Unit – 4: Sales Promotion
and Distribution channel
Introduction to sales promotion
Sales promotion is one of the most loosely used terms in the
marketing vocabulary. We define sales promotion as demand. Stimulating devices
designed to supplement advertising and facilitate personal selling. In other
words, sales promotion signifies all those activities that supplement,
co-ordinate and make the efforts of personal selling and advertising more
effective. It is non recurrent in nature which means it can’t be used
continuously.
Concept of
Sales Promotion: Sales promotion consists of diverse collection of incentive
tools, mostly short-term designed to stimulate quicker and / or greater
purchase of a particular product by consumers or the trade. Where as
advertising offers a reason to buy, sales promotion offers an incentive to buy.
Sales promotion includes tools for consumer promotion (for example samples,
coupons, prizes, cash refund, warranties, demonstrations, contest); trade
promotion (for example buying allowances, free goods, merchandise allowances,
co-operative advertising, advertising and display allowances, dealer sales
contests); and sales-force promotion (for example bonuses, contests, sales
rallies).
Sales promotion efforts are directed at final consumers and
designed to motivate, persuade and remind them of the goods and receives that
are offered. Sales persons adopt several techniques for sales promotion.
Creative sales promotion can be very effective. It is the marketing manager’s
responsibility to specify promotion objectives and policies.
Definitions
of Sales Promotion
According to American Marketing Association “ Those marketing
activities other than personal selling advertising and publicity that stimulate
consumer purchasing and dealer effectiveness such as display shows and
exhibitions, demonstrations and various non-recurrent selling efforts not in
the ordinary routine.”
W.J. Stanton defines sales promotion as all those activities other
than advertising, personal selling, public relations and publicity that are
intended to stimulate customer demand and improve the marketing performance of
sellers.
Objectives of Sales Promotion
The basic objectives of sales promotion are:
i) To
introduce new products: To induce buyers to purchase a new product,
free samples may be distributed or money and merchandise allowance may be
offered to business to stock and sell the product.
ii) To
attract new customers: New customers may be attracted through issue
of free samples, premiums, contests and similar devices.
iii) To
induce present customers to buy more: Present customers may be induced to
buy more by knowing more about a product, its ingredients and uses.
iv) To help firm remain
competitive: Sales promotions may be undertaken to meet competition from a
firm.
v) To
increase sales in off season: Buyers may be encouraged to use the product
in off seasons by showing them the variety of uses of the product.
vi) To
increase the inventories of business buyers: Retailers may be induced to keep in
stock more units of a product so that more sales can be effected.
Purpose of sales Promotion
Sales promotion activities tend to achieve
following objectives:
1) To
generate consumer interest, which should lead to trial?
2) To
build long-term customer loyalty.
3) To
encourage repeat sales.
4) To
generate inquiries from the target customer group.
5) To
widen the distribution of the product or brand.
6) To
build up retail inventory levels.
7) To
increase the frequency of purchases.
8) To
build traffic for a brand at retail outlet and thereby generating additional
sales for the product.
9) To
encourage customers to visit a particular sales outlet.
10) To
conduct product/service and market investigations.
11) To
coordinate sales and advertising.
12) To
plan sales promotion programmes.
13) To
assist dealers in their selling efforts by toning up the morale of salesman.
14) To
reward loyal customers.
15) To
enable manufacturer to adjust to short-term variations in supply and demand.
16) To
promote customer awareness about the price, quality, variety and availability
of products.
17) To
enable consumer to become smart shoppers by availing advantages of price
specials.
Sales promotion can be used to dramatize product and to boost
sagging sales. Sales promotion effects are usually short run. Companies use sales
promotion tools to create a stronger and quicker response. The main objective
of sales promotion is to establish better co-ordination between the activities
like advertising, personal selling, publicity etc. Stanton says, “Really the
major function of sales promotion is to bridge the gap between advertising and
personal selling; so that efforts of these two areas could be supplemented and
coordinated.”
