MARKETING FUNCTIONARIES AND CHANNELS

Transcription

1 UNIT 3 Structure MARKETING FUNCTIONARIES AND CHANNELS 3.0 Objectives 3.1 Introduction 3.2 Market Functionaries and their Functions Market Functionaries 3.3 Marketing Channels What are Marketing Channels? Functions of Marketing Channels Channel Length Multi-channel Marketing Benefits Offered by Channels Marketing Channels in Fisheries Sector 3.4 Wholesale and Retail Markets Wholesale Markets Retail Markets 3.5 Let Us Sum Up 3.6 Glossary 3.7 Suggested Further Reading 3.8 References 3.9 Answers to Check Your Progress 3.0 OBJECTIVES After reading this unit, you will be able to: identify the major functionaries and their functions in marketing; justify that the functionaries are important in marketing; determine various marketing channels in fisheries sector; and differentiate between wholesale and retail markets. 3.1 INTRODUCTION As you have already studied, transfer of produce or goods takes place through a number of agencies before it reaches the consumer. These agencies or middlemen discharge their duties keeping in mind the overall interests of the producer and the ultimate consumer. The role of such agents is so important that unbiased distribution, pricing, profit making etc. cannot be optimized without their participation. In this background, a study on various agencies known as market functionaries and their activities known as marketing functions assume great significance. In this unit, you will learn in detail, the various functionaries and their functions in a marketing system. 33

2 Basics of Marketing 3.2 MARKET FUNCTIONARIES AND THEIR FUNCTIONS Do you have any idea who are these market functionaries? The individuals or agencies that perform any of the activities in marketing are the marketing functionaries and the respective activities carried out by the functionaries with the objective of attaining the best possible output, are their functions. The different agencies, generally known as market functionaries, have specified activities or functions to perform. Each functionary performs single or multifunctions in marketing. As the word marketing is a comprehensive term to represent all the inter-connected activities in marketing, the viability of marketing is to be understood as the successful outcome of all functions performed by the functionaries Market Functionaries The term refers to agents/agencies involved in effective discharging of all activities and services called marketing functions (Fig.3.1) in the interest of the producer/ manufacturer, the end user or consumer. They play a dominant role in the distribution of goods and also help producers to regulate production. This situation of regulating production comes up when there is scarcity or excess production. Functionaries have to guard against undue price fluctuations and unethical trade practices. The marketing efficiency depends on how best a functionary has discharged the functions that are expected of him. Producers Traders Commission Agents Processors Consumers Facilitators Importers & Exporters Fig. 3.1: Marketing Functions The various functionaries may be classified into different groups based on the particular activity that is being carried out by them. Accordingly, major marketing functionaries are identified as under: a) Producers/Manufacturers 34 Even though technically marketing starts after production of commodities only, the background works for a successful marketing commences from the production stage. This is specially so because the entire marketing activity is centered on the product or commodity itself. The manufacturer or producer should appreciate that it is now consumer s market and not a producer s market. The viability of marketing to a large extent depends on this understanding. The producer should be able to identify the type of product required by the consumer. The changing consumer preferences may be used to make suitable modifications in the product.

