The right choice of marketing strategy is a key factor in the development of the enterprise. A well-established distribution system allows you to expand the range of goods and services, increase the company's market share, assess the degree of customer satisfaction and receive financial profit.
What is a marketing strategy?
In the broadest sense, marketing (or distribution) means the delivery of an enterprise's goods or services to a customer or customer. To organize a distribution system, it is necessary to create a logistics structure and distribution channels. The strategy should define the number and type of intermediaries in the distribution network, the cost of wholesale and retail for the intermediate and final buyer, the need for additional services before and / or after the sale, as well as how to manage and communicate between participants in the chain. Marketing methods are divided into intensive and exclusive. The first involves the sale of goods through an extensive network of distributors in order to cover the market, the second - through a limited number of intermediaries or direct sales. With exclusive cooperation, the manufacturer has the rightput forward special requirements regarding the range, prices and product design.
The choice of this or that way of sale depends on the coverage of the market, whether the goods belong to a certain price segment, production volumes, the financial capabilities of the enterprise and other factors. In marketing, the sales strategy is a key factor in the development of an enterprise. A well-established distribution system allows you to expand the range of goods and services, increase the company's market share, assess the degree of customer satisfaction and receive financial profit.
Sales functions
The logistics and marketing system should perform a number of functions, some of which are taken over by the manufacturer, the other by distributors (wholesalers and retailers).
Primary planning functions:
- Planning sales volumes based on the current market situation.
- Selection of distribution channels, transportation and warehousing systems.
- Defining the form of packaging and assortment.
- Calculation of distribution and implementation costs.
Organization functions:
- Organization of logistics and storage of goods.
- Organization of post- and pre-sales service department, training of salesmen and other employees.
- Establish contact with consumers and organize sales.
- Organization of a management system and communication between members of the distribution network.
Coordination and regulation functions:
- Monitoring the implementation of sales and sales plans.
- Sales promotion.
- Evaluation of statistics and accounting reports of intermediary enterprises.
- Marketing analysis of customer satisfaction.
Trading and financial functions:
- Stimulation of demand, segmentation of the market to strengthen positions.
- Influence on market prices.
- Crowding out competitors.
- Make a profit.
Direct marketing method
Sales can be carried out without intermediaries, directly from the manufacturer. Such a structure is called a straight line. Sales can be carried out through an online store, a network of sales agents, from the company's warehouse (cash and carry), through subsidiaries and representative offices. Direct marketing is used when:
- sales are high;
- the cost of goods is much lower than the cost of sale and revenues cover the costs of organizing their own distribution system;
- the main consumers are few and located in a small area;
- Item needs professional service or is made to order.
With a direct marketing strategy, a manufacturer faces a range of costs for transportation, renting warehouses and retail space, training materials for staff, telephone bills, etc. In addition, the creation of subsidiaries is time consuming and needs constant control. However, this method of marketing contributes to the establishment of trusting relationships with customers, allows you to quickly respond to any changes inmarket.
Indirect marketing method
To improve sales efficiency, some manufacturers resort to a network of independent intermediaries. Such a multi-level system solves the problem of lack of finances for the organization of its own sales. The indirect method is used when:
- Group of potential consumers is extensive;
- bulk supplies needed;
- market is geographically dispersed;
- the difference between the cost price and the final price is small.
If in direct marketing the manufacturer interacts directly with the buyer, with the indirect method, the main work is done with an intermediary. In this case, it is much more difficult to maintain the company's image or influence prices. The choice of intermediaries, their number and distribution of functions are the main stages in the formation of a sales strategy.
Types of indirect marketing channels
There are many options for implementing indirect distribution. The main intermediaries are:
- Agents and brokers are participants in the distribution chain of goods that help in transactions. The broker is not directly involved in sales, does not have its own rights to the goods, does not store their stocks and does not bear any risks. His task is to find a buyer and arrange a deal. Agents enter into contracts with enterprises, which stipulate all their functions and tasks: the geographical territory of the search for customers, the level of margins for goods, the provision of guarantees, delivery and service options, etc. Agents are not onlyorganize sales, but also participate in planning, introducing a new product to the market, advising customers. The services of such intermediaries are used with a wide geographical spread of the market and sale in small lots.