Importance of
Sales Promotion
The growing significance of sales promotion
can be attributed to the following:
1) Growing
Consumerism in India.
2) Fragmentation
of viewers and readers due to multiple T.V Channels, magazines and newspapers.
3) Sales
promotion is more cost effective as compared to advertising due to rising cost
of mass media.
4) Technological
advancement and standardized products have also added value to sales promotion
activities.
5) Increasing
inter-firm rivalry within the industry, in fact in all sectors of the economy
also by laying down emphasis on sales promotion to popularize their own
products.
6) It
provides opportunities to manufacturers to reach out different market segments
with different price-differentiation plans.
7) It
adds excitement to in-store merchandizing of consumer durable items.
8) It
motivates distribution channels to keep more inventories of the products which
promote sales.
LIMITATIONS OF
SALES PROMOTION
Sales promotions are an important tool in
the hands of sales management to increase the sales. But there are certain
limitations which are given below:
1. Short-term device: It is a short-term
device to increase the sales. It is not effective in creating long-term brand
preferences.
2. Lack of regularity: If the goods are
not in regular supply then sales promotion cannot be successful.
3. An activity to support advertising and personal
selling: It establishes co-ordination between advertising and personal
selling and makes efforts to increase the effectiveness of these two
activities. Sales promotions are not an independent tool.
4. Defective distribution: If the channel
of distribution of products, chosen by the seller is defective, sales promotion
cannot work successfully.
5. A non-recurring effort: It is not a
recurring effort and if it is adopted on recurring basis, its importance will
diminish.
6. Chances of manufacturing defects in product:
The sales promotion will not be of any use if the product has certain
manufacturing defects.
7. The defects of other marketing efforts
cannot be removed: It is a complementary effort and cannot remove drawbacks
of other marketing efforts such as drawback in packaging, colour, size,
quality, pricing etc.
8. Can attract only deal-plan Customers:
Those who are interested to avail short term benefit from buying are attracted
by the sales promotion tool. It does not change the habits of loyal brand
buyers.
9. Not useful for buyer’s market: This
technique cannot work successfully if buyer’s market exists.
Factor Affecting
Sales Promotion
Sales Promotion is a skill activity to induce
the customers. Sales promotional programmes should be designed carefully with creativity
and novelty to get the desired results. Following factors should be kept in
mind while designing sales promotion programme:
1. Target Market: Sales promotional
programmes should be oriented towards the target market in such a manner so as
to prompt the purchase of the product. There are six stages involved in
inducing the customers. These are –
a) Awareness: The buyers must be made
aware about the availability of the product or brand in the market.
b) Knowledge: The seller’s task is to
explain the features of the product so that buyer can have knowledge about
that.
c) Liking: The potential buyers should
have liking for the product or brand to be sold.
d) Creating Preference: The seller must
create preference for his product. He must convince the buyer that his product
is better than the other alternatives available.
e) Conviction: It refers to actual
decisions of the buyer to commit the purchase.
f) Purchase: The ultimate task of seller
is to motivate the buyer to purchase the product immediately.
2. Nature of Product/Service: Promotional
strategy gets affected by the nature and attributes of products of services.
The most important of them are –
a)
Customization:
No sales promotion effort will be required if the product to be marketed is
manufactured on the basis of individual’s specific needs.
b)
Unit
Price: If the price of the product is low, there is less risk of the
customer to buy the product. Even manufacturer’s risk will be less. Low price
products can be promoted by mass marketing and mass sales promotion schemes.
c)
After-Sale
Service: For the products like personal computers, washing machines etc.
after sales service become important. Customers will prefer those brands which
offer good after-sale service.
3. Stage of Product Life Cycle: When a new
product is introduced, more advertising and personal selling efforts are
required to popularize the product among the prospective buyers. Once the
product becomes popular and successful, more sales promotional activities need
to be undertaken to intensify the sales.
4. Proposed Budget: The ultimate
determinant of any sales promotional programme is the availability of funds.
