Background
The founder of Kez’s Kitchen, Keren Carp (Kez), stated by cooking a few cholate cookie chips and selling them to people in their neighbourhood in 1991. In time, the upstart has grown into a mega business supplying customers across Australia with Cereal, premium biscuit, and snack brands. Kez had a unique recipe that she used to produce delicious chocolate-chip cookies which she started selling door to door. The customers were impressed by the taste of the products, and they started making ever increasing orders. In one of the orders, the customer requested a product Kez could not produce, and she requested her mother to produce it. The customer was more than satisfied, and the word of mouth advertising brought in new orders spurring mother and daughter to move from baking in their house to rent a proper kitchen in which they could comfortably handle the customers’ requests. In 1994, Kez’s brother, Michael, joined the business and helped it grow including venturing into the gluten-free market. The company wants to introduce a new product in the market, and the following sections will discuss some aspects of marketing channel designs that would help the company to achieve it mission and objectives.
Marketing channels are important as they play a significant role in determining the appropriate link between the producers and the consumers (Hutt, & Speh, 2007). In other words, marketing channels determine the availability of a business’s products to the final consumers.
In deciding on the marketing channels design of the Kez’s Kitchen, it is important to ensure that the company gathers all the necessary information on the shopping patterns of the target market (Yang, Jia, & Cai, 2014), In the Australian market, the consumers of Kez’s kitchen products access them on retail shelves of both big retail outlets and smaller ones. Increasingly, the consumers access the products through e-commerce where they view and order and pay products from retailers like Walmart and Amazon on their mobile devices, and they are delivered at their doorsteps. The internet provides many avenues for companies including advertising and making the actual products accessible to the consumers (Delloite 2018).
Once Kez’s Kitchen gathers information on the shopping patterns of the consumers of its products, it should take steps to promote the availability of the company’s Cereal, premium biscuit, and snack brands. Most consumers in the Australian market use devices such as mobile phones and tablets to access social media sites or company websites. The most important channel for advertising its products would, therefore, be the internet especially on the social media sphere and the company’s website. While the company is advertising its products, it should ensure that it has a proper compilation of the features of the products on offer.
It is important that as the Kez’s Kitchen advertises its products, it ensures that they are available and that the retailers have enough inventory to ensure that they can supply the products promptly. On the shelves, it is advisable that the company ensures that its products are placed next to competitive product so that the consumers are given real choices. The company should establish processes that ensure that once the consumer orders for the products the orders are filled in efficiently and effectively. The product ordered should be Transported to the nearest available access point for the person making the order. The final step of the distribution tasks for Kez’s Kitchen is ensuring the establishment of a procedure for product return (Gerrit et al. 2010)
Marketing Channel Design
There are various ways in which Kez’s Kitchen can get its products from the kitchen to the consumer. The company may decide to deal directly with the consumer or pass through intermediaries to reach the same end (Tan & Dwyer 2014). The alternative channel structures have various dimensions including some levels, kinds of intermediaries at each level and the intensity at each level. Regarding the number of levels dimension, the company can decide to sell directly to the consumers in a two-channel process or sell the products to other suppliers with a chain that can involve five intermediaries before the product can get to the final consumer. In each of the levels, the company can decide to use more than one intermediary. The phenomenon where some such entities are operating within a specific level are referred to as channel intensity. Intensity is categorised depending on the participants in the level. Some companies allow the distribution of their products to any intermediary within the level; a condition referred to as intensive distribution. On the other hand, the company may decide to distribute to some specific intermediaries locking other possible participants out of the loop; a condition referred to as Selective distribution. The final category in the concept of utility is a situation is an exclusive distribution in which the company decides to distribute to only to a selected few entities (Kovalenko & Piddubna, 2016).
