Why does the manufacturer outsource a share of the work in selling goods to intermediaries? One of modern ways work with intermediaries.
What is the reason why a manufacturer agrees to outsource a significant share of the work in selling goods to intermediaries, since the situation is not controlled by the manufacturer?
Actually, the answer is already in the question, because. not always the one who produces a product or service knows how best to sell it. You may be a genius author, but if you can't sell your book, you're nobody. Similarly, in other areas, the use of intermediaries - who have a specific goal and an interest in increasing sales volumes, allows the manufacturer not to deviate from specialization.
One of the modern ways of working with intermediaries are vertical marketing systems. Next, we will explain in more detail the essence of this sales / distribution channel.
A distribution channel is a collection of firms or individuals which take over or help transfer to someone else the ownership of a particular good or service on its way from producer to consumer.
Why are intermediaries needed?
Why is the manufacturer ready to shift part of the sales work to intermediaries? After all, this means that he, to some extent, loses control over how and to whom the goods are sold. Nevertheless, manufacturers believe that the use of intermediaries brings them certain benefits.
- Many manufacturers lack financial resources for direct marketing. For example, even the largest automakers sell their cars through tens of thousands of independent dealers. Even auto monsters would have a hard time finding the money to buy out all those dealerships.
- In order to achieve the economics of a mass distribution system through direct marketing, many manufacturers would have to become middlemen in the sale of other manufacturers' products. For example, chewing gum manufacturers would find it impractical to open small shops around the world to sell their products, or sell their gum to peddlers, or sell it by mail order. They would have to sell chewing gum, along with a host of other small items, which would ultimately turn them into the owner of either a supermarket chain or a grocery store chain. So, according to these firms, it is much easier for them to work through an extensive network of independent retailers and wholesalers.
- But even if a manufacturer can afford to create its own distribution channels, in many cases it will earn more if it increases capital investment in its core business. If manufacturing generates a 20% rate of return, but retailing is estimated to yield only 10%, the firm will not want to retail itself.
- The use of intermediaries is mainly due to their unsurpassed effectiveness in making the product widely available and reaching the target markets. Through their contacts, experience, specialization and scope, intermediaries offer the firm more than it can normally do alone.
Distribution channel functions.
Distribution channel is the path along which goods move from producers to consumers. It bridges the long gaps in time, place, and ownership that separate goods and services from those who would like to use them. Distribution channel members perform a number of very important functions:
- Research work. Collection of information necessary for planning and facilitating the exchange.
- Sales promotion. Creation and dissemination of communications about the product.
- Establishing contacts. Establishing and maintaining relationships with potential buyers.
- Product adaptation. Product customization to customer requirements. This applies to activities such as production, sorting, assembly and packaging.
- Conduct of negotiations. Attempts to negotiate prices and other conditions for the subsequent implementation of the act of transfer of ownership or possession.
- Organization of goods movement. Transportation and storage of goods.
- Financing. Finding and using funds to cover the costs of channel operation.
- Risk acceptance. Taking responsibility for the operation of the channel.
The fulfillment of the first five functions contributes to the conclusion of transactions, and the remaining three - to the completion of already concluded transactions. The question is not whether these functions should be performed - necessary, and mandatory - but rather who should perform them. All these functions have three common properties: They consume scarce resources, can often be better performed through specialization, and can be performed by different channel members. If part of them is performed by the manufacturer, then his costs rise accordingly, which means that prices should be higher. When transferring some of the functions to intermediaries, the costs, and hence the prices of the manufacturer, are lower. Intermediaries in this case must charge an additional fee to cover their costs of arranging the work. The question of who should perform the various functions inherent in a channel is essentially a question of relative effectiveness and efficiency. If it becomes possible to perform functions more effectively, the channel will be reorganized accordingly.
The number of distribution channel levels.
Distribution channels can be characterized by the number of their constituent levels. The distribution channel level is any intermediary that performs some work to bring the product and ownership of it closer to the final buyer. Because the certain work both the manufacturer and the end consumer perform them; they are also part of any channel.
- The zero-level channel (also called the direct marketing channel) consists of a manufacturer selling a product directly to consumers. The three main ways to sell directly are peddling, mail order, and manufacturer-owned stores.
- A peer-to-peer link includes one intermediary. In consumer markets, this intermediary is usually a retailer, while in industrial markets, this intermediary is often a distributor or broker.
- A two-layer channel includes two intermediaries. In consumer markets, these intermediaries are usually the wholesaler and retailer; in industrial markets, they may be the industrial distributor and dealers.
- A three-level channel includes three intermediaries. For example, in the meat processing industry, there is usually a small wholesaler between the wholesaler and the retailer. Small wholesalers buy goods from large wholesalers and resell them to small businesses retail, which large wholesalers, as a rule, do not serve.