Companies with large magnitude of funds can afford to make more effective
utilization of promotional schemes than a company with limited financial
resources. The budget for sales promotion will be made by taking into account
the extent of competition, the percentage of sales, the availability of capital
for sales promotion and so on.
Types of Sales Promotion
In using sales promotion, a company must fulfill the objectives of
the organization. Sales promotion objectives are derived from broader promotion
objectives, which are derived from more basic marketing objectives developed
for the product. The specific objectives set for sales promotion will vary with
the type of target market.
For consumers, objectives include encouraging purchase of
larger-size units, building trial among non users and attracting switches away
from competitors‟ brands. For retailers objectives include inducing retailers
to carry new items and higher levels of inventory, encouraging off-season
buying, encouraging, stocking of related items, off setting competitive
promotions, building brand loyalty of retailers and gaining entry into new
retail outlets. For sales force, objectives include encouraging support of a
new product or model, encouraging more prospecting and stimulating off-season
sales.
Many sales promotion tools are available to accomplish these
objectives at the consumer level, and at the middle men level. For the purpose
of convenience, the types of sales promotion methods may be grouped under three
categories:
1. Types of sales promotion directed at consumers.
2. Types of sales promotion directed at dealers and distributors.
1. Consumer
Promotion Tools: The main consumer promotion tools include
samples, coupons, cash refund offers, price packs, premiums, prizes, patronage
rewards, free trials, product warranties, tie-ins, and point of purchase
displays and demonstrations.
a) Samples: Samples
are offers of a free amount or trial of a product to consumers. The sample
might be delivered door to door sent in the mail, picked up in a store, found
attached to another product or featured in an advertising offer. Sampling is
the most effective and most expensive way to introduce a new product. 189
b) Coupons: Coupons
are certificates entitling the bearer to a stated saving on the purchase of a
specific product. Coupons can be mailed, enclosed in or on other products or
inserted in magazine and newspaper advertisements. Coupons can be effective in
stimulating sales of a mature brand and inducing early trial of a new brand.
c) Cash
Refund Offers or Rebates: These are like coupons except that the price
reduction occurs after the purchase rather than at the retail shop. The
consumer sends a specified “proof of purchase” to the manufacturer, who in turn
„refunds‟ part of the purchase price by mail. Cash refunds have been used for
major products such as automobiles as well as for packaged goods.
d) Price
Packs: These are offers to consumers of savings off the regular price of a
product, flagged on the label or package. They may take the form or a
reduced-price pack which is single packages sold at a reduced price (such as
two for the price of one) or a banded pack, which is two related products
banded together (such as a tooth brush and tooth paste). Price packs are very
effective in stimulating short term sales, even more than coupons.
e) Premiums
or Gifts: These are merchandise offered at a relatively low cost or free as an
incentive to purchase a particular product. Sometimes the package itself, is a
reusable container may serve as a premium. A self-liquidating premium is an
item sold below its normal retail price to consumers who request it.
f) Prizes: These
are offers of the chance to win cash, trips or merchandise as a result of
purchasing something. Pepsi-cola offered the chance to win cash by matching
numbers under the bottle cap with numbers announced on television. Sometimes
the prize is a person, offering the winner either cash or dinner with actor
Sharuk Khan.
g) Patronage
Awards: These are values in cash or in other forms that are proportional to
one’s patronage of a certain vendor or group of vendors. Most airlines offer
“frequent flyer plans” providing points for miles traveled that can be turned
in for free airline trips. Cooperatives pay their members dividends according
to their annual patronage. Le Meridian adopted an “honoured guest” plan that
awards points for users of their hotels.
h) Free
Trials: Free trails consist of inviting prospective purchasers to try the
product without cost in the hope that they will buy the product. Thus, often we
see, auto dealers encourage free test drives to stimulate purchase interest.
i) Product
Warranties: These are an important tool, especially as consumers become more
quality sensitive. When My TVS offered a two year car warranty, substantially
longer than other competitors‟ customers took notice. They inferred that My TVS
quality must be good or else the company would be in deep trouble. Companies
must carefully estimate the sales-generating value against the potential costs
of any proposed warranty programme.
j) Tie-in Promotions: These are becoming
increasingly popular. In a tie in promotion two or more brands or companies
team up on coupons, refunds and contests to increase their pulling power.
