Royal Sugar

8/7/2019 Royal Sugar

1/18

Introduction

ROYALs mission is to enrich the quality of life of people through responsible

application of knowledge, skills and technology. It is committed to the pursuit of excellence

through world-class products, innovative processes and empowered employees to provide the

highest level of satisfaction to its customers. We will manufacture best quality sugar which

does not have any harmful elements.

Mission and Vision

Attain a high level of productivity in all its operations through effective and efficient

use of resources, adoption of appropriate technology and alignment with our core

competencies.

Develop its employees by encouraging empowerment and rewarding innovation.

Promote an environment for learning and personal growth of its employees.

Provide products and services of high and consistent quality, ensuring value for

money to its customers.

Encourage and assist in the qualitative improvement of the services of its suppliers

and distributors.

Establish harmonious relationship with the community and promote greater

environmental responsibility within its sphere of influence.

Value of the company

Quality

Customer Focus

Fairness

Transparency

Continuous Improvement

[Marketing Channel Design of Royal Sugar] Page 1


2/18

Distribution Network

The company maintains strategically located territory managers in 25 different

locations across the country. It has developed an advanced distribution system through its

more than 350 skilled and trained manpower and a large task force over 25 vehicles. The

distribution system will be capable of handling continuing volume of diverse range of

products from the various businesses. As our product is sugar, from market research we

found that people dont want to spend a lot of time in buying sugar. Brand loyalty is also not

much in terms of buying sugar. Few important things are its availability, product quality, size

and packaging etc.

Challenges in Designing Marketing Channel

In designing our products marketing channel there are two major tasks involves:

A. Designing the right channel

B. Implementation of the design

A. Designing the Right Channel

Segmentation

Our market segment will consist of mass consumers, particularly lower, middle and

upper-middle class people.

Positioning

Next we will define the optimal channel to best serve the segmented customers. In

other word we will position or configure the channel. We will position the channel by

Identifying the necessary channel flow

Determine the optimal channel structure

We will perform 8 generic channel flows - Physical possession, ownership,

promotion, negotiation, financing, risking, ordering, and payment. In determining the

channel structure we will decide on who will be the channel members and how many

channel members will be involved in the channel. Our channel will be consisting of

manufactures, wholesaler, and retailers who will deliver the products to the end-user.



3/18

Targeting

After determining the market segment based on their service output

demand, we will target mass customers who are very potential to buy the product.Since our product is sugar and its especially for lower, middle and upper-middle

class people. We are not saying that rich people would not buy our product but rich

people are very health conscious. They prefer low calorie sugar rather than normal

sugar.

B.Implementation of the Design

Identifying Power Sources

In the distribution channel, we are the manufacturer and we will serve as Channel

captain and will exercise power to ensure that all the channel members perform as

per their requirement.

Identifying Channel Conflicts

Since we are using intensive distribution and a number of retailers are involved in ourchannel, the conflict would be must. There is the possibility of conflict regarding

goal, domain and perception.

Channel Coordination

In this step we will harmonize all the channel members actions, performance and

interest in such a way that the end-user is not affected and the marketing channel inaction is regarded as the most effective and efficient channel.



4/18

As a manufacturer we have 3 alternatives to distribute our product in the market.

We are selecting the producer to the consumer channel because we will be distributing the

product directly to the business consumers. There are so many restaurants, event

Management Company, we would directly sell our product to them. We are going to

implement a 2 level channel whereby we will sell the product to the retailers and they will

directly sell to the consumers. We will use this type of channel for shops like agora, nondon

etc. For the mega cities we will use the wholesalers and retailers for the distribution of the

product. Our main target is to sell the product in the mega cities. In order to make the product

available to the consumers we have to use both the wholesaler and the retailer. Since we are

using an intensive distribution in our country to cover up all the 64 districts of our country

we will appoint wholesalers in the mega cities.



5/18

Efficiency Template

The efficiency template describes the types and amounts of work done by each channel

member along with importance in performing the marketing flows. Here is assuming

efficiency template for our eight channel flows:

Weight for Flows Potential flow performance of Channel

Member

Costs Benefit 1 2 3 4(end

user)

TOTAL

Potential Final

(high, Weight

mediuml or low)

Physical

possession

17.00 Medium 18 60 20 15 5 100

Ownership 10.00 Medium 12 25 25 25 25 100

Promotion 13.00 Medium 12 50 30 10 10 100

Negotiation 0.00 Low 0 0 0 0 0 100

Financing 8.00 Low 8 100 0 0 0 100

Risking 15.00 Medium 15 33.33 33.34 33.33 0 100

Ordering 7.00 Low 10 60 20 15 5 100Payment 30.00 High 25 40 30 20 10 100

Total 100 N/A 100 N/A N/A N/A N/A N/A

NPS N/A N/A N/A 50% 25% 15% 10% 100

In our marketing channel, there are 4 channel members.