There are channels with more levels, but they are less common. From the producer's point of view, the more layers a distribution channel has, the less control it has.
The concept of distribution channels implies distribution not only physical goods. Producers of services and ideas also face the challenge of making their offerings accessible to target audiences. To do this, they create "systems for the dissemination of knowledge", "systems for the provision of health", etc. In order to reach a widely dispersed audience, they need to consider both the nature and placement of their presences.
Service businesses should create own systems distributions that match the characteristics of their services, since, unlike most goods, services are unique or require specific distribution.
Distribution of vertical marketing systems (VMS).
One of the most significant recent developments has been the emergence of vertical marketing systems that challenge traditional distribution channels. A typical traditional distribution channel consists of an independent manufacturer, one or more wholesalers, and one or more retailers. Each participant in the channel is a separate enterprise, striving to secure the maximum possible profits for itself, even at the expense of the maximum profit extraction of the system as a whole. None of the members of the channel has complete or sufficient control over the activities of the other members.
Vertical Marketing System (VMS), on the contrary, consists of a manufacturer, one or more wholesalers and one or more retailers acting as a single system. In this case, one of the channel members is either the owner of the others, or grants them trading privileges, or has the power to ensure their full cooperation. The dominant force within a vertical marketing system can be either a manufacturer, a wholesaler, or a retailer. Navy emerged as a means of controlling the behavior of the channel and preventing conflicts between its individual members pursuing their own goals. Vertical marketing systems are economical in terms of their size, have great bargaining power and avoid duplication of effort. VMCs have become the predominant form of distribution in consumer marketing, where they already cover 64% of the total market.
Consider three main types of vertical marketing systems. Within a corporate BMC, the successive stages of production and distribution are within the same firm.
The contractual Navy is made up of independent firms affiliated contractual relations and coordinating programs of their activities to jointly achieve greater savings and/or greater business results than could be done alone. Contractual naval forces have become widespread quite recently and are one of the significant phenomena in economic life. Contractual naval forces are of three types.
The distribution system planning process involves the following steps:
Stage 1. Identification of alternative distribution systems
When making a decision regarding the marketing of its goods, the company can use a chain of independent intermediaries or choose a distribution system in which all the subjects of the channel - the manufacturing company, wholesale and retail trade - act as a single system, join forces with other companies of the same level, or use several distribution channels to cover different market segments. The named options express the content of alternative distribution systems that a company can choose:
> traditional system;
> vertical marketing system;
> horizontal marketing system;
> multi-channel (combined) marketing system.
Traditional distribution system
The traditional system is a collection independent companies, in which each level of the distribution channel operates independently of the others in order to maximize its own profit, leaving the efficiency of the channel as a whole unattended.
1. Producer-consumer is a zero-level channel. The manufacturer carries out direct marketing - he sells the goods. With this distribution option, the manufacturer avoids the cost of distributors, retains control over the sale of goods.
2. There are several options for direct marketing methods: selling goods at home; sale of goods through stores owned by the manufacturer; selling by phone (telemarketing); catalog sale; direct response advertising.
3. Manufacturer - retailer - consumer (single-level channel). This distribution channel involves the sale of goods by manufacturers to retailers who, in turn, sell them to final buyers (consumers). Direct deliveries of retail trade, bypassing wholesalers, become economically profitable with its enlargement.
4. Manufacturer - wholesaler - retailer - consumer - a typical second-level channel in which the manufacturer sells his product to wholesalers who resell it to retailers. This type of distribution channel is especially cost-effective for small retail stores who buy goods in small batches.
5. Manufacturer - agent - retailer - consumer. This option is acceptable in a situation where a small enterprise, instead of maintaining its own sales staff, uses industrial agents who visit retail stores and present the product at a professional level.
6. Manufacturer - agent - wholesaler - retailer - consumer (three-level channel) - companies grant the right to sell goods to an agent who comes into contact with a wholesaler, who, in turn, with a retailer, while receiving commissions from the sale. Companies can also use the services of brokers to sell their products. Access to foreign markets can be carried out through agents and brokers.
Many companies use vertical and horizontal marketing systems as alternatives to the traditional distribution system.
Vertical Marketing Systems (VMS)
Unlike traditional distribution channels, where none of the channel participants has the authority to distribute functions and control others, vertically integrated distribution systems provide such an opportunity.
Vertical marketing systems provide for full or partial coordination of the functions of distribution channel participants in order to save on operations and increase market impact. In this case, one of the channel participants (manufacturer, wholesaler or retailer) takes the initiative to coordinate actions.
There are three forms of vertical coordination:
> corporate vertical marketing systems;
> administrative vertical marketing systems;
> contractual vertical marketing systems.