Evaluation of the variables affecting channel structure, i.e. market, product,company, intermediary, environmental and behavioural variables
The choice of channel structure is determined by six main factors (Sreenivas, & Srinivas 2008)
- Product Variables
- Market Variables
- Intermediary variables
- Behavioural Variables
- Environmental variables
- Company variables
There are various factors that would affect Kez’s Kitchen including market geography, the behaviour of the market, the relative size of the market, and the density. Given the fact that Kez’s Kitchen supplies their products all over the country, it would be very expensive to use to distribute the products to the consumers. The company needs to choose a channel structure with intermediaries which would make the distribution of the product less expensive. Kez’s Kitchen has customers across the face of Australia who will need the new products on offer. A big market means that distributing the products directly to the consumers will be very expensive and as such, the company needs to choose to distribute its products through intermediaries. The density of the market refers to the ratio of buying units per land unit area, with the implication that the higher the density, the less the need for intermediaries and vice versa. Finally, the issue of who buys, when they do it, where and how all affect the choice of a distribution channel structure.
There are various product variables that affect the choice of a channel structure including the perishability of the product, size of the product, weight, and unit value. The products produced by Kez’s Kitchen are not bulky, perishable or technical and as such do not need direct distribution. However, given that it is a new product being introduced into the market, it would serve the company well to use a short channel structure and only distribute to a few selected intermediaries to enable the company to effectively promote the products. Other than for purposes of concentrated promotions, the rest of the products should be distributed using the necessary intermediaries so that it can effectively reach the consumer.
Advertising and Promotion
In choosing the optimal channel structure, the focus should be on the efficacy of the channel and its cost-effectiveness. The channel selected should enable the company to get its products to the consumers effectively and at the lowest cost possible. The marketing field has yet to come up with foolproof means of selecting an optimal channel structure for businesses, but there are various approaches proposed which can help the company in selecting the next best in the given circumstances. These approaches include: “Characteristics of Goods and Parallel Systems” Approach, financial approach, Transaction Cost Analysis approach, Management Science Approach, and Judgmental-Heuristic Approach.
In “Characteristics of Goods and Parallel Systems” approach, the channel manager uses the product variables such as gross margins, adjustment, replacement rate, searching time and adjustment. On its part, the financial approach considers channel structure as an investment and thus calculates the long-term return on the resources invested in it. Transaction cost analysis approach focuses on the assets involved in the distribution channels and compares the cost of the direct distribution by the company relative to using intermediaries. In the same vein, the management science approach the manager collects information as many variables as possible and develops an equation in a bid to develop predictive models for selecting the optimal channel structure (Lipowski & Angowski 2016). Finally, Judgmental-Heuristic Approaches are potentially useful means deciding on the most appropriate channel structure that a company can use. A greater proportion of the method utilises “guestimates” and common sense measures, but it also utilises modern management strategies that calculate the cost implications of the various channel structures (Borowska 2015).
In selecting the prospective channel members, channel manager does three things: uses various means to identify the prospective channel members, applies a set of criteria to determine the suitability of the said channel members and then works at developing and maintaining a working relationship with the selected channel members (Kovalenko & Piddubna 2016).
The channel manager has various sources of information including field sales organisation, customers, trade fairs, trade sources, Reseller enquiries, and advertising. Salespeople in the field are the best sources of information for the company as they are in direct contact with the intermediaries and the consumers. During tradeshows and trade fares a person can learn a lot about the intermediaries and the various distribution channels available. At the same time, a channel manager can access information on prospective customers from publications that cover issues in the industry (Yan 2010).
It is virtually impossible to capture all the criteria that would be needed in making perfect choices of the channel elements. However, it is important for companies to develop an exhaustive list of criteria that it can use to test the viability of prospective channel members (Dent 2014). A few approaches to the formulation of the criteria list have been postulated, with Pegram’s criteria being the most useful. The criteria include analysis of the financial and credit situation of the prospective intermediary; quality and quantity of the Salesforce working for the prospect; product lines; market coverage; reputation among others.
