Distribution channels
Instructions:-
Explain using marketing distribution concepts how channel members add value to the product or service. Give specific examples.
Q2. Mobile phone manufacturers largely distribute their products through service providers like T-Mobile and Verizon and not directly to the customer. Why do you believe this is so? Do you think this is the most efficient method? Explain.
Solution
Distribution channels
Q1. Explain using marketing distribution concepts how channel members add value to the product or service. Give specific examples.
The use of channel members or distribution channels results in greater efficiency in making products available to consumers. Besides, members of distribution channels add value to product and services in various ways. First, channel members are involved in the bulk of promotional work. Through various methods of promotion such as word of mouth advertising convincing and persuading customers, branding, display, etc., channel members engage in the creation of awareness on the product which drives sales and revenues to the manufacturers.
Often, manufacturers package their products in bulk, while the end-user is only interested in much smaller quantities. For instance, manufacturers may only package rice in sacks of 50kgs, while consumers only want to purchase in smaller quantities like 1, 2 or 5kgs. Channels members add value to this product by repackaging it into smaller quantities that can appeal to customers. Without such channel members, consumers would be unable to purchase rice in such huge quantities and therefore the sales of rice would be low.
By bridging the gap with regard to time, possession and place that separate goods and services from those that produce them to the end-users, channel members play a critical role in value addition to products and services. When a product is manufactured, it would take inordinately long to reach the intended end user if only one dealer was supplying the whole market. With distribution channels, goods are able to reach the right place at the right time for consumers to purchase.
Companies rely on members of the distribution channels to provide information that would help in improving the product. Marketers often rely on resellers to provide information on customer response to products complaints and complement feedback that helps manufacturers to improve their products which add value to such products.
In some cases, resellers often provide a friendly financial program that allows customers to easily buy products such as programs that ease payment requirements. Such programs include purchasing in credit, hire purchase and other payment plans, trade-ins and exchange options. This greatly drives sales for a particular product.
Q2. Mobile phone manufacturers largely distribute their products through service providers like T-Mobile and Verizon and not directly to the customer. Why do you believe this is so? Do you think this is the most efficient method? Explain.
Selling mobile phones and associated products through service providers such as T-Mobile and Verizon provides several benefits to the manufacturers. Key among them is the reduction in the length of the distribution channel which essentially reduces the cost of distribution. Distributing products through a few service providers as opposed to open distribution channels reduces costs by increasing efficiency in distribution networks (PWC, 2013). Additionally, the fact that the company does not necessarily have to invest in physical shops and other storage areas means that operating costs are greatly reduced.
Mobile service providers are mainly reputable brands, which mean that utilizing them as distribution channels promotes the brand as a reputable one, thus driving sales. Mobile service providers are also known to sell authentic and original brands and therefore consumers tend to trust them, which translate to higher sales. Their reputation means that they are likely to honor warranty agreements as opposed to conventional dealers, thus furthering the good reputation of the mobile phone brand.
Most mobile service providers have the capacity to offer other ancillary and support services which reduce the costs of operations for the manufacturers. Additionally, such mobile service providers have great marketing and promotional strategies such as free data bundles, additional utility gadgets etc., which makes these mobile phones attractive to buyers, eventually driving sales and revenues.
In conclusion, distributing mobile phones through mobile service providers provides a great opportunity for phone manufacturers to not only drive sales but also reduce costs of distribution while maintaining their margin.
References
Szopa P., Pękała, W (2012) Distribution Channels and Their Roles in the Enterprise. Polish Journal of Management Studies
PWC (2013) A multichannel strategy for telecom operators. Retrieved from: http://www.strategyand.pwc.com/media/file/Strategyand_Customer-Centricity_Selective-Capillarity.pdf