In economically poor countries, short or direct channels are used to sell product at low price. In developing and developed countries, normally, indirect channels are used to distribute products. Number and types of services expected by the target market, and company’s capacity and readiness to meet them are important issues to be considered in this connection. For example, if the market expects a lot of services, and the company is unable and/or unwilling to satisfy them, indirect channels are preferred to avail the services from middlemen. Direct routes are preferred by companies who seek complete control over their distribution. Those companies who don’t care about control or are only concerned in product sales, on the other hand, choose indirect channels.
You should record all costs and inspect whether the benefits of the channel you chose are justifiable or not. A company can have a dedicated sales team responsible for selling services or goods. If the company owns a broad range of products to be distributed, it can set up multiple teams to sell goods or services to different audiences and segments.
Selling and Pricing strategies of public utilities are different from other organization. Discuss.
Product-related factors are among most relevant and powerful factors affecting channel decision. Financial strength, management expertise, and the desire for control all play a role in determining which path the product will follow before reaching the final consumer. This strategy involves the manufacturers themselves, sales teams, and commercial agents. In the direct channel method, the manufacturer immediately sell the goods to the shoppers.
Based on the product quality, this method is excellent for manufacturers and even for the retail outlets or chain stores. In this distribution channel strategy, goods transit from the place of production to the site of consumption via a distribution network. In addition, the channel members also carry out functions like purchasing, performing inventory, selling, financing, transporting, etc. Such procedures facilitate the efficient and timely flow of information and products from the manufacturer to the user.
Direct routes are appropriate if delivery time is not a concern, demand isn’t high, order sizes are enormous, or clients are concerned about piracy. A company with a lot of money and good management expertise can build its own distribution channels, whereas a company with little money and management expertise must rely on third-party distributors. Direct channels are employed when the nature of the product is more technical and the consumer may demand direct interaction with the manufacturer. Longer channels are used if the product is fairly simple to use and direct contact has no effect on the quantity of sales. When a single company creates two or more marketing channels to address one or more consumer segments, this is known as multi-channel marketing. Hybrid channel systems have become increasingly popular in recent years.
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In the VUCA world, producers prefer the channel structures and policies that provide for a higher degree of adaptability. For example, when US regulations banned the import of Mangoes from India, the farmers had to immediately establish a robust internal channel so that the fruit didn’t go waste. Here the direction of analysis would be how the customer views the product from the point of view of the channel. Customers might choose one particular product on price differentiation and another product on the ease of access to the product. The effect of this cost and the method of performing the service on production and consumption.
In the days to come, supermarket chains will become bigger, facilitating the year-round supply of fresh produce, thus supporting international perishable trade, also by air. The fruits, vegetables and flowers are ‘living tissues’ that are subject to continuous change after harvest. Post-harvest changes in fresh produce cannot be stopped but can be slowed down within certain limits.
Like decentralization, integration in the marketing process may have both advantageous and disadvantageous effects. Whether a particular case of integration is advantageous to society or the individual can be judged by the motive with which it has been undertaken. The schematic arrangement of a vertically integrated firm is illustrated in Fig.
The organised players contribute only 8-10 percent of the cold chain industry market. To reduce transaction and handling costs, a single window system to facilitate export of perishable for perishable products a channel has to be used agricultural produce has been introduced. India accounts for 11 percent of world’s total vegetable production, but India’s share in global vegetable trade is only 1.7 percent.
The specific structure depends to a large extent on the nature of the product and the firm’s target market. There is no best channel structure, for all firms producing similar products. If the firm has targeted multiple market segments, management may have to develop multiple channels to service these markets efficiently. As a result, a company may opt for indirect channel to take help of middlemen in this task.
Which of the following are the factors determining choice of channels of distribution? – Business Studies
Hence, an informed decision has to be taken about arriving at the right channel for one’s products or services, which brings us to the next decision in the channel design process. Perishable goods cannot be sold on channels that take time to reach the customer. This is why we see the sugarcane industry close to plantations so that the sucrose level is not lost in transition. Hence channel segmentation becomes crucial, and marketing executives must be aware of the fact that consumers display varying needs during the purchase process and primarily look to get the best deal possible. Some of the costs are linked with the quantity marketed and some are linked with the value of the commodity. The actual rates of charges are converted in terms of the weight unit or Rs.100 worth of produce sold.
Presently there are 95 Rythu bazaars operating in all the 23 districts of the state. Generally, in the Rythu Bazar, prices are fixed 20 per cent over the wholesale prices and 15 to 20 per cent less than local market prices. Prices fixed are displayed at several places all over the Rythu Bazar for the benefit of the consumers. Marketing channels for oilseeds are different from those for foodgrains, mainly because the extraction of oil from oilseeds is an important marketing function of oilseeds. The flow chart in Fig.5.2 reveals the movement of oilseeds from producers to consumers in India.
When the product is perishable in nature a channel is advisable?
# Perishability : If the product is of perishable nature then shorter channel is preferred. However if product is of non perishable nature then longer channel is preferred.
