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Wednesday, October 18, 2017

Sales Management Notes: Sales Promotion and Distribution Channel

Unit – 4: Sales Promotion and Distribution channel
Introduction to sales promotion
Sales promotion is one of the most loosely used terms in the marketing vocabulary. We define sales promotion as demand. Stimulating devices designed to supplement advertising and facilitate personal selling. In other words, sales promotion signifies all those activities that supplement, co-ordinate and make the efforts of personal selling and advertising more effective. It is non recurrent in nature which means it can’t be used continuously.
Concept of Sales Promotion: Sales promotion consists of diverse collection of incentive tools, mostly short-term designed to stimulate quicker and / or greater purchase of a particular product by consumers or the trade. Where as advertising offers a reason to buy, sales promotion offers an incentive to buy. Sales promotion includes tools for consumer promotion (for example samples, coupons, prizes, cash refund, warranties, demonstrations, contest); trade promotion (for example buying allowances, free goods, merchandise allowances, co-operative advertising, advertising and display allowances, dealer sales contests); and sales-force promotion (for example bonuses, contests, sales rallies).
Sales promotion efforts are directed at final consumers and designed to motivate, persuade and remind them of the goods and receives that are offered. Sales persons adopt several techniques for sales promotion. Creative sales promotion can be very effective. It is the marketing manager’s responsibility to specify promotion objectives and policies.
Definitions of Sales Promotion
According to American Marketing Association “ Those marketing activities other than personal selling advertising and publicity that stimulate consumer purchasing and dealer effectiveness such as display shows and exhibitions, demonstrations and various non-recurrent selling efforts not in the ordinary routine.”
W.J. Stanton defines sales promotion as all those activities other than advertising, personal selling, public relations and publicity that are intended to stimulate customer demand and improve the marketing performance of sellers.
Objectives of Sales Promotion
The basic objectives of sales promotion are:
i) To introduce new products: To induce buyers to purchase a new product, free samples may be distributed or money and merchandise allowance may be offered to business to stock and sell the product.
ii) To attract new customers: New customers may be attracted through issue of free samples, premiums, contests and similar devices.
iii) To induce present customers to buy more: Present customers may be induced to buy more by knowing more about a product, its ingredients and uses.
iv) To help firm remain competitive: Sales promotions may be undertaken to meet competition from a firm.
v) To increase sales in off season: Buyers may be encouraged to use the product in off seasons by showing them the variety of uses of the product.
vi) To increase the inventories of business buyers: Retailers may be induced to keep in stock more units of a product so that more sales can be effected.
Purpose of sales Promotion
Sales promotion activities tend to achieve following objectives:
1)      To generate consumer interest, which should lead to trial?
2)      To build long-term customer loyalty.
3)      To encourage repeat sales.
4)      To generate inquiries from the target customer group.
5)      To widen the distribution of the product or brand.
6)      To build up retail inventory levels.
7)      To increase the frequency of purchases.
8)      To build traffic for a brand at retail outlet and thereby generating additional sales for the product.
9)      To encourage customers to visit a particular sales outlet.
10)   To conduct product/service and market investigations.
11)   To coordinate sales and advertising.
12)   To plan sales promotion programmes.
13)   To assist dealers in their selling efforts by toning up the morale of salesman.
14)   To reward loyal customers.
15)   To enable manufacturer to adjust to short-term variations in supply and demand.
16)   To promote customer awareness about the price, quality, variety and availability of products.
17)   To enable consumer to become smart shoppers by availing advantages of price specials.
Sales promotion can be used to dramatize product and to boost sagging sales. Sales promotion effects are usually short run. Companies use sales promotion tools to create a stronger and quicker response. The main objective of sales promotion is to establish better co-ordination between the activities like advertising, personal selling, publicity etc. Stanton says, “Really the major function of sales promotion is to bridge the gap between advertising and personal selling; so that efforts of these two areas could be supplemented and coordinated.”
Importance of Sales Promotion
The growing significance of sales promotion can be attributed to the following:
1)      Growing Consumerism in India.
