Day 4 The Place
The role of a Distribution Channel A product might pass through several distribution channels before it finally reaches the consumer. The organizations involved in each stage of distribution are commonly referred to as “intermediaries”. Why does a business give the job of selling its products to intermediaries? After all, using an intermediary means giving up some control over how products are sold and who they are sold to. An intermediary will also want to make a profit by getting involved. Intermediaries are specialists in selling. greater sales can be achieved than if the producing business tried to run a sales operation itself . The advantages are: • Know how, contacts • More efficient distribution logistics • Lower costs (even taking into account the intermediaries’ margin or commission) may be lower • Consumers may expect choice (i.e. the products and brands of many producers) at the point of sale • Producers may not have sufficient resources or expertise to sell direct
Distribution Channels Wholesalersstock a range of products from several producers, promote the products and give producers a feedback on mkt performance. The role of the wholesaler is to sell onto retailers. Retailers Retailers always sell to the final consumer. Agentssell the products and services of producers in return for a commission (a percentage of the sales revenues). Good examples include travel agents, insurance agents . Personal selling is where businesses use people (the “sales force”) to sell the product after meeting face-to-face with the customer. They aim to inform and encourage the customer to buy, or at least trial the product .e.g Avon/Folletto, factory shops, mail catalogues, door-to-door selling and e-commerce Franchises are independent businesses that operate a branded product (usually a service) in exchange for a licence fee and a share of sales. Franchises are commonly used by businesses (franchisors) that wish to expand a service-based product into a much wider geographical area.
What is the “best choice”? There is no best choice. The most suitable solution depends on the type of product, on the market , on the company ‘s goals (do I want to spread rapidly, or not? How much control do I want to have on my distribution?..).
Selling direct Direct marketing means selling products by dealing directly with consumers rather than through intermediaries. Traditional methods include mail order, direct-mail selling, cold calling, telephone selling, and door-to-door calling. More recently telemarketing, direct radio selling, magazine and TV advertising, and on-line computer shopping have been developed. The main advantages of selling direct are : • there is no need to share profit margins • the producer has complete control over the sales process. • Products are not sold alongside those of competitors either. Examples of direct selling are factory shops, mail catalogues, door-to-door selling and e-commerce
Selling direct There may also be specific market factors that encourage direct selling: • There may be a need for an expert sales force, to demonstrate products, provide detailed pre-sale information and after-sales service • Retailers, distributors, dealers and other intermediaries may be unwilling to sell the product • Existing distribution channels may be owned by, or linked to, competing However, there are significant costs associated with selling direct which may be higher than the costs associated with using an intermediary to generate the same level of sales.
The lesson of Apple Retail History Apple’s stores are among the most successful shops around, generating more revenue per square foot than any other retailer in the United States, including Tiffany. Apple's retail success is fuelled to a large extent by demand for the company's products. But there are two more assets than can well explain this amazing success and the lesson we learn is that Place can be a crucial Mkg tool and it ‘s no longer about distributing the product: • the customer service • the importance that Apple gives to the shopping “experience”
Apple Retail History When Mr. Jobs returned to Apple in 1996 after being ousted 11 years earlier, the company was struggling. Fixing Apple's retail strategy was a priority for Mr. Jobs because Apple's brand had become so weak that mass retailers refused to stock Macintoshes. While Apple was developing new products, Mr. Jobs knew they would have little impact if consumers couldn't find them. Mr. Jobs realized it was impossible to control the experience at retailers like CompUSA. "People don't just want to buy personal computers anymore, they want to know what they can do with them," said Mr. Jobs . Building Apple's own retail stores was a natural progression. In 1999, Mr. Jobs recruited Millard Drexler, then president of Gap Inc., to join Apple's board and advise the company on retail strategy. Many members of Apple's initial retail team came from Gap, which was viewed as a model because of its hip image and success with its branded stores.
The shopping experience It was Mr. Drexler's idea to build a prototype store in a warehouse on Cupertino's Bubb Road, near Apple headquarters. There, Apple designed a store layout that displayed its products in a way that highlighted how they could be used, rather than the conventional retail method of stacking products by category. Apple spent a year testing its concept before it opened its first two stores in May 2001. A little over two years later, it had opened over 70 stores in locations such as Chicago, Honolulu and Tokyo. At the time, electronics stores tended to resemble warehouses stuffed with accessories, pamphlets and cords.
The shopping experience Apple, by contrast, chose an open plan with a clutter-free look, using natural materials like wood, glass, stone and stainless steel. Over the past decade, Apple's stores have become even more dramatic, from a location inside the Louvre in Paris to one located under a 40-foot-high glass cylinder in Shanghai. “People buy emotionally even though they justify their decision rationally.”
The shopping experience key factor in determining whether a shopper will have a great experience include: • store design and atmosphere, which relates to the boredom and the similarity of specialty chain stores , use of lights, colours, space, etc • consistently great product quality, and product range • seeing products which we wouldn’t expect to see there • making customers feel they're special. • speeding the shopping process • along with the ability of a retailer to resolve a problem once it crops up • sensorial experience However, the components of a great retail experience vary somewhat by the age, gender and nationality of shoppers. Consumers over age 50 are more likely to mention the importance of store representatives who seems genuine and caring. They also like being acknowledged and treated courteously.
Visual Merchandising Visual merchandising is about attracting potential customers into the shop and influencing the customer experience in order to motivate customers to buy. Visual merchandising professionals need to have an expertise in fashion, psychology, designing, psychology and architectural principles. Interior design, also, plays a special role in encouraging the potential buyers' decisions. Visual Merchandising is the art of displaying merchandise in a manner that is appealing to the eyes of the customer It includes window displays, signs, interior displays.
Window VM With the help of a few basic tips and ideas, any space can be turned into one that is visually appealing to people. Make merchandise the focal point. Customers give three to five seconds of their attention to window display. The retailers visual message should be conveyed to the customer in that short period of time. It should not be like an unsuccessful TV advertisement, where the product is forgotten altogether and only the concept of the commercial remains in the mind of the viewer. Color: Using color is the first way to attract attention. Bright happy colors are more likely to attract people, as opposed to dull colors. While having bright painted walls are one option, the other is that of using colored products and putting them on display. Change Display Frequently: Using this technique is essential for the simple reason that it let's a person know what's new at the store, thus tempting them to walk into the store. Use Interesting Themes: Display windows that look like no effort has been put into them, very evidently, are less likely to attract people into the store. These themes could be based on either seasons, festivals, or anything that seems appropriate for that moment.
In store VM • Placing a guided path causes the customer to walk past all of the store's merchandise, increasing the chance of a sale. • display the most important items on a shelving system that reaches eye level to gain the most attention of the customer. • Balance the look of the display by using darker merchandise on the lower level of shelving and gradually place lighter-colored items toward the top of the shelving system. • Balance the size of the merchandise by placing a large item on one side, followed by a cluster of products directly opposite. • Install lighting in order to bring focus to the merchandise. • Create signage to attract attention and promote your display. Use large images or graphics to add impact to the display.