Channel Strategy For Economos

The case of Eeonomos shows how a firm can use technological innovations to achieve greater distribution effectiveness (including international expansion) and efficiency, and to enhance customer service delivery. Increasingly, many firms, operating in all types of product sectors, are utilizing technical advances in areas such as information gathering and processing, communications and logistical processes, and methods to improve distribution channel performance. In this chapter, we will take a closer look at an important, albeit often neglected, component of the marketing mix - place - and focus on decisions and activities relating to distribution channels and logistics management.

Ivfarketing channel decisions are among the most important decisions that management faces. They determine how well target customers gain access to the firm's product or service and whether the distribution channel system is cost-effective for the organization concerned. A company's channel decisions directly affect every other marketing decision. The company's pricing depends on whether it uses mass merchandisers or high-quality speciality stores. The firm's sales force and advertising decisions depend on how much persuasion, training and motivation the dealers or resellers need. Whether a company develops or acquires certain new products may depend on how well those products fit the abilities of its channel members.

Companies often pay too little attention to their distribution channels. Managers who see channel functions merely as the physical transportation, storage and distribution of finished goods to the end-user fail to utilize the channel of distribution as a competitive weapon. AH we saw in the case of Economos, like the rest of its competitors in the seal-making industry, the firm had relied on the use of a rigid distribution channel system. Constraints in materials and production technologies were generally accepted to rule out speed and flexibility in small-order delivery. However, by forceful investment in technological innovations, Economos overcame these barriers and found a means of creating superior channel advantage - closeness to customers, flexibility, no order-size restriction, faster customer-order response time, international reach, lower costs, higher margins and rewards for its distributors and entrepreneurial franchises. It had used a more imaginative distribution system to gain a competitive advantage.

Distribution channel decisions often involve long-term commitments to other firms. For example, companies can easily change their advertising, pricing or promotion programmes. They can scrap old products and introduce new ones as market tastes demand. But when they set up distribution channels through contacts with franchises, independent dealers or large retailers, they cannot readily replace these channels with company-owned stores if conditions change. Therefore, management must design its channels carefully, with an eye on tomorrow's likely selling environment as well as today's. In the case of Economos, the use of franchises has enabled it to expand its distribution network outside Austria, but these intermediaries must be properly managed if they are successfully to maintain sales, the Seal-Jet brand name and market position. Economos has to revise its channel strategy to maintain cost-effective service delivery to customers.

Single market reforms in the European Union have forced many companies to review their entire distribution strategy. The use of third-party as opposed to in-house distribution in the grocery retailing sector, for example, is on the increase, and current operators in Europe must look for new ways to differentiate their services by taking advantage of the trend.2

This chapter examines the following questions concerning marketing channels:

• What is the nature of marketing channels?

• How do channel firms organize to do the work of the channel?

• What problems do companies face in designing and managing their channels?

• What role does physical distribution play in attracting and satisfying customers?

• What are the changes taking place among channel institutions?

Continue reading here: Why arc Marketing Intermediaries Used

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