Page 223 - DMGT408DMGT203_Marketing Management

Marketing Management/Essentials of Marketing

Notes quality problems with the first cabinet supplier. Then, he ran short of a key component
after a mix up with a second supplier. He tried hard to avoid debt, but had to borrow
` 2.5 million from a bank. Prices for his cabinets and some components had risen, and
product returns had been higher than expected. The price and cost increases put pressure
on his margins, forcing Arvind to raise his prices (to those mentioned above). Despite the
price increases, his margins were less than the targeted 50%.
All things considered, Arvind felt good about his progress. The price increase does not
seem to have affected demand. The few ads and particularly word-of-mouth seem to be
working. Arvind receives an average of five calls per day, with one in six calls leading to
a sale. Arvind also feels the stress of log hours and the low pay. He is not able to pay
himself a high salary. His total salary for the year was ` 480,000.
Arvind reaches over his table and picks up his most recent projections. It seems this year
will earn a profit of about ` 9 lakhs. Perhaps he is going to make it. As he puts back the
projections on the table, Arvind’s mind drifts to his plans of introducing two new models
Minnow (` 168,000 per pair) and the Rostuk (` 340,000 per pair). He knows that there
is a considerable potential in the foreign market for his speakers. Should he use the same
direct marketing strategy for foreign markets, or should he consider distributors.
The dreamer is visualising.
Questions

1. Why did Arvind establish a direct marketing channel?
2. What objectives and constraints have shaped his channel decision? If you were a
consultant, what distribution channel strategy would you recommend Arvind for
domestic and foreign markets?

Self Assessment

Fill in the Blanks:
5. Zero-level marketing channel is also known as …………………… channel.
6. In a …………………… level channel, the manufacturer sells goods to the retailers, who in
turn sell them to the final consumers.
7. An arrangement where another company through its own marketing channels sells the
products of one producer, is known as …………………….
9.3 Channel – Terms and Conditions

The producer stipulates terms and condition and responsibilities of channel partners to develop
better mutual understanding and usually include price policy and trade margins, payment terms,
and territorial demarcation, guarantee and returns policy, and mutual responsibilities etc.
Price policy and trade margins should be fair and require manufactures to establish a price list,
trade margins and allowances. Intermediaries’ margins should be sufficient enough so they can
earn a reasonable margin for their efforts and high return on investment. Simplicity and clarity
help in avoiding strained relations between the produce and intermediaries.
Payment terms include any discounts on quantity and early payments. This may also include
guarantees producer offers against defective goods or breakages during transit, or price declines,
and producer policy on taking back date expired products.
Territorial demarcation establishes territorial boundaries and rights of company appointed
distributors or dealers. This avoids conflicts and strained relations between dealers operating in

216 LOVELY PROFESSIONAL UNIVERSITY