Final draft:

Name: Era Ayman Kamal

ID: 123401

Mkt 306

Submitted to: Dr.Heba Samir

T.A: Noura

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Distribution channel management: power considerations

Introduction

A Distribution channel is of interdependent organizations involved in the

process of making a product or service available for use or consumption. Distribution

channels are very important because channel is an important asset in the company's

overall marketing and positioning strategy. Channels usually prefer better if a party is in

charge, providing some level of leadership. Essentially, the purpose of this leadership is

to coordinate the goals and efforts of channel institutions. The style of leadership may

range from very negative, based on fear and punishment, to very positive, based on

encouragement and reward. In a given situation any of these leadership styles may prove

effective. Now I am going to talking about the role of power in the distribution channel

system and the factors which affect the way in which power is used.

The Role of power in Distribution Channels:

A channel of distribution is responsible for moving the product from the

producer to the consumer. The need some cooperation between the channels members

and coordination members in order to allow the individual organization plan effectively.

Sometimes there is a conflict in the channels because members don’t have the goals,

Such as having different ideas and perceptions. The use of power may affect the decision

making and the behavior of one another, but some firms supposed that the leadership role

and make deliberate try to organize the channel. The main source of the meaning of the

power is the operations between individual channel members' activities are coordinated

so that the conflict will be controlled to some extent.

Sometimes using power by individual channels affects the decision making and

the behavior of one another. It is the tool that the channel is organized and weel-making

behavior well-kept. But it doesn't mean that organizations automatically set out

consciously to organize the channel, but that this organization of the channel arises out of

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individual organizations regulating their behavior to one another in relation to the power

they each have and use.

Methods of using power:

There are two types: the setting up of rewards or positive sanctions for compliance;

and the setting up of punishments or negative sanctions for non-compliance.

The first type is the economic rewards such as increased sales or profits which they

are very important in the channel. Also Rewards or positive agreements may be in terms

of any resource appreciated by a firm. There is another way of rewards but indirect

through expertise as it may be able to give training to a producer, which allows the final

to improve performance and so gain rewards.

The Second type is punishments or negative authorizations also contains more than

economic penalties. In extreme form negative authorizations contain physical force

which is very unusual in the channel, but there could be pressures of displeasure or loss

prestige. Moreover, a negative authorization can be indirect.

Factors affecting the use of power by firms:

There are factors very important because it could affect at firm's decision such as

how it will use its power in some situations. Also it makes the firm control through it the

rewards firm notices it will gain and the costs it notices will be deserved . For example if

I will gain a lot of profit from my product I should minimize the cost of distribution in

order to gain the maximum net profit.

Expected Rewards: it always depends on the goals of the

influencer and the place of a specific influence in the organizing of

things.

Expect Costs: Costs can be direct and indirect. If there is setting

up or punishments; it should be direct cost to the influencer while

indirect costs contain opportunity costs. The use of power in one

direction may well prevent its use in another; if only because of the

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limited extent of attention. So if the one firm tried to change its

behavior it will be balanced against the benefits to be gained from

using this power in another direction.

The Second form of indirect cost is that sometimes there is conflict that produced through

the use of power. For example if a firm is forces to do something it didn’t plan to do, it

will affect the firm in the future situations.

The outcome of the use of power

It is talking about the degree of success which the firm will achieve through the

decision making or behavior of another in line with its wishes. It depends on two basic

variables.

The strength of the influence: it depends on the costs to the influence

of refusing to obey, as well as any negative sanctions forced for

noncompliance such as reduced business or respect and the value of

opportunities foregone but not obeying.

The resistance of the influence: it is talking about to what extent that

the firm can resists the demands of another can affect the outcome of

any effort to change its decision making or behavior.

Conclusion:

Finally, Power is our willingness to use force in a relationship. It is often the means

by which we are able to control or influence the behavior of another party. In the channel

mechanism, power refers to the capacity of the particular channel member to control or

influence the behavior of another channel member. For example, a large retailer may

want the manufacturer to modify the design of the product, or perhaps be required to

carry fewer inventories. Both parties may attempt to exert their power in an attempt to

influence the other's behavior. The ability of either of the parties to achieve this outcome

will depend upon the amount of power that each can bring to bear.