3 The producer should try to introduce latest technological advances to bring out product diversification. Value addition not only attracts consumers, it will significantly contribute to increase of revenue. Strict quality control should be introduced at production and packaging stages to create enhanced interest in the product. The demand and supply should be balanced and marketing should be regulated when there is scarcity or excess production. Pricing policy should be evolved for attaining reasonable profit margins to the functionaries. This can be achieved by controlling the cost of production and the idle capacity in the production line. The producer has to identify the right consumer of his/her product and also the most suitable distribution chain. Adequate storing and transportation facility may be ensured. Producer should transact only with proven financial agencies and take the help of efficient agencies for advertising his/her product. Market intelligence may be periodically conducted for assessing future demand and incorporate modifications before the release to obtain wider acceptability of the product. b) Traders The individuals or agencies who are actually engaged in the buying and selling of commodities are generally known as traders. They are engaged in large scale to small scale trading which depend on the volume of trade. Those who transact business in bulk quantities are wholesalers and those who procure commodities from wholesalers for distribution are the retailers. The traders occupy an important position as they are the major partners in the initial stages of marketing. Wholesalers collect the products directly from the producer, store and transport the same to retailers and to distant and interior markets. Both types of traders require essential infrastructure for conducting their activities. There are many small and large-scale traders engaged in marketing in both rural and urban areas. Retail merchants include those who sell the commodities in small and medium markets, roadside markets, vending stalls, door-to-door vendors etc. They form the direct trading link between producer and the consumer. However, as the number of trading functionaries increases, the cost of the product also increases. c) Commission agents They are another set of important functionaries who are attached with all levels of trading. The commodity changes hands from producer to traders or consumers through agents only. They can identify the consumer and effectively convince him to perform trading. They will be ready with information regarding consumer s requirements, demand-supply position, pricing etc. This set of functionaries include brokers also who act as a link between traders and consumers and charge for the service rendered from both the parties. d) Processors The processors are functionaries who are responsible for cleaning, grading, packing, storing, value addition etc. and prepare the commodity suitable for domestic and export markets. They insist on hygiene and sanitation right from harvesting stage and ensure quality control up to the last stages of processing. e) Importers and Exporters The commodities that are produced and processed within the country are exported to other countries to cater to the demands in the respective countries. The different products produced under strict quality control are exported for earning substantial foreign exchange. In the case of fish/agriculture products, mostly processors themselves act as exporters. 35

4 Basics of Marketing On the other hand, importers are engaged in trading with other countries for bringing products or raw material from international markets to convert into new products, suitable for domestic markets or for the reprocessing and re-export after value-addition. f) Facilitators The functionaries who facilitate trading by providing financial assistance, market intelligence, advertising, after sales service, local administrative support etc. are facilitators who play a very important role in modern marketing. Co-operative societies, commercial banks etc. provide soft loans and advise on financial management. Financial analysts/and market analysts give proper guidance to all concerned. Local bodies like Corporation/ Panchayat etc. have the responsibility of providing the required infrastructure for ensuring efficiency. The other type of service providers for restaurants, communication, loading and unloading, transportation, machine operation, water, ice, electricity etc. are also important and worth mentioning. The various functionaries and their functions in marketing are given below: Functionaries Functions Producers Production as per consumer needs Quality Control Application of modern technology in production Collection of market intelligence Transportation to markets Identification of intermediaries Evolving pricing policy Introduce value addition and diversification Publicity for the product Supply to demand Revenue generation Traders Collection of products Quality Control Storage and Transportation Identification of potential customers Appointing suitable agencies Advertising Pricing Buying and selling Payment of taxes 36 Commission Agents Locating potential consumers Linking traders and consumers Facilitating the sales Collection of market intelligence Assist for efficient marketing Collection of commission

5 Processors Cleaning and Grading Storage and transportation Preparation of raw material for domestic market Market intelligence Adoption of technologies for product development Production of value added products for export Revenue generation Importers and Exporters Import of raw material for reprocessing Import of finished products Export of finished products Earn foreign exchange Facilitators Financial Assistance Banking Marketing intelligence Advertising After sales services Market analysis Infrastructure development Market management Provide all other support system Consumers Collect market information Inspect the products available Check the quality of the product Compare the prices Make proper selection of product Buy the product Activity 1 Identify the different market functionaries in your nearby market. Visit a large market and study how advertisement is used to promote marketing. Can you identify various activities in a fish-processing factory? Name a few value added fishery products exported from India and locate their major markets? 37

6 Basics of Marketing? Check Your Progress 1 Note: a) Write your answers within the space provided. b) Check your answers with those given at the end of the unit. 1) What do you understand by the term market functionary? 2) Name major functionaries in marketing? 3) How do you differentiate between functionary and function? 4) Write in brief the functions of any two functionaries? 5) How the functionaries are important? 6) What is the role of facilitators? 3.3 MARKETING CHANNELS 38 Here, you will be learning about the various steps through which commodities especially fish and fishery products reach the household of the consumer. In this section, you will be able to identify the various marketing channels for fish and fishery products and get an idea of the various personnel involved in marketing and the channels of movement of products to the ultimate consumer.

