The company's link with the target market in order to facilitate access to its products / services are naturally the distribution channels.
Distribution channels operate in the territories decided by the company (plaza) and operate through its sales force.
In the appropriate choice of the same and in their professional administration rests the success or failure of the performance of the sales forecasts of the companies.
Constant creative innovation in the search for alternative channels is the only strategic differentiation that companies have today to obtain sustainable comparative advantages over time compared to their competitors.
The traditional concept of points of sale is changing rapidly. Promotions, merchandising, special draws, etc., have generated a pitched battle between competitors on the stage of sales channels.
The relative stability of the same as ideal means of commercialization, happened to such turbulence, that they move us away from their predictable handling.
Are there marketing tools that help the "decision maker" the professional management of distribution channels?
Yes, the Entrepreneur or Manager has a very useful tool, for the fluid management of his decisions, through the Matrix of Behavior of the Channels. For the purposes of its understanding, it is necessary to expose key concepts intrinsic to the matrix, for its correct knowledge and interpretation:
- Plaza: characterized by the physical or geographical environment and the socio-economic scope that defines it. Functions of the Channels: Connection: develop the communication circuit: company - client - company Promotion: bring products closer to intermediate or final consumers; They locate demand, stimulate it, differentiate products, create support conditions to capture potential demand. Distribution Costs: will vary and affect both the final price of products and their contribution margins. It can be estimated that, on average, channels consume around 50% of the final sales value of the different products that are marketed in the market. Accessibility: facilitate the delivery of products in the conditions of time and services that make consumption more favorable or use of products or services.Competitive Strategies: the management of creative and innovative alternatives that differentiate the management of channels
Services provided by the channels:
- Plaza: they refer to the market coverage they must provide. For example, mass consumption products, with a high frequency of purchases, must have a minimum coverage that exceeds 75% of the sales locations. Possession: they are related to the variety of assortment that the channels to have in stock must serve the needs of consumers.Time: refers to the opportunity in which the channels will carry out the attention of consumers (Ex: 24-hour attention), as well as the frequency of visits, and the delivery opportunity (Ex: the milk that is distributed in the early hours of the morning)
Channel classification:
- Direct Channels: are those that connect the company with its market, without any other intermediary: Local; Sellers; Direct marketing; InstallationsIndirect Short Channels: use a single link of intermediation between the company and the market: retailersIndirect Long Channels: several links are used: wholesalers, distributors, retailers
Channel Selection Criteria:
• Quantitative:
Number of clients to attend
Distances to cover
Stock maintenance
Sales Financing
Production absorption
Marginal Contribution
Product lines to distribute
Amount of personnel required
• Qualitative
Nature of products
Shopping habits
Nature of the services to be provided
Competitive strategies
Guidelines to keep in mind for channel selection:
• Objectivity
• Updating
• Market orientation
• Taking advantage of opportunities
• Profitability
• Marketing services and functions
Now we are in conditions to elaborate a matrix in which we will put the behavior of the different alternatives, in such a way to assign objective values to each one of them and then decide.
It is a double entry table where we evaluate the following elements:
a) functions that the channels must fulfill, b) scoring in conventional values, can be from zero to ten, of the behavior of each of the channel alternatives, c) subjective probability of presentation of the qualified behavior, based on the analyst's judgment, experience or available information; This probability is particular in each alternative, therefore, as it is not exclusive, its totalization should not give one, d) the expected value of each alternative, which will result from the product of the rating (b) due to its subjective probability (c).
The sum of the expected values of each alternative will be the decision barometer to use.
Let's show with a simple example how the matrix works, and how the decision is made:
COMPANY: Importer of Home Appliances
| Features |
Alternatives |
|||||||||||
| Sales premises | Dealers | Sale
Retailer |
Sale
At home |
|||||||||
| Pje | Pr | Go | Pje | Pr | Go | Pje | Pr | Go | Pje | Pr | Go | |
| Connection | 6 | 0.5 | 3 | 8 | 0.7 | 5.6 | 10 | 0.9 | 9 | 3 | 0.3 | 0.9 |
| Promotion | 10 | 0.9 | 9 | one | 0.8 | 0.8 | 5 | 0.9 | 4 | 10 | 0.2 | two |
| Costs of
Distribution |
two | 0.8 | 1.6 | 10 | 0.9 | 9 | 7 | 0.9 | 6.3 | one | 0.5 | 0.5 |
| Margin
Contribution |
9 | 0.9 | 8.1 | two | 0.9 | 1.8 | 5 | 0.9 | 4.5 | 10 | 0.5 | 5 |
| Accessibility | 7 | 0.7 | 4.9 | 5 | 0.8 | 4 | 9 | 0.8 | 7.2 | two | 0.8 | 1.6 |
| Strategy
Competitive |
8 | 0.8 | 6.4 | 5 | 0.5 | 2.5 | 7 | 0.5 | 3.5 | 10 | 0.7 | 7 |
| Totals
Go |
33 |
23.7 |
34.5 |
17 |
NOTES:
PJE:
PR score.:
VE Probability: Expected Value
It is obtained that the highest value comes from the sales alternative through short indirect channels: retail, which yields 34.5 points out of a possible total of 60 points, that is to say, its efficiency is 57%. Second was the alternative of sales premises, and then of distributors.
For this example, given the low value of relative efficiency of the most favorable alternative (57%), it is convenient to reinforce the structure with a mixture of direct promotion that can be done through the use of contact by mail (mailings with catalogs) or promotions in premises of sales of clients (intervention in special draws).
Final reflection:
This methodology has the virtue of being markedly practical, and very easy to use for its application.
In the whirlwind of small daily priorities, the businessman in whose hands the strategic decisions of business success or failure are, should strive to rise and pause, and periodically spend time using these practical tools.
Getting used to it will disguise it as one more task, but you will be sure that you have at least exhausted all the market updates available to you, to enhance the efficiency of your decisions.