2)      Fragmentation of viewers and readers due to multiple T.V Channels, magazines and newspapers.
3)      Sales promotion is more cost effective as compared to advertising due to rising cost of mass media.
4)      Technological advancement and standardized products have also added value to sales promotion activities.

5)      Increasing inter-firm rivalry within the industry, in fact in all sectors of the economy also by laying down emphasis on sales promotion to popularize their own products.
6)      It provides opportunities to manufacturers to reach out different market segments with different price-differentiation plans.
7)      It adds excitement to in-store merchandizing of consumer durable items.
8)      It motivates distribution channels to keep more inventories of the products which promote sales.
Sales promotions are an important tool in the hands of sales management to increase the sales. But there are certain limitations which are given below:
1.       Short-term device: It is a short-term device to increase the sales. It is not effective in creating long-term brand preferences.
2.       Lack of regularity: If the goods are not in regular supply then sales promotion cannot be successful.
3.       An activity to support advertising and personal selling: It establishes co-ordination between advertising and personal selling and makes efforts to increase the effectiveness of these two activities. Sales promotions are not an independent tool.
4.       Defective distribution: If the channel of distribution of products, chosen by the seller is defective, sales promotion cannot work successfully.
5.       A non-recurring effort: It is not a recurring effort and if it is adopted on recurring basis, its importance will diminish.
6.       Chances of manufacturing defects in product: The sales promotion will not be of any use if the product has certain manufacturing defects.
7.       The defects of other marketing efforts cannot be removed: It is a complementary effort and cannot remove drawbacks of other marketing efforts such as drawback in packaging, colour, size, quality, pricing etc.
8.       Can attract only deal-plan Customers: Those who are interested to avail short term benefit from buying are attracted by the sales promotion tool. It does not change the habits of loyal brand buyers.
9.       Not useful for buyer’s market: This technique cannot work successfully if buyer’s market exists.
Factor Affecting Sales Promotion
Sales Promotion is a skill activity to induce the customers. Sales promotional programmes should be designed carefully with creativity and novelty to get the desired results. Following factors should be kept in mind while designing sales promotion programme:
1.       Target Market: Sales promotional programmes should be oriented towards the target market in such a manner so as to prompt the purchase of the product. There are six stages involved in inducing the customers. These are –
a)      Awareness: The buyers must be made aware about the availability of the product or brand in the market.
b)      Knowledge: The seller’s task is to explain the features of the product so that buyer can have knowledge about that.
c)       Liking: The potential buyers should have liking for the product or brand to be sold.

d)      Creating Preference: The seller must create preference for his product. He must convince the buyer that his product is better than the other alternatives available.
e)      Conviction: It refers to actual decisions of the buyer to commit the purchase.
f)       Purchase: The ultimate task of seller is to motivate the buyer to purchase the product immediately.
2.       Nature of Product/Service: Promotional strategy gets affected by the nature and attributes of products of services. The most important of them are –
a)      Customization: No sales promotion effort will be required if the product to be marketed is manufactured on the basis of individual’s specific needs.
b)      Unit Price: If the price of the product is low, there is less risk of the customer to buy the product. Even manufacturer’s risk will be less. Low price products can be promoted by mass marketing and mass sales promotion schemes.
c)       After-Sale Service: For the products like personal computers, washing machines etc. after sales service become important. Customers will prefer those brands which offer good after-sale service.
3.       Stage of Product Life Cycle: When a new product is introduced, more advertising and personal selling efforts are required to popularize the product among the prospective buyers. Once the product becomes popular and successful, more sales promotional activities need to be undertaken to intensify the sales.
4.       Proposed Budget: The ultimate determinant of any sales promotional programme is the availability of funds. Companies with large magnitude of funds can afford to make more effective utilization of promotional schemes than a company with limited financial resources. The budget for sales promotion will be made by taking into account the extent of competition, the percentage of sales, the availability of capital for sales promotion and so on.
