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Marketing Channel Design of Royal Sugar (Part 01)
http://www.reportbd.com/articles/3040/1/Marketing-Channel-Design-of-Royal-Sugar-Part-01/Page1.html
Asif Rahman
I m studying B.B.A at a Private University and majoring in Marketing. 
By Asif Rahman
Published on 23 November 2012
 
Distribution Network of Royal Sugar. Challenges in Designing Marketing Channel. Implementation of the Design.

Marketing Channel Design of Royal Sugar
Introduction

ROYAL’s mission is to enrich the quality of life of people through responsible application of knowledge, skills and technology. It is committed to the pursuit of excellence through world-class products, innovative processes and empowered employees to provide the highest level of satisfaction to its customers. Royal Sugar will manufacture best quality sugar which does not have any harmful elements.  

Mission and Vision

  • Attain a high level of productivity in all its operations through effective and efficient use of resources, adoption of appropriate technology and alignment with our core competencies.
  • Develop its employees by encouraging empowerment and rewarding innovation.
  • Promote an environment for learning and personal growth of its employees.
  • Provide products and services of high and consistent quality, ensuring value for money to its customers.
  • Encourage and assist in the qualitative improvement of the services of its suppliers and distributors.
  • Establish harmonious relationship with the community and promote greater environmental responsibility within its sphere of influence.
Value of the company
  • Quality
  • Customer Focus
  • Fairness
  • Transparency
  • Continuous Improvement
Distribution Network    
The company maintains strategically located territory managers in 25 different locations across the country. It has developed an advanced distribution system through its more than 350 skilled and trained manpower and a large task force over 25 vehicles. The distribution system will be capable of handling continuing volume of diverse range of products from the various businesses. As Royal Sugar product is sugar, from market research we found that people don’t want to spend a lot of time in buying sugar. Brand loyalty is also not much in terms of buying sugar. Few important things are its availability, product quality, size and packaging etc.
 
Challenges in Designing Marketing Channel
In designing our product’s marketing channel there are two major tasks involves:
A.    Designing the right channel
B.    Implementation of the design
A.    Designing the Right Channel

Segmentation
Royal Sugar market segment will consist of mass consumers, particularly lower, middle and upper-middle class people.   

Positioning
Next Royal Sugar will define the optimal channel to best serve the segmented customers. In other word Royal Sugar will position or configure the channel. Royal Sugar will position the channel by –
  • Identifying the necessary channel flow
  • Determine the optimal channel structure
Royal Sugar will perform 8 generic channel flows - Physical possession, ownership, promotion, negotiation, financing, risking, ordering, and payment. In determining the channel structure we will decide on who will be the channel members and how many channel members will be involved in the channel. Our channel will be consisting of manufactures, wholesaler, and retailers who will deliver the products to the end-user.

Targeting
After determining the market segment based on their service output demand, we will target mass customers who are very potential to buy the product. Since Royal Sugar product is sugar and it’s especially for lower, middle and upper-middle class people. Royal Sugar are not saying that rich people would not buy our product but rich people are very health conscious. They prefer low calorie sugar rather than normal sugar.

B. Implementation of the Design

Identifying Power Sources
In the distribution channel, Royal Sugar are the manufacturer and we will serve as “Channel captain” and will exercise power to ensure that all the channel members perform as per their requirement.

Identifying Channel Conflicts
Since Royal Sugar are using intensive distribution and a number of retailers are involved in our channel, the conflict would be must. There is the possibility of conflict regarding goal, domain and perception.

Channel Coordination
In this step Royal Sugar will harmonize all the channel members’ actions, performance and interest in such a way that the end-user is not affected and the marketing channel in action is regarded as the most effective and efficient channel.

As a manufacturer Royal Sugar have 3 alternatives to distribute our product in the market.