Companies pool funds with the hope of broader exposure, while several sales
forces push these promotions to retailers, giving them a better shot at extra
display and ad space.
k) Point-of-Purchase
Displays: These take place at the point of purchase or sale. Display of visible
mark or product at the entrance of the store is an example. Unfortunately many
retailers do not like to handle the hundreds of displays, signs and posters
they receive from manufacturers. Hindustan Lever often use this tool to promote
its products in the retail market.
l) Product
Demonstrations: Products are being shown in action. Consumers can visit the
store and see the usage of product in live action so that doubts of the
consumers can be clarified in the store itself. When a new product is
introduced in the market, the sales promotional tool is often used. For example
ultra modern grinder mixie being used by the company to demonstrate its speciality
than the other product.
2. Trade
Promotion Tools: More sales promotion rupees are directed to
the trade than to consumers. Manufacturers seek the following objectives in
awarding money to the trade:
i. Trade promotion can persuade the retailer or wholesaler to
carry the brand.
ii. Trade promotion can persuade the retailer or wholesaler to
carry more than it normally carries.
iii. Trade promotion can induce the retailers to promote the brand
through featuring, display, and price reduction.
iv. Trade promotion can stimulate retailers and their sales clerks
to push the product.
Manufacturers use several promotion tools. Some of which are
mentioned below:
a) Price –
Off: Manufacturers may offer a price – off, which is straight discount off the
list price on each case purchased during a stated period of time. The offer
encourages dealers to buy a quantity or carry a new item that they might not ordinarily
buy. The dealers can use the buying allowance for immediate profit or price
reductions.
b) Allowance:
Manufacturers may offer an allowance in return for the retailer‟s agreeing to
feature the manufacturer’s products in some way. An advertising allowance
compensates retailers for advertising the manufacturer’s product. A display
allowance compensates them for carrying a special display of the product. 193
c) Free
Goods: Manufacturers may offer free goods, which are extra cases of merchandise
to middlemen who buy a certain quantity of items.
d) Push
Money: Manufacturers may offer push money which is cash or gifts to dealers or
their sales force to push the manufacturer’s goods.
e) Speciality
Advertising Items: Manufacturers may offer free specialty advertising items to
the retailers that carry the company’s name such as pens, pencil, calendars,
paper weights, and memo pads.
As the number of competitive sales promotions have increased,
friction has been created between the company’s sales force and its brand
managers. The sales force says that the retailers will not keep products on the
shelf unless they receive more trade promotion money, while the brand managers
want to spend their funds on consumer promotion and advertising.
Channels of Distribution
One of the important problems of marketing is
the distribution of goods & services to the right place, person & the
right time. Manufacturers often find it difficult to decide about the effective
distribution system. The channel of distributions refers to the group of
intermediaries, which perform the distribution functions. A
channel of distribution is an organised net-work or a system of agencies and
institutions which, in combination, perform all the activities required to link
producers with users and users with producers to accomplish the marketing task.
According to Philip Kotler, “The distribution
is the set of all firms & individuals that assist in the transferring the
little of goods & services as they move from producers to customers.”
According to Richard Buskirk,
“Channel of distribution is that system of financial organization by which a
producer sends his products to the hands of consumers.”
According to Cundiff and Still,
“Channels of distribution are those marketing nets through which the producer
flow the products toward the market.”
Functions
(Role) of the Channels of Distribution
The following are the main function of the
channel of distribution:
(1) Extending Suggestions Regarding Price-Determination: The
middlemen are in the direct contact of the consumers. Therefore, they possess
the knowledge that on what price may the consumer accepts the product. Thus,
the channel of distribution extends necessary advice to the producers in the
price-determination.
