions picked by a few favorable options. Analyzes of these restrictions:
1. Replacement market: location (distance between producers and market size (number of customers), dispersion (the number of customers per unit area), the behavior of consumers (who, when, where and how to buy).
To analyze such variables as location market can be used a model that takes into account the distance between producers and markets, as well as shipping of goods in transit or intermediary parties netranzytnymy parties - the final consumer (model Bakklina AP)
The relationship between the east and Cd (based on the location of the market) in Fig. Figure 53 shows that due to the need to create reserves in the mediator indirect channels for commodity more expensive. However, to reach remote markets are relatively cheap.
By analyzing such variables as the size of the market, breaking-known rule: the more users, it is advantageous to use intermediaries. This relationship between east and Cd illustrated in Fig. 54.
For the analysis of variance into account the concentration of consumers, it is greater the more and the use of direct distribution channels. However, sometimes come into effect other factors, so that this rule is violated. An example would be Japan. Here 50% of the population is concentrated in the territory in which the United States is home to only 4% of the population. However, direct channels of distribution of goods in Japan is almost gone. Instead, as has been said, there are multi-channels.
The reason - the original culture of Japanese society, and hence consumer behavior. Thus, it is estimated that the Japanese housewife wants to purchase items not on 500 yards (about 460 meters) from the house, and she spends each visit no more than 1,000 yen (US $ 3.25) in one shop. This implies the need for a large number of outlets to give it the opportunity. The historical aspect of most of the distribution channels developed in Japan, especially in rural areas where natural mediators needed for exchange of goods. Therefore dealerships in Japan were traditionally so strong that producers did not even attempt to create its own sales network.
Consumer behavior - a variable that takes into account, when, where and how the purchase of goods who buys them.
When the market buying? There are seasonal, weekly and daily fluctuations in purchases. According to the distribution channels for formation must consider two important points.
First, the seasonal variations in purchases create peaks and valleys in the expansion of commodity, loading their production capacity. In this regard manufacturers organize production during the recession, piling stocks of finished products for a period of peak demand. However, it is too expensive and potentially dangerous way for producers that own accumulates and holds stocks in warehouses of finished products. But if this is going mediator, the costs and risks for producers reduced.
Secondly, you must select a channel such entities that monitor the changing ways consumers shopping "are attached" to consumer behavior (eg, changing your schedule).
Where market purchases, ie which types of stores prefer? The answer to this question is closely related to the geographical location of outlets, but not only. The consumer chooses between balancing the convenience store to have as close to home, the price level required for the purchase of energy costs, attractive product range and services, the need to maintain their social status and so on. But not enough to know the type and location of outlets where consumers buy goods. You must know the nature of consumer behavior and predict how it will affect the purchase of goods in the future.
As the market is buying? You must first find out what is attractive to consumers - buying in small or large quantities, store, or sell through vendors, in one or several outlets, spontaneously or by premeditated plan, after comparing with other goods or without it with related services or without them, with payment in cash or by bank transfer, etc.
Who buys, ie who directly buys the goods and who else is involved in the resolution of his purchase? In most cases, the question is formulated somewhat differently: whose interests are specific individuals should consider commodity, creating a channel of distribution of their products.
2. Variable product: the volume and weight, the level and rate of damage, cost, level of standardization, innovation, technology and others.
So, larger volume and weight of the product, the more expensive it will be transporting. Because the distribution of bulky and heavy goods efficiently carry large quantities and shortest rotshymy channels. This usually means a direct relationship between producers and consumers.
Short distribution channels are also suitable for goods that are perishable or out of fashion. Such channels can minimize the risks.
The lower the cost per unit of product, it may be longer distribution channels. The low cost of goods allows sufficient due to the difference between the cost price and create reserve funds, including the cost of distribution.
As the level of standardization possible to increase channel length also increases. The main reason for this - the need for special maintenance customers standardized products (especially equipment), which provide the majority of intermediaries can not.
Novelty product requires a focused and aggressive distribution of products, especially during its introduction to the market. So, what is the greater degree of novelty goods - it should be shorter distribution channels.
3. Replacement of the manufacturer: size, financial capacity, experience and method of distribution management, system management, objectives and policies.
The larger the company and its financial capacity, the greater is its ability to hold its own distribution channels that contribute to optimize the impact of channel and consumers. This includes art distribution management. The larger the enterprise experience in this field, the shorter distribution channels are its products.
Objectives and policy of the company determine the extent of his control over the distribution of products. They determine the strategy and tactics of division, its aggressiveness, responsiveness to changing market conditions. All this can greatly affect the change characteristics of channels.
4. Changes intermediaries: the availability of cost services offered by them, availability, market position.
These variables determine the real possibility of using multi-channel distribution, as they control.