Manufacturer refers to number 1 in efficiency template

Wholesaler refers to number 2 in efficiency template

Retailers refers to number 3 in efficiency template

End user refers to number 4 in efficiency template

From the efficiency template, cost for payment flow is high, cost for physical possession,

ownership, promotion and risking flow are medium and other flows cost is low. The

manufacturer (we) has the highest cost of operation and they also have highest profit margin

share. Second highest cost of operation and second highest normative share belong to sales

branches which ultimately belong to us. Finally, the third highest cost of operation and

normative share belong to the retailers. NPS- Normative profit share-the percentage that



6/18

measure of how much contribution each member is making in relationship to the cost

is known as normative profit share.

Channels Flows

The work of the channel includes the performance of several marketing flows.

The term flows rather than function is because the work flow through channel is

being done at different points in time by different channel member. It is mentioned

that we will perform eight generic channel flows - Physical possession, ownership,

promotion, negotiation, financing, risking, ordering, and payment.

Service Outputs

Service Outputs refers to reducing end users search, waiting time, storage and other cost. It

also states as value added services of a channel to satisfy its customers. A channel existence

and its feasibility are ensured by providing service outputs in regard to satisfy its ultimate

users. Customers are now more focusing on having more service output and the channel

intermediaries should enhance their efficiency to satisfy the customers without sacrificing the

service outputs. Service output ensures the smooth continuation of the marketing channels.



7/18

Our targeted audience groups are as follows:

Business (restaurants, event management, bakery, ice cream factory)

Mass people

On the basis of our target consumer we will be ensuring the convenience of our product to

them. For this we have to encourage our intermediaries to provide the customers with proper

service outputs so they remain satisfied with our product. For a product like sugar service

outputs are very important. Those are discussed below:

Bulk-Breaking

Customers tend to buy in different quantities. The wholesalers will buy in huge quantity

from us and then they will sell it to the retailers but the retailers has to offer the desired size

or quantity the consumer wants. Because we have to remember at the end of the day our

success solely depends on the consumer. We are offering .5 kg, 1 kg, 2kg, and 5kg plastic

container. So the customers can get any one of them in any quantity that they needed. For

middle class and lower class people bulk breaking is very important. It is mainly because

they cant buy in huge quantity in every time. Our .5 kg packet is targeted to these people.

Spatial Convenience

Another thing is that consumers do not have spare time and that is why they want to

reduce the search and transportation cost anyhow. To consume our product they want to visit

the nearby shops and when they do not get that in desired places they become dissatisfied.

We have to remember people dont want to spend time to buy a product like sugar but as we

are involved in intensive distribution so, we will make our product available in every

possible sectors.

Waiting time and Delivery time



8/18

The lead time is needed to be reduced. It is the difference between the ordering

and receiving time of the goods. This indicates the Waiting time or Delivery time.

As our product is available so the consumers need not to wait for the delivery.

For our product, we can not offer assortment and variety. This service output is not viable for

our product type.

In order to make the channel more efficient and effective we have to under take some

strategies. As our product Royal sugar is newly introduced, so to remain competitive in the

market we need to take some steps.

Strategies for Making the Channel Effective and Efficient

Free Goods:

We will provide free goods to the retailers and to the wholesalers in the beginning. This

will motivate the wholesaler and the retailer to give good effort to sell the product As we are

launching a new brand of sugar and sugar is a product for which people dont have much of a

brand preference. So, we will have to give some sort of benefit to the intermediaries in the

form of free goods so they will keep our products and push it to the customers at the point of

purchase. For a product like sugar retailers opinion has great importance to the consumers.

Display and Slotting Allowance:

Super Salt will provide a fixed fee to the retailers in the form of display and slotting

allowance. For most of the department stores like Nandan, Agora and Almas we will offer

them slotting allowance to display our product in the shelves. In these department stores if

we can have a well decorated shelf, then we can easily attract the buyers. After that when

these consumers will go to their local retailer they would hope fully ask for royal sugar. For

the convenience stores and other retailers we will give them display allowance to put up our

product instead of those of our competitors.



