Sample Essays: Channel Development in Marketing

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Channel development and pricing represent the crucial elements for the effective marketing strategy of a company on either new or existing markets. However, the extent of their influence can only be fully realized when the strategy is applied in practice and calculated in numbers. Thus, with the help of simulation case describing the channel development and pricing strategy of Add Computers on the new market in England it was possible to estimate the importance of precise calculations and marketing choices and learn those innocent mistakes that can nevertheless lead to a big failure.

One of the first steps in the channel development process is to define the right channels for selling the products on the new market. The right choice of distributors will determine whether the products will be sold and supported effectively (Kotler, 2002). Many different criteria are considered before the final decision is made. In case with Add Computers I have decided to take a stake on Sellwell Distributors, as a reputable and trustworthy company with an evidently growing financial strength, increasing profits, largest coverage within the country and strong control over resellers and customers. However, I have not paid much attention to the percentage of computers in total sales, which was a crucial mistake, since Sellwell Distributors appeared to be inexperienced in IT field and this has negatively affected the speed of market expansion. Another important lesson was when I refused to drop the price of a product at the initial stage of market entry. This didn’t affect the sales dramatically; however, the drop could lead to more sales and an increased percentage of customers aware of the new brand.

The next important step in channel development process is negotiation of margins and the right choice for an effective promotional program for consumers. However, there options are not unlimited. For Add Computers there was a certain promotional budget of $35 millions, and any promotional actions could not exceed this limit. In the simulation it turned out that it was important to balance the satisfaction of customers as well as satisfaction of resellers and distributors. Therefore, the budget should have been distributed in such effective way, so that both resellers and customers would be motivated enough to buy a product.

Finally, the last but not least important step was the right choice of a pricing strategy on the new market. In this situation it was a battle between sales forecast and profitability. This example has demonstrated that while the percentage of the new customers is the biggest one, the old customers can nevertheless be easily persuaded, too, if the price is attractive enough and they are satisfied with the quality. Thus, the balance here is also important.

In general, while the Add Computers case was applied to numbers and forecasts, it turned out that there are many issues involved in the process of decision-making for the right marketing strategy, they all represent an ingredients of a pie, and if one is missing, the whole pie won’t turn out to be good. This is a good lesson for practical implementation in either field of market activities and I expect to use it in real life practice.

References:

1. Channel Development and Pricing Simulation: Add Computers. The University of Phoenix.

2. Kotler, Philip. (May 2002) Marketing Management. Pearson Education; 11th edition.

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