Need for Specialist Distribution

If after applying the guidelines, the firm finds that a given industrial product lends itself for marketing through channels, the firm may proceed to select an appropriate channel. It must member that:

1. Industrial products as a general rule require specialist distributors. Entrusting the products with the traditional consumer product distributors does not bring in the best results.
2. Different industrial products need different types of distributors.

For example some industrial products have to be demonstrated to the customers. Here, specialist distributors with the required demonstrations facility will be more suitable. Some industrial products are hazardous from the point of view of distribution. Petroleum products, explosives and certain industrial chemicals are examples of this category. These products need specialized distributors, who command specialized transportation and storage facilities. Similar command the required service facilities.

Even within Consumer Products Channel Requirements of Different Products may vary:

Even within consumer products, different products may need different channels. In the Buyer Behavior, we came across three distinct categories of products within consumer goods – viz., (1) convenience goods, (2) shopping goods, and (3) specialty goods. The different categories of goods require different channel systems, since buying behavior and buying habits differ, depending on the category. Convenience goods require intensive market coverage and, therefore need a comprehensive and high penetration channel arrangement. Shopping goods and specialty goods need lesser intensity of coverage, compared to convenience goods. Often, in these cases, the number of tiers in the channel can be less than those for convenience goods. The number of outlets too can be far lesser. In the matter of location of the outlets too, the requirements will be different in respect of convenience goods on the one hand, and or shopping and specialty goods, on the other. Obviously there is a need for product channel matching.

The product’s PLC Stage influences Channel Choice:

Concept of PLC helps product management. PLC also helps channel management. Different channels fit different stages of PLC.

A product in the introduction stage will be relatively unknown to the market; its customer base small; and its sales volume low. At this stage, it may be advantageous to sell the product directly to the customer dispensing with the channels. Such a move will enable the manufacturer to get direct feedback on the new product and thereby improve the product as required. Alternatively, a specialized channel could be used in this stage. A specialized distributor will be in a better position to introduce the product in the market and also provide the required technical support to the user.

When the product moves into the growth and maturity stages, the requirements of distribution will be different. In these stages, the product is almost am off-the-shelf item. Now, convenience in delivery and price competitiveness are more important factors. Therefore, conventional/general purpose distributors would be more suitable. Producers usually appoint a number of general purpose distributors at this stage and also make more and more territories non-exclusive. Some pushing becomes necessary at this stage and conventional market channels admirably suit this requirements.

In the decline stage in the PLC, the market for the product usually gets reduced to select groups of customers and it may be advantageous to revert back to direct marketing to customers at this stage. Alternatively the firm may serve the select groups of customers through a minimal use of middleman.

Product Influences Type and Number of Channel Members as well:

Product characteristics influence not merely the channel design to be opted for; the often influence even the type and number of intermediaries needed. For example, for textiles or shoes, franchises who can run showrooms, may be an effective type of intermediary. For product like detergents, conventional wholesaler retailer arrangement may be the appropriate one.

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