7 3.3.1 What are Marketing Channels? In marketing, most producers do not sell their produce directly to the end users. They depend on middlemen or agencies to perform these tasks due to various reasons. The intermediaries, also called agents, have fair idea on supply and demand of commodities and are able to identify the potential buyers and negotiate with them. However, trading operates through a chain of activities known as marketing channels which are formed based on convenience and requirements. The important links in the channels are producers, wholesalers, retailers and consumers. Other functionaries like brokers, sales agents, representatives of producers and traders, and facilitators also play their role at some point of the channel as a supporting system. Box 1 : Various definitions of marketing channel A marketing channel is an established system through which customers can gain access and purchase a product. A marketing channel can be viewed as a set of independent agencies involved in the process of making a product available or providing service to the requirement and satisfaction of a consumer. A system of marketing institution that promotes the physical flow of goods and services along with the ownership title from producers to consumer or business user; also called as distribution channel. For each commodity, there is an established and time tested way through which the commodity is passed on effectively and efficiently to the consumer. Fish being a highly perishable commodity to be sold in fresh form needs a distribution channel. A lot of personnel are involved to transport it from the landing centre to markets and then to the households. It cannot be sold like other products by transportation. The channels of distribution widely known as the marketing channels do this. The concept of channels of distribution of various commodities varies according to the nature of the product, price, type of promotion needed, etc. and this should be understood clearly before proceeding to learn other marketing aspects. There are many factors involved in the movement of commodity from one end to another. Many considerations are also to be taken into account depending upon the nature of the commodity. For example, high end products from fish like readyto-cook items have to be attractively displayed in urban markets so as to target high income groups Functions of Marketing Channels A marketing channel performs the work of transferring commodities from producers to consumers. It is said to overcome time, place and possession gaps that separate goods and service from those who use them. Members of marketing channel perform a number of key functions that are given below: Collection of marketing information about potential and current consumers, competitors etc. Development and dissemination of persuasive communication to attract consumers. 39

8 Basics of Marketing Attempt to reach final agreement on price and other terms. Backward communication to manufacturer. Arranging finance for transaction. Storage and movement of products. Prompting buyers to make payment through banks Channel Length Depending upon the number of intermediary levels, channel length can be classified into four which are as follows: i) Zero level channels have no intermediary. This is also called direct marketing, since the producer sells his product directly to the consumer. He/she uses his/her own sales team to sell the products. Major ways of direct marketing are door-to-door, mail order, tele-marketing, TV selling, on stores of the producer etc. Box 2: Features of Direct Marketing Less transportation cost No intermediary No profit sharing by middlemen Reasonable cost to consumer Less time lag between production and consumption Quality of product guaranteed ii) iii) iv) Retailer: A one-level channel contains one intermediary such as retailer. Two level channel contains two intermediaries like wholesaler and retailer. Three level channel contains three intermediaries, such as wholesaler, retailer and other minor retailers. Higher channel levels also exist. However, in consumer marketing, zero, one, two and three levels are common. As the channel level increases, getting information on consumers becomes difficult and the producer s share in the consumer rupee gets reduced Multi-channel Marketing This type of marketing occurs when a single manufacturer uses two or more channels to reach a number of consumer segments. By adding more channels, the producer or company gets increased market coverage, low channel cost and more customers based selling of the product Benefits Offered by Channels The benefits derived out of the channels are plenty, some of which are as follows: 40 i) Cost Savings: Members in the distribution channel are specialists in what they do and so cost involved will be minimal.

