Marketing Channels - Amazon.com - Case Study Example

Marketing Channels Name: Unit: Course: Supervisor: Date of submission: Question 1 The retail selling price in this case should be controlled by the Amazon.com. In a marketing channel there is transfer of goods from the point of production to the end seller and finally consumer in order to break bulk. Depending on the marketing mix, the pricing of a product starts from the manufacturer who sets the wholesale price in which the retailers are able to purchase the product. Disagreements in pricing leads to price wars which destabilises distribution channel (Coughlan et al, 2006). By Amazon sticking with $ 9.99, publishers like Macmillan who are not contented with the price will move to Apple. This may lead to creation of two tier system where the many customers not willing to spend more will remain aligned to Amazon.com while the quality publishers may move to Apple and attract the buyers willing to purchase the quality at higher price. This may not be desirable for Amazon.com as it may lose its market share to Apple, but the established market and other inherent factors are the main determinants of choice of distributor. Therefore, it is not dictated that there will be a two tier rift system that will substantially affect Amazon.com. Even though value and quality of a product are factors to consider in pricing, other market forces determined by both internal and external environment of company such as competition, structural organisation, demand, supply and the amount the consumer is willing to spend on a product are main considerations which should be aligned with the overall objectives and strategies of Amazon in the pricing. Amazon.com distribution to final consumer is over internet and targets many customers across the globe; hence can employ the economy pricing in which there is no product considered of more value, hence all the prices are kept at par in order to attract and ensure that that market segments that are price sensitive are catered for. However, it is worth noting that the Macmillan have stake in pricing but this is depended on the marketing channel and in this case I believe Amazon.com is right in pricing of the e-books as it is the final seller of the books. Question 2 The dealers are true to their accusations. The channel partnership in marketing is normally depended on the final consumer purchasing power and frequency that ensures that the product reaches the end user and reduces the waiting time. Therefore, the producer/supplier is supposed to supply amounts that satisfy the customer in order to ensure smooth mobility in the marketing channel. This implies that the partnership between the producer and dealer is not a fair weather friendship but based on the market forces of that are inherent in distribution channel (Coughlan et al, 2006). The effect of the channel stuffing is that the dealers end up incurring a lot of costs which reduces their profits. Some of the costs incurred include: storage costs, maintenance costs and costs incurred in advent of returning the unsold goods to the supplying company. In addition, this will lead to surplus in supply as the demand is low. The result will be price declines of the product as the market forces in which high supply and low demand will lead to low prices. Bearing in mind the effect of market forces such as competition, economic changes, and changes in customer preferences which consequently affect the demand, implies that marketing channel should be supplied with goods which satisfy the demand. This means that the supply should be conscious of the impeding marketing forces. Over supply leads to overloading the system and results in hurting the whole market channel. Therefore, Harley Davidson should take to consideration such factors in order to avoid the channel stuffing that will have a negative ripple effect on whole system due to reduced bulk breaking, Harley Davidson should allow sufficient waiting time that is depended on the market forces. Question 3 I agree with Gillette’s position. Though the iPhone app may not be entertaining it targets a specific segment of the market that is likely to be influenced by the trends in the technology and would certainly entice the given to relate with the new promotion. In order to be effective and ensure that goods are sold at a higher frequency, a company has to segment its market in order to identify the different customer needs and establish measures to connect with the customer segments. Connection with customers entails understanding their behaviour and psychographic factors, i.e. the lifestyle. In the case of Gillette, the target segment includes the young generation who are more enticed by phone applications. This iPhone app will thus keep this market segment more connected to Gillette and the effect is that they will possibly connect and identify with and possibly buy the products affiliated to Gillette. The aim of any promotion strategy is aimed at increasing the sales volume and it acts as tool for competition in which a given market segment is targeted. The effect of the promotion is that retail sellers will experience high frequency of bulk breaking of Gillette products. These sales will likely be moved by the young people who are main target of the promotion. For any successful promotion, that will has a positive effect on the marketing chain; it must draw attention of the target customer. This will subsequently arouse impact and desire and hence action for buying the Gillette which implies retailers recording more sales for the Gillette products. The connect that that is established