Types of Sales Promotion
In using sales promotion, a company must fulfill the objectives of the organization. Sales promotion objectives are derived from broader promotion objectives, which are derived from more basic marketing objectives developed for the product. The specific objectives set for sales promotion will vary with the type of target market.
For consumers, objectives include encouraging purchase of larger-size units, building trial among non users and attracting switches away from competitors‟ brands. For retailers objectives include inducing retailers to carry new items and higher levels of inventory, encouraging off-season buying, encouraging, stocking of related items, off setting competitive promotions, building brand loyalty of retailers and gaining entry into new retail outlets. For sales force, objectives include encouraging support of a new product or model, encouraging more prospecting and stimulating off-season sales.
Many sales promotion tools are available to accomplish these objectives at the consumer level, and at the middle men level. For the purpose of convenience, the types of sales promotion methods may be grouped under three categories:
1. Types of sales promotion directed at consumers.
2. Types of sales promotion directed at dealers and distributors.
1. Consumer Promotion Tools: The main consumer promotion tools include samples, coupons, cash refund offers, price packs, premiums, prizes, patronage rewards, free trials, product warranties, tie-ins, and point of purchase displays and demonstrations.
a) Samples: Samples are offers of a free amount or trial of a product to consumers. The sample might be delivered door to door sent in the mail, picked up in a store, found attached to another product or featured in an advertising offer. Sampling is the most effective and most expensive way to introduce a new product. 189
b) Coupons: Coupons are certificates entitling the bearer to a stated saving on the purchase of a specific product. Coupons can be mailed, enclosed in or on other products or inserted in magazine and newspaper advertisements. Coupons can be effective in stimulating sales of a mature brand and inducing early trial of a new brand.
c) Cash Refund Offers or Rebates: These are like coupons except that the price reduction occurs after the purchase rather than at the retail shop. The consumer sends a specified “proof of purchase” to the manufacturer, who in turn „refunds‟ part of the purchase price by mail. Cash refunds have been used for major products such as automobiles as well as for packaged goods.
d) Price Packs: These are offers to consumers of savings off the regular price of a product, flagged on the label or package. They may take the form or a reduced-price pack which is single packages sold at a reduced price (such as two for the price of one) or a banded pack, which is two related products banded together (such as a tooth brush and tooth paste). Price packs are very effective in stimulating short term sales, even more than coupons.
e) Premiums or Gifts: These are merchandise offered at a relatively low cost or free as an incentive to purchase a particular product. Sometimes the package itself, is a reusable container may serve as a premium. A self-liquidating premium is an item sold below its normal retail price to consumers who request it.
f) Prizes: These are offers of the chance to win cash, trips or merchandise as a result of purchasing something. Pepsi-cola offered the chance to win cash by matching numbers under the bottle cap with numbers announced on television. Sometimes the prize is a person, offering the winner either cash or dinner with actor Sharuk Khan.
g) Patronage Awards: These are values in cash or in other forms that are proportional to one’s patronage of a certain vendor or group of vendors. Most airlines offer “frequent flyer plans” providing points for miles traveled that can be turned in for free airline trips. Cooperatives pay their members dividends according to their annual patronage. Le Meridian adopted an “honoured guest” plan that awards points for users of their hotels.
h) Free Trials: Free trails consist of inviting prospective purchasers to try the product without cost in the hope that they will buy the product. Thus, often we see, auto dealers encourage free test drives to stimulate purchase interest.
i) Product Warranties: These are an important tool, especially as consumers become more quality sensitive. When My TVS offered a two year car warranty, substantially longer than other competitors‟ customers took notice. They inferred that My TVS quality must be good or else the company would be in deep trouble. Companies must carefully estimate the sales-generating value against the potential costs of any proposed warranty programme.
j)  Tie-in Promotions: These are becoming increasingly popular. In a tie in promotion two or more brands or companies team up on coupons, refunds and contests to increase their pulling power. Companies pool funds with the hope of broader exposure, while several sales forces push these promotions to retailers, giving them a better shot at extra display and ad space.
k) Point-of-Purchase Displays: These take place at the point of purchase or sale. Display of visible mark or product at the entrance of the store is an example. Unfortunately many retailers do not like to handle the hundreds of displays, signs and posters they receive from manufacturers. Hindustan Lever often use this tool to promote its products in the retail market.
l) Product Demonstrations: Products are being shown in action. Consumers can visit the store and see the usage of product in live action so that doubts of the consumers can be clarified in the store itself. When a new product is introduced in the market, the sales promotional tool is often used. For example ultra modern grinder mixie being used by the company to demonstrate its speciality than the other product.
