Distribution Channel of Personal Computer

A computer company has decided to enter the domestic P.C market. Previously the company used to sell only to industrial buyers through direct sales people and companies personnel located at different cities and provided after sale service. The company currently has about 80 service centers and their territory is uniquely defined. The management feels that existing sales force and channel design would not be sufficient for the home P.C market. Propose a channel design using your conceptual understanding of channel design framework.

Key points to be analyzed :-1. The company is already familiar with business market.2. It wants to enter now into the consumer market. 3. The targeted consumer market is new for the

company. In other words the company don’t have any experience over this particular segment of market.

4. The company is already having 80 service centers which the company can also use for delivering to this particular segment.

5. Selling of computer is also attached with the after sale services.

The requirement of new distribution channel……WHY ??

1. Today computers has became a rapidly used consumer product and the company is targeting for consumer market.

2. Now the consumer market is very large and wide. 3. It is not possible for the company to cater the whole

consumer market with only 80 sales outlets/service centers.

4. The company does not have any experience of distributing to the consumer market with its existing distribution channel.

5. So it is very much necessary for the company to designing a new distribution channel.

Designing a new distribution channel.

Designing a marketing distribution channel evolves four major areas to analyze.1. Analyzing customer’s desired out put level.2. Establishing channel objectives &

constraints.3. Identifying and evaluating major channel

alternatives. 4. Evaluating the major alternatives.

Identifying the customer segments.

•Now a days large no. of consumer visits the Personal Computer market.

Market Attractiveness/Environ

ment

•The are large no of companies are available in the market for the same product. So competition is very high. •Competitors are also targeting same customers.

Competitive Strength

•Due to variation in the configuration of P.C. Customer wise requirement also varies.

Product Requirement

•As a P.C is an electronic component malfunctioning and warranty is also attached with the selling.

Service Requirement

Target customers.

As computer is not perfectly a consumer product which every consumer can buy and use. And depending over previous analysis it can have some specified customers whom the company will be targeting. The consumers may be :- • Students• Persons for their personal uses.• Different press for their graphic work.• Mobile stores for dealing with various mobile related

software.• Small shops for their record/data keeping purpose.

Analyzing customer’s desired service output level.

1. Lot Size

• Basically the consumer market of computer will prefer a channel that will cater a small lot size (one, two or smaller no.)

2. Waiting time

•A consumer will prefer for immediate delivery of computer just after giving the order. •In case of sale form retail outlet he will prefer for readymade product.

3. Special convenience

•For a computer the customer will prefer for a home delivery.•For a laptop the customer may prefer to carry by own.

4. Product Variety

•As different configuration of computer is possible and the cost and performance of computer depends on it. The customers can have varieties in the product requirement.

5. Service Requirement

•Being an electronic product. The computers needs after sale services. •So the designing of marketing channel should must be capable of providing after sale service.

The Framework

COMPANY CUSTOMER

1. Lot Size2. Wanting Time3. Special convenience 4. Product variety5. Service Requirement

Establishing channel objectives & constraints.

1. Minimizing the total channel cost and still provide desired level of service output.

2. Effective planning to choose the target market and finding the best distribution channel for each target market.

3. Minimizing shipping distance and repetitive handling.

4. Channel objectives must be to cater the larger environment (The whole consumer market of P.C) .

The Framework

DISTRIBUTION CHANNEL

All channel objectives must be implemented over the whole distribution channel.

Identifying and evaluating major channel alternatives.

• Here the company is already having a channel for business market. The company can prefer for this channel also for distribution directly to customers, but here the no. of customer will be very less and the desired service will not be achieved.

• Now there are four levels of distribution channel. 1. Level zero. 2. Level one. 3. Level two. 4. Level three.

Choosing the proper level. The company’s own distribution channel.Disadvantage:- Very few no. of customer

Catering to macro level is not possible.

Managing only 2 intermediaries will not also properly serve the

problem.

Being a consumer good

and having a large market

this level will be appropriate.

Applying selective distribution strategy

All the consumer in a market do not use a computer and it is not also a good which very few consumer opt for. So the company must not looking for an exclusive distribution as well as for an intensive distribution. It should consider a selective distribution where it will be using the intermediaries which deals with computers.

Evaluating the major alternatives.

Evaluation of the major alternatives is basically dependent over two criteria

1. Economic criteria2. Control and adaptive criteria.

Economic Criteria

Companies own agency

Other agencies

cost

Sale level

Equilibrium pt. (A)

A

•Fixed cost for companies own agency is lesser as it is already having a channel.•At A channel cost through companies own network and other agencies network is same.•After A cost of other agencies will be lower for higher level of sale. •Below A companies own agencies will cost less for same level of sale. •Now to choosing a path depends over the market demand. •Normally being a consumer good the market demand is always high.

Control and adaptive criteria.

•In case of a Level 4 distribution channel a huge market can be served it is right. But it engages lots of people and agencies.•So controlling of these agencies is very important in the distribution channel. •And if there any change occurs in the channel or product or service the adaptive criteria also must be met for all the channel intermediaries.

Complete channel designing framework.Target Group Slide no. 6 & 7

Buyer’s need Slide 8 & 9

Retailer’s need •The retailer can store large no. of computer stock point. So the company must be able to deliver in bulk.•Different computer features also comes in retailer’s need.•As he purchase in bulk discount rate must be there.

Legal aspect In order to avail the tax benefit the company should have one warehouse in every state.

Distribution need •Manufacturing of computer requires very sound technical application and skillful work so it takes lot of time for manufacturing.•So the demand must be forecasted and orders must be made earlier form the retails.

Feasible alternativeSlide 13 & 14

The Complete channel

Company

Company

warehouse

Wholesaler Jobber Retailer Consum

er

Direct Selling /servicing by mailing and telemarketing.

Buyer needs

Retailer’s need

Distribution need / Functions to be performed by the channel.