Corporate (integrated) vertical marketing systems (systems that are owned by companies) provide for the control of one owner of the distribution system, who owns retail stores, over all stages of production and distribution. At the same time, the manufacturer - the owner of the channel can both control the sale of their goods and coordinate the work of retailers.
Administrative (controlled) vertical marketing systems are a form of integration of distribution functions that does not provide for contractual obligations and exists due to the high reputation of one of the participants in the system. The role of leader in this case belongs to one of the most powerful participants in the systems. At the same time, the leader receives support from sellers in the form of allocating retail space, organizing the export of goods, and sales promotion measures.
Contractual (contractual) vertical marketing systems - independent channel participants (manufacturers or intermediaries) sign contracts with other intermediaries, which define in detail the rights and obligations of participants in order to coordinate distribution functions. There are three types of contractual Navy:
> voluntarily established systems of retailers under the auspices of wholesalers - the wholesaler organizes a voluntary association of independent retailers, develops a program that provides for the provision of economical procurement, standardization of trading practices. The main goal of such associations is to create opportunities for effective competition with branched networks. large organizations;
> cooperatives of retailers-is the association of retailers in cooperatives. Members of the association purchase products through cooperatives, jointly organize advertising. The profit received is distributed among the members of the cooperative proportionally;
> franchising systems - provide for the transfer to franchisors (manufacturer or seller) of a franchise (license) for the right to sell their products under the name of the company to channel participants (franchisees, for example, retail stores), which are often granted exclusive rights in a certain territory ..
In parallel with the development of vertical marketing systems, horizontal marketing systems are developing.
Horizontal marketing systems - provide for the unification of the efforts of companies of the same level. This makes sense if the pooling of capital, marketing resources and production capacity strengthens the position of firms. At the same time, competing firms and firms that do not compete with each other can also merge.
Combined (multi-channel) marketing system involves the use of multiple distribution channels to cover different market segments. For example, telemarketing (direct marketing) - to serve one market segment, a two-level channel - manufacturer - retail - for another segment, and the like.
Stage 2. Determining the goals and objectives of distribution
Distribution goals are the criteria for choosing distribution channels and are subordinated to global firms and marketing goals. After setting goals, specific distribution tasks are determined, that is, functions that must be implemented in a specific market situation.
Stage 3. Selecting the channel structure
The main decision regarding the channel structure is the market coverage strategy, i.e. to limit the services to one or more intermediaries or to sell through the maximum possible number of intermediaries, for example, retail outlets. There are three options here:
> intensive distribution;
> selective (selective) distribution;
> exclusive distribution on the basis of exclusivity.
Intensive distribution involves the placement and sale of goods through the maximum possible number of outlets. Virtually any retailer that is willing to sell a particular product is eligible to do so. These are consumer goods (toothpaste, detergents), some auxiliary industrial goods, paper, raw materials. At the same time, the company benefits due to economies of scale, producing products available to many consumers in large batches. However, intensive distribution also has its drawbacks - in fact, the enterprise must independently advertise its products on the market.
Selective distribution involves the conclusion by the supplier of an agreement with several, but not all, intermediaries who are interested in selling the goods. Among the goods, in the sale of which selective distribution has become most widespread, - Appliances, electrical goods, fashionable clothes, etc.
Exclusive distribution (on the basis of exclusivity) is that manufacturers provide intermediaries exclusive right sales of goods in a certain regional market.
When distributed on the basis of exclusivity, a manufacturing enterprise can count on the support of resellers in promoting their products. Having received from the manufacturer the exclusive right to sell its products, the reseller himself makes efforts to increase the effectiveness of advertising, trying to draw the attention of consumers to the product.
When choosing the optimal distribution channel, there are the following approaches:
> cost approach (the costs of each alternative are compared);
> scientific and managerial, which uses decision theory and operational research;
> subjective-objective approach, in which alternative channels are evaluated by the most important factors (required investments, expected profit, company's experience in the market) and others.
Stage 4. Development of a communication strategy in the distribution channel
The organization of effective cooperation with intermediaries requires the manufacturer to decide which communication strategy to influence the intermediary should be chosen:
> pushing;
> attraction;
> combined communication strategy.
The push strategy involves directing the company's efforts to intermediaries in order to encourage them to include the company's products in the assortment, create the necessary inventory, allocate to trading floors retailers best places and encourage consumers to buy the firm's products. It provides:
> granting the right of exclusive marketing in a certain territory;
> wholesale discounts;
> payment of warranty service costs;
> allocation of funds for sales promotion;
> delivery of goods at the expense of the company;
> personnel training, sales contests.
The attraction strategy involves focusing the main communication efforts on end consumers in order to create their positive attitude towards the product and the brand so that the consumer himself demands this product from the intermediary, thus encouraging him to trade this brand:
> providing free goods;
> coupons that provide the right to return part of the money.
The combined strategy involves the use of both strategies, while the important question arises of how exactly to allocate resources for the implementation of the attraction strategy and the push strategy.