2. Trade Promotion Tools: More sales promotion rupees are directed to the trade than to consumers. Manufacturers seek the following objectives in awarding money to the trade:
i. Trade promotion can persuade the retailer or wholesaler to carry the brand.
ii. Trade promotion can persuade the retailer or wholesaler to carry more than it normally carries.
iii. Trade promotion can induce the retailers to promote the brand through featuring, display, and price reduction.
iv. Trade promotion can stimulate retailers and their sales clerks to push the product.

Manufacturers use several promotion tools. Some of which are mentioned below:
a) Price – Off: Manufacturers may offer a price – off, which is straight discount off the list price on each case purchased during a stated period of time. The offer encourages dealers to buy a quantity or carry a new item that they might not ordinarily buy. The dealers can use the buying allowance for immediate profit or price reductions.
b) Allowance: Manufacturers may offer an allowance in return for the retailer‟s agreeing to feature the manufacturer’s products in some way. An advertising allowance compensates retailers for advertising the manufacturer’s product. A display allowance compensates them for carrying a special display of the product. 193
c) Free Goods: Manufacturers may offer free goods, which are extra cases of merchandise to middlemen who buy a certain quantity of items.
d) Push Money: Manufacturers may offer push money which is cash or gifts to dealers or their sales force to push the manufacturer’s goods.
e) Speciality Advertising Items: Manufacturers may offer free specialty advertising items to the retailers that carry the company’s name such as pens, pencil, calendars, paper weights, and memo pads.
As the number of competitive sales promotions have increased, friction has been created between the company’s sales force and its brand managers. The sales force says that the retailers will not keep products on the shelf unless they receive more trade promotion money, while the brand managers want to spend their funds on consumer promotion and advertising.
Channels of Distribution
One of the important problems of marketing is the distribution of goods & services to the right place, person & the right time. Manufacturers often find it difficult to decide about the effective distribution system. The channel of distributions refers to the group of intermediaries, which perform the distribution functions. A channel of distribution is an organised net-work or a system of agencies and institutions which, in combination, perform all the activities required to link producers with users and users with producers to accomplish the marketing task.
According to Philip Kotler, “The distribution is the set of all firms & individuals that assist in the transferring the little of goods & services as they move from producers to customers.”
According to Richard Buskirk, “Channel of distribution is that system of financial organization by which a producer sends his products to the hands of consumers.”
According to Cundiff and Still, “Channels of distribution are those marketing nets through which the producer flow the products toward the market.”
Functions (Role) of the Channels of Distribution
The following are the main function of the channel of distribution:
(1)   Extending Suggestions Regarding Price-Determination: The middlemen are in the direct contact of the consumers. Therefore, they possess the knowledge that on what price may the consumer accepts the product. Thus, the channel of distribution extends necessary advice to the producers in the price-determination.
(2)   Regularizing the Decisions: The channel of distribution regularizes the decisions and the transactions, resulting in the lowering of the costs. If the products are sold off to some such store which has many branches in the city, the producer then doesn't need going to various branches frequently or repeatedly. The main cause of the same is that if the product seems suitable for the store, it will itself send the purchase order to the manufacturer and in this way, with only the limited efforts, it will become possible to sell the products in bulk quantities.
(3)   Managing the Finance: We find that the agents generally send some advance money along with the order. Very often the product is supplied to the agents through the bank so that the company gets the documents discounted from the bank. Thus the finance is arranged. Thus it-is also the function of the agents to arrange the finance.
