Applied Channel System Assessment - Assignment Example

Answer 1. There are basically eight universal flows; these include the physical possession, ownership, promotion, negotiation, financing, risking, ordering and payment. According to the channel management schematic, efficient channel responds to the recognition of end users’ service output requires several takes, including deciding on a channel structure, splitting the workload of the channel among the available channel members, creating and fostering the desired degree of commitment in the channel system and updating channel design to minimize gaps in channel performance. A basic understanding of how the work of a marketing channel gets done is fundamental in answering questions. Manufacturers, wholesalers, and retailers participate in marketing channels to create the service outputs like bulk breaking, quick delivery, spatial inconvenience and assortment and variety demanded by their target end-users. Just as a production plant produces physical products, the members of a marketing channel are also engaged in productive activity. Specific channel members may specialise in performing one or more flows and may not participate at all in the performance of other flows and may not participate at all in the performance of other flows. Further, it may be tempting to remove a particular channel member from the channel but the flows performed by that channel member cannot be eliminated. Mary Kay revolves its strategies around independent beauty consultants, who are able to fill the orders on the spot given the fact that the product lines are limited and the distribution system involves only one wholesale sale (from company to consultant) and one retail sale (from consultant to the buyer). This also means that the consultant plays the role of the wholesaler, the distributor and the retailer. The independent beauty consultants earn their commission from the sales of cosmetics. In effect this means that the organisation is made up of many entrepreneurs and the success of each consultant’s business adds to the success of the company. Such arrangements are also known as pyramids. Given the fact that markets have increasingly become more and more splintered, and the fact that sub-segments have slowly evolved, direct sales organisations have been forced into adopting the ownership through leadership option (McKenna, 1991). This perspective is based on the notion that the true goal of marketing is not merely to create products of sufficient value to allow a profitable operation of the firm. Rather the ownership-through-leadership model dictates a single-minded focus on one part of the market, ultimately resulting in the erection of a significant buffer from competitive forces (Rosenbloom, 1990). Where direct selling is concerned, channel partners tend to specialise in the performance of one or more flows and may not participate at all in the performance of other flows (Kotlet et al., 2002). Every flow contributes to the production of valued service outputs but also carries an associated cost. Physical possession for example refers to all channel activities concerned with the storage of goods including their transpiration between two channel members (Coughlan, 2007). Promotion flows in marketing channels can take many forms including personnel selling by an employee or outside sales force, media advertising, sales promotions and other public relations related activities (Coughlan, 2007). Negotiation occurs when terms of sale or of the maintenance of the ongoing relationships with the market are decided. Financing costs are inherent in the terms of sale from one level to the channel and finally to the end user. Ordering and payment flow costs are the total costs incurred in the actual purchase of and payment for the product (Coughlan, 2007). In the context of the independent beauty consultants that work for Mary Kay, it has already been established that they perform the functions ascribed to the retail, the distributor and the wholesale side of the channel partner. They organise a party of five-six, educate women about the cosmetics and make sales. In this capacity, they also perform several public relations related activities. They purchase, transport and house all products, bearing the costs thereof. Also they are involved in the performance of all payment and ordering related activities given the fact that they would place orders according to demand and ensure payments accordingly. In conclusion, therefore it can be argued that independent beauty consultants in their capacities as direct selling agents of Mary Kay end up performing all 8 channel flow duties that are inherent in the above discussed theoretical nuances. Answer 2. Market segmentation is the process of dividing a total market into market groups consisting of people who have relatively similar product needs. Arguably clusters of needs form different segments. The purpose is to design a market segmentation scheme that would be matching to and representative of the requirements of the people or a given set of individuals/ communities in a given market segment. It can therefore be defined as a ‘state of demand heterogeneity such that the total market demand could be disaggregated into segments with distinct market functions. Differentiation therefore could be sought on the basis of quality, quantity or some given innate. A market segment consists of individuals, groups or organizations with one or more characteristics that cause them to have relatively similar product needs (Selden, 2002)). Customers have unique requirements, aspirations and satisfaction levels. Some customers, though, are “similar”: they have common requirements for goods, services and ideas (Dibb and Simkin, 1993). If these customers' needs can be clearly identified and those with similar needs grouped in quantities of sufficient sizes, market segments have been determined. Each customer group – or market segment – has specific expectations and retail marketers must develop retail brands and concepts which cater for the needs of the segment targeted. Having decided on which segment (or segments) to target, retailers position their brands with an image with which the targeted customers identify. Market segmentation, targeting and positioning is a fundamental process in modern retail marketing strategy. The key decisions and the steps necessary for successful implementation are examined. In the first instance, the example of an integrated product segmentation marked at just product design the way a movie-goer’s product is product segment is identified. In such instances, the product is created keeping the segment of rich urban movie goers in mind, but cannot and does not dictate the manner in which this segmentation will marketed in the long run. This happens given the fact that product attributes do not and cannot define the manner in which the product has to be sold to the consumer. Also, it has to be understood in products such as this that one cannot expect homogenous consumer behavior from the members of the same social class. Infact it has been suggested that a diversity of family situations and a nearly unbelievable range in income totals are contained within each class (Angela, 1998). The second example of market segmentation being used for product design is one carried out by high end fashion designers when they come up with their new lines every season. In most such cases, the variables used for segmentation end up affecting in a major way the final outcome of the look, perception and buyer base of the lines that are designed by the designers. One of the primary variables that could be used in the process of market segmentation where is through the usage of social classes (Loudon, 2001). The significance if social stratification for the marketers is that there are marked differences in values, attitudes, and behavior of a given class with respect to buying behavior. These differences would therefore automatically provide a basis on which to segment markets and obtain enhanced understanding of the behavior of the consumers. Some of the major findings of research on general social stratification will be summarized in this discussion with a view to how each class would react to a given strategy or a product in terms of their preferences and buying behaviors. Segmentation on the basis of lifestyle is a common approach ton segmenting the market. Individuals are grouped, based in their behavioral characteristics attitudes and opinions (Berkowitz, 2006). To conduct lifestyle segmentation, marketing researchers profile consumers based on their responses to attitudes, interests and opinions. A rich line, which is to be targeted keeping in mind the upper segment would for example use costlier raw materials and more intricate work (Kelner, Brad, et al, 1999). This segmentation also works in case of marketing channel segmentation given the fact that the segmentation determines the manner in which the product itself has to be dealt with. References: Berkowitz E N, (2006). Essentials of healthcare marketing. Jones and Bartlett publishing. Coughlan, A, T., (2007). Marketing Channels. Pearson Education India. P73-87 Gabriel, Angela. "Single Message May Not Hit All Markets." Phoenix Business Journal. November 20, 1998. Kelner, Brad, et al. "Market Segmentation Strategies and Service Sector Productivity." California Management Review. Summer 1999. Kotler, Phillip, Jain D and Maiscincee S, 2002, Marketing moves: a new approach to profits, growth, and renewal, Pub, Boston, Harvard Business Press, p26  Loudon, N., (2001). Consumer Behavior: Concepts And Applications. Tata McGraw Hill. Selden P H 2000, The Power of Quality Thinking In Sales and Management, pub, Quality Progress: pp58-64.  Rosenbloom, B., (1990). Direct Selling Channels. Routledge. Pp37-40. Read More