First, it depends on the goals: the push strategy, as noted, aims to encourage intermediaries to engage in a particular brand and is effective if it is not realistic for the firm to allocate significant funds for advertising in the media at this stage.
When bringing a well-known brand to the market, on the contrary, it is the attraction strategy that may turn out to be optimal.
Secondly, the choice of communication strategy depends on the product: manufacturers of industrial goods prefer a push strategy, and manufacturers of well-known brands of consumer goods prefer a pull strategy. At the same time, insufficient attention to the formation of the loyalty of intermediaries can have unfortunate consequences for the company (for example, a decrease in advertising efforts by the intermediary).
Having chosen the optimal distribution channel and a strategy for influencing intermediaries, it is necessary to decide which of them the company will specifically work with, how to motivate and evaluate them.
Stage 5. Decision on the management of distribution channels
The selection of specific intermediaries is essentially the first component of the distribution channel management process, which requires:
> selection of intermediaries;
> motivation of participants in the distribution channel;
> evaluation and control of the activities of channel participants;
> conflict resolution.
Choice of intermediaries
Within the optimal channel, the selection of direct distribution participants should be carried out taking into account the following criteria:
o financial position- wide financial opportunities, stable financial position, experience in doing business in a certain area of business testify in favor of a potential agent;
o organization and main indicators of sales - the presence of an extensive sales network, high rates of turnover is a certain guarantee of effective sales of the company's products;
o products sold by an intermediary - Preference should be given to intermediaries who are already involved in the marketing of your company's products. Another plus in favor of the intermediary - high quality the products it sells;
o the total number of goods and products of different firms that the intermediary sells - if there are many such goods, then before choosing this intermediary, you should make sure that sufficient attention will be paid to the products of your enterprise;
o reputation among clients;
o market coverage:
Geographically, you should avoid duplication in your distribution network and conflicts between dealers;
In the sectoral context, the sales network of dealers should cover the main segments of consumers;
The frequency of receiving orders - the less often orders are received, the less likely it is to maintain your presence in the business;
o stocks and storage facilities - the willingness of the intermediary to maintain stocks at a level necessary for the regular supply of consumers. In addition, storage facilities must be equipped with everything necessary for handling cargo;
o management - confident leadership in your field is always a guarantee of success. So, one of the ways to study a dealer is to assess its aggressiveness in the market.
Motivation of distribution channel participants
The second component of the distribution channel management process is associated with the choice of motives that are adequate to the expectations of intermediaries and effective, taking into account the goals determined by the manufacturer. Among such motives: monetary reward; the right to the exclusive sale of goods in a certain territory; resource support; close partnerships.
The basic principle of building relationships in the chain "manufacturer-intermediary" is long-term relationships, supported by appropriate forms of maintaining cooperation, and financial interest.
Evaluation and control of the activities of channel participants
The decision to continue or terminate cooperation with an intermediary is based on the results of its activities, the main criteria of which are:
> sales volumes in value and physical terms;
> profitability;
> value inventory;
> time of delivery of goods to consumers;
> the number of new customers;
> market information that distributors provide to the manufacturer;
> participation in sales promotion programs;
> level of customer service;
> the quality of displaying goods in shop windows and on store shelves. If the evaluation shows that the performance of a particular intermediary or the efficiency of the distribution channel system leaves much to be desired, a decision will need to be made to change, search for new intermediaries or modify the entire distribution system.
Conflict management
None of the distribution systems presented above is ideal and inevitably leads to conflicts between channel participants, the causes of which may be various purposes; competition between different distribution channels, which may be caused by the fact that, by selling goods through different channels, the manufacturer "provokes" conflicts between intermediaries who sell the same product in the same territory; inconsistency in the work of channel members.
Recall that the choice of distribution channel is a strategic task. Let's name the main elements of the distribution strategy:
> direct (or indirect) sales;
> optimal distribution channel;
> integration in the channel;
> communication strategy;
> determining the best ways to sell goods, locating warehouses.
One of the most significant recent developments has been the emergence of vertical marketing systems that challenge traditional distribution channels. On fig. 2.1 compares two block diagrams of channels. A typical traditional distribution channel consists of an independent manufacturer, one or more wholesalers, and one or more retailers. Each member of the channel is a separate enterprise, striving to secure the maximum possible profits for itself, even at the expense of the maximum profit extraction of the system as a whole. None of the members of the channel has complete or sufficient control over the activities of the other members.
Rice. 2.1.
