Comparison of Distribution Strategies for Automobiles and Soup
Distribution strategies are an essential part of the marketing mix; without a suitable strategy the process of effectively bringing together customers with the goods or services they wish to purchase maybe inefficient and a potential failure, potentially costing the firm both lost sales and incurring unnecessary expenses. To assess the way distribution strategies may be developed in an effective manner, two different products which would require different strategies, may be assessed; automobiles and soup.
The distribution strategy adopted by any firm will be the strategy of getting the goods from the firm or supplier to the customer. Whatever product is being sold, before developing a distribution strategy it is necessary to consider the characteristics of the product, the characteristics of the potential purchasers, the goals of the firm and the budget/cost of the item. The commonalities in terms of considerations, and while it distribution strategies may differ based on products, marketplaces and resources will be considered by looking at products.
When examining potential distribution strategy for automobiles, the first consideration may be the product itself. This is a large, heavy product, which will be an infrequent purchase by the majority of customers. As the target market, regardless of whether it is at the upper or lower end of the market, are likely to undertake a highly considered approach, duties purchase being a high ticket value, and potentially taking up a relatively large amount of disposable income (Kotler and Keller, 2011). The purchase process is likely to consider different influencing factors, not only initial cost, but also style, running costs, and available choices, before making a purchase decision, the distribution strategy needs to facilitate the provision of the type of information will be needed, at the same time as winning over the potential customer, and emphasizing any differentiation which may provide for a competitive advantage (Mintzberg et al., 2011). It is also likely that the target market will wish to experience the product before committing to it, purchasing a large item without previously trying or experiencing it may be seen as risky to many consumers (Kotler and Keller, 2011).
The main distribution strategy utilized by many automobile companies is through the use of specialized car showrooms. The usual approach is for showrooms to be set up under a franchise arrangement, which reduces the amount of capital that the organization has a tie-up in the downstream supply chain. However, with the vast majority of franchise agreements, only one automobile manufacturer's cars will be sold in a showroom. For example, buyers will go to a Ford dealer if they wish to buy a Ford car, a Toyota dealer to buy a Toyota car, and will go to a GM dealer if they wish to buy a GM car.
A difficulty with the sale and distribution of automobiles is the high level of capital where a high level of stock is held, as well as the difficulty moving that stock around. For this reason, the distribution strategy for the sale of new automobiles will usually have car showrooms provided with a number of display models, which may be used to demonstrate features of the car. In most cases there will also be demonstrated cars, which potential buyers can use to gain a driving experience. However, when the customer decides to buy a car, it would usually be ordered from central stock, or be built to order. For mass-market cars, such as Ford and GM, the franchisees will have access to a database of the car that have already been built and are on hand, which may help a customer decide whether or not to purchase a car which has ready been built, with the most common combinations of features prepared ready for buyers, or wait a little longer for a car that is customized specifically to their needs. For the luxury car market, for example Porsche, Rolls-Royce and Aston Martin, when a new car is purchased it is less likely to be from stock, with a higher proportion of the cars finished to individual customer specifications. The franchises for the different companies is also likely to be limited geographically, in order to attract the franchises, to ensure that the business opportunity is attractive and has the potential to be profitable to those franchise holder. The franchises require a high level of capital investment, so the potential for a good return is a necessity (Hooley et al., 2007). This is also facilitated in the pricing strategy that is set so the franchises can make sufficient profit (Kotler and Keller, 2011).
The way in which the cars are presented to potential buyers will be important, as this will impact initial impressions (Kapferer, 2012). It is this reason that many cars are presented in sparkling condition, with shining paintwork, a luxury car needs to exude luxury and comfort, where as a car that is sold to a target market where the principle concern may be space may be displayed in a manner that emphasizes the room inside the car (Kapferer, 2012). The buying the car is made to be a pleasurable experience, the buyers will often being offered drinks. The showroom may also be designed to appeal to the values and desires of the target market, aligning the sales process with the product design knowledge about the buyers and the process. In recent years there has been an increased use of the internet, as a cost effective distribution strategy, but this requires the buyer to already have a knowledge of the car they which to purchase (Chaffey, 2009). So, while there is an established distribution strategy for most firm it is also one that is adapting and changing.
The distribution strategy for soup will vary greatly due to the nature of the product and the purchase. Soup is a relativity cheap product; it takes only a very small proportion of disposable income, making it much more affordable. Soup may be purchased multiple times a year, and several may be purchased at the same time.
To be successful, firms such as Heinz and Bachelors, the firm needs to sell a high volume of soup; the revenue and profit on each can, packet or tub of soup sold will be very small, and the profit goals are achieved only by selling a large amount of goods, where as the automobiles offered a large amount of profit per unit, and required lower sales due to the higher revenue and profit per unit.
The main distribution channels, in order to ensure there is a large accessibility to the target market, are inevitably through supermarkets such as WalMart and Target and grocery stores. This reason many companies, for example Heinz, benefit from an ongoing relationship they have with retailers, as they are often supplying many other products, from condiments to canned meals. Where a company is already doing business with a customer, the addition of further items is often much simpler compared to the creation of new customer accounts. This reason, distribution strategies for existing food suppliers are likely to build on the existing customer relationships and distribution channel/strategies.
From a practical perspective, it would not be viable for the large organizations to deal directly with every retailer. While the companies may deal directly with retailers such as WalMart, who purchase very large amounts of goods, the soup is likely to be distributed to smaller retail chains and independent stores through the use of wholesalers. The wholesaler, or middleman, is able to deal with the smaller scale customers. In some cases the retailers may go to wholesalers, such as Booker, and purchase goods, transporting themselves back to their premises, larger retailers may have contractual relationships and place orders which are delivered.
The soup that is sold will be placed on shelves, with companies competing for the most prominent positions. It is known that the positioning of an item on shelving with impact on its sales level, with the most profitable areas being the end of the aisles, followed by shelves at eye level along the aisles. As the end of the aisles is known to be very favorable, it is not unusual for grocery firms to enter into rebate arrangements in order to gain, on shelving space. It is known within marketing that where an individual try the product and likes it, it is likely to stimulate repeat purchases. Therefore, increasing the potential for an initial purchase, especially by increasing the chances of a potential impulse purchase, may lead to repeat purchases (Kotler and Keller, 2011). The purchase process as it may also be argued as less involved for the consumer, as there is less risk involved in purchasing can of soup for only a few dollars or less that you do not like, compared to investing tens of thousands of dollars in a car that you do not like.
The distribution strategy is also likely to be impacted by the seasons. During winter seasons there is likely to be greater…