(2) Regularizing the Decisions: The channel of distribution
regularizes the decisions and the transactions, resulting in the lowering of
the costs. If the products are sold off to some such store which has many
branches in the city, the producer then doesn't need going to various branches
frequently or repeatedly. The main cause of the same is that if the product
seems suitable for the store, it will itself send the purchase order to the
manufacturer and in this way, with only the limited efforts, it will become possible
to sell the products in bulk quantities.
(3) Managing the Finance: We
find that the agents generally send some advance money along with the order.
Very often the product is supplied to the agents through the bank so that the
company gets the documents discounted from the bank. Thus the finance is
arranged. Thus it-is also the function of the agents to arrange the finance.
(4) Performing the Promotion Activities: By the
middlemen, particularly by the retailers, the advertisements, individual sales,
and the sales promotion activities are performed. Very often the middlemen
themselves plan and implement the promotion activities and sometimes the
manufacturers to extend their help in such work. Really, the result or the
outcome of the sales, by the producer, very much depends upon the promotion
activities undertaken by the middlemen.
(5) Serving the Consumers: Due to
the middlemen only, the consumers get their required products. Only in
accordance with the needs of the consumers, the retailers arrange to purchase
the products from the wholesellers and the manufacturers.
(6) Minimizing the Total Transactions: If
there were no middlemen, the producer would have been required to sell the
product directly to the consumers which would have result into more of
expenditure and trouble. Really speaking, due to the existence of the middlemen
only, the number of total transactions is reduced which also reduces the costs
of distribution.
Types of Channels
A. Zero-level channel (producer to
consumer): It is also called as direct marketing or direct selling.
This channel consists of the producer who directly sells his products to the
ultimate consumers. This is the shortest, simplest, & cheapest form of
distribution. Producers are benefited by increased profit, whereas consumers
are benefited by reduced price. This is possible because it eliminates the
middleman completely. With the development of sophisticated & efficient
retailing like supermarkets, chain-stores, automatic selling machine is
financially sound follow this channel of distribution. For products like
jewelry & industrial goods like machinery, this is the best channel.
Factors Affecting the Selection
of the Channel of Distribution
Every producer, in order to pass on the
product to the consumer, is required to select a channel for distribution. The
selection of the suitable channel of distribution is one of the important
factors of the distribution decisions. The following factors affect the
selection of the channel of distribution:
A. Factors
Pertaining to the Product: Keeping in view the nature,
qualities and peculiarities of the product, could only the channel for
distribution be properly made. The following factors concerning the product,
affect the selection of the channel of distribution:
(1) Price of the Product: The products of a lower price
have a long chain of distributors. As against it, the products having higher
price have a smaller chain. Very often, the producer himself has to sell the
products to the consumers directly.
(2) Perishability: The products which are of a
perishable nature need lesser number of the intermediaries or agents for their
sale. Under this very rule, most of the eatables (food items), and the bakery
items are distributed only by the retail sellers.
(3) Size and Weight: The size and weight of the
products too affect the selection of the middlemen. Generally, heavy industrial
goods are distributed by the producers themselves to the industrial consumers.
(4) Technical Nature: Some
products are of the nature that prior to their selling, the consumer is
required to be given proper instructions with regard to its consumption. In
such a case less of the middlemen arc) required to be used.
(5) Goods Made to Order: The products that are
manufactured as per the orders of the customers could be sold directly and the
standardized items could be sold off only by the middlemen.
(6) After-Sales Service: The products regarding which
the after-sales service is to be provided could be sold off either personally
or through the authorized agents.
B. Factors
pertaining to the Consumer or Market: The following are
the main elements concerned with the consumer or the market:
(1) Number of Customers: If the number of customers is
large, definitely the services of the middlemen will have to be sought for. As
against it, the products whose customers are less in number are distributed by
the manufacturer himself.
(2) Expansion of the Consumers: The span over which are the
customers of any commodity spread over, also affects the selection of the
channel of distribution. When the consumers are spread through a small or
limited sphere, the product is distributed by the producer himself or his agent.
As against it, the goods whose distributors are spread throughout the whole
country, for such distributors, services of wholeseller and the retailer are
sought.
