The following points highlight the three major problems associated with marketing channels. The problems are:- 1. Consumers’ Needs 2. Choice of Marketing Channels 3. Problems of Distribution Methods.
Problem # 1. Consumers’ Needs:
The consumers in general are scattered and their needs and expectations are varied. They choose to buy their goods from those who serve them best. Here, the aim of marketing is to match the segments of supply and demand. For this matching process, the role of intermediaries, especially retailers, is important.
The consumers’ buying habits are not the same and thus, affect the channel decision. If the consumers expect easier credit facilities and require the personal services of the sales people, then channel strategy will be different.
This channel becomes shorter whenever a producing firm can afford to shoulder these responsibilities direct, otherwise, the channel becomes lengthier if it has to depend on the agents and wholesalers, etc.
Problem # 2. Choice of Marketing Channels:
In order to decide about the best marketing channel suitable for a producing firm, the following steps are important:
(a) Identifying the various alternative means of distribution;
(b) Comparing the merits and demerits of each of the alternatives; and
(c) Recognising the one that will be best under the circumstances keeping in view the resource constraints.
With regard to this aspect of decisional problems, the economic criteria are needed to be studied and analysed.
Such criteria should include and address the pertinent questions like:
1. What would be the expected sales volume under each channel alternative?
2. Whether the channel alternative, is capable to handle and improve upon the sales.
3. What would be the selling fend distribution costs of each alternative?
4. Whether the costs of a particular, alternative are reasonable and can be met by a firm in consideration of its sales volume and financial resources.
5. What is the outcome of comparison as, to the sales and cost-benefit factors among the different marketing channels alternatives what is the impact of each alternative on the firm’s profit?
6. Whether the firm should use its own sales force or go in for a sales agency.
Apart from the economic criteria stated above, a firm should take certain measures to exercise controls over the marketing channels by means of appropriate strategies with respect to various factors.
Problem # 3. Distribution Methods:
A firm should adapt one or more of the following distribution methods depending on the problems and circumstances peculiar to it:
(1) Intensive distribution:
This refers to the use of various outlets to obtain the maximum coverage of the market segments as in the case of cigarettes and cosmetics, etc.
(2) Selective distribution:
This refers to the selective choice of outlets wholesale and/car retail distributors. A firm should closely monitor their activities for sales improvement by having considerations as to the market and marketing strategies. This method is suitable for the products like typewriters, duplicators, Xerox machines, etc. which require after-sales services.
(3) Exclusive distribution:
Under this method, a distributor is allotted an exclusive sales territory to deal in the products independently. Thus, this system not only adds prestige to the product but also encourages the distributor to plan and programme the sales activities in its own way for effective distribution.
(4) Consignment selling:
This practice refers to the distribution of products through the middlemen like agents who get commission on the sales effected on behalf of the producing firms. The terms and conditions of sales like price, discount, etc. are fixed by the firms.
(5) Franchise selling:
This refers to the distribution system with sate chosen individual outlets to whom a producing firm provides necessary leans and facilities including the advertisement and promotional campaigns for the business.