Environmental Factors
Category: Marketing
Market characteristics will inform and constrain channel design. Numbers and dispersion of potential buyers provide the backcloth to decisions on availability. Large widely dispersed markets present quite different possibilities to those in small concentrated markets. The former may point to the need for complex indirect channels and the latter to more direct means. But market characteristics do not include only numbers of buyers purchase behaviour can also influence channel choice. Customers may expect to be able to buy certain products in certain channels and they plan their shopping trips on those expectations. Further they may restrict their search activity to those channels. Their shopping behaviour for a particular product category may also be conditioned by their shopping for other products. Consumers may wish to minimise the number of retail outlets visited and to cluster several product purchases at one place If there were some regularity in this clustering then analysis of the typical outlets for those associated product classes could affect the channel decision.
Purchase size and frequency should also be considered. This will be related to consumer willingness to hold stocks, and to their consumption levels. Products with a weekly repurchase cycle provide enormous distribution problems and require vast channel arrangements. These would be eased if customers were willing to take a six months’ supply of (say) breakfast cereal at a time. They would be simpler still if customers were willing to travel fifty miles to collect their breakfast cereal. But naturally, customers value convenience in the availability of such products.
Customers’ expectations about product availability can vary from one country to another and even regionally within the same country. In the UK most people expect a daily home delivery of milk and newspapers and many expect a similar service for bread. This is not the case elsewhere. The high cost of such a system is apparently acceptable to British consumers although it seems a matter of historical accident that it his endured in this country. Departures from established custom are possible but they can encounter considerable consumer resistance. This has been demonstrated in recent years with the experiments with one-trip non returnable milk containers, which had to be withdrawn from the experimental areas after consumer action groups collected all the containers and deposited them at the Town Hall.
Competitors channel arrangements will also have to be investigated. It may be necessary to ensure similar market coverage by employing the same channels. But as mentioned earlier strategic advantage may be gained by being different. Both product positioning and market coverage decisions embody the impact of competitors’ channel strategies.
Channel characteristics refer to actual and latent channels. Performance of existing channels needs to be evaluated. They may give insufficient or inappropriate market coverage and if so the firm would have to investigate the possibility of its own channel innovation. This could entail making the product or service available through its own outlets some franchising agreement or introducing novel mechanisms for transferring product to buyer or buyer to service point.
Another environmental consideration in channel design is that of «political influences». For example Yves Saint Laurent Parfums have recently had to bow to the dictates of the European Commission and change from a very exclusive distribution policy to a more selective one. Traditionally Yves Saint Laurent Parfums has strictly limited the number of retailers allowed to sell its perfume, skin care and beauty products, giving it an exclusively positioned exclusively distributed premium-priced product. Now it must allow any outlet that meets its standards to sell the range. The company must also allow retailers to set prices for the products. So much for the «free» European market! The Commission are reported to be on the scent of another French perfume company for the same reasons: Givenchy SA