(3) Size of the Order: When bulk supply orders are
received from the consumers, the producer himself takes up the responsibility
for the supply of these goods. If the orders are received piece-meal or in
smaller quantities, for it the services of the wholeseller could be sought. In
this way, the size of the order also influences the selection of the channel of
the distribution.
(4) Objective of Purchase: If the product is being
purchased for the industrial use; its direct sale is proper or justified. As
against it, if the products are being purchased for the general consumption,
the products reach the consumers after passing innumerable hands.
(5) Need of the Credit Facilities: If, for the sale of any
product, it becomes necessary to grant credit to any customer, it shall be
helpful for the producer that for its distribution, the services of the
wholeseller and retailer businessmen be sought. In this way, the need of the
credit facilities too influences the selection of the channel of distribution.
C. Factors
Pertaining to the Middlemen: The following are the main factors
concerned with the middlemen:
(1) Services Provided by Middlemen: The selection of the middlemen
is made keeping in view their services. If some product is quite new and there
is the need of its publicity and promotion of sales, then instead of adopting
the agency system, the work must be entrusted to the representatives.
(2) Scope or Possibilities of Quantity of Sales: The same channel should be
selected by means of which there is the possibility of more sales.
(3) Attitude of Agents towards the Producers'
Policies: The
producers generally prefer to select such middlemen who go by their policies.
Very often when the distribution and supply policies of the producers being
disliked by the middlemen, the selection of middlemen becomes quite limited.
(4) Cost of Channel of Distribution: While selecting the channel of
distribution, the cost of distribution and the services provided by the
middlemen or agents too must be kept into consideration. The producers
generally select the most economical channel.
D. Factors
Pertaining to the Producer Or Company: The following
factors, concerning the producer, affect the selection of the channel of
distribution:
(1) Level of Production: The manufacturers who are
financially sound and are of a larger category, are able to appoint the sales
representatives in a larger number and thug could distribute the commodities
(products) in larger quantities. As against it, for the smaller manufacturers,
it becomes necessary to procure the services of the wholesellers and the retail
traders.
(2) Financial Resources of the Company: From the financial point of
view, the stronger company needs less middlemen.
(3) Managerial Competence and Experience: If some producer lacks in the
necessary managerial experience or proficiency, he will depend more upon the
middlemen. The new manufacturers in the beginning remain more dependent upon
the middlemen.
E. Other Factors
(1) Distribution Channel of Competitors: While determining the channel
of distribution, the channels of distribution of the competitors too must be
borne in mind.
(2) Social Viewpoint: What is the attitude of society
towards the distribution, this fact too must be kept into consideration while
selecting the middlemen.
(3) Freedom of Altering: While selecting the agents,
this fact too must be kept into mind that in case of need, there must be the
liberty of changing or replacing the agents (middlemen).
SALES PROMOTION
PLANS FOR NEW PRODUCTS
Middlemen are the vital link in the chain of
distribution. The term dealer’ includes the retailer, wholesalers and
distributors. The important schemes used for sales promotion are:
a) Advertising
and display aids.
b) Managerial
assistance.
c) Sales
assistance.
d) Other
assistance and incentives.
Advertising
and Display Aids: Wholesalers and retailers are assisted by the producers
in advertising the new products and shop displays. Some of such aids are –
1) Direct mail advertising: The
advertising and publicity material of new products is sent by the producers to
the wholesalers and customers by mails. Such materials are supplied to
customers free of costs. E.g. Replay cards, Calendars, diaries, folders, hand
bills, Order books, house magazines come under this category.
2) Local newspaper advertising: The
advertising is given in the local newspaper by specifying the names of the
wholesalers and retailer of the product to be launched in a particular
locality.
3) Advertising allowances: Actual expenses
of the advertising are not met by the producer; instead, an allowance is paid
to the dealer towards advertising expenses of new products.
4) Out door advertising: This is the
method adopted to attract the attention of dealers. Signboards, banners and
posters are printed in the names of dealers and pasted on the walls to invite
the attention of the people who are occupied making way alongside the street.