by this new app serves a communication tool that ensures that the product awareness is maintained. Awareness is a selling point as it establishes the existence and positions a product which persuades the targeted customer to use the product due to given factors which are aimed at creation loyalty. Question 4 Logistical idea The logistical program proposed by Walmart is not a good idea. There are many parties that participate in the distribution in a marketing channel. In a real situation, the producers or manufacturers do not have the capacity and the economies of scale to ensure that their goods are distributed directly. If they are to distribute the goods directly to the retailers and the final consumers, it will be cost prohibitive for the manufacturers. To navigate this, they have to depend on the wholesalers and retailers to organise agencies that help in distribution through the facilitation and collaboration with the wholesalers and retailers. The distribution of goods through the different channel members plays a crucial role in determination of the success in the different levels of the marketing channel system. Between the manufacture and the retailer, there are agencies that are mandated with provision of transport and storage facilities (Coughlan et al, 2006). These agents are crucial in the distribution channel and ensure that both the manufacture and the retailers are supplied with goods at the right time. This ensures just in time inventory. By choosing to transport the goods for itself, Walmart will be eliminating the transportation agents. Even though Walmart has the capacity to undertake this program, the challenge will be added management responsibilities and logistical problems. For instance, the challenge of collecting the required inventory from different manufacturers at the right time will possibly be coordination challenges. In addition, the direct collection of the goods from the manufacturer will definitely affect pricing of the product which may lead to unfair competition with other retailers. In the existing system the wholesalers and retailers have set a system that forces the suppliers to deliver goods at agreed standards. This ensures smooth business operation and control of inventory at the stores. The system ensures that the retailer is cushioned against some losses. The implication for this is that Walmart will lose these cost saving that are extended by manufacturers. The decision will also lead to possible channel conflicts especially with the distribution agents. Question 5 Failures in distribution channel by Coca-Cola in India In order to get a good market share, the design of the distribution channels plays a very big role. For a business to succeed, it must analyse both the internal and external environments which play significant role in the success of any business. In this case, the factors inherent in India were the external environment for Coca-Cola and were good for the Coca-Cola to attain a good market share. However, external environment cannot guarantee success if the internal environment is not functioning well. The internal environment entails organisational factors which entail the management and corporate culture. A company of stature of Coca-Cola failed because the management never studied and designed a good distribution channel that could guarantee the realisation of the 4Ps (product, promotion, price and place) of marketing mix. The management of marketing channels play a great role in ensuring efficiency and effectiveness of distribution which subsequently ensure realisation of objectives and strategies of a company (Coughlan et al, 2006). In a marketing channel, there are agents that are tasked with ensuring that the marketing mix is realised. The failure to have good promotion strategy meant that the coke product could not be accepted by the larger India community. The bottling process is a very important intermediate in the business of Coca-Cola, therefore, having an outdated intermediate meant that the Coke could not reach the customers at the right time, it increased the waiting time which is a weak point and competitors are likely to capitalise on such failures. In addition, the management failed to have a good distribution network which is core for the movement of products to the final consumer. The result was a high price of their product and could not beat the competition. A failure in the design of the distribution channel affects members of a marketing channel and the result is failure in penetrating the market irrespective of the size of the company (Coughlan et al, 2006). For a company of Coca-Cola stature to trail Pepsi in the Indian market points to extent which channel distribution and the supply chain factors are crucial for successful marketing. Conclusion Market channels ensure that goods move from the manufacturer to the final consumer through a smooth distribution channel where each channel member plays a crucial role. Prioritisation of the distribution is normally anchored on the overall objectives and strategies of the involved organisation. Therefore, each member has to have objectives and strategies that ensure that profitability is realised. In a marketing channel, distribution plays a key role in satisfying the demand inherent in the market and it creates synergy from the channels. It is through the channel marketing that the essences of the contemporary marketing strategies are drawn bearing in mind the business environment and its effect on the marketing mix. Reference Coughlan, A., Erin, A., Louis, W. and Adel, E. Marketing Channels. Prentice Hall, 2006. Read More