Procedure for Selection of Effective Trade Channels
Every business should select its trade channels wisely. But the selection of the Trade channels is not so easy task as we said. Business should carefully analyze many factors before selecting the trade channel. Generally the following steps are involved in the selection of trade channel.
(1) Analysis Of The Product : The first step is the analysis of the product for the determination of its uses or characteristics. The characteristics of the product aid in deciding on the channels necessary for its marketing and as such, at first, the manufacturer is to analyze the products. This is because all kinds of products are not susceptible to the same kind of outlet. For example, classifying the products as convenience, shopping or specialty will dictate the type of outlet that should be employed for distribution of the goods.
(2) Determine The Nature And Extent Of The Market : The second step is to determine the nature and extent of the market in which the products are offered. The manufacturer shall have to identify the potential buyers his products, the number of the buyers, their living place, likes, dislikes, preferences, prejudices, buying motives and habit and the manner in which they are at present satisfying the wants that the manufacturer’s product can satisfy. The determination of these factors will help the producer to select a channel which will make it possible for the users to find the product without difficulty and the producer to realize better profits and sales than those recognize these factors.
(3) Review The Existing Or Available Channels: At this stage the manufacturer have to review the existing or available channels used by manufacturers of competing products. The various kinds of channels should be thoroughly appraised by the manufacturer in relation to the objectives he is seeking to attain.
(4) Appraising Of Sales: The fourth stage involves the appraising of sales, cost and profit possibilities of each channel. When different native channels are open to the manufacturer he should then appraise or evaluate the sales volume that can be attained, the costs that will be incurred and the amount of profit that can be realized from the use of each channel. It may be found that a certain channel has the greatest sales potentialities but a close examination of the costs involved may indicate that profits would be jeopardized. Consequently, the manufacturer should choose that channel which will maximize his profits.
(5) Conduct Of A Market Survey : This step embraces the conduct of a market survey to determine the customer’s and middle-men’s opinions regarding the channels employed by leading competitors. Here the manufacturer, through a market survey, ascertains the opinions of potential consumers regarding their previous buying experiences for similar goods. He may also obtain information regarding competitors’ mistakes through interviews with the representative outlets used by competitors and this information helps him guard against similar mistakes himself.
(6) Defining The Nature And Extent Of Co-Operation : The sixth step calls for defining the nature and extent of co-operation which the manufacturer expects from the channels chosen. In the sale of his product the manufacturer expects co-operation from the middlemen because it would be a futile attempt to maximize profit without such co-operatic n. So he is to determine how much co-operation he will from using a particular trade channel.
(7) Review And Appraisal Of Channels Chosen: The last step is the review and appraisal of channels chosen. After a channel has been selected, the manufacturer should continuously appraise the channels in the light of marketing developments. The relative effectiveness of available channels may change considerably over a period of time.