6. Marketing Channels Add Value Factors that can affect customers\' perceptions

Question

6. Marketing Channels Add Value

Factors that can affect customers' perceptions of a product or service offering include:

   The consumer services offered: information or advice, the attitude of sales personnel and the availability of a credit.

   The convenience of the outlet in terms of opening times and locations.

   The depth and assortment of an offered stock.

All these factors above are provided and controlled by the middleman (intermediaries) and are critical in adding value to the basic product.

Types of Middlemen

There are a number of different types of middlemen acting in marketing channels. There are important differences between the most common intermediaries:

   Agents - Agents do not take ownership or physical possession of the products they represent. They act on a producer's behalf and take a commission on any sales they negotiate with a third party.

   Producers' agents - Producers' agents tend to work for a bigger amount of different producers and with non-competitive or complementary products in a specific geographic area. They are normally involved in delivering the sales function.

   Sales agents - Sales agents usually deal with one producer and have to deliver a full range of marketing activities for this concrete client (e.g. creating distribution, pricing and promotional policies). These agents are commonly used by small companies with limited resources or by producers that are moving into an unknown market, especially which is located overseas (here: the sales agent can provide essential local knowledge).

   Brokers - Brokers strive to bring potential buyers and sellers together by negotiating specific contracts. They are supposed to not have a long-term relationship. Brokers, like agents, do not take ownership, nor do they physically handle the product and they act on a commission basis.

   Wholesalers - Wholesalers, on the contrary, take title to the goods they handle and are involved in the physical distribution of those products. They sell mostly to other middlemen or directly to industrial, commercial or institutional customers rather than individual consumers. There are two types of wholesalers: full service wholesalers and limited service wholesalers. The first ones offer a broad range of marketing activities for their suppliers and customers (purchasing, sales, warehousing and transportation of goods). The latter ones cut out non-essential services and as a result are able to offer cost savings to customers.

   Retailers - Retailers sell goods and services directly to the end consumer. Retailers take title to the goods they stock which is a crucial factor in their relationship with their suppliers.

There are a number of other, less common middlemen. These include:

     Purchasing agents – These agents usually have a long term contract with an organization on whose behalf they will act. Their responsibilities may be wider than merely purchasing on behalf of the company but may also include receiving, inspecting, storing and shipping the goods to their client.

     Resident buyers – Resident buyers are found in sectors such as the clothing industry. They are to be found in major clothing markets, for instance, London, Paris, or Milan. They provide essential information to smaller retailers and will buy merchandise on behalf of these clients. (http://en.wikipedia.org/wiki/Marketing_channel)

Visit a wine retailer (like The Wine and Cheese Gallery, ABC Fine Wine & Spirits, or a small independent liquor store in your area, or pick some other store selling products with a long complex distribution chain.) Look at the number of brands and varieties; look at the countries, regions, and vineyards. Research value chains and distribution in the wine industry. Trace the value chain. Describe how the product gets from a vineyard in France or California to the store in Gainesville. Be sure to discuss who is the “customer” at each point in the chain? What value is added at each point? How does the added value affect the price of the product?

Explanation / Answer

I would like to talk about ABC fine wine and spirits. ABC has many varieties and brands in selling. They are,

Red wine – There are multiple varieties in Red wine

Shop Merlot

Shop Pinot Noir

Shop Zinfandel

Shop Shiraz

Shop Red blend

White wine – There are multiple varieties in White wine

Shop Chardonnay

Shop Sauvignon Blanc

Shop Pinot Grigio

Shop Riesling

ABC fine wine & Spirit started in Florida United states of America and slowly they started operating in many locations and many states. Currently the stores are operated in more than 150 locations of United States of America. When you say Wine you think grape since the wine is made of grape. The value chain of Wine industry involves many people like Winemakers, agents, wholesalers, distributors, retailers, merchants and atlast the consumers. Each value chain has its own customers.

Customers at each value chain level

Value Chain – Consumer at each level

Winemakers – Wholesalers – Wholesalers are the ones who locate the appropriate people to buy the fine wine and distribute in the market

Wholesalers – distributors – Distributor is the representative of the manufacturer. Distributor always helps in promoting the products and services

Distributors – Agents – Agents are the ones maintains the proper balance between the demand and supply and ensures that when there is more demand they arrange for more supply

Agents – Retailers - Retailers are the ones who sells the goods directly to the consumers and retailers are the face of product and maintains the company’s brand image

Retailers – Consumers

Each value added has its own contribution to the price of the product. When the Wholesaler buy the product from fine winemakers for good price and sells it to the wholesalers who has good distributors and Agents who can really promote the wine they have and contribute to the sales of the wine, the demand for wine increases and supply as well. This can contribute for the success of brand helps in enhancing the price of wine. It helps in increasing the price of wine as well and helps in better profits.

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