5) Organizing of Fashion Shows: In order
to publicize for the fashion goods, some of the large-scale producers, organize
fashion shows in big cities.
6) Display allowances: Thos producers who
do not provide display materials to the dealers, provide them with display allowance
for promoting new products.
7) Cooperative Advertising: Both the
dealers and producers share the expenses of advertising of the new products.
Either the producer will bear a fixed amount or a percentage to purchase made
by the dealer in a year.
8) Promotional Novelties: Various
advertising and publicity items are printed by giving the name of the producer
and are distributed to the retailers free of cost. Such novelties include
calendars, pen, pencils, paper weights, ashtrays, bills books, menu pads, bags,
diaries etc.
Managerial
Assistance: It is very difficult to manage the wholesale and retail trades.
The knowledge of various management technique is very necessary. The following
type of managerial assistance is provided to the dealers.
1) Sales Management function: Solutions to
problems like selling process, sales conferences, buyers bahaviour, customer
relations, sales force management, buying motives, assist the dealers in
launching and promoting new products.
2) Guidance in setting up internal organization:
The guidance is provided towards managing the business operation, location of
the firm, its size, equipment to be used, inventory control, display and
decorative materials, books and accounts by the producer.
3) Advice towards policy matters: Advice
is given towards sales, general management, credits, employees, purchasing,
finance, distribution, publicity and promotion free of cost to the dealers.
4) Providing general information: General
information about the new techniques, changes taking place in the business
circles, improvements to be made in the product, government policies and
regulations marketing strategy based on changing marketing environment.
Sales
Assistance: Producers provided the following kind of assistance to the
dealers.
a) Sales meetings: Sales meetings and
conferences are organized which are specially designed for distributors and
traders from time to time. In these meetings information is provided about the
new products, sales policies and plan facilities extended by the producer to
the distributor and traders etc.
b) Training: Training is provided to the
salesmen who are working with dealers to familiarize them with operation of the
new product and to develop the selling skills.
c) Price off or buying allowances: This is
given basically on purchase made during a specified period of time, directly
from the producer, on-off list or off-invoice basis. Producer will be
encouraged to produce more.
d) Buy-back guarantee: This guarantee
means that the goods are sold to dealers on “sale or return” condition i.e.
producers give buy-back guarantee to dealers for the new goods that have not
been sold out.
e) Special Services: Special services
offered by producers include pre-pricing, categorization of products,
packaging, dealer listing etc. which are helpful in stimulating the middlemen
for large purchase from the produce.
f) Contest for traders salesmen: Different
types of contests are organized by the salesmen working with wholesalers and
retailers on regional basis, state-wise or area-wise on the basis of best
counter decoration or the highest sales made by each of them. The successful
dealers are given attractive prizes.
g) Special trade terms: Special trade
terms give encouragement incentive to the middlemen which in turn are
beneficial to them. These terms may be related to price, payment, credit,
balance stock, allowances, purchased quantity, goods returned and financial
assistance etc.
h) Brand deal allowance: Brand producers
or producers of particular product give special allowances to the middleman who
deals exclusively in their brand or product. In other words, these allowances
are given to the middlemen who deal in the single brand. This becomes very
relevant for promoting new products.
i)
Building
up sales plan: Objectives, strategies and sales programme are being set by
the producers, by giving expert knowledge to the wholesalers and retailers in
building up sales plans for launching new products and services. This will help
the dealers to develop their selling skills and increase in profits.
Other
Assistance and Incentives
1) Dealer Contest: Contest are organized
for dealers also, on the basis of highest sales achieved by dealers during a
specified period to time. Certificates and prizes are given to the dealers who
win the contests. These contests create healthy competition and motivate them
for larger purchases of the newly launched products.
2) Credit facilities: Short term credit
facilities are extended; the dealers are motivated to keep maximum stock of the
products. Producer’s use this promotional technique for sale of their products.