(4)   Performing the Promotion Activities: By the middlemen, particularly by the retailers, the advertisements, individual sales, and the sales promotion activities are performed. Very often the middlemen themselves plan and implement the promotion activities and sometimes the manufacturers to extend their help in such work. Really, the result or the outcome of the sales, by the producer, very much depends upon the promotion activities undertaken by the middlemen.
(5)   Serving the Consumers: Due to the middlemen only, the consumers get their required products. Only in accordance with the needs of the consumers, the retailers arrange to purchase the products from the wholesellers and the manufacturers.
(6)   Minimizing the Total Transactions: If there were no middlemen, the producer would have been required to sell the product directly to the consumers which would have result into more of expenditure and trouble. Really speaking, due to the existence of the middlemen only, the number of total transactions is reduced which also reduces the costs of distribution.
Types of Channels
A. Zero-level channel (producer to consumer): It is also called as direct marketing or direct selling. This channel consists of the producer who directly sells his products to the ultimate consumers. This is the shortest, simplest, & cheapest form of distribution. Producers are benefited by increased profit, whereas consumers are benefited by reduced price. This is possible because it eliminates the middleman completely. With the development of sophisticated & efficient retailing like supermarkets, chain-stores, automatic selling machine is financially sound follow this channel of distribution. For products like jewelry & industrial goods like machinery, this is the best channel.
B. One-Level Channel (Producers            Retailers              Consumers or producers              Wholesalers                      Consumers): This is a short channel where the manufacturer may himself perform some of the wholesaler. This is considered to be the best channel as it eliminates some of the marketing intermediaries & at the same time gets advantages of inclusion of retailers. In case of perishable goods, this is the best channel. When there is large scale promotion, inelastic demand & when manufactures are financially sound this channel is preferred.
C. Two-Level Channel (Manufactures          Wholesalers                           Retailers          Consumers): This is the traditional channel. It is more useful in the case of buyers, sellers, & manufactures who operate in small scale. The manufacturer sells his products in large quantities to a wholesaler who in turn sells in small quantities to retailers & finally retailers sell to ultimate consumers. Products which have low unit value & which are purchased frequently may be distributed through this channel.
D. Three Level Channel (Manufactures            Wholesalers           Agents         Retailers           Consumers): In this method manufactures appoint agent such as consignees to sell their products. It is preferable for exporters or MNCs.

Factors Affecting the Selection of the Channel of Distribution
Every producer, in order to pass on the product to the consumer, is required to select a channel for distribution. The selection of the suitable channel of distribution is one of the important factors of the distribution decisions. The following factors affect the selection of the channel of distribution:
A. Factors Pertaining to the Product: Keeping in view the nature, qualities and peculiarities of the product, could only the channel for distribution be properly made. The following factors concerning the product, affect the selection of the channel of distribution:
(1)   Price of the Product: The products of a lower price have a long chain of distributors. As against it, the products having higher price have a smaller chain. Very often, the producer himself has to sell the products to the consumers directly.
(2)   Perishability: The products which are of a perishable nature need lesser number of the intermediaries or agents for their sale. Under this very rule, most of the eatables (food items), and the bakery items are distributed only by the retail sellers.

(3)   Size and Weight: The size and weight of the products too affect the selection of the middlemen. Generally, heavy industrial goods are distributed by the producers themselves to the industrial consumers.
(4)   Technical Nature: Some products are of the nature that prior to their selling, the consumer is required to be given proper instructions with regard to its consumption. In such a case less of the middlemen arc) required to be used.
(5)   Goods Made to Order: The products that are manufactured as per the orders of the customers could be sold directly and the standardized items could be sold off only by the middlemen.
(6)   After-Sales Service: The products regarding which the after-sales service is to be provided could be sold off either personally or through the authorized agents.
B. Factors pertaining to the Consumer or Market: The following are the main elements concerned with the consumer or the market:
(1)   Number of Customers: If the number of customers is large, definitely the services of the middlemen will have to be sought for. As against it, the products whose customers are less in number are distributed by the manufacturer himself.