After all, when on a particular market does not exist a developed system of intermediary companies or organizations, or when their services are too expensive or too monotonous, businesses try to reduce such channels, whether, despite the high cost, they themselves create by their own marketing capabilities.
5. Replacement environment: legal framework, competition in distribution traditions. What they are more specific, the more likely the company will just adjust their channels and overall distribution policy to these changes.
6. Variable behavior of all of the channel, relationships, potential conflicts tradition. It is important to prevent conflicts between actors channels. The more the threat of conflict is created shorter distribution channels.
Heuristics used for evaluation of existing restrictions, allows only approach the selection of optimal channel allocation. So at this stage we can only roughly determine which channel will be preferable in this situation (tab. 28).
The final selection of the optimal structure of the distribution channel (the sixth stage of the process of its formation) can be accomplished using such methods.
Method Aspinvola. This method is based on the analysis and use of the characteristics of the goods:
- Replacement level - a measure of satisfaction possible commodity specific needs of customers;
- The level of possible margins - the difference between the cost of goods and the value at which it can be sold to end users;
- Service - quality and quantity of services that must accompany the product;
- The consumption - the period during which the product maintains its characteristics and properties;
- Acquisition - the time it takes consumers to move between two retail stores or dealers, or the distance between them.
According to these characteristics of all products can be placed within a special color diagram with three "poles" (from red to orange to yellow and then):
a) red - goods with the highest and lowest replacing other characteristics;
b) orange - goods with an average value of characteristics;
c) yellow - of non-replacement and other high performance.
Aspinvola method comes from the fact that the structure of the channels used in the distribution of goods closely linked to them "continue lyusnistyu" (all five levels of performance). Thus, the "red" products have high zamischenosti and high frequency purchases, creating opportunities for standardization solving problems of distribution. It also provides an opportunity to attract specialized marketing organizations, forming a long channel distribution. Typically, this category of products to meet the everyday consumer markets and functional - industrial.
"Yellow" products (low zamischenosti) are characterized by relatively high cost of distribution. The reasons for this - low opportunity Standardization of distribution. Single goods (sewn to order a suit, special industrial equipment) are required short, usually zero, channels of distribution.
"Orange" products (with an average level of performance) mostly require certain "prypasovuvannya" need for adequate consumer.
These products include, for example, cars and furniture. The replacement of such products is quite high, giving the opportunity to have some standardization of distribution. You stand at least one mediator between producers and consumers.
Within these poles according to the level of the goods, there are many positions that determine the structure of distribution channels.
Method Lambert. This method uses financial variables as the most important factors that form the structure of the distribution channel.
According to this method of selection of the structure of the channel likened to the decision-making process of the rationality investment. This choice involves comparing capital growth in all alternative channel structures and comparing it with growth, made possible by investment in manufacturing operations. If the company is investing capital in the distribution channel, earn more than his investment in production, it can be argued that the more favorable will be the transfer of relevant functions intermediaries.
Scientific management method. This is an attempt to describe the possible structure of distribution channels and their best option by means of operational research, mathematical modeling and theory making.
This approach makes it possible to calculate the cost of the tasks of distribution in its various stages to alternative channels and choose the best channel in terms of its least cost and maximum profit.
Mixed subjective-objective method. Choosing the structure of the distribution comes from the expert assessments and management professionals, as well as basic rules heuristics. His three varieties are:
- The method of direct qualitative judgments - different alternative structures of distribution channels valued at factors that they consider most important (change of prices, profitability, growth prospects, etc.); choose the channel that gains the highest number of votes "for";
- Evaluative approach - different alternative structures of distribution channels considered using a quantitative assessment of the impact of the most important factors (tab. 29); a channel that will take greater amount of points, recognize the best (according to Table. 29 is a channel number 1).
Value approach involves determining the value of each channel and the income from it. For example, the company supplies products to 100 customers, each of which requires a sales agent visits twice a month. If the agent can make the sale of ten visits a month, he can answer for 5 users. Thus, to service their customers need enterprise twenty sales agents. Given their salaries, warehouse and office expenses, etc., and comparing the resulting amount of costs that may occur when using independent intermediaries, we can conclude that the cheaper feed.
The same should be done by comparing the revenue that may occur in the first and second case.
Certainly, the use of such methods for selecting the optimal structure of the distribution channel can provide high accuracy. But combining them with expert experts, even intuitive, you can achieve quite acceptable results calculations.
The last stage of the process of forming distribution channel - the choice of his subjects, ie intermediaries who will directly trade organization movement of enterprise-producers.
Typically, such a choice is made in three stages.
In the first stage looking for potential mediators learn that the current system of intermediary companies and organizations that can be used to form a distribution channel, the second - work out criteria for selecting intermediaries, and only the third - directly choose mediators make and implement program management.