A vertical marketing system (VMS), in contrast, consists of a manufacturer, one or more wholesalers, and one or more retailers acting as a single system. In this case, one of the channel members is either the owner of the others, or grants them trading privileges, or has the power to ensure their full cooperation. The dominant force within a vertical marketing system can be either a manufacturer, a wholesaler, or a retailer. Navy emerged as a means of controlling the behavior of the channel and preventing conflicts between its individual members pursuing their own goals. The Navy is economical in terms of its size, has great bargaining power and eliminates duplication of effort. VMCs have become the predominant form of distribution in consumer marketing, where they already cover 64% of the total market.
Let's consider three main types of IUDs presented in fig. 2.2.
Fig.2.2.
CORPORATE NAVY. Within a corporate BMC, the successive stages of production and distribution are single-owned. For example:
Sherwin-Williams owns and operates over 2,000 retail businesses. Reportedly, 50% of all goods sold by Sears Corporation come to its stores from enterprises, part of the shares of which are owned by the corporation... many intra-company establishments for the redistribution of goods. In short, these and other organizations are powerful vertically integrated systems. To call them "retailers", "manufacturers" or "motel owners" is to oversimplify the complex nature of their activities and to ignore the realities of the market 6 .
CONTRACT NAVIES. A contractual VMS is made up of independent firms that are contracted and coordinate their programs of activities to collectively achieve greater savings and/or greater business results than could be done alone. Contractual naval forces have become widespread in recent times and are one of the most significant phenomena in economic life. Contractual naval forces are of three types.
Voluntary chains of retailers under the auspices of wholesalers. Wholesalers organize voluntary chains of independent retailers to help them compete against the big distribution networks. The wholesaler is developing a program to standardize the trading practices of independent retailers and ensure purchasing economy, which will allow the entire group to compete effectively with chains. An example of such an association is the Union of Independent Grocers.
Retailer cooperatives. Retailers can take the initiative in their own hands and organize a new independent business association, which will be engaged in wholesale operations, and possibly production. Members of the association will make their main purchases through the cooperative and jointly plan promotional activities. The profit received is distributed among the members of the cooperative in proportion to the volume of purchases made by them. Retailers who are not members of the cooperative may also purchase through it, but do not participate in the distribution of profits. An example of such a cooperative is the Grocers Association.
Organizations of privilege holders. The member of the channel, called the owner of the privilege, can combine in his hands a number of successive stages of the process of production and distribution. The practice of issuing trade privileges, which has gained momentum in recent years, is one of the most interesting phenomena in the retail industry. And although the fundamental idea of this phenomenon has been known for a long time, some forms practical activities based on privileges have appeared quite recently. There are three types of privileges.
The first manufacturer-sponsored retail franchise holder system in use in the automotive industry. For example, Ford issues licenses to sell its cars to independent dealers who agree to adhere to certain sales and service arrangements.
The second system of wholesalers-holders of privileges under the auspices of the manufacturer, common in the field of trade soft drinks. For example, the Coca-Cola Company issues licenses for the right to trade in different markets to bottling plant owners (wholesalers) who buy beverage concentrate from it, carbonate it, bottle it and sell it to local retailers.
A third system of retail franchise holders under the auspices of a services firm. In this case, the service firm forms an integrated system, the purpose of which is to bring the service to consumers in the most effective way. Examples of such systems are found in the field of car rental (firms "Herz" and "Avis"), in the field of enterprises Catering quick service (McDonald's, Berger King), in the motel business (Howard Johnson, Ramada Inn). This form of trading privileges will be discussed in more detail in Chap. 13.
MANAGED NAVY. A managed Navy coordinates the activities of a series of successive stages of production and distribution, not because of the common ownership of one owner, but because of the size and power of one of its participants. The manufacturer of a leading branded product is able to obtain cooperation and strong support from the resellers of this product. Thus, the corporations General Electric, Procter and Gamble, Kraft and Campbell Soup are able to achieve unusually close cooperation with resellers of their goods in organizing exhibitions, highlighting retail space, implementation of incentive measures and pricing policy.
vertical marketing systems. Recently, vertical marketing systems have emerged that challenge traditional distribution channels.
Typically, a distribution channel consists of an independent manufacturer, one or more wholesalers, and one or more retailers. Each channel participant is a separate enterprise whose goal is to obtain the maximum possible profit, even to the detriment of the maximum profit extraction of the system as a whole. None of the members of the channel has complete or sufficient control over the activities of the other members. A vertical marketing system (VMS), in contrast, consists of a manufacturer, one or more wholesalers, and one or more retailers acting as a single system. In this case, one of the channel members either owns the others, or grants them trading rights, or has the power to ensure their close cooperation. The dominant force within a CPA can be either a manufacturer, a wholesaler, or a retailer. The Navy arose as a means of controlling the channel and preventing conflicts between its individual members pursuing their own goals. Navies are small in size, have great bargaining power and avoid duplication. In developed countries, IUDs have already become the predominant form of distribution in consumer products.