(2)   Expansion of the Consumers: The span over which are the customers of any commodity spread over, also affects the selection of the channel of distribution. When the consumers are spread through a small or limited sphere, the product is distributed by the producer himself or his agent. As against it, the goods whose distributors are spread throughout the whole country, for such distributors, services of wholeseller and the retailer are sought.
(3)   Size of the Order: When bulk supply orders are received from the consumers, the producer himself takes up the responsibility for the supply of these goods. If the orders are received piece-meal or in smaller quantities, for it the services of the wholeseller could be sought. In this way, the size of the order also influences the selection of the channel of the distribution.
(4)   Objective of Purchase: If the product is being purchased for the industrial use; its direct sale is proper or justified. As against it, if the products are being purchased for the general consumption, the products reach the consumers after passing innumerable hands.
(5)   Need of the Credit Facilities: If, for the sale of any product, it becomes necessary to grant credit to any customer, it shall be helpful for the producer that for its distribution, the services of the wholeseller and retailer businessmen be sought. In this way, the need of the credit facilities too influences the selection of the channel of distribution.
C. Factors Pertaining to the Middlemen: The following are the main factors concerned with the middlemen:
(1)   Services Provided by Middlemen: The selection of the middlemen is made keeping in view their services. If some product is quite new and there is the need of its publicity and promotion of sales, then instead of adopting the agency system, the work must be entrusted to the representatives.
(2)   Scope or Possibilities of Quantity of Sales: The same channel should be selected by means of which there is the possibility of more sales.
(3)   Attitude of Agents towards the Producers' Policies: The producers generally prefer to select such middlemen who go by their policies. Very often when the distribution and supply policies of the producers being disliked by the middlemen, the selection of middlemen becomes quite limited.
(4)   Cost of Channel of Distribution: While selecting the channel of distribution, the cost of distribution and the services provided by the middlemen or agents too must be kept into consideration. The producers generally select the most economical channel.
D. Factors Pertaining to the Producer Or Company: The following factors, concerning the producer, affect the selection of the channel of distribution:
(1)   Level of Production: The manufacturers who are financially sound and are of a larger category, are able to appoint the sales representatives in a larger number and thug could distribute the commodities (products) in larger quantities. As against it, for the smaller manufacturers, it becomes necessary to procure the services of the wholesellers and the retail traders.
(2)   Financial Resources of the Company: From the financial point of view, the stronger company needs less middlemen.
(3)   Managerial Competence and Experience: If some producer lacks in the necessary managerial experience or proficiency, he will depend more upon the middlemen. The new manufacturers in the beginning remain more dependent upon the middlemen.
E. Other Factors
(1)   Distribution Channel of Competitors:  While determining the channel of distribution, the channels of distribution of the competitors too must be borne in mind.
(2)   Social Viewpoint: What is the attitude of society towards the distribution, this fact too must be kept into consideration while selecting the middlemen. 
(3) Freedom of Altering: While selecting the agents, this fact too must be kept into mind that in case of need, there must be the liberty of changing or replacing the agents (middlemen).
Middlemen are the vital link in the chain of distribution. The term dealer’ includes the retailer, wholesalers and distributors. The important schemes used for sales promotion are:
a)      Advertising and display aids.
b)      Managerial assistance.
c)       Sales assistance.
d)      Other assistance and incentives.
Advertising and Display Aids: Wholesalers and retailers are assisted by the producers in advertising the new products and shop displays. Some of such aids are –
1)      Direct mail advertising: The advertising and publicity material of new products is sent by the producers to the wholesalers and customers by mails. Such materials are supplied to customers free of costs. E.g. Replay cards, Calendars, diaries, folders, hand bills, Order books, house magazines come under this category.
2)      Local newspaper advertising: The advertising is given in the local newspaper by specifying the names of the wholesalers and retailer of the product to be launched in a particular locality.
