How the Shopping Characteristics for the Consumer and Industrial Goods Affect the Channels for Them - Assignment Example

Title: Marketing Channels Student’s Name: Instructor’s Name: Course Name and Code: University: Date of Submission: Marketing Channels 4, page 103, chapter 3 Explain how the shopping characteristics for the following consumer and industrial goods affect the channels for them 1. Consumer Goods                                             Bread There is little involved in the purchase of consumer goods and therefore little decision making is involved. The main characteristic of this consumer is that he or she just needs to find bread at the local outlet and at the specified price. The decision to purchase is thus instant and is barely influenced by a slight change in price because the product is a necessity. The buyer may also have a favorite brand which he or she will look for once at the retail outlet. The responsibility of the channel therefore is to deliver bread at the right time and at the required price in the retail outlets near the consumer. The channel must be highly efficient because bread is a fast moving product. Breakfast cereal  Just like bread, the purchase process is easy and the specific cereals are easy to find, select ad buy. Information on the product is usually already known unless the consumer wants to change from one breakfast cereal to another. Planning is necessary as well as the need for information for use during comparing and choosing. Experience matters a lot and this could dictate whether the consumer purchases the product and so is the need to buy the specific product. The characteristics of the breakfast cereal customer requires the channel to be highly efficient in order to ensure that fast-moving cereals are provided and also ensure that quality is maintained. Prices are also an important consideration and so is information on the breakfast cereals. Women's hosiery Every woman will have her own preference but it is highly important to consider that quality, pricing and durability are some of the most important aspects that may be considered by consumers. These consumers tend to compare and seek what pleases them most. Depending on experience, they may purchase the same brand or change to another one. In that case, adequate information is required to make a decision. It could also involve consulting with friends and relatives. The channel is expected to provide high quality and fair prices as well as provide adequate information. If this is done, the outlets concerned could expect higher repeat sales.          Refrigerators This is a durable good and consumers are expected to take a longer decision making process. This is characterized by comparison between different brands, seeking information on operations, warranty and after-sales service, budgeting and looking for finances. The channel needs to ensure that adequate information is provided and also guide the consumers in the decision making process. It is also imperative to ensure that there are after-sale services such as transportation and repair services so that customers can choose their models.  2. Industrial Goods                            Laser printer toner cartridges This is a consumer looking for a high value product and therefore service output priorities are expected to be many. This type of customer will take time in getting references and advice through consultations before eventually purchasing the product. The durability of the laser printer toner cartridges is expected to be a priority and so it’s the ability to get assistance on the best choice during the decision process. The buyer could also seek the lowest price. Accordingly, channels need to advertise intensively and also ensure that the best quality and lowest prices are offered. Provision of adequate information would enhance the decision process by the consumer hence the need for advertisements. Uranium for nuclear power plants This is a highly sensitive customer because uranium purchased must be able to meet the desired needs in the nuclear power plants. Poor quality would be detrimental and therefore such customers are expected to inspect quality. The price of the uranium, source of the uranium and the ability of the seller to transport the uranium after sales would also be some factors that the consumer considers highly. The channel therefore has a role to ensure that the consumer gets at least all these qualities despite the costs that may be incurred. Cement Cement customers are likely to be highly cautious individuals or organizations because of the importance placed on cement used in construction. The quality of cement is highly important to the consumer because it determines the quality of the construction. Once the quality has been determined, the other factors such as price, quantity and after-sales services such as transportation may be considered. Coming up with a conclusion regarding the cement to be purchased calls for adequate information to enhance comparison between different brand and outlets. The channel must therefore advertise extensively, provide quality products and services and also add complimentary services such as transportation in order to attract this consumer. Medical machinery (e.g. ultrasound machine)                  Medical machinery is highly sensitive and the consumer is expected to exercise extra caution during purchase. To begin with, the decision process may take longer because more time is needed in the collection of adequate information regarding different types of machinery. Similarly, a considerable amount of consultations may be involved in order to ensure that a quality product is purchased. There would be need for product demonstrations and trials, problem solving assistance and after sales service such as maintenance. The channel would therefore have to offer its services in three steps: pre-sales, sales and post-sales. During the pre-sale step, the supplier should provide the consumer with adequate information through advertising and relevant information during the decision making process before the sale can be made. The after-sale service would involve full service offers, support, installation and training as well as responsive support. The channel member must also seek to offer the lowest cost to influence the purchase decision. Question 4, page 150, chapter4 4. Why do greater sales and greater coverage go together? Should manufacturers always seek greater coverage? Conversely, should resellers always seek to carry more brands in their assortment for a given product category? Why or why not? It can be justified that