The reputation of the intermediaries, which has a direct impact on the company’s performance, is a significant component in how successful this plan will be. To adapt this technique, the manufacturer has to recruit subject sales group and the sales representatives are liable for the sales. Cost of Channel member for making product available to final consumer. Based upon the role performed by these intermediaries they are classified into following types. If X is profitable, then it would mean that the responsibilities given are getting the monetary fruit. If X is not making money, the manufacturer needs to alter either responsibilities or the number of channel members.
Company Characteristics:
Consumers judge the product by the general elements such as smell, color of gill and belly condition but except all those, they also often judge the product based on where it is preserved in supermarket. Therefore, if the fishes are kept in refrigerators, that might cause sales of fish to reduce. According to the retailers, buyers tend not to buy bones and instead buy more meats even though the study shows the consumers judge it according to color and hygiene and not much according to fat or bones.
Use of direct and short channel can minimize risk of theft or robbery. With the intensive distribution approach, products are distributed to as many retail outlets as possible. Gum, for example, is a product that frequently employs this method. Gum can be found in petrol stations, grocery stores, vending machines, and retail stores such as Target. This strategy is based on making a big number of products available in numerous locations.
Above table shows the distribution based on the preference of place to buy perishable products. It has been found that significant number of respondents (37.50%) prefers to buy perishable products from open market followed by 35.00% retail stores and 16.25% super market. For costly goods, shorter channels are preferred while products of small value can be sold through long channels. So if you look at raw materials supply chains there are lot of perishable supply chains there as well where a lot of these same first principles actually act for them.
Which channel has to be used for perishable product A?
Direct channels are usually used by manufacturers selling perishable goods, expensive goods, and whose target audience is geographically concentrated.
First part of the questionnaire is the demographics of the respondents such as age, gender, age and Place to buy perishable products. For the purpose of the study, 71 respondents have been chosen randomly to help us in finding the factors affecting the consumer buying behavior of perishable products. Before conducting the survey concern from the respective respondents has been taken. Predesigned questionnaire has been used to designed to the achieve the research objective. This study has been designed to have a complete understanding of the attitude related to the urban consumers. This study also focuses on finding the factors involved in dealing with perishable products.
And third is essentially price that I’m getting it at the right fair price. Through what I spoke before all of these things can actually be solved for, for the end buyer and customer. Sign up and we will get back to you within 24 hours to discuss what services would be best for your business needs. Considering these logistics aspects is significant to ensure goods reach sales outlets flawlessly.
The goods are transferred from the manufacturer to the customer via two intermediaries in this distribution channel. Wholesalers and retailers serve as a link between manufacturers and consumers in this scenario. A direct channel of distribution is the means by which a company gets its product straight to the consumer without using any intermediaries.
These studies have used different approaches, and vary considerably in their depth. A higher value of E denotes higher level of efficiency and vice versa. When applied in the area of marketing, output is the ‘value added’ by the marketing system and ‘input is the real cost of marketing ‘. The difference in the price at the farm level and that at the retail level may be used to measure the ‘value added’ but it has limitations mainly because of market imperfections. Assuming that degree of imperfection is pervasive, this measure has been used to compare the marketing efficiency of two spatially separated markets, of two commodities or at two points of time.
So these three supply chains, milk and milk products, fish and milk protein, seafood and fruits and vegetables are which are the large categories within perishable supply chain. But it can additionally create a fancy system that generally makes distribution management tough. Longer distribution channels can also imply less revenue every middleman costs a producer for its service. E-commerce digitalizes inventory management, storage and shipment, direct sales. While a enterprise with classic distribution channels might struggle with the need to accumulate know-how, connection and contacts, an e-commerce enterprise can safely function with IT-educated personnel solely.
- Financial strength, management expertise, and the desire for control all play a role in determining which path the product will follow before reaching the final consumer.
- That is why producers have vested interest to promote in bulk, in massive quantities, whereas retailers have a vested interest to carefully asses if a particular product will be bought.
- So if you’re going to a farmer you buy the entire orchard of apples.
- Those companies who don’t care about control or are only concerned in product sales, on the other hand, choose indirect channels.
In this chapter, we have seen the various decisions the organizations and producers have to take when designing a channel, especially from a marketing channel design perspective. In the next chapter, we will see the decisions that will have to be taken to manage the selected channel design. The rise of mobile and internet channels has brought this to the forefront in recent times. For example, Air pods have an option of getting the name engraved on the outer case; in such a case, the sale is directly made via the website. While designing the channel, marketing executives keep a few key ingredients in mind to make up a robust and dynamic mechanism through which the producers can meet the consumers. If the supply is more elastic than the demand (e.g., of many farm products over a longer period), consumers get a larger share of the benefits.
What is the channel of distribution of perishable goods?
Direct distribution channels
The direct distribution channel does not make use of any intermediaries. The manufacturer or producer sells directly to the end consumer. The direct form of distribution is typically used by producers or manufacturers of niche and expensive goods and items that are perishable.
