The Channel Development and Pricing simulation examined the effectiveness of distribution channel, and assesses the parameter to apply the right channel. When deciding the distributor to go with one has to look at:
- Number of year of experience the distributor has been in the industry
- Financial strength
- Coverage and
- Control over resellers and stores
Coverage is key in distribution the more the product is seen, the more people will be likely to buy. A distributor may not be a big distributor but their wide experience, reputation and network of representative offices and their degree of influence with all the resellers makes them a great distributor. During hard competition in the simulation management had to increase their distributors and resellers margin and lunch consumers’ promotion to be able to keep up with other companies. By increasing their distribution and resellers’ margin, the resellers will have the incentives to promote your product more and the consumer promotion will give costumer an incentive to buy the products.
Selecting the right set of distribution channel is very important responsibility of marketing professional. Even the company as a very good project to offer, if it is not available to the customer where they are looking for you are likely to lose out because in the competitive world customer have many options.
Marketing Concepts and Principles
There are many tools available to help with the process of forecasting demand. However, we cannot solely rely on the numbers calculated from these tools, we must still perform careful analysis, interpretation, intuition, and judgment on the estimates obtained from these tools. Each of the scenarios from the simulation presented different tools and techniques to use depending of the market situation. In the first scenario, the key tools that were available included industry trends based on macroeconomic factors, estimating demand based on sales trends of comparable products, and market research by sampling target consumers in the industry. The results of the first scenario was based on forecasting demand for the new software using the sales trends of comparable products, which seemed to have produced good and fairly accurate results for the product during the introduction phase.
The key tools that was available in the second scenario included Chain Ratio Method to forecast demand based on a base number of target consumers and then making some assumptions, Multiple Factor Index Method to forecast demand based on key factors of the industry – presence of computers, people strength, and profits, and Market Buildup Method to forecast demand by identifying all potential buyers. The results of the second scenario was based on being a bit conservative on the forecasts for doctors and the IT industry and going with the forecasts for the banking industry. Using this method generated good results for the product during the growth phase.
On the Service Added Based Differentiation, one important concept is product and service differentiation. Product and service differentiation are a source of competitive advantage that depends on producing and service some items that are regarded to have unique and valuable characteristics (Bender & Hill, 2000). In the simulation, the team has to find some services that can presents difference. Moreover, the differentiation is not enough so we should also consider another concept, which is value perception. The value perception presents what value consumers would perceive if they can get an additional service. This will help us to determine a proper price. Different understanding for the two concepts is the mean reason that our team members achieve total different results. In a mature market, a company should combine these two methods in order to gain competitive advantages.
Another tool is the hierarchy of needs. The model is shown in the following graph:
This model presents five levels of needs and is a good method to identify what consumers are interested in. We can use it to find how to make products or services different depending on specific needs of consumers.
In the channel development and pricing simulation, the key marketing concept and principles are Marketing Mix, distribution channels and motivating strategy through competitive markets.
In this simulation distribution channels are responsible for the transfer of computer products from the warehouse of the manufacturer to the end user. These same distribution channels are often also directly involved and may even be fully responsible for the sales of products within these channels. The distribution channel, an integral part of the 4P’s of marketing Mix once in place is the most difficult to change. The marketing mix approach is a model of crafting and implementing marketing strategies. The marketing mix stresses the "mixing" of various factors in such a way that both organizational and consumer (target markets) objectives are attained. Management had to find the right pricing strategy for the initial price of the product. In a new market, an initial prices drop enables higher sales, even if it means a drop in profitability, the drop in profitability can be seen as an investment into the business.
In competitive market an attractive incentive to your customers and attractive incentives to your channel partners is an important strategy because it gives both your customer and partners the incentive to go and purchase your product or for the partners to go and promote your products. In a competitive scenario it is normally a good ploy to reduce prices especially if you are a new entrant into the market. Reducing the price of a new product may reduced your sales target but it gives the customers the incentives to go and tried it and if they like the product they will recommend the product to other people and that way we can reach our sales target.
Lessons Learned
The lessons learned on the marketing demand simulation that can be applied to the marketing audit are the difficulty of forecasting demand accurately, the key tools used for forecasting demand, and the number of analysis and personal interpretation and judgment required beyond the estimates obtained from the forecast methods. Forecasting demand is not any easy task because of there are no certainties and no guarantees that the forecasts will produce accurate results. Because of this uncertainty in forecasting demand and the extra analysis, interpretation, and judgment required beyond the estimates, it may be necessary to apply to the marketing audit when analyzing the marketing strategies and the marketing mix. The key tools used for forecasting demand introduced in this simulation are useful and can be applied to analyze the marketing section of the marketing audit. Forecasting demand is an important process in marketing and its success is partially dependent on it; therefore, making it an important analysis during the preparation of the marketing audit. When using the demand forecasts in marketing audits, marketing plans, and product productions, any judgments made must be supported and be adjusted regularly based on changes in market conditions and as new information becomes available, making this flexibility the key to success in the market.
The lesson learned on the Service Added Based Differentiation Simulation is that in a mature market, the task of the marketer is very difficult due to non-differences among products. For example, Ford Motor Corporation may feel very difficult to be different with its competitors due to mature automobile industry. How to survive in such markets is the key point that should be considered in consumer markets. Another example is Nu Skin. Its market seems to be mature too. Since the core product becomes common, adding additional services would be a good way to differentiate the product and gain competitive advantages. To be different in the market, we suggest that the company should not only focus on the products, but also pay more attentions on customer. The company should go into their minds and look at what is need it.
On the channel development and pricing the lesson learned were the importance of marketing mix and choosing the distribution channel. In order to achieve your marketing objectives you need to have a strategy that includes different elements the various parts of the marketing mix (Product, Price, Promotion and Place). The marketing mix on this simulation helped the group members in the marketing audit to determine their company marketing mix. Another lesson is the importance of choosing the right distribution channel. The right distribution channel is very important even with the best product in the market, if the product is not available to the customers where they are looking for it you are likely to lose out because the consumers have many options to choose from.
During the marketing audit the group member’s look at their company distribution channel to determine if their company products are available to the consumers. For example Petro-Canada has a very good distribution channel the company tries to have gas pump at convenient places where they know the traffic is high so it easier for consumers to get their services.
Conclusion
Based on the above information from the three simulations, our team discovered that the results obtained, the marketing concepts and principles used, and the lessons learned will be different and based on our own individual interpretation of the information presented to make our decisions and choices in the simulations. Thus, our own experience in and understanding of marketing plays a big role in the decisions made, the results obtained, the tools and concepts used, and the lessons learned.
Reference
University of Phoenix. (2006). Service Added Based Differentiation. Retrieved June 10,
2006, from University of Phoenix, rEsource, Simulation, MKT551.
University of Phoenix. (2006). Marketing Demand. Retrieved June 15, 2006, from
University of Phoenix, rEsource, Simulation, MKT551.
University of Phoenix. (2006). Channel Development and Pricing. Retrieved June 15,
2006, from University of Phoenix, rEsource, Simulation, MKT551
Bender, K., & Hill, L. (2000). Producer alternatives in growing specialty corn and
soybeans. Urbana-Champaign. Retrieved June 14, 2006 from University Library
