Marketing Channels Issues - Assignment Example

Applied channel xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Name xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Institution xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Lecturer xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Date Chapter 5; Q3 Use the concept of demand- side gaps to explain why it is frequently a bad idea to transplant a channel design from one country directly to another without any modification. Transplanting a channel design from one country to another is usually a bad idea from the demand-side gaps perspective. To begin with, there must existing the necessary structural infrastructure for the consumer to efficiently utilize the channel in order for it to be acceptable to them. Since structural infrastructure capacity differ from one country to another, what works in one country may not necessarily work in another. Modification is necessary to ensure that a channel is accommodated in the existing structural infrastructure or that infrastructural issues are addressed. This includes government policies from the demand side to ensure that the product is acceptable and does not contradict already set policies. It is for this reason that online bill payment may be effectively applicable to some countries and not others. In addition, such channels lack end-to-end capability whereby there is a link between the levels of the chain enhancing business to business channels (Coughlan et al 2006).. The idea of unmodified channel designs may results to demand gaps whereby target consumer do not have comprehensive information about the product. As a result, channel flow costs may increase as a result of target customers being unsure of what to buy. End users in this case unintentionally purchasing the wrong product or tries to reduce the risk of purchasing the wrong item by buying multiple sizes of the same product intentionally, hence increasing the product return rate. This increases the channel flow costs. In addition, the company may confuse this for increased demand for the product and in reaction, increase production for the product. This not only results to increased channel flow costs, but overproduction as the company tries to avoid stocking out of the product in demand as well. Management cost of the payment increases since credits must be issued to customers for product returns hence increasing the cost of monitoring. In the worst case scenario, customers who may not be aware of restocking fee may be lost to competitors due to dissatisfaction with received services or the brand. Lastly, clients may be dissatisfied in cases where they are concerned with time taken for a delivery to be made. This happens when a wrong product is delivered just to be returned for an exchange or refund. Customer choice or preference may differ from one country to another in relation variety/ assortment and bulk breaking. This means that low level of assortment or bulk breaking may not be an issue in one country but this may impact on the marketplace acceptance of the product in another country. It is therefore necessary for the customer needs to be assessed and the channel be modified accordingly. Failure to do this is likely to result to limited success or high operation cost being incurred during production and marketing. In addition, low price strategy may work in one country and fail in another where product quality in terms of assortment/variety is more important to consumers as compared to cost (Coughlan et al 2006). This results to a service-value gap on the demand side as the services are perceived to be too low. For instance, a certain album may be on hit in one country but in another country, only one song attracts consumers. Bulk breaking in this regard will be important to meet the demand s of the customers not having to buy the entire album. Lack of this may result to target customers opting for online music downloads. Poor information provision sometimes may result to target customers not purchasing or accepting the product. This includes information on use, assortment and bulk breaking. However, the company transplanting a channel design from one country to another may overinvest in service outputs with the aim of providing high quality customer services and information to the clients. Such attention may become distractive and irritating when customers are already aware or information is available in the internet. This results to a double penalty on the part of the company since it has already invested heavily in customer service but reaps a decrease in customer satisfaction instead of an increase. All these factors indicate how important it is to identify target customer characteristics, values and needs in order modify a channel design accordingly before transplanting it in a different country. Chapter 5: 6 You are the owner/ manager of an auto dealership in Germany selling the Audi line. Your dealership is exclusive to Audi; you have invested heavily to build the dealership; and your contract is such that, if you decide to sell your dealership, Audi has the right to approve or disapprove any buyer you might find. What is the balance of power in your relationship? What could your supplier do to ensure you do not become alienated? In this case, I am dependent on Audi based legitimate power. This result from the fact that I am exclusively stocking and selling Audi products and the high cost of switching from this manufacturer to another. Bearing in my that the auto dealership is exclusive to Audi, switching from Audi will require foregoing benefits such as advertisement. In this regard, Audi has power or influence on what I do. However, I am important in reaching its customers and competitors. The fact that I cannot solely make the decision of selling the dealership to a buyer of my choice makes the ruling power coercive. In this regard, my relationship with Audi is likely to deteriorate due to the perception that Audi is using threats to ensure I am a loyal dealer. The relationship is likely to be an unsatisfying one unless an intervention is made. I might fell less committed to this relationship and become alienated. The more I perceive Audi as being less fulfilling, respectful, easy to work with and concerned, the higher the likelihood of a widened gap between the producer and I as the reseller. To mend this relationship, the producer must provide avenues through which I can perceive the attached benefits of the relationship as a reseller. Achieving this would ultimately result to my appreciation replicated through increased loyalty and willingness to cooperate with the producer and hence strengthened channel relationship (Coughlan et al 2006). Due to the nature of my dealership, the expectation is that I remain loyal to Audi by trading its products exclusively since Audi has the legal right of supervising my operations. For instance, it is illegal for me to stock products from competitors or even advertise such. Doing so would be considered as bridge of contract and will incur penalties. Referent power is also evident in that I have opted to stock Audi products only. However, as the distributer I can request for assistance form Audi in meeting my objectives such as market reports to identify potential customers To ensure that I am not alienated, the supplier may apply a reward system by create credible channel policies such as pledging 100% reliance on distributers or paying employee channel the same regardless of whether the client buys from a direct channel or not. In addition, market development support policies can be established to include training seminars and sales support information, certification programs, discretionary funds and/or personal assistance. This can also be achieved through supplemental contract programs whereby communication programs are issues, and transactions and information are automated. High powered incentive programs including immediate cash incentives and financial programs aimed at reducing my purchasing cost can also be implemented. Though contracted by Audi, I can decide to terminate my contract and stock products from its competitors. The well established customer base, trust and loyalty would pull competitors to offering the necessary support for me to switch. This makes it important that Audi gives every support to ensure that I am satisfied and I contribute to meeting their goals. End-user encouragement programs can be applied in ensuring that I do not alienate myself. In the struggle to enhance production of value-added services to the consumer, the manufacturer and dealers are bound together (Coughlan et al 2006). this would include provision of trial usage programs aimed at reducing risks for the consumers. Audi will offer such programs through I as the resellers. In addition, the Audi can cooperate with my dealership in marketing the product to identified targets. Lastly, Audi can use reseller marketing programs whereby it will promote me to the end-user who will purchase their product to my retail store as a reward. Audi can also offer assistance through expert power by consistently engaging in market research on identifying available opportunities for expansion, threats and market trends which would important to me as their reseller. This will ensure I am ahead of competitors to defend their brand and that I will always go back to then in search for knowledge and information with regard to available market. The aim of this will be to build a strategic alliance against competitors by keeping me informed (Coughlan et al 2006). Since there already exists dependence this strategy would work well in combination with building a relationship based on trust. Audi can use mystery shoppers to ensure that my dealership remains exclusive and that I only recommend their product. A combination of all these strategies will ensure a strengthened alliance against competitors. As a result, both the producer and the reseller reap advantages from existing relationship reducing chances for frustration on one part. Dependence on both side will ultimately developed sustaining the existing relationship for the benefit of all. Reference Coughlan, AT, Anderson, E, Stern, LW & El-Ansary, AI 2006, Marketing channels, 7e, Prentice Hall, Upper Saddle River, NJ. Read More