Typically, the choice of retailers carried the following criteria:
- Financial aspects of the (more stable financial possibilities and the financial intermediary position in the market, the more likely it was his choice);
- Organization and key figures sales (reason for choosing reseller might be a large number of employed workers in it, their high level of competence and high performance sales and turnover growth rates, the availability of powerful marketing infrastructure, a wide range of services);
- Description of products offered: products sold intermediary must meet the quality, variety, competitive one that offered him (the higher quality product that implements the mediator, the more he can trust);
- Product range (when the intermediary sells a wide range of products of different companies, it is necessary to ensure that from you will be given the necessary attention);
- Reputation (own observations and other information are indicative of honesty, helpfulness mediator, his desire to "share" profits);
- To reach the market (that more consumers can cover a mediator, the better);
- Proximity to the market (which is less than the distance from the intermediary market, the better);
- Stores and warehouses (which should be enough to provide the necessary supplies);
- Management (high qualified staff, rational organizational structure).
Recently, in the formation of new distribution channels noticeable trends. Yes, yet until recently (and we know said above) that only direct channels allow customers to get everything you need from the "source" and only for customers who are at large distances from producers or require small batches cost-effective is the use of indirect channels.
Today this theory is subjected to doubt, because there are new priorities and circumstances. The new priorities are the need of designing distribution channels, which are able to:
First, create the conditions for achieving the goals commodity (penetration into new markets, providing the desired market share sufficient volume of sales, maintain degree of product differentiation, etc.);
secondly, to ensure an appropriate level of customer service target markets, to establish and maintain long-term business relationship with them and a suitable system of guarantees timely delivery and quality products.
The new circumstances are changes that have occurred through the information and technological revolution the 90 p. XX century.
With the development of direct marketing, database marketing producers have the opportunity to communicate with a distant consumers, even those that need small quantities of products. Costs are now only a fraction of the cost of direct deliveries. Therefore, distributors can no longer be the only alternative to save cost allocation. Thanks to computer systems prompt delivery companies that transport the small quantities of products capable of doing it with almost the same efficiency and speed, that large orders. Flexible production systems allow producers to meet small orders and cost performance which was not much more than the cost of execution of large orders.
In general, the difference between the capacity of producers and distribution channels to supply products to the market gradually disappears. Because of this, consumers are much wider range of alternatives, that is much more effective system to satisfy their requests.
As a result, changing the concept of channel strategies. Previously there was the main choice of mediator, able to properly serve consumers, the new approach is focused on providing customer requirements to the distribution channel as a whole. The focus now is the consumer. Thus, the channel selection is not the result, but rather an integral part of a strategy targeting the needs and demands of consumers.
Mediators also understand the changes occur, feel the benefits of information technology to actively use them.
So, quickly become of the combined distribution channels. They have separate functions efficiently distributed between the commodity and its partners intermediaries. For example, commodity assumes the negotiation of the sale, taking orders, intermediaries organizing order fulfillment, product delivery, provide warranty service and provision of services. The main feature of this channel is the horizontal distribution functions (Fig. 55).
The main problem of this channel - the complexity of management, because all participants should properly perform its functions, not to depart from the duties through the efforts of others. Typically, this disadvantage is offset commodity to monitor and if necessary correct deficiencies in the partners. These channels provide mostly industry leaders.
Gradually also develop multiple distribution channels, ie, those that hold all possible and useful to consumers and intermediaries set of functions (Fig. 56). These channels are created primarily to serve different market segments or customers with unpredictable changes in behavior.
Constantly reduced length distribution channels. So, increasingly lacks the main distributor. Such channels of commodity products goes directly to dealers or retailers.
In response to the extraordinary demands of consumers emerging distribution channels of cooperation vzayemopidtrymuvalnymy systems. Such systems are, for example, allow manufacturers and distributors to immediately fulfill its customer orders through the reallocation of reserves and their functions.
For example, Volvo GM Heavy Corp. (USA) selling vehicles and spare parts to them through the two-level distribution channels (regional warehouses and commercial dealers). From 1993 to 1995, an increase in shortages of spare parts dealers, though their stocks very carefully planned. Under growing dissatisfaction and customer service system of spare parts. There have been studies that have shown the inefficiency of the distribution system for road accident cases.
Solution was found in cooperation with Federal Express and the opening of spare parts in Memphis (Tennessee), which houses a full range of spare parts. Organization immediate delivery from central warehouse has enabled the Corporation to close its three warehouses, reduce the total number of stocks to 15%, but due allowances for urgent orders and increase profitability increase its dealers significantly improve customer relationships.
Develops also horizontal integration of distributors, ie a respective alliances, based on - the sharing of the resources available goods and services to increase the overall spectrum proposals. In these channels if the distributor can not, fulfill consumer's order, he turns for help to other suppliers associated corresponding written contracts. This enables customers to reduce the number of suppliers, and hence the number of contacts and the amount of expenditure. Market of contracts between distributors in the US reached $ 5 billion. (1998 p.).