- Dealers acquire ownership of a product from an agent or manufacturer without obtaining trademark rights. As independent entrepreneurs, they have their own market, sell goods at retail and set the margin at their discretion. Dealers issue warranties and provide service.
- Consignees are intermediaries who organize the storage of the manufacturer's goods in their own warehouses with subsequent sale. They don't buy property. The sale is carried out in accordance with the contract with the supplier, which specifies the prices for the goods, volumes and terms of sales.
- Distributors are engaged in the sale of goods on their own, concluding agreements with manufacturers and buyers. Such intermediaries set prices for goods, conduct promotions, provide service and warranty services, have their own warehouses for storage and wholesale and retail outlets.
Sequence of sales strategy formation
The choice of the most effective sale of goods begins with a market analysis. Market assessment involves consideration of a number of factors that affect sales: supply and demand, price levels in various regions of activity, market coverage by the company, competitors' actions, etc. These factors determine the goalsmarketing strategies.
The goals and objectives of the company's sales must be consistent with the overall marketing strategy, as well as with the assortment policy and financial capabilities. Distribution goals can be as follows:
- Transformation of existing marketing methods, implementation of a new marketing strategy due to the changed market situation.
- Increasing the company's market share.
- Increase in the quantity of goods sold.
- Expand product line and/or enter a new market.
- Adapting to changes in the organization and policies of the intermediary firm.
- Creating your own channels for selling goods.
To implement the formulated tasks, it is necessary to analyze the forms and structures of sales. Based on the characteristics of the market and goods, they decide on direct, indirect or mixed sales.
Before engaging intermediaries to cooperate, they evaluate the strengths and weaknesses of the enterprise. Interaction with other companies allows you to compensate for shortcomings. If the manufacturer is limited in financial resources or technical staff, working with a large distributor and transferring some of the marketing functions to him will be a profitable solution. Thus, at the initial stages of creating a marketing strategy, the powers of intermediaries are determined. They can engage in service, local advertising, shipping, lending, etc., which will benefit both the manufacturer and the end customer. In addition, it is important to defineassortment of goods sold by one or another distributor.
The number and type of intermediaries affect product demand, company reputation, customer contact, service quality, etc. A large number of small distributors allows you to maintain control, respond quickly to market changes and ensure a wide customer coverage. However, large intermediaries can keep large stocks of goods and provide better service. A detailed classification of indirect marketing strategies, depending on the tasks and characteristics of the enterprise, determines all the benefits and risks of cooperation with intermediaries.
After the approval of the strategy and distribution channels, the company selects specific intermediaries, and also selects the structure of the management organization and performance evaluation.
Classification of indirect distribution strategy types
Methods of selling goods through intermediaries are divided according to the type of market coverage, orientation, communication with the end customer and the way sales are organized. Each type of classification has several forms that meet the objectives of the enterprise.
Market coverage:
- Intensive, i.e. the maximum number of distributors of all types is used for a large market coverage. This form is used for goods of daily or impulsive demand, in order to increase brand awareness and increase the share of the enterprise. Disadvantages include difficulty in controlling pricing and implementing an overall marketing strategy.
- Selective, i.e. work with a limited number of intermediaries. Suitable for pre-selected products and products that require complex maintenance. Such cooperation limits the company's market share and makes the company dependent on intermediaries, but it makes it possible to control prices, deliver goods in large quantities for sale, save on local advertising and improve brand reputation.
- Exclusive, carried out by one intermediary. It is used in sales of luxury goods that require high-quality maintenance. Unprofitable for most manufacturers, as it limits market share and makes the company completely dependent on the distributor.
