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Unit 9: Managing Marketing Channels

firms, they also carry competing brands and manufacturer cannot depend on them to push a Notes
specific brand. They generally avoid stocking expensive and slow moving items and may seek
special incentives. In case of industrial channel three (R), an independent firm works as producers’
representative or agent on a commission, usually sells complimentary products of several
companies in specific territories. The agent does not acquire ownership title to the products.
Agents offer the advantage of their considerable technical and market information and have an
established number of customers. They can be very useful for seasonal industrial products,
more so because agents are paid only commission on sales. When the company cannot afford a
full-time sales team, agent can be an asset.
The problems include little control on agents, because of commission system they often focus on
large buyers, and may not adequately follow up customers when it reduces productive selling
time.
Using two intermediaries, selling agent and industrial distributor(s) is useful when manufacturers
wish to operate in large geographic areas and do not want to employ sales people, demand for
products is seasonal, or when starting coverage of new geographic area without expanding sales
force.

Case Study Bypassing Practice

rvind Sood, like most entrepreneurs, dreamt a lot. He dreamt customers would
eagerly phone Woodstock Acoustic Systems in India. To order the latest, custom
Amade stereo speakers. He saw demand rising and rising, cash flowing, and his
technicians producing superior quality products that were delightful and appreciated by
the Woodstock customers, and favourable word-of-mouth spreading.
Arvind had a degree in mechanical engineering from Delhi School of Engineering, but his
hobby was always acoustics. Like most entrepreneurs he had taken a long time in
developing his dream. It was during the course of completing his studies in engineering
that he became interested in audio science and devoted time to his hobby. Just after
completion of his studies, Arvind started working on creating stereo speakers in his
garage. He named his enterprise Woodstock Acoustic Systems. He would design a pair of
speakers and invite a couple of his friends to listen and give their opinions. Occasionally,
on the recommendations of his friends, one or two customers would come and after
demonstration would buy a pair. After a year, his parents told him that he had spent
enough time working on creating his ideal stereo speakers, and now he should look for a
job to start his career.
It was a Friday, and Arvind had spent nearly ` 50,000 taken from his parents and was down
to his last ` 10. He was seriously contemplating to take up some job because so far nothing
fruitful had come out of his dreams. He looked fondly at the two pairs of speakers he had
finished designing only a week back, when his landline phone rang. The voice said, he
was Ajay Suri and had heard about his speakers from some friends. He asked for an
appointment on Monday, the 15th June 2001 to discus few things regarding his stereo
speakers. The meeting was fixed for 4 pm on Monday at Arvind’s place.

All through, Arvind had focused on creating something delightful for “audio addicts,” –
the people who love to listen to music and appreciate high-quality stereo equipment at a
reasonable price. These people were fastidious about sound quality but were unable to
afford very expensive brands of well-known companies such as Bose or others. They were
young, well educated, upwardly mobile in their careers, and would be affluent in about
6-10 years, and would prefer to buy a set of speakers now rather than wait.
Contd...

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