Distribution Strategy
Customers are in need of clear differences between products to make it easy to make choices. Product differentiation can be achieved through various means including unique packaging, price levels, value, and convenience. Product differentiation not only serves the producer, but it also serves the channel elements (Wiid 2017). It is important for the company to invite the inputs of inputs of the channel participants in the production and designing of new products as they are likely to be more receptive of handling products in which they have had some input. Also, it is important to ensure that the new products will add value to the intermediaries and they are confident that by handling it, they will benefit (Bakker & Raabe 2015).
Product positioning is a concept that deals with the use of various strategies to ensure that customers perceive the products differently compared to the competition. Kez’s Kitchen must ensure that its products are differentiated with the competitors so that it can be easy for the consumers to make the purchasing choice easily. In product positioning, it is important for the company to involve the channel elements every step of the way including the time of introducing the product into the market and in cases of any changes such as price changes or withdrawal of a product from the market (Szopa & Pe?Ka?a 2012). Brand strategy should also align with the overall strategy which includes the support given to intermediaries and channel elements (Frazier 2009). Once the company identifies the potential prospects, it should go right ahead and make contact with the said prospect and enter into an agreement. The company should then find ways of motivating the intermediary to provide the best distribution service to the company. There exist many incentives that would act as a ma eans of securing a prospect including product line, promotions and advertising, friendly relationship and fair dealing.
References
Bakker, D., & Raabe, T., 2015, Vertical brand portfolio management: strategies for integrated brand management between manufacturers and retailers. https://public.eblib.com/choice/publicfullrecord.aspx?p=1965925.
Borowska, A, 2015, Outdoor markets as a regional food distribution channel in Poland between 2004 and 2013. Annals of Marketing Management & Economics : International Journal. 1, 5-14.
Dent, J. (2014). Technology distribution channels: understanding and managing channels to market. https://www.books24x7.com/marc.asp?bookid=68027.
Frazier, G. L., 2009, PHYSICAL DISTRIBUTION AND CHANNEL MANAGEMENT: A KNOWLEDGE AND CAPABILITIES PERSPECTIVE<sup>*</sup>. Journal of Supply Chain Management. 45, 23-36.
Gerrit H, Van Bruggen, Kersi D. Antia, Sandy D. Jap, Werner J. Reinartz, & Florian P, 2010, Managing Marketing Channel Multiplicity, Journal of Service Research 13, (3), pp. 331 – 340. https://doi.org/10.1177/109467051037560
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Kovalenko, V. V., & Piddubna, V., 2016, Implementation of innovative marketing channels of the promotion of banking products. Public Policy and Economic Development : Scientific and Practical Journal. 2016, 209-217.
Lipowski, M., & Angowski, M., 2016, Gender and consumer behaviour in distribution channels of services. International Journal of Synergy and Research. 5, 45-58.
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Szopa, P., & Pe?Ka?a, W., 2012, Distribution channels and their roles in the enterprise, Polish Journal of Management Studies : PJMS. 6, 143-150.
Tan, J., & Dwyer, L., 2014, managing distribution channel confict in the hotel industry. International Journal of Marketing and Business Communication. 3, 9-19.
V., 2018, Meaningful brands: Connecting with the consumer in the new world of commerce, Deloitte, Viewed 9 October 2018 https://www2.deloitte.com/content/dam/Deloitte/au/Documents/consumer-industrial-products/deloitte-au-cip-meaningful-brands-report-2018.pdf.
Wiid, J. (2017). Channel management. https://search.ebscohost.com/login.aspx?direct=true&scope=site&db=nlebk&db=nlabk&AN=1647438.
Yan, R. (2010). Product brand differentiation and dual-channel store performances of a multi-channel retailer. European Journal of Marketing. 44, 672-692.
Yang, Z., Jia, F., & Cai, S., 2014, The performance implications of perceptual differences of dependence in marketing channels. Asia Pacific Journal of Marketing and Logistics.
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