3)      Advertising allowances: Actual expenses of the advertising are not met by the producer; instead, an allowance is paid to the dealer towards advertising expenses of new products.
4)      Out door advertising: This is the method adopted to attract the attention of dealers. Signboards, banners and posters are printed in the names of dealers and pasted on the walls to invite the attention of the people who are occupied making way alongside the street.
5)      Organizing of Fashion Shows: In order to publicize for the fashion goods, some of the large-scale producers, organize fashion shows in big cities.
6)      Display allowances: Thos producers who do not provide display materials to the dealers, provide them with display allowance for promoting new products.
7)      Cooperative Advertising: Both the dealers and producers share the expenses of advertising of the new products. Either the producer will bear a fixed amount or a percentage to purchase made by the dealer in a year.
8)      Promotional Novelties: Various advertising and publicity items are printed by giving the name of the producer and are distributed to the retailers free of cost. Such novelties include calendars, pen, pencils, paper weights, ashtrays, bills books, menu pads, bags, diaries etc.
Managerial Assistance: It is very difficult to manage the wholesale and retail trades. The knowledge of various management technique is very necessary. The following type of managerial assistance is provided to the dealers.
1)      Sales Management function: Solutions to problems like selling process, sales conferences, buyers bahaviour, customer relations, sales force management, buying motives, assist the dealers in launching and promoting new products.
2)      Guidance in setting up internal organization: The guidance is provided towards managing the business operation, location of the firm, its size, equipment to be used, inventory control, display and decorative materials, books and accounts by the producer.
3)      Advice towards policy matters: Advice is given towards sales, general management, credits, employees, purchasing, finance, distribution, publicity and promotion free of cost to the dealers.
4)      Providing general information: General information about the new techniques, changes taking place in the business circles, improvements to be made in the product, government policies and regulations marketing strategy based on changing marketing environment.
Sales Assistance: Producers provided the following kind of assistance to the dealers.
a)      Sales meetings: Sales meetings and conferences are organized which are specially designed for distributors and traders from time to time. In these meetings information is provided about the new products, sales policies and plan facilities extended by the producer to the distributor and traders etc.
b)      Training: Training is provided to the salesmen who are working with dealers to familiarize them with operation of the new product and to develop the selling skills.
c)       Price off or buying allowances: This is given basically on purchase made during a specified period of time, directly from the producer, on-off list or off-invoice basis. Producer will be encouraged to produce more.
d)      Buy-back guarantee: This guarantee means that the goods are sold to dealers on “sale or return” condition i.e. producers give buy-back guarantee to dealers for the new goods that have not been sold out.
e)      Special Services: Special services offered by producers include pre-pricing, categorization of products, packaging, dealer listing etc. which are helpful in stimulating the middlemen for large purchase from the produce.
f)       Contest for traders salesmen: Different types of contests are organized by the salesmen working with wholesalers and retailers on regional basis, state-wise or area-wise on the basis of best counter decoration or the highest sales made by each of them. The successful dealers are given attractive prizes.
g)      Special trade terms: Special trade terms give encouragement incentive to the middlemen which in turn are beneficial to them. These terms may be related to price, payment, credit, balance stock, allowances, purchased quantity, goods returned and financial assistance etc.
h)      Brand deal allowance: Brand producers or producers of particular product give special allowances to the middleman who deals exclusively in their brand or product. In other words, these allowances are given to the middlemen who deal in the single brand. This becomes very relevant for promoting new products.
i)        Building up sales plan: Objectives, strategies and sales programme are being set by the producers, by giving expert knowledge to the wholesalers and retailers in building up sales plans for launching new products and services. This will help the dealers to develop their selling skills and increase in profits.
Other Assistance and Incentives
1)      Dealer Contest: Contest are organized for dealers also, on the basis of highest sales achieved by dealers during a specified period to time. Certificates and prizes are given to the dealers who win the contests. These contests create healthy competition and motivate them for larger purchases of the newly launched products.
2)      Credit facilities: Short term credit facilities are extended; the dealers are motivated to keep maximum stock of the products. Producer’s use this promotional technique for sale of their products.