9/18

Count-Recount:

A count recount system can be introduced and incentives can be paid to the

retailer on the basis of the number of products they sell in a 30 day period.

Conflict

Conflict is a state of discord caused by the actual or perceived opposition of needs,

values and interests. A conflict can be internal (within oneself) or external (between two ormore individuals). Channel Conflict arises when the behavior of a channel member is in

opposition to its counterpart. It is opponent centered and direct in which the goal or object

sought is controlled by its counterpart.

Since we are going for an intensive product distribution in the market its quite obvious there

will be conflict among different channel members. It could be vertical channel conflict or

horizontal channel conflict.

Horizontal Conflict

- Disagreements among channel members at the same level.

- For example retailer with another retailer or wholesaler with another wholesaler.

Figure: Horizontal Conflict

Vertical Conflict

- Channel members at different levels find many reasons for

disputes.

- For example wholesaler with manufacturer.

http://en.wikipedia.org/wiki/Needhttp://en.wikipedia.org/wiki/Value_(personal_and_cultural)http://en.wikipedia.org/wiki/Needhttp://en.wikipedia.org/wiki/Value_(personal_and_cultural)


10/18

Figure: Vertical Conflict

Conflict Management Strategies

There are different type of conflict management strategies.

Figure: Conflict Management Strategies

Institutionalized Mechanisms

As an institutionalized mechanism, we will use information intensive mechanism and

building relational norms which are more appropriate for our channel. The justifications aregiven below-



11/18

Information Intensive Mechanism:

We are going to encourage our channel members to share information among

them to make the channel more effective and efficient. By doing so there will be free

flow of all information regarding what is happening around. When everything will be known

to everyone then there will be lesser chance to arise conflict.

Building Relational Norms:

We will encourage our intermediary partners to cultivate rational norms among

themselves. It will help them to work together rather than against each other. Moreover, we

might be able to build synergy among them.

Style of Conflict Resoulation

We think, accommodation and collaboration style are the style we should follow to

resolve conflict.

Accommodation:

We can assist the retailers or wholesaler with guidance and strategies to cope up with the

situation rather than ignoring them and thus build up a healthy relationship. We can open up

a troubleshooting or problem solver or a communication branch in our company where we

will listen to the problems that the retailers or other wholesalers are facing.

Collaboration:

Solving a problem with collaboration strategy is really difficult because it requires high level

of resources, information, time and energy. Since its a win-win approach its desirable by

intermediaries. We will consider this approach whereby a serious issue arises. The issue

could be arising from domain conflict, perception conflict or goal conflict. Whatever the area

is we will try to come up with an optimal solution through negotiation by considering

everyones expectation.

Conflict Resolution Via Economic Incentive



12/18

Sometimes its a good idea to use economic incentives to resolve conflict. Economic

incentives are offered to encourage people to make certain choices or behaviour in a

certain way. They usually involve money, higher commission/revenue sharing scope, easy

finance etc.

Economic Incentives will do the following:

Encourage intermediaries to perform better.

Persuade them to push our product to the buyer.

Convince them to continue doing business with us.

Give them a positive feeling of becoming our channel partner.

Types of Intermediaries

We are going to use the following intermediaries as our channel partners.

Retailers

Retailers are those who have the direct contact with the end user. There are many typesof retailers. For our product, we have decided to distribute only in department stores, super

stores and convenient stores which are more feasible and even will not decrease the brand

image. We cannot go for Category Killers, City Market/Open Market; because these do not

suit our product. So, for the above reason

Wholesalers

For our purpose, we are going to target general merchandise wholesaler. These

wholesalers offer broad but shallow product lines that are mostly of interest to retailers

carrying a wide assortment of products, such as convenience stores, variety stores etc. Since

these wholesalers offer such a wide range of products, their knowledge of individual products

may not be strong. But we are paying more attention to enhance the knowledge of these

wholesalers about our product so that they can push the retailers as well.

Distribution Channel Intensity

Universally there are three types of distribution intensity in marketing channel.

http://www.econedlink.org/lessons/glossary_popup.php?title=Moneyhttp://www.econedlink.org/lessons/glossary_popup.php?title=Money


13/18

Figure: Types of Channel Intensity

Our Choice: Intensive Distribution

We are planning to select intensive distribution to distribute our product because sugar

is regarded to be one of the most useful products and the demand for sugar is always in the

market.