Corporate Navy. Within a corporate BMC, the successive stages of production and distribution are managed by a single company. The world's largest company in terms of the number of employed workers, General Motors, since 1996, receives more than 50% of its income from trade and the sale of services, and not from the production of goods. More than 50% of all goods sold by the US's largest retailer, Sire, come to its stores from businesses that are partly owned by the company. This is a global trend.
Contractual Navy. Contractual VMS is made up of independent firms that are contractually bound to achieve better results together commercial activities than one would have alone. Contractual navy became widespread in the 70s and often impoverishes small and big business. Contractual naval forces are of three types:
1. Voluntary chains of retailers under the auspices of wholesalers. Wholesalers in developed countries are organizing voluntary chain associations of independent retailers en masse to help them compete with large distribution networks. The wholesaler is developing measures aimed at streamlining trading activities independent retailers and ensure purchasing economy, which allows the entire group to compete effectively with chains. Many Russian retailers willingly agree to such a merger, but wholesalers do not pay due attention to them.
2. Cooperatives of retailers. Retailers can take the initiative and organize an independent business association, which will be engaged in wholesale operations, and possibly production. Members of the association will make their purchases through the cooperative and jointly plan promotional activities. Despite the old traditions of Russian cooperation, it has not yet become widespread in trade. The main reason is insufficient attention to this problem by regional and municipal authorities.
3. Organizations of rights holders. A member of the channel - the owner of the rights can combine in his hands a number of successive stages of the production and distribution process. The practice of issuing rights is one of the most interesting phenomena in the retail industry. And although the idea of such an association has been known for a long time, some forms of practical activity based on the transfer of rights have appeared only recently.
Here are the following forms:
a) a system of retail rights holders under the auspices of the manufacturer, traditionally distributed in the automotive industry, starting with the creation in our country of the AvtoVAZ trade and service network in the 70s. But there are many other examples. Thus, Microsoft issues licenses for the right to trade in its software to independent dealers in Russia. They are obliged to adhere to certain conditions of sale and organize service;
b) the system of wholesalers-holders of rights under the auspices of the manufacturer, common in the non-alcoholic beverages trade. For example, the Coca-Cola company issues a license for the right to trade in different markets to the owners of Russian bottling plants, who buy concentrate from it, prepare the drink, bottle it and sell it to retailers;
c) a system of retail, rights holders under the auspices of a services firm. In this case, the service firm forms a complex system, the purpose of which is to bring services to consumers in the most effective way. Examples of such systems are found in the field of tourism, catering, etc. Navy controlled. A managed Navy coordinates the successive stages of production and distribution, not because of a common ownership by one owner, but because of the size and power of one of its participants. The manufacturer of a branded product is able to obtain cooperation and support from resellers of this product. Thus, the Coca-Cola Corporation, even in Russian conditions has achieved close cooperation with resellers of its products in organizing exhibitions, allocating retail space, implementing incentive measures and shaping pricing policy.
DISTRIBUTION CHANNELS OF GOODS AND SERVICES
Most businesses sell their products through intermediaries. Distribution channel - a set of firms or entrepreneurs who take over or help transfer to someone else the ownership of a particular product or service when moving it from producer to consumer. Functions of intermediaries. The manufacturer transfers part of the sales work to intermediaries. To some extent, he loses control over how and to whom the goods are sold. But manufacturers believe that the use of intermediaries is beneficial. Many manufacturers do not have enough financial resources to organize trade - both Russian coal mines and American car companies. General Motors, for example, sells its cars through an army of 20,000 dealers. It is very difficult even for this largest corporation in the world to buy out all the dealerships. Firms find it unprofessional and unprofitable to open stores everywhere for their products. Intermediaries, through their contacts, experience, specialization and scale of activity, offer the manufacturer greater sales opportunities than he can achieve on his own. One of the main sources of savings when using intermediaries is the increase in the number of contacts with consumers. For example, to connect three manufacturers directly to three consumers, nine separate contacts must be established. But if three manufacturers operate through the same authorized distributor, only six contacts need to be established. Intermediaries increase the operational efficiency of the market. Distribution channel functions.
The channel of distribution is the path along which goods move from producers to consumers. Its task is to ensure the movement and change in ownership of goods and services, as well as to smooth out the unevenness of their flows. The participants in the distribution channel perform the following functions: they organize the movement of goods - the transportation and storage of goods, stimulate sales by spreading tempting information about the product; establish and maintain relationships with potential buyers, finalize, sort, assemble and pack goods; negotiate, agree on prices and other terms of sale; finance the operation of the channel, assume the risk of responsibility for the operation of the channel, collect information for sales planning. All these functions consume scarce resources, but they must be fulfilled. If part of them is performed by the manufacturer, his costs rise accordingly, which means that prices should be higher. When transferring some functions to intermediaries, the costs and prices of the manufacturer are lower. Intermediaries in this case must charge an additional fee to cover their costs of organizing the work. The question of who should perform the various functions inherent in a channel is essentially a question of relative effectiveness and efficiency.