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Develop a Framework for Selection of Intermediary in Marketing Channel

Introduction:

Marketing intermediaries refers to resellers, physical distribution firms, marketing

services agencies, and financial intermediaries. These are the people who help the company

promote, sell, and distribute its products to final buyers. Resellers are those who hold and sell the

company’s product. They match the distribution to the customers and include places, such as

Wal-Mart, Target, and Best Buy. Physical distribution firms are places, such as warehouses, that

store and transport the company’s product from its origin to its destination. Marketing services

agencies are companies that offer services, such as conducting marketing research, advertising,

and consulting. Financial intermediaries are institutions, such as banks, credit companies, and

insurance companies. Market channel means ways used by marketers to make products

available to consumers. Wholesalers, distributors, sales agents, retailers, and all other sources

used in getting the product to consumers are included in the category of marketing channels. This

article is talking about how a company can select the best intermediary for its Marketing

channels with minimum of criteria and time. Any Company is opening a new business its goal is

to satisfy the customer's needs and to gain profit. Satisfying customer is the most important and

difficult task for business.

The 4Ps:

There is something called "4Ps" (Product-Price-Promotion-Place).The First step of any

company should take it to understand the consumer behavior for the second step which is

organizing the plan for producing a new product and how to be attractive to the customers and

satisfy their needs. There are 4 parts should be organized well in order to satisfy the need of the

customer. First The Product it should be semi equal to what the customer want. Second The

Promotion such as advertisements and billboards. They can be costly high but in this case

they will attract the attention of the customer also they should contain information about the

product and it should be full of creativity and well designed. They can make free samples for the

customers. Third The Price the company should price the product correctly not too high and not

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too low. The final part Distribution is the place element in market mix. Distribution means the

transferring the products from producer to the customer.

Drucker predicted that at that time most of companies don’t sell their products directly

to the consumers which mean that there are intermediaries that transfer the products from the

producer to the consumer. So the company should take care while choosing the intermediaries.

A sustainable competitive advantage is a competitive edge that can’t be quickly or easily copied

by competitors. In recent years, it has become far more difficult for companies to attain such an

advantage through product, price, and promotion strategies. Product strategy: rapid technology

transfer from one company to another and global competition have made it much easier for

competitors to achieve parity in product, design, features, and quality. Pricing strategy: in

today’s global economy gaining a sustainable competitive advantage through price is even less

feasible through product strategy. The ability of more & more firms to operate production

facilities all over the world has created fierce price competition in many different product

categories and in services as well. Consequently, a company whose strategy emphasizes lower

prices than competitors’ is not likely to hold on to that advantage for very long. Another

company, domestic or foreign, manufacturing the same products somewhere around the globe is

virtually certain to match or undercut the price. Promotion strategy: the large quantity of

advertising and other forms of promotion to which consumers are exposed on a daily basis has

created enormous clutter, which reduces the impact of promotional messages. Hence, the effect

of the most creative and clever promotional messages are short-lived as thousands of messages

knock each other out of the target audience’s mind. Place or marketing channel strategy: does

offer greater potential for gaining a competitive advantage than the others because it is more

difficult for competitors to copy. We should know that distribution became an important part of

marketing strategy. So the company should Find and select the right channel intermediaries in

order to achieve its goal which is satisfying the customer's needs.

A broad concept of an intermediary is that it covers all those firms placed between

the manufacturer and the customer. Historically, this referred to a traditional channel structure

with a vertically integrated manufacturer, a wholesaler, retailer and then the consumer (Alderson,

1965, Shaw, 1912).