9 ii) iii) Reduce exchange time: The channel members also perform their job rapidly. Imagine a situation where a marketer directly procures from each producer. Boats of fish have to wait till the marketers deal with each and every person and simultaneously each marketer will be negotiating, resulting in confusion. Product should be obtained by the consumer without wastage of time and money. Resellers sell smaller quantities: The ability of intermediaries to purchase large quantities, but to resell them in smaller quantities makes these products available for those wanting in smaller quantities and the reseller is able to pass along to their customers Marketing Channels in Fisheries Sector In the fisheries sector, you are aware that the fish is a highly perishable commodity. So, the channel for marketing of fish also is very different from other commodities. Unlike other food items, the producers are widely dispersed. According to need, it is essential to collect the produce from various locations and distribute through various routes so as to reach the ultimate consumer. The sources of fish caught are varied. Two main sources of fish marketing are marine and inland. In case of marine fisheries, the catch is landed at fishing harbours or fish landing centres. It is brought to the auction platform and authorized persons called auctioneers conduct the auctioning. Once the deal is finalized, the buyer transports the fish to his/her location for further processing or resale. Thus, the following channels may be possible: Producer Agent Consumer Producer Agent Wholesaler Consumer Producer Agent Wholesaler Retailer Consumer Producer Agent Retailer Consumer Producer Agent Wholesalers Processor Exporters Consumer Inland fisheries involve fishing from inland waters like ponds, rivers, lakes, reservoirs etc. Fish varieties also vary according to the type of fishery. The catch is scattered in this case and procurement of the fish is done by agents at various points. Hence, the movement of the product from hands of the fishermen/producer to the hands of the customer will naturally involve a lot of intermediaries. As far as inland fishery is concerned the channels vary depending on the volume of the produce. Producer Consumer Producer Agent Consumer Producer Agent Market Consumer Producer Vendors Consumers There are two type of distribution system viz., Direct (without any intermediaries) and Indirect. In the case of inland fisheries such as fishing lakes, reservoirs and ponds and farming, the middlemen has to collect fish from various sources to pool and distribute to the main market. In case of marine fisheries, the landing centre is the spot market and starting point of the channel where buyers/middlemen compete and make a good deal with the 41

10 Basics of Marketing producer. In the case of rivers/lakes, there are many fishermen fishing everyday, but due to limited catch, the middlemen have to buy from many fishermen. In the case of pond fishery, the output is huge to be consumed by a single person. The landed fish is sent to auction by an auctioneer. Once the price is decided, it is declared as sold to the buyer. He/She may be a direct consumer, wholesaler, retailer or another middleman. Once the fish is auctioned, it is transported to the location as desired by the buyer. Hence, we see the channel as: Producer Agent Wholesaler Consumer The wholesaler may resell the fish to a retailer or directly to a consumer. Fish in small quantities are also procured by retailers directly from the landing centres. There are different activities which are involved in the channel. Activities involved in the channel are wide and varied. The basic activities are: Production Handling/shipping Storage Display (auction in case of fish) Selling Consumption Majority of the fish (70 per cent) in our country is consumed as fresh followed by frozen (20 per cent) and cured (10 per cent).? Check Your Progress 2 Note: a) Write your answers within the space provided. b) Check your answers with those given at the end of the unit. 1) What is meant by a marketing channel? 2) What are the functions of members of channels? 3) Explain the term channel length? 4) Write down the essential features of direct marketing? 5) What do you mean by multi-channel marketing? 42

11 3.4 WHOLESALE AND RETAIL MARKETS Markets can be classified into two viz. Wholesale and Retail depending upon the quantity of goods and commodities sold and purchased Wholesale Markets Wholesale markets are locations where commodities are received and traded in bulk quantities and distributed to different markets in the country. The trading is between producers or their agents and retailers. The goods received from production centres are sold through agents or intermediaries and transported to various destinations based on demand. This is one of the important reselling activities in the marketing channel. They exist in many formats, affect a wide range of industries and offer different sets of features and benefits depending on the markets they serve. Wholesaling is a distribution channel function where one organization buys products from supplying firms with the primary intention of redistributing to other organizations (but, in general, not to the final consumer). A wholesaler is an organization providing necessary means to: Allow suppliers (i.e. producers) to reach organizational buyers (e.g. retailers, business buyers) Allow certain business buyers to purchase products which they may not be able to otherwise purchase. The distinguishing characteristic of wholesalers is they offer distribution activities for both a supplying party and for a purchasing party. The primary benefit a wholesaler offers to a channel is that, since they sell to a large number of buyers, their order quantities may match those of large retailers thus allowing them to obtain lower prices from suppliers. Wholesalers can then pass these lower prices along to their buyers, which can enable smaller retailers to remain competitive with larger rivals. In marine fisheries, fish is landed by mechanized/motorized/traditional fishing crafts in their respective landing centres. It is displayed in the auction hall or locations near landing sites and then auctioned. After auctioning, fish is washed, packed and transported to nearby and distant markets for distribution. Fish being an easily perishable commodity, is unloaded, iced and repacked for further transportation. The varieties like prawns meant for export market are transferred from landing/ auction centres to fish processing factories, where they undergo many processing, grading and packing stages and exported to other countries for earning valuable foreign exchange to the country. For any wholesale market, well developed roads, connectivity with retail markets, landing centres and interior markets, spacious modern civil structures to facilitate trading, packing, storage and transportation, provision for water, ice, waste management system etc. are essential. Quality aspects should get top priority right from wholesale markets for obtaining end products of high quality standards. 43