3)      Dealer premium: Producers operate premium plan for their dealers. Premium like watches, radios, TVs etc. are given to the dealers on the basis of highest purchases made during a period of time.
Role and Functions of Marketing Intermediaries
A marketing intermediary performs the task of transferring goods and producers to consumers. It creates time and place utilities and overcome possession gaps that separate goods from those who need them from those who manufacture them. Generally, when a business expands and the market to be covered is dense and large, it becomes essential to take assistance of marketing intermediaries. They bridge the gap between producers and consumers most efficiently. Fig. 10.1 shows a situation in which four producers of the same product must deal directly and separately with four consumers, if they do not appoint intermediaries. There will be 16 contacts. But this number will be reduced to 4 when marketing intermediaries are appointed.
A series of functions are performed by marketing intermediaries in order to market the products in an effective manner. The channel starts from the producer and extends to the last person who buys it, without making any significant change in its form. When its form is changed, another product emerges and a new channel is started. The various functions performed by marketing intermediaries are:
A.      Physical Distribution without the Help of Intermediaries.
B.      Physical Distribution with the Help of Intermediaries.
1.       Facilitates distributive systems: The intermediaries bring together the producers and ultimate users and facilitate the distributive system by performing following functions –
a)      They collect information about potential and current customers, competitors and other forces in the marketing environment.
b)      Suitable contacts are established with them by disseminating persuasive communications.
c)       Intermediaries minimize the number of contacts a producer needs to establish for reaching out to the ultimate consumers and bridge a gap between the producer and the consumer.
d)      They reach out agreements with consumers regarding price and delivery terms.
e)      They place orders with manufacturers.
f)       They break the bulk and meet the small-size needs of individual consumers.
g)      Intermediaries generally combine the products manufactured by different companies and offer them in convenient assortments. They match segments of supply with segments of demand.
h)      They also provide for the successive storage of physical goods.
i)        They oversee actual transfer of ownership of the products sold from manufacturers to the consumers.
2.       Stabilize the Prices: Price stability is another function performed by marketing intermediary. They conduct price negotiations with buyers on behalf of the manufacturers and assist in stabilizing the price. Many times the intermediaries absorb an increase in the price of the product and continue to charge the same old price for some time with the expectation that the price will come down itself by the inter-play of market forces. Sometimes, intermediaries also assist in arriving at the right price-the price which is acceptable to the producer as well as to the consumer.
3.       Provide Salesmanship: Intermediaries also promote the product. They help in introducing and establishing new products. In their territories. In many cases, buyers buy the products on the recommendations of the intermediaries. They design their own sales inventive programmes. Their persuasive selling and person-to-person communication boost the sales of the product. They provide effective pre-sale and after-sale services to the consumers.
4.       Assist in Merchandizing: Intermediaries assist in merchandizing the products by attractive displays and retail outlets. They around the interest of the visiting clients, reinforce the awareness about the product and lure their attention by silently explaining the salient features and benefits of the product. Intermediaries complement the selling efforts of the company.
5.       Provide Market Intelligence: Intermediaries have a role in providing market intelligence to the manufacturers. Having direct and constant contact with the customers, these intermediaries could better notice the changes in customers’ demography, psychology, media habits, changing preference and the entry of new brand. They feel the pulse of the market all the time and provide all the market information to the manufactures without any additional cost.
6.       Provide Finance: Intermediaries also share the financial burden of the manufacturers by providing the necessary working capital in the form of advance payment for goods and services. Often they pay the cash and lift the goods and manufacturers get their money much before the products reach to the ultimate consumers. Moreover, the intermediaries enhance the chances of sale by bringing the products close to the potential consumers.

7.       Transfer Title: Intermediaries also take the title of goods in their won name. Transfer of title to the intermediaries diffuse the transfer of ownership risks and enable them to take physical possession of the goods. This in turn enables them to meet the demand of the customers as and when it arises. Title can be immediately transferred to the consumers from the intermediaries without any further delay.