If it becomes possible to perform functions more effectively, the channel should be rebuilt. The number of channel levels. Distribution channels differ in the number of levels that make up them. The level of the distribution channel is any intermediary that performs this or that work to bring the product and ownership of it closer to the final buyer. Since both the manufacturer and the end consumer perform certain work, they are also part of any channel. The length of a channel is usually denoted by the number of intermediate levels present in it. The zero-level channel, also called the direct marketing channel, consists of a manufacturer selling a product directly to consumers. There are three main methods of direct selling - trade through manufacturer-owned stores, mail order and peddling. A peer-to-peer link includes one intermediary. In consumer markets, this is usually a retailer, while in industrial markets, this is usually a distributor or broker. A two-layer channel includes two intermediaries. In consumer markets, these intermediaries are usually wholesalers and retailers; in industrial goods markets, this can be an industrial distributor and dealers. A three-level channel includes three intermediaries. For example, in industry, there is usually a small wholesaler between the wholesaler and the retailer. Small wholesalers buy goods from large wholesalers and resell them to small retailers. There are channels with more levels, but they are less common. The more levels the distribution channel has, the less the ability to control it, but the more stable the rhythm of the manufacturer's work.
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concept distribution unites the regulation of all production activities aimed at moving the product in space and time from the place of production to the place of consumption.
To reduce the influence of external and internal factors, as well as to increase the controllability of channels, the so-called vertical, horizontal, multi-channel distribution systems of goods have become widespread.
Distribution channels:
Horizontal systems . Can create two or more independent firms to implement a joint distribution policy. The presence of such associations allows them to transfer certain functions of the distribution policy, which are implemented in a centralized manner (based on competition and individual achievement arrived).
vertical systems. The producer and other participants in the distribution channels coordinate all their efforts to implement an effective distribution policy, acting as a single entity. The entire distribution policy is under the control of one of the participants in this system, which is its owner. Coordinating their joint work allows them to carry out more effective entrepreneurial activity(based on corporate cooperation and corporate profits).
Multichannel systems. Their essence is that an organization engaged in market trading sells goods not only through its own stores, but also uses the capabilities of other marketing organizations. Moreover, the buyer can purchase goods both through one and through another channel. Multi-channel systems are used to serve different market segments, different groups buyers. For example: an organization producing nutritional supplements for sports nutrition, can sell its goods through a network of independent trade enterprises (shops, distributors, etc.) and directly to large consumers (national teams, federations, etc.).
In the marketing strategy of the company, a special place is occupied by retail trade. Retail trade is understood as any activity of organizations and individuals selling goods directly to final consumers for personal use.
There are many retailers, which are classified according to the following criteria:
1. Product range (department store, specialty stores, shopping malls etc.).
2. Price factor(discount stores, catalog shop, etc.).
3. Features of customer service (by mail, vending machines, peddling, online store, etc.).
4. Ownership of the store (state, private, cooperative, store-enterprise, etc.)
The choice of distribution channels is strictly individual, depending on the capabilities of the company and market conditions.
Conclusion: organization for the promotion and sale of goods is a system of methods aimed at achieving main goal, making a profit at the most full satisfaction consumer needs.
Structure and options for choosing promotion channels
and distribution of goods and services
Promotion is a set of various methods of stimulation used by companies in interaction with target markets and the general public.
A promotional event has three main objectives: to inform, persuade, and remind.
Informing- this is the primary goal of promotion, since people will not buy a product until they know about its existence.
Belief is also an important element of promotion, since most people need motivation to choose one way or another to satisfy their needs. If consumers have never used the product before, they need to be convinced of its merits.
Reminder- the opportunity to purchase a particular product and its merits is also necessary, as it stimulates additional demand.
To achieve promotional goals, marketers use four main tools:
· Personal Selling involves direct communication between the buyer and the seller: Only through personal selling, the seller can accurately select a product that meets the individual needs and interests of a particular buyer. It can also be viewed as a continuous process. chief
its disadvantage is its relatively high costs.
Advertising is a way of forming a certain provision of consumer properties goods and the type of communication between the producer and the consumer. Among the means of promotion, advertising is the best means of accessing a mass audience - the fastest and cheapest per consumer.
· The concept of "public relations» covers any form of communication with a wide variety of audiences that are not directly related to sales.
Some public relations activities are of a general nature. For example, helping local schools implement educational projects. On the other hand, specific coverage of the company's activities and its products and the creation of conditions for the appearance of favorable reviews about the company's products in newspapers, magazines on TV.
· Sales promotion- includes a wide range of activities and activities, the purpose of which is to interest buyers.
Introducing sweepstakes, discounts, free samples, competitions, screenings and demonstrations, organizing trade shows and other events.