12 Basics of Marketing Box 3 : Functions of Wholesale Market Major trading centre for agriculture/fisheries products. Facilitates efficient distribution of products to distant and interior markets. Ensures revenue to the primary producer and intermediaries. Enhance marketing activities for generation of large scale employment and national income. As the first major trading point, effective quality control programmes can be initiated at Wholesale Markets Retail Markets Retail Markets are locations where people come together for selling and buying of commodities in small quantities that are received from producers or wholesale markets. In retail fish markets, fish and fishery products are washed, graded and displayed for sale. The traders or customers may bargain and trading takes place based on mutually acceptable terms. In some cases, washing, grading and packing also takes place before transporting to other destinations. The customers get an opportunity to compare the quality and price between different merchants of the same product before taking the final decision. The retail markets also serve as supplying centers to small-scale markets and vendors. Commodities to rural and interior markets also are supplied in fresh or iced or dried form. Retail markets are popular markets for trading a variety of goods on a face-to-face basis between merchants and customers who generally belong to the low or middle income group of the Society. However, a number of problems also exist in the retail market system which are given below: Poor hygiene and sanitation conditions exist and chance for spoilage of commodities is high. Law enforcement is difficult and poor market management by the local body authorities. Sale space and moving space for customers are insufficient. This leads to overcrowding which makes smooth transactions difficult. Only low-cost retailing facilities available in respect of road facilities, transportation, areas, washing, packing and storing, selling platforms etc. Potable water in sufficient quantity not available coupled with poor drainage and waste management system. Markets are under funded resulting in low capital investment for modernization. Poor marketing efficiency due to lack of coordination between functionaries. Poor market management. Commodities handled in retail markets are: 44 Agricultural products/grains/fruits/vegetables Fresh/dried/salted fish

13 Cooked/canned fish, raw /processed fish meat Household goods/utility items/textiles Any other item on demand by the customer Major retail markets Minor retail markets Super markets Retail Markets Vending stalls Roadside markets Open air markets Door to door vending Functions of retail markets: Provide easy access to a wide range of products. Provide a diversity of outlets to serve the rural and urban population. Cost efficient retailing keeps prices at affordable levels to low and middle income groups. Helps keeping hygiene standards. Helps reducing post harvest loss. Possesses efficient distribution chain. Activity 2 Visit a nearby fish market and identify how marketing channels vary across different fish species. Also, visit a retail market and list the type of products handled there ? Check Your Progress 3 Note: a) Write your answers within the space provided. b) Check your answers with those given at the end of the unit. 1) What are the functions of Wholesale market? 45

14 Basics of Marketing 2) Explain retail marketing channel? 3) What are the problems which exist in retail market system? 3.5 LET US SUM UP Market functionaries play a very crucial role in modern marketing. There are specific functions to be performed by each functionary and the success of marketing is based on the coordination of the functions and efficiency of functionaries. The major market functionaries are identified as producers, traders, commission agents, processors, importers and exporters, facilitators and consumers. Different marketing channels through which the commodity moves from producer to consumer are explained. The different marketing channels and their significance in marketing have been detailed. It has been observed that the wholesale marketing and retail marketing are the two marketing channels prevailing in the country. In the fisheries sector, retail marketing assumes great importance as an efficient channel for fresh fish from both marine and inland sources. 3.6 GLOSSARY Major Retail Market : Minor Retail Market : They are markets with a number of retailers distributing the product to smaller market or selling directly to the consumer. They are small retail markets with only a small number of traders selling directly to the consumers. Retail Market : This is the most important type of marketing channel that plays a central role in the distribution system. Retail markets are locations where people assemble for trading relatively small quantities of goods on a face-to-face basis between the seller and buyer. Roadside Markets : Small retailing performed at roadside where vendors gather at a specified time to sell their product. Usually, such markets have no shelter or storage facilities. Super Markets : They are generally located in cities where all type of commodities needed by the consumer are traded. 46 Vending Stalls : Small stalls, generally kept clean, for trading only one or two commodities at a time.