the greater the market share, the greater the sales a company is likely to make. This in turn insinuates that greater coverage amounts to greater sales. According to Coughlan, Anderson, Stern and El-Ansary (2006) more coverage is considered better by manufacturers because it is bound to create higher sales. They argue that more is always better and that if more outlets carry a brand, the more likely it is to sell and hence the reason why greater coverage is preferred. Furthermore, greater coverage makes the process of obtaining brands easier for prospects thus increasing the probability of enhancing sales levels. It is also notable that with increased coverage, prospective customers are likely to encounter promotional or sales efforts in each of the outlets they visit. The essence of this is that the combined persuasion that is derived from the different outlets could eventually lead the prospect to surrender; thus justifying the usefulness of greater coverage. It can therefore be established clearly that the more outlets a brand is carried in, the greater the amount of sales expected from the sale of the brand. Accordingly, greater sales and greater coverage go together. Manufacturers should seek great coverage but not always. The need for greater coverage is especially desirable in the sale of convenience goods which are likely to attract a high level of demand. Coughlan, Anderson, Stern and El-Ansary (2006) note that for this type of products, there is high demand but purchases are mostly considered low-involvement purchases. This means that the buyer considers the purchases minor and low risk. It further insinuates that customers do not have to get their favorite brand in shopping for convenience goods and are therefore likely to pick whatever is offered or what seems acceptable to them if they cannot find the particular preferred brand where they are shopping. The implication for manufacturers is that if their products are not stocked in a particular outlet, customers may not strain themselves or go out of their way to look for another outlet but will instead pick what is available. Accordingly, the manufacturer has a role to ensure that products are available in as many outlets as possible in order to ensure that customers can access the product. Greater coverage is therefore desirable for manufacturers of convenience goods as it tends to increase sales. Manufacturers however should not always seek greater coverage because despite being highly effective in creating more sales, there are significant costs associated in managing the outlets. Each of the outlets created to meet the required objectives is in need of attention and support; including the process of ordering, shipping and financing of the overall process. It is, therefore, important to consider whether the various outlets are expected to be profitable before venturing into them. Furthermore, it is possible for the manufacturer to identify a particular market that is expected to have higher returns and concentrate on this market as opposed to having many outlets in areas that are not productive. It would be highly imperative for sellers to provide an assortment of products in order to satisfy customer demand. This is because individual choice varies and it would be important to ensure that the needs of each customer are accounted for. On the contrary however, retailers consider greater coverage a negative and therefore tend to differentiate themselves through offering unique assortments. These downstream members tend to prefer exclusivity (Coughlan, Anderson, Stern and El-Ansary, 2006). It is also notable that small retailers, having to deal with space constraints stock up one or two brands due to the knowledge that consumers to a significant level have little brand choice especially in convenience goods such that greater coverage does not really appear to be important. This insinuates that resellers do not necessarily require offering more assortments even though it would be generally preferred in order to give customers autonomy to choose the brands they desire to purchase. Question2, page192, chapter5 Give an example of a purchase occasion when you chose not buy a product at a particular outlet because the service output levels were not appropriate. Indentify whether the demand gap was in the provision of too low a level or too high a level of service outputs. What did you do instead? Buy would be happy to buy from the outlet that you rejected? Why would they be happy to do? Sony, a leading electronics company had been advertising their new range of music systems in the market for about one week when I decided to take advantage of the offer and buy the music system for myself. Accordingly, I set out to the nearest Sony distribution centre to purchase the system only to find that the music system that I had singled out had run out of stock. The attendants tried to talk me into getting another model but I just needed the one I had identified. Hoping that I could collect the system in the next few days, I was informed that the next batch would be delivered in ten days’ time. I then proceeded to two supermarkets in the neighborhood only to find the same predicament. I was highly disappointed, given all the excitement I had about the music system. The lack of the music system in the stores on the other hand represented a significant gap in the marketing channel. There was a failure in meeting demand, either fuelled by the producer of the retailer, thus creating a channel gap. I concluded that while Sony ran a highly effective promotion, they failed in anticipating a rising level of demand that would lead to an outage of stock if consumers flocked to the various outlets in large numbers to purchase the advertised products. According to Coughlan, Anderson, Stern and El-Ansary (2006), a gap in the marketing channel occurs when there is a breakdown in the link between the producers and the customer. The scenario represents a case in which the service output demanded is higher than the service output supplied thus creating a demand side gap. Accordingly, the channel cannot be said to be an optimal channel because it does not meet the service output demands. The gap could have been caused by either of the channel members; that is Sony the manufacturer for not supplying enough music systems or the retail outlets for not ordering enough stock in anticipation for the rise in demand. This could be caused by postponement, whereby manufacturers may tend to delay production until orders for the goods are received. I would be happy to buy from the outlet that I rejected only if I am assured