Promotion of sales of services has become widespread in the banking, financial, tourism services. Predetermines special importance during the period of the least workload of enterprises, due to the impossibility of warehousing.
The choice of promotion structure depends on the size and degree of market concentration.
For large markets, advertising is usually the most effective way to promote a product. Where small consumer markets are well suited for personal sales.
To choose the right combination of personal selling, advertising, public relations and sales promotion, in marketing activities the seller of a product or service must use one or another promotion structure, depending on the characteristics of the product itself and the sales market.
Competitor and competition
Competitors - the struggle for superiority, priorities.
Competition is the rivalry of people (firms), primarily in the economic, but also in other spheres of society. From the position of the economy, competition is the struggle of sellers (manufacturers) for the best satisfaction of consumer requirements, as well as the rivalry of buyers for the acquisition of the most useful goods for them on the most favorable terms.
The goal of competitors in the market is to make sure that the buyer purchases their product. Increasing competition creates a situation in which, in order to stay and succeed in the market, a company must constantly offer the consumer new or more modern products and do it faster than competitors. That's why competition is called " engine of progress».
Competition, on the one hand, is the key to the continuous progress of society, which prevents stagnation in the economy, on the other hand, conflicts, instability, bankruptcy, and dismissal of workers are integral companions of competition.
Types and methods of competition
There are three types of competition.
1. Functional - based on the satisfaction of the same need in different ways. For example: rest, sleep, reading, watching TV, etc.
2. Subject - based on the satisfaction of similar needs of different in nature, but similar in function, subjects. For example: quenching thirst with water, tea, juice, etc.
3. Specific competition - based on the satisfaction of needs with similar products various kinds. For example: black tea, red tea, green tea, flower tea, etc.
Competition arises not so much between products in real performance, but between products and support. Therefore, it is important to develop and implement a service organization program for sports goods and services.
Competition in the market is conducted by two main methods: price and non-price competition.
1. Price competition - sales of products
2. Non-price competition - in service.
In the first case, the fight against competitors is carried out by reducing the price of goods. Price competition It is used in markets with a seller's priority (excess of demand over supply and more intense competition among buyers), in conditions with a predominance of pure competition (when there are many manufacturers of the same product). The price method of competition is ineffective, since competitors can almost immediately take similar retaliatory steps. In addition, price manipulation excludes the possibility of any financial stability, complicates the planning and management of the enterprise. AT modern conditions the price method continues to be applied, especially when entering new markets (price reduction by 10%).
In modern conditions, preference is given to the method non-price competition- highlighting your product from a number of competing products, giving it unique properties for buyers; taking into account the specifics of customer demand, up to individual requests. To do this, competitors resort to the release of new products, their improvement, improving their quality, advertising, providing an increasingly diverse range of additional services and after-sales service guarantees.
With non-price competition, relative financial stability is ensured, which makes it possible to effectively manage the enterprise. The non-price method of competition is more effective, since competitors cannot take retaliatory steps as quickly as with the price method. The non-price method of competition requires more effort and financial costs compared to the price method, but it pays off if successful, it is also called effective competition.
Illegal methods of competition. These include not only criminally punishable, but also violating business ethics actions of competitors. For example: industrial, technological, sports and other espionage. Jumping at the expense of additional benefits for specialists from competing firms. Release of counterfeit goods
well-known firms.
sports competition- the essence and meaning of sports activity is nowhere more acute than in the battles of football and basketball teams. About fights of boxers, wrestlers and in all kinds of sports. Therefore, it is so important not only to prepare the athlete well physically, psychologically, technically, it is also necessary to prepare him tactically, i.e. predict and plan all the features of the fight. It can be said that the most outstanding successes in sports are based on the competition of "one's own best forces against the enemy's weak points."
Product competitiveness indicators:
1. Consumer price - a set of consumer costs for the acquisition and operation of the product.
2. Quality - a set of factors that most fully meet the needs when used for its intended purpose.
3. The usefulness of a product is the ability of a product to satisfy a specific need of a particular consumer; individual attitude of the consumer to the product.
4. Improving the quality of goods is not only the task of the manufacturer, but mainly a competitive necessity.
Depending on the goals and capabilities of the company, it can choose one of several options for competitive behavior:
1. Creation of new products, technologies; sales, service and advertising methods.
2. Copying in the shortest time and at the lowest cost the results of those who create something new.
3. Maintaining the achieved positions for the maximum possible period of time by improving the quality, modifying the assortment, etc.
Competition between goods primary, since it is determined in the market, competition between firms secondary, i.e. manifested through the product. The competitiveness of the goods determines the profitability of the company, the stability of its position in the market. The analysis of the sides of the main competitors consists in the study of marketing categories: market, product, price, promotion to the market, sales organization.