Strategies to Manage the Intermediaries

We have to be very attentive towards these intermediaries in order to manage them

well for getting the best output of it. Because our product which is newly introduced needs to

pay a greater attention to get the market share; because there are already other competitors of

sugar are doing very well in their respective field. The strategies taken in response to manage

our intermediary partners are given below:

Invest in Brand Equity Building

We need to undertake steps to build brand equity such that the consumers demands the

product from the channel intermediaries for the sake of enjoying benefits derived from the

usage of the product.For our product, service is not required and consumers buy preferred



14/18

one without considering the alternatives. When our brand equity will be strongly

established then if the customers cannot find it, they will be dissatisfied with the

outlet and the outlet cannot convince them to change their preferences. So, the

channel member will be bound to carry our product because we have high brand equity.

Incentives

Monetary and non monetary incentives will be provided to our channel intermediaries

in regard to manage them well so that they do not switch to others. It is a very important

issue. If there is a chance that our channel member may switch to those where they will get

chance to make more money out of the business, then we should apply this strategy. It will

attempt to strengthen the performance reward relationship and thus motivate the affected

related members.

Auditing and Tracking

It refers to continuous performance evaluation of the channel members. We have to

audit and track their performance in regard to ensure competitive distribution of our newly

introduced product. For this there will be our territory managers who will observe and take

the feedback of the convenient stores in regard to know that how our distributors are

performing.

Encourage Retailers to Go for Push Strategy

As we are a newly introduced brand so we have to encourage the retailers to go for push

strategy to divert the attention of the consumers from a well recognized brand to our brand.

Strategic Alliances

Strategic Alliances refer to co-operative agreements between channel members, which

may be wholesalers and retailers to share or transfer skills and resources to meet mutually

agreed goals. We will form strategic alliances with our wholesaler and retailerso that they



15/18

collaboratively work together for the betterment of the channel. Definitely this will

help both of the parties in regard to make more profit when they will work together

as their goal will be same.

We have identified some of the purposes of going for strategic alliances between our

intermediaries.



16/18

Achieve Better Market Coverage

From a manufacturers perspective this will provide us with better andwider marketcoverage in low cost.

Motivating the Downstream Partners

Through an alliance, we can harvest strong commitment with the wholesalers and retailers..

Barriers to Entry

An alliance with our channel partners will help us to prevent our competetors of being

exposed to the customers as much as we do.

Uninterrupted Flow of Goods Supply

With an alliance, we can maintain an uninterrupted flow of goods to the market. So

customer will never return empty handed when they will ask for our sugar.

Revenue Generation

We can provide our sugar to our allied intermediary partners at a minimized cost which

will help them to generate more revenue.

Differentiation

Our intermediary partners can position themselves creating a differentiation in the eyes of

the consumers indicating they have better stock, good price and all necessary service outputs

to better satisfy the customers.



17/18

Concluding Remarks

This time is recognized as the era of globalization. Customers are more

knowledgeable about the current market as they are more exposed to different product of

both home and abroad. This is really very difficult task to please the customers and quite

impossible to deceive them. They are always so demanding and in order to meet their

demand the marketer always need to up to date about the market, need to understand what

customer want, customize their product offerings, communicate them well and most

importantly keep track what their competitors do. By doing these all successfully they will

become the market leader. So, in conclusion we can say that the distribution network we

have designed and the strategies we have developed will enable us to become the most

effective and efficient distribution channel and serve our end-user appropriately.



18/18

Reference:

Coughlan,A.T, Anderson,E, Stern, L.W & El-Ansary, A.I. (2003).Marketing

Channels, Edition 6th . Prentice-Hall Ltd: New Delhi, India.

Buhalis, D. & Laws, E. (2001) Tourism Distribution Channels: Practices, Issues and

transformations, Cengage Learning EMEA.

Kotler, P. and Keller, L. K.(2007-2008). Marketing Management. Edition 12th.

Prentice-Hall Ltd: New Delhi, India.

Kapoor,S.K & Kansal,P (2003) Basics of Distribution Management: A logistics

Approach, Edition 2nd . Prentice-Hall Ltd: New Delhi, India.


Documents

Royal Sugar