15 Vendors : One who collects vegetables/fish/meat and sells to consumers adopting various methods like doorto- door, by head load, or bicycles and other two wheelers. Wholesale Market : These markets are locations where commodities are received and traded in bulk quantities and distributed to different parts of the country. Here the trading is between producers or their agents and retailers. 3.7 SUGGESTED FURTHER READING Coughlan, A. and Anderson, E. Marketing Channels, Prentice Hall Publishers. Salim, S.S., Biradar, R.S. and Pandey, S.K Introduction to Fisheries Economics and Marketing, Central Institute of Fisheries Education, Mumbai Sathiadhas, R Production and Marketing Management of Marine Fisheries in India, Daya Publishing House, New Delhi REFERENCES Etzel, M.J., Walker, B.J. and Stanton, W.J Marketing, Tata McGraw Hill Edition. Kotler, Philip and Armstrong, G Principles of Marketing, Prentice Hall, Inc. 3.9 ANSWERS TO CHECK YOUR PROGRESS Check Your Progress 1 1) The term market functionary refers to individuals/agencies who are involved in effective discharging of any of the activities and services in marketing. 2) The major functionaries in marketing are producers/manufacturers, traders, commission agents, processors, exporters, facilitators and consumers. 3) The persons or agencies that perform any of the activities in marketing are called functionaries and the respective activities carried out by the functionaries are known as functions. 4) Producers are very important. Since the entire marketing activity is centered on the product or commodity itself. The market viability depends on the understanding that it is now consumers market. The producer should know the need of a consumer and produce good quality of the products to satisfy their demand. The traders occupy a prominent role as they collect the products from producers and efficiently distribute through a chain of functionaries to reach the consumers to meet their requirements. 5) The functionaries play a key role in the timely distribution of goods to the consumers and they even guard against undue price fluctuations and unethical trade practices and help to attain market efficiency. 47

16 Basics of Marketing 6) They provide financial assistance, market intelligence, advertising, after sales services, local administration support etc. and also act as service providers in the day-to-day activities of the market. Check Your Progress 2 1) In marketing, producers sell their goods to the consumers through middle men or agencies who are able to identify potential buyers. They operate through a chain of activities known as marketing channels which are formed based on convenience and requirements. 2) A marketing channel performs the work of transferring commodities from producers to consumer. They collect market information and assist the potential consumers for making transaction of commodities. They also help in keeping the quality of the products by providing storage, transport etc., arrange financial assistance, making mutual agreements or prices and other terms to ensure smooth trading. 3) Length of channel indicates the number of intermediary levels between producer and consumer for performing the transactions of products. 4) In direct marketing, there is no intermediary between producer and consumer. The transaction takes place directly between the producers to the customer. The producer s share in consumer s rupee is high in direct marketing as there are no middlemen. Major ways of direct marketing are door-to-door, mail order, tele-marketing, own stores of the producer etc. 5) When a single manufacturer uses two or more channels to reach a number of consumer segments, the type of marketing is the multi channel marketing. By adding more channels, the company gets increased market coverage, low channel cost and more consumer base. Check Your Progress 3 1) The functions of wholesale market are as follows: Major trading centre for agriculture/fisheries products. Facilitates efficient distribution of products to distant and interior markets. Ensures revenue to the primary producer and intermediaries. Enhance marketing activities for generation of large scale employment and national income. As the first major trading point, effective quality control programmes can be initiated at Wholesale Markets. 48 2) They are locations where people gather for selling and bringing of products in small quantities. The traders and customers bargain on prices and trading takes place on mutually acceptable terms. Here, the customers get an opportunity to compare the quality and price between different merchants of the same product before taking a final decision. The retail-marketing channel is a large network of small-scale markets through which the products are distributed to satisfy the ultimate consumer both in rural and urban localities.

17 3) Some of the problems which exist in retail market system are as follows: Poor hygiene and sanitation conditions exist and chance for spoilage of commodities is high. Law enforcement is difficult and poor market management by the local body authorities. Sale space and moving space for customers are insufficient. This leads to overcrowding which makes smooth transactions difficult. Potable water in sufficient quantity not available coupled with poor drainage and waste management system. Markets are under funded resulting in low capital investment for modernization. Poor marketing efficiency due to lack of coordination between functionaries. 49