Market Mix Strategy: Place
The article by Markgraf discusses about strategies that should be used in distribution channel by manufacturers in order to meet the consumer demands. In marketing mix strategy, there are four important elements i.e. product, price promotion and place. In Markgraf’s article he concentrates on the place element. Place is simply the process of moving a product to the intended or end user, and for this to be possible therefore there need be a distribution channel. Markgraf’s article concentrates on the factors that need to be considered in order to move the product to the intended user. The factors identified by the author are; market influence, product influence, manufacturer influence and potential strategies. There are two main forms of distribution as described by the author i.e. either a manufacturing facility distributing directly to the intended user or using an intermediary. There are different types of intermediaries in the market depending on the product or service handled, examples of intermediaries are; wholesaler, retail, internet, Value-Added Reseller (VAR), dealer, consultant, manufacturer’s representative, etc. For instance in the automobile industry they require dealers to distribute their products. The number of intermediaries would depend on the market (Markgraf).
The market has influence on the channel of distribution that should be used by the manufacturer. The market structure can hinder the manufacturer from distributing its products directly to the final consumer, for instance if the users are distributed in a wide area then it would be uneconomical for the manufacturer to distribute the products on their own. The second factor identified by the author is product influence on the choice of channel of distribution. The product itself and its attributes can be used to determine the channel of distribution. Markgraf identifies three important product influencing factors i.e. quality, size and durability. If a product is of good quality and is produced in small batches, this means the product would sell fast; therefore a manufacturer would need few or no intermediaries. Manufacturers would prefer to distribute perishable products on their own to reduce any chances of inconveniences. Thirdly, manufacturer can influence the choice of channel of distribution through capability or availability of resources. Small companies are more likely to rely on wholesalers to distribute their products because they do not have the resources to set up a huge distribution network (Markgraf). Lastly potential strategies involves optimizing the distribution channel by reducing costs and maximizing effect; this will involve choice of effective distributors and channels compared to those of competitors.
The information presented in the article is important in marketing strategy by providing a process in which organization should choose their channels of distribution in order for their products to reach the targeted user. It might appear to be straightforwardly conceivable and more intelligent for an organization to specifically distribute its own goods and services without the assistance of a distribution channel. This is particularly so on the grounds that the internet permits dealers and purchasers to collaborate continuously. On the contrary, in genuine practice it may not bode well for an organization to set up its own particular distribution channel. Manufacturers who produce on a large scale like consumer merchandise for instance, need to store items of fundamental need, for example, tissue in however many little and huge stores in the greatest number of areas as could reasonably be expected. These areas might be as near one another as three in the same locale. They might likewise be remote up-country stores and petrol stations. This would be expensive and counterproductive for the organization to endeavor to accomplish this without an appropriate channel of distribution.
In the article, the author is trying to state in other words that it is important for an organization to plan before choosing a channel of distribution and a proper plan requires goal setting. The company needs to identify the needs of the consumers, in understanding their needs the organization will be able to identify the location that they need the products and provide timely delivery. It is also important for an organization to deliberate on the objectives of the channel. An example of a good channel objective is to deliver huge quantity of products with the least cost possible, another objective would to deliver the products in a timely manner, a third objective would be to deliver the product in the desired state i.e. quality. These are objectives that should be set in identifying the appropriate distribution channel. The tasks and processes that will be involved in the distribution channel should be discussed in detail in order to ensure everything plays out fine.
A unique channel of distribution will provide a competitive advantage in the market. A company ought to have a unique distribution channel especially if their products are not differentiated as this would differentiate the product from the competitors. Organization should be able to develop less costly and efficient distribution channels that would sometimes be difficult for the competitor to replicate. Owning a distribution channel and unique on that matter may be lucrative for any business. An example of a unique distribution channel is coca-cola who sells concentrates, syrups and beverage bases to bottling operators who will manufacture, package and distribute the final product: this makes the product more local and readily available from anywhere (Lu and Tiwana).
An organization needs different distribution strategies for different types of products. What this means is that a distribution strategy for product X may not work for product Y. An intensive strategy of distribution may be used for products that are likely to impose impulse buying to consumers on the market e.g. candy and mint. These are products that are never on the shopping list but are always bought. Most of these products are usually of low prices which others might consider insignificant to their budget but is significant to the manufacturer. Selective distribution can be used for products that are used in different demographical situations. For instance farm tools are more likely to be bought in areas where agriculture is practiced and therefore a selective approach should be used to distribute such products to selective stores. Exclusive distribution is used for products that are rather expensive and can be bought by a few e.g. it would be difficult to find a jewelers store just anywhere in the city or a car showroom because these are considered as exclusive products and can only be sold in a single outlet.
The last important issue is to assess the benefits and costs that would arise from choosing different distribution channels. Some of the benefits that organizations should look at are; intermediaries specialize in what they do so they are more likely to do the job more cost effectively, the intermediaries buy in bulk and sale in small quantities, this makes it easier for the final consumer and increases sales, intermediaries are able to provide varieties for consumers as they can choose from a single outlet. The possible channel costs that a manufacturer may encounter are; firstly, reduction of importance of the product because an intermediary may push other products first. Secondly, there is loss of communication control when using an intermediary as they may pass wrongful information from the manufacturer to the consumer. In using intermediaries revenues may be lost by several channels e.g. distributors increasing product price to gain more profit which may affect the sales. Therefore a cost-benefit analysis should be carried out in the choice of a channel of distribution (Palmatier, Stern and Ansary).
In conclusion, the article written by Markgraf is clear and concise when it comes to choice of a distribution channel. The author comes up with four factors that influence the choice of distribution channel and explains them in a simple language and still maintaining depth of the information. Many facts and details can be deduced from this simple article which is less than 1,000 words but captures the whole concept of channel distribution in order to satisfy consumers, reduce costs and increase efficiency. The article is recommendable to both laymen and experts in business management.