that they will be in a position to provide me with the product that I required. This insinuates the need to close the channel gaps by addressing the challenges facing the channel members. These include managerial channel bounds which impact the channel from within. The company and the retail outlets could close the demand gaps by expanding or retracting the output levels of the demanded products depending on the level of demand. The outlets could also adapt new distributional technologies and management systems to ensure that demand is met. While Coughlan, Anderson, Stern and El-Ansary (2006) note that some bounds may not be eliminated, it is important to challenge some of the bounds through making the management aware, making the management care, appointing a champion for the process and ensuring that the approach taken is customer driven. Once the channel gaps are closed, it would be possible for customers like me to get the desired service and thus enhance satisfaction. I would be happy to purchase because I would be assured of the product that I initially demanded. This is because a personal choice is of great significance to the satisfaction level and one is never really satisfied until they can get the product that they really wished for in the first place. I would be happy to purchase the music system that I desired from the beginning because I still feel that I need it more than the one I bought as an alternative. Question5, page238, chapter6 5. DuPont Agricultural Chemicals is an extremely large and diversified supplier of herbicides and pesticides to farmers. It has several competitors, also large and diversified (such as Monsanto and Dow). Imagine a dealer selling a full line of whatever a corporate or individual farmer would use, including agricultural chemicals. Is it possible to imagine a scenario in which the dealer is more powerful than DuPont? What factors might make this possible? It is possible to imagine a scenario in which the dealer is more powerful than DuPoint. This is because the dealer provides more convenience to the farmer through offering all the products required at a central point. It is a case of having an assortment of products in one outlet which is not only convenient in terms of accessing the products but also saving extra costs incurred in going from one supplier to the other to collect different requirements for the firm. The dealer selling a full line of the farm requirements would be closing a major gap in the distribution channel through ensuring the availability of the products for customers gives them increased satisfaction. Besides the availability of products, the concept of channel power is of great importance in explaining the scenario in which the dealer could be more powerful than DuPoint. Channel power denotes the ability of a channel member to control other members in the channel or the ability to alter behavior of other channel members with a goal of influencing them. It is a tool that is considered highly necessary for business survival but which cannot be classified as good or bad. There are 5 sources of power including reward power, expert power, coercive power, legitimate power and referent power. The situation in which an extremely large and diversified supplier like DuPoint would be overpowered by the smaller retailer could be a case of expert power transfer. Coughlan, Anderson, Stern and El-Ansary (2006) note that the expert in each marketing channel possesses a significant level of power over others due to the expert knowledge held about the market trends, products or customers. In order to maintain market power, channel members may choose to keep the information withheld or to release the expertise in small portions while retaining important knowledge so that the other channel members remain dependent on it. When a significant amount of the expert power is transferred to another member of the channel, the power possessed by the original expert in the relationship is reduced significantly (Coughlan, Anderson, Stern and El-Ansary, 2006). It is possible that as a larger supplier of the farm inputs, DuPoint was initially more powerful until increased dissemination of information empowered the smaller dealers such that they do not have to rely on it and other larger suppliers anymore. Accordingly, DuPoint’s power in the channel decreased while the dealer became more powerful. The dealer is thus in a position to identify the needs of the customers, the new products in the market, changes in trends and generally what to provide to the customers to keep them satisfied. Combined with the fact that the retailer provides all the products that the farmer needs, the dealer is bound to overpower DuPoint. Coughlan, Anderson, Stern and El-Ansary (2006), note that retailers are constantly building expert power over suppliers because of their twin advantage of customer touch and assortment. Accordingly, they are in a better position to establish the needs of the customers, thus translating this into greater power in the channel. The dealer in this case is likely to have good relations with the local consumers in such a way that there is a mutual interaction whereby the dealer is capable of identifying the challenges being faced by the farmer. Accordingly, the dealer possesses more expert power than the large supplier which gives the dealer more power in the channel. It is also possible to hypothesize that the dealer could possess more power than DuPoint if higher members in the channel such as manufacturers and wholesalers use reward power on the dealer. Reward power works where a channel member agrees to alter behavior to fit another’s preference. Reward power is often given as a result of complying in the channel and it is possible that the dealer could have received such power from various manufacturers of the farm inputs. These channel members could work towards ensuring that the dealer works within their preferences by promising rewards to the dealer thus exercising their power on the dealer in natural way but which also impacts positively on the dealer. This could include financial rewards, help in building the business and promoting the reseller to the end user. If the same form of power is not available for DuPoint, it is possible to visualize a situation in which the dealer is more powerful than DuPoint despite being an extremely expansive supplier. This is because the dealer gets the much needed boost in enhancing business while DuPoint does not get it. Reference Coughlan, AT, Anderson, E, Stern, LW & El-Ansary, AI 2006, Marketing channels, 7e, Prentice Hall, Upper Saddle River, NJ. Read More