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The best way to select an intermediary in marketing channel .Your distribution should

be chosen based on your customer's habits. Things you need to know before moving forward

with your design are whether there is a market for your product, how large that market is and

how much the product will cost in terms of start-up. Kotler (2006) developed a model including

4 steps in CHANNEL DESIGN DECISION PROCESS. A-Analyzing consumer’s needs: For

maximum effectiveness channel analysis and decision making should be more determined. Do

consumers want to buy from nearby location? They willing to travel to more distant centralized

locations? Would they rather buy in person, over the phone, through mail or e-mail? Do

consumer want many add on services? B-Setting channel objectives: Targeted level of customer

services Decide which segment to solve and the best channel to use in each case Company wants

to minimize the total channel cost of meeting customer services requirement It also influenced by

the nature of company, its products, its marketing intermediaries, its competitors. C-Identifying

major alternative and evaluating them: Company sales force, Manufacturer agencies,

Industrial Distributor.  Each alternative should be evaluated as: Economic (Cost, Sales, and

Profitability) Control (According to Situation) Adaptive Criteria (Flexible, It can adopt to the

environmental changes).

Designing a channel system calls for analyzing customer needs, establishing channel

objectives, objectives, & identifying & evaluating the major channel alternatives.

Conclusion:

Finally, Marketing intermediaries help the company promote, sell, and; distribute its

products to the final buyers. Company should select the intermediary carefully. The choice of the

most effective channel of distribution is an important aspect of marketing strategy. Finding and

selecting the right channel intermediaries is main reason for achieving success. Best management

of distribution channels is one of the factors providing the success of products sold by the

company in the market. Also a company should not forget about the appropriate upgrading of a

product over time to meet the expectations of customers and to be desired by them. Also

noteworthy and not to be underestimated is an offered potential by the growth of networks and

electronic commerce. It seems that the electronic channel of distribution will be soon one of the

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most popular forms of distribution channel. A main advantage of this article is that it focuses on

an important intermediary firm that is well placed to effect economies across different

distribution systems.

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Direct and Online Marketing Building Customer Relationships

Introduction

Direct marketing (A marketing channel without intermediaries) consists of Direct

Connections with Carefully Targeted Individual Consumers to Both Obtain an Immediate

Response and Cultivate Lasting Customer Relationships. Which means that it removes the

"middle man" from the promotion process, as a company's message is provided directly to a

potential customer. This type of marketing is typically used by companies with smaller

advertising budgets, since they cannot afford to pay for advertisements on television and

often do not have the brand recognition of larger firms.

What is the New Direct Marketing Model?

The New Direct Marketing Model Some firms use direct marketing as an extra

medium. For many companies, direct marketing - especially Internet and e-commerce

companies - creates a new and complete model for doing business. Some firms use the new

direct model as their only approach. Experts envision a day when all buying and selling will

involve direct connections between companies and their customers which mean a marketing

channel without intermediaries.

Benefits of Direct Marketing to Buyers:

For buyers, Direct Marketing provides convenience, easy to use, and private way

of interacting with Sellers. Buyers from the comfort of their homes or offices can browse mail

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catalogs or company websites at any time of the day or night. Direct Marketing gives buyers

ready access to a wealth of products and information, at home and around the globe. Direct

Marketing is immediate and interactive – buyers can interact with sellers by phone, chat or

emails or on the seller’s website to create exactly the configuration of information, products, or

services they desire, and then order them on the spot. Also buying direct can mean dealing

strictly with the manufacturer without the intervention of a third-party retailer or distributor.

This eliminates the price markups added by a middleman, resulting in lower prices to the buyer.

So it may also provide the buyer the opportunity to negotiate price.

Benefits of Direct Marketing to Sellers:

For sellers, direct marketing is a great tool for building customer relationships.

Using customer databases and insight into customer data, marketers can target small groups or

individual consumers, tailor offers for individual needs, and promote these offers through

personalized communications. Direct Marketing can also be timed to reach prospects at just the

right moment. The internet is a great tool for direct marketing as it provides interactivity, one-to-

one communication, access to global markets and measurability.

Customer Databases and Direct Marketing:

Database marketing is a form of direct marketing using databases of customers or potential

customers to generate personalized communications in order to promote a product or service for

marketing purposes. The method of communication can be any addressable medium, as in direct

marketing.