- Franchise is a form of exclusive strategy in which the franchise holder transfers to an intermediary the rights to use their own technology for the production and sale of goods. The franchisor saves money on the organization of production, receives cash flow from the franchise and increases brand awareness in the market. However, this form has significant drawbacks, because the reputation of the company depends entirely on the actions of the intermediary.
Sales Orientation:
- For buyers - implies an assessment of customer needs, subsequent segmentation of the market in accordance with them, an increase in the range in accordance with changing requests.
- For goods - is to actively promote products, increase brand awareness and constantly search for new ways to sell.
Sales method:
- Opportunisticthose. reduction or complete suspension of sales. It is used when defects are found in the goods, there is a shortage on the market, a change in prices is expected, or a foreign intermediary has failed to cope with the tasks and ruined the company's reputation.
- Passive, not requiring much interaction with customers. Used when selling low-cost consumer goods, when sold by large retail distributors, or when the brand is widely known.
- Offensive, in which the manufacturer strongly promotes the product in all available ways. The method is popular when selling a product of passive demand, seasonal or overpriced goods.
- Expert, or customer-focused. It is actively used in B2B sales, for long cycle goods and for frequent subsequent sales to the same buyers. The manufacturer's activity is aimed at maintaining long-term mutually beneficial cooperation with customers.
Method of communication:
“Pushing” implies active influence on all intermediaries of the distribution network to introduce more of their own goods into the partner's assortment. There are various ways to motivate and stimulate distributors: free training of intermediary personnel, partial reimbursement of advertising costs, provision of bonuses, cash rewards for sellers, competitions between outlets, etc
- “Pull-in”, or focusing the producer on the consumer. Companyconducts large-scale promotions in order to increase demand and interest of buyers, controls the availability of goods at points of sale, organizes quality service and delivery. In this case, the intermediaries themselves are interested in cooperation in order to receive large sales proceeds. This strategy is often used by large enterprises, because it requires significant financial costs.
- The “combined” marketing strategy combines the first two options. It is used only by large corporations that are able to bear the costs of strengthening relationships with both buyers and distributors.
The manufacturer can choose the type of distribution that corresponds to its current capabilities. Expansion usually moves to more sophisticated promotion strategies.
What to look for when selecting intermediaries?
Intermediaries are in direct contact with buyers, which means that the reputation of the manufacturing company depends on them. When developing marketing strategies and selecting intermediaries, attention should be paid to the history of companies, their marketing policies, staff skills, sales volumes and financial condition. If the manufacturer intends to transfer certain functions to a partner, an analysis of the preparedness of employees and the availability of technical equipment is carried out in advance. Companies come to an agreement on financial and technical support, purchase volumes, payment methods, pricing strategy and service level. Then organizational issues are resolved by means of communication andmanagement.
Organization of sales service
To work effectively with intermediaries, enterprises structure the sales department in accordance with the characteristics of the sales strategy, product properties, coverage and market size. Most often, the division of duties of employees occurs according to the following principles:
- By market geography. In such a structure, each manager is responsible for a separate area. The higher his position in the hierarchy, the larger the area of the territory for which he is responsible.
- By product type. Each manager is responsible for a specific group of products in the assortment.
- By functions. The sales department can be divided into customer service, sales, service, shipping, merchandising, etc.
- By types of clients. When a manufacturer sells standardized consumer goods, managers work separately with each group of consumers.
- Mixed form of division is used by small and medium-sized producers and includes different services, depending on the characteristics of the sale.
Assessing the effectiveness of the distribution policy
Analysis of the sales strategy of an enterprise includes checking the fulfillment of sales goals, the implementation of the sales plan, the level of income and profit. In addition, it is necessary to control the activities of intermediaries related to the company's reputation: the quality of service, the effectiveness of promotions, timely delivery, maintaining inventory. Marketers conduct surveys and research to measure customer satisfaction. Large manufacturers forward trade reports from resellers with high sales to less successful distributors to stimulate improvement.