3) Dealer premium: Producers operate
premium plan for their dealers. Premium like watches, radios, TVs etc. are
given to the dealers on the basis of highest purchases made during a period of
time.
Role and Functions
of Marketing Intermediaries
A marketing intermediary performs the task
of transferring goods and producers to consumers. It creates time and place
utilities and overcome possession gaps that separate goods from those who need
them from those who manufacture them. Generally, when a business expands and
the market to be covered is dense and large, it becomes essential to take
assistance of marketing intermediaries. They bridge the gap between producers
and consumers most efficiently. Fig. 10.1 shows a situation in which four
producers of the same product must deal directly and separately with four
consumers, if they do not appoint intermediaries. There will be 16 contacts.
But this number will be reduced to 4 when marketing intermediaries are
appointed.
A series of functions are performed by
marketing intermediaries in order to market the products in an effective
manner. The channel starts from the producer and extends to the last person who
buys it, without making any significant change in its form. When its form is
changed, another product emerges and a new channel is started. The various
functions performed by marketing intermediaries are:
A. Physical Distribution without the Help of
Intermediaries.
B. Physical Distribution with the Help of
Intermediaries.
1. Facilitates distributive systems: The
intermediaries bring together the producers and ultimate users and facilitate
the distributive system by performing following functions –
a) They
collect information about potential and current customers, competitors and other
forces in the marketing environment.
b) Suitable
contacts are established with them by disseminating persuasive communications.
c) Intermediaries
minimize the number of contacts a producer needs to establish for reaching out
to the ultimate consumers and bridge a gap between the producer and the
consumer.
d) They
reach out agreements with consumers regarding price and delivery terms.
e) They
place orders with manufacturers.
f) They
break the bulk and meet the small-size needs of individual consumers.
g) Intermediaries
generally combine the products manufactured by different companies and offer
them in convenient assortments. They match segments of supply with segments of
demand.
h) They
also provide for the successive storage of physical goods.
i)
They oversee actual transfer of ownership of the
products sold from manufacturers to the consumers.
2. Stabilize the Prices: Price stability
is another function performed by marketing intermediary. They conduct price
negotiations with buyers on behalf of the manufacturers and assist in
stabilizing the price. Many times the intermediaries absorb an increase in the
price of the product and continue to charge the same old price for some time
with the expectation that the price will come down itself by the inter-play of
market forces. Sometimes, intermediaries also assist in arriving at the right
price-the price which is acceptable to the producer as well as to the consumer.
3. Provide Salesmanship: Intermediaries
also promote the product. They help in introducing and establishing new products.
In their territories. In many cases, buyers buy the products on the
recommendations of the intermediaries. They design their own sales inventive
programmes. Their persuasive selling and person-to-person communication boost
the sales of the product. They provide effective pre-sale and after-sale
services to the consumers.
4. Assist in Merchandizing: Intermediaries
assist in merchandizing the products by attractive displays and retail outlets.
They around the interest of the visiting clients, reinforce the awareness about
the product and lure their attention by silently explaining the salient
features and benefits of the product. Intermediaries complement the selling
efforts of the company.
5. Provide Market Intelligence:
Intermediaries have a role in providing market intelligence to the
manufacturers. Having direct and constant contact with the customers, these
intermediaries could better notice the changes in customers’ demography,
psychology, media habits, changing preference and the entry of new brand. They
feel the pulse of the market all the time and provide all the market
information to the manufactures without any additional cost.
6. Provide Finance: Intermediaries also
share the financial burden of the manufacturers by providing the necessary
working capital in the form of advance payment for goods and services. Often
they pay the cash and lift the goods and manufacturers get their money much
before the products reach to the ultimate consumers. Moreover, the
intermediaries enhance the chances of sale by bringing the products close to
the potential consumers.
7. Transfer Title: Intermediaries also
take the title of goods in their won name. Transfer of title to the
intermediaries diffuse the transfer of ownership risks and enable them to take
physical possession of the goods. This in turn enables them to meet the demand
of the customers as and when it arises. Title can be immediately transferred to
the consumers from the intermediaries without any further delay.