The distinction between direct and database marketing stems primarily from the attention paid to

the analysis of data. Database marketing stresses the use of statistical techniques to develop

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models of customer behavior, which are then used to select customers for communications. As a

consequence, database marketers also tend to be heavy users of data warehouses, because having

a greater amount of data about customers increases the likelihood that a more accurate model can

be built.

Consumer databases are organized collection of information about the consumer. These may

include a variety of data, including name and address, history of shopping and purchases,

demographics, and the history of past communications to and from customers. For larger

companies with millions of customers, such data warehouses can often be multiple terabytes in

size.

Forms of Direct Marketing:

1. Personal selling direct marketing

2. Direct-mail direct marketing

3. Catalog direct marketing

4. Telephone marketing

5. Direct-response television marketing

6. Kiosk marketing

7. Digital direct marketing

8. Online marketing

1) Direct-mail Marketing:

Direct mail contains a wide variety of marketing materials, including brochures,

catalogs, postcards, newsletters and sales letters. Major corporations know that direct-mail

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advertising is one of the most effective and profitable ways to reach out to new and existing

clients. Direct mail lets you communicate one-on-one with your target audience. That allows you

to control who receives your message, when it's delivered, what's in the envelope and how many

people you reach.

2) Catalog direct marketing:

Catalog direct marketing involves printed and Web-based catalogs. Printed catalogs

became one of the best ways to drive online sales.

3) Telephone Marketing:

Another common form of direct marketing is  telemarketing, in which marketers

contact customers by phone. The primary benefit to businesses is increased lead generation,

which helps businesses increase sales volume and customer base. The most successful

telemarketing service providers focus on generating more "qualified" leads that have a higher

probability of getting converted into actual sales. There two forms of telemarketing which the

first one is Outbound telephone marketing sells directly to consumers and businesses and the

Second is Inbound telephone marketing uses toll-free numbers to receive orders from television

and print ads, direct mail, and catalogs. It has many benefits such as purchasing convenience and

increased product and service information. Telemarketing also considered a major fund raising

tool for nonprofit and political groups.

4) Direct-Response Television Marketing:

It involves 60- to 120-second advertisements that describe products or give

customers a toll-free number or Web site to purchase and 30-minute infomercials such as home

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shopping channels. Infomercials can be considered a form of direct marketing, since responses

are in the form of calls to telephone numbers given on-air. This allows marketers to reasonably

conclude that the calls are due to a particular campaign, and enables them to obtain customers'

phone numbers as targets for telemarketing. In modern years a number of large companies

started using infomercials to sell their products such as P&G, Disney, Apple, and Kodak.

5) Kiosk Marketing:

Kiosk Marketing involves placing information and ordering machines in stores,

airports, trade shows, and other locations. For example in store Kodak, Fuji and HP the

customers can transfer pictures from their mobile memory or any digital devices and the store

edit them and print. Red box runs more than 24,000 DVD rental kiosks in Max, Walmart, and

Walgreens that customers can make their selections easily on a touch screen.

6) Digital direct marketing Technologies:

Today, People are using the technologies devices more than anything so

Direct marketing through these devices become easily way to reach and interact with the

customers; Such as mobile phone marketing, podcasts, vodcasts and interactive TV.

A. Mobile Phone Marketing:

Marketing through cellphones' SMS (Short Message Service) became increasingly

popular in the early 2000s in Europe and some parts of Asia when businesses started to collect

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mobile phone numbers and send off wanted (or unwanted) content. On average, SMS messages

are read within four minutes, making them highly convertible. Over the past few years SMS

marketing has become a legitimate advertising channel in some parts of the world. This is

because unlike email over the public internet, the carriers who police their own networks have

set guidelines and best practices for the mobile media industry (including mobile advertising).

Mobile marketing via SMS has expanded rapidly in Europe and Asia as a new channel to reach

the consumer. SMS firstly received negative media coverage in many parts of Europe for being a

new form of spam as some advertisers purchased lists and sent unsolicited content to consumer's

phones; however, as guidelines are put in place by the mobile operators, SMS has become the

most popular branch of the Mobile Marketing industry with several 100 million advertising SMS

sent out every month in Europe alone.