Producer > Consumer
Producer > Retailer > Consumer
Producer > Wholesaler > Retailer > Consumer

Royal Sugar are selecting the producer to the consumer channel because we will be distributing the product directly to the business consumers. There are so many restaurants, event Management Company, we would directly sell our product to them. We are going to implement a 2 level channel whereby we will sell the product to the retailers and they will directly sell to the consumers. Royal Sugar will use this type of channel for shops like agora, nondon etc. For the mega cities we will use the wholesalers and retailers for the distribution of the product. Our main target is to sell the product in the mega cities. In order to make the product available to the consumers we have to use both the wholesaler and the retailer.  Since Royal Sugar are using an intensive distribution in our country to cover up all the 64 districts of our country we will appoint wholesalers in the mega cities.

Efficiency Template
The efficiency template describes the types and amounts of work done by each channel member along with importance in performing the marketing flows.

In our marketing channel, there are 4 channel members.
  • Manufacturer refers to number 1 in efficiency template
  • Wholesaler refers to number 2 in efficiency template
  • Retailers refers to number 3 in efficiency template
  • End user refers to number 4 in efficiency template
From the efficiency template, cost for payment flow is high, cost for physical possession, ownership, promotion and risking flow are medium and other flow’s cost is low. The manufacturer (we) has the highest cost of operation and they also have highest profit margin share. Second highest cost of operation and second highest normative share belong to sales branches which ultimately belong to us. Finally, the third highest cost of operation and normative share belong to the retailers. NPS- Normative profit share-the percentage that measure of how much contribution each member is making in relationship to the cost is known as normative profit share.

Channels Flows

The work of the channel includes the performance of several marketing flows. The term “flows” rather than function is because the work flow through channel is being done at different points in time by different channel member. It is mentioned that we will perform eight generic channel flows - Physical possession, ownership, promotion, negotiation, financing, risking, ordering, and payment.

Service Outputs
Service Outputs refers to reducing end user’s search, waiting time, storage and other cost. It also states as value added services of a channel to satisfy its customers. A channel existence and its feasibility are ensured by providing service outputs in regard to satisfy its ultimate users. Customers are now more focusing on having more service output and the channel intermediaries should enhance their efficiency to satisfy the customers without sacrificing the service outputs. Service output ensures the smooth continuation of the marketing channels.

Our targeted audience groups are as follows:
  • Business (restaurants, event management, bakery, ice cream factory)
  • Mass people
On the basis of our target consumer Royal Sugar will be ensuring the convenience of our product to them. For this Royal Sugar have to encourage our intermediaries to provide the customers with proper service outputs so they remain satisfied with our product. For a product like sugar service outputs are very important. Those are discussed below:

Bulk-Breaking
Customers tend to buy in different quantities. The wholesalers will buy in huge quantity from us and then they will sell it to the retailers but the retailers has to offer the desired size or quantity the consumer wants. Because we have to remember at the end of the day our success solely depends on the consumer. We are offering .5 kg, 1 kg, 2kg, and 5kg plastic container. So the customers can get any one of them in any quantity that they needed. For middle class and lower class people bulk breaking is very important. It is mainly because they can’t buy in huge quantity in every time. Our .5 kg packet is targeted to these people. 

Spatial Convenience
Another thing is that consumers do not have spare time and that is why they want to reduce the search and transportation cost anyhow. To consume our product they want to visit the nearby shops and when they do not get that in desired places they become dissatisfied. Royal Sugar have to remember people don’t want to spend time to buy a product like sugar but as we are involved in intensive distribution so, we will make our product available in every possible sectors.

Waiting time and Delivery time
The lead time is needed to be reduced. It is the difference between the ordering and receiving time of the goods. This indicates the Waiting time or Delivery time. As our product is available so the consumers need not to wait for the delivery. 
For our product, we can not offer assortment and variety. This service output is not viable for our product type.
In order to make the channel more efficient and effective we have to under take some strategies. As our product  Royal sugar is newly introduced, so to remain competitive in the market we need to take some steps.