B. Podcasts and Vodcasts:

Contain the downloading of audio and video files via the Internet to a handheld

device such as a PDA or iPod and listening to them at the consumer’s convenience.Podcasting is

simply a new way of downloading and playing audio and video files over the internet. The key

difference being that it has a subscribe feature for automatically delivering your content to your

customers or listeners. Podcasting also has a ‘Time Shift’ feature meaning that your customers

can view or hear your content whenever they want and where ever they want on a multitude of

platforms from PC's, iPod’s and enabled cellphones. Because your subscribers to the podcast

feed (your customers) will automatically receive new podcast episodes when they are published

you have a direct line of communication to them, an effective direct marketing channel to your

customers.

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C. Interactive TV(iTV)

let’s viewers interact with television programming and advertising using their

remote controls and provides marketers with an interactive and involving means to reach

targeted audiences.

Conclusion:

Online marketing is effective for a number of reasons. It costs very little for your

business to contact new customers and it is usually much faster and easier to create digital

advertisements than print ones. Direct marketing, however, offers many advantages that you

should consider as you decide upon an advertising plan for your business. Not only can you

target a small demographic, but you can also contact those prospective customers in a way that

may be more effective than traditional online marketing. Direct marketing allows you to mail

advertisements or broadcast commercials directly to the customers who are most likely to want

what you're selling. Marketing professional Dave Dolak points out that direct marketing appeals

to a customer's desire not to search extensively for the goods and services they want. If you own

a sushi restaurant, for example, you may benefit by only mailing your menus to locals who have

eaten at your restaurant before or have expressed an interest in spending an evening in a sushi

restaurant. Direct marketing allows you to add personal touches to your advertisements. Instead

of sending countless metered letters bearing address labels, this targeted approach means you can

hand-write the customer's addresses and demonstrate to the customer that they are being

contacted by an actual human instead of a computerized mail service. Direct marketing also

carries disadvantages. One of the main disadvantages of direct marketing is the demand from

consumers to end unsolicited contact from companies. Consumers do not appreciate privacy

intrusion or the sheer mass of communication, referred to as spam or junk mail, received on a

daily basis. Other disadvantages include generating poor quality leads and failing to bring a high

number of repeat customers.

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Coca Cola’s distribution System :

Producer Customers

They are using direct Distribution by selling goods directly to the customer by deliver supplies with Macdonald.

Producer Wholesalers Retailers Customers

The Coca-Cola Company sells its products to bottling and canning operations,

distributors, fountain wholesalers and some fountain retailers. These then distributes them

to retail outlets, milk bar and corner stores, restaurants, petrol stations and newsagents.

Thus we can cite different point of sales where Coca cola is generally available throughout the

Coca-Cola Company:

- Wholesalers/ distributors

- Retail/corner stores/supermarkets/Groceries…

- Restaurants/cafés/night clubs

- Petrol stations

- Automated teller machines (AMTs)

Coke’s distribution system is one of the most important and is very impressive compared to all other drinks in the category. It has such an impact on consumers and is so successful that even wholesalers and distributors need the product for their business’ success. Coke’s position on consumer’s mind makes it essential to retailers, wholesalers and away-from-home market. They have achieved their goal thanks to this high visibility, and to the availability of the products all over the world, even in remote places. 

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Reference

Kotler.Philip, Armstrong. Gary, Principles of Marketing .United States of America, 2012, 14 Edition.

Doyle, P. (1998). Marketing Management and Strategy (2nd ed.). Prentice Hall. Bowersox, D. J., & Cooper, M. B. (1992). Strategic Marketing Channel Management.

McGraw-Hill I.F Wilkinson. Distribution channel management: power considerations. Journal of Physical

Distribtuion,Vol.4 No1.1973,pp,4-15 Hamed R.|I, Kamran.S, Gholamreza.J. Develop a Framework for Selection of Intermediary

in Marketing Channel. Iranian Journal of Management Studies (IJMS) Vol.4, March 2011, pp:25-42

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