Your family runs a specialty ice cream parlor, Scoops. it manufactures its own i

Question

Your family runs a specialty ice cream parlor, Scoops. it manufactures its own ice cream in small batches and sells it only in pint-sized containers. After someone not affiliated with the company sent six pints of your ice cream to a popular talk show host, she proclaimed on her national TV show that it was the best ice cream she had ever eaten. Immediately after the broadcast, orders came flooding in, overwhelming your small-batch production schedule and your limited distribution system. The company's shipping manager thinks she can handle it, but you disagree.
a) List the reasons why you need to restructure your channel of distribution?
b) Building on question a, determine a new channel structure for Scoops. Write a proposal to present to your key managers.
c) Now that you have a basic channel structure for Scoops, list the market, product, and producer factors that will affect your final channel structure.

Explanation / Answer

(a) Reasons to restructure the channel of distribution:

(b) To determine a new channel structure for Scoops:

Channel Strategy:

Channel strategy is a plan for product's distribution channels that help route the product from point-of-origin to point-of-consumption.

Following are the factors that influence channel strategy:

It is imperative to consider several factors before selecting a marketing channel. The three main factors that influence the channel strategy are mentioned below:
• Market factors — This is the most important factor that helps managers understand the complexity and diversity of their target market. It requires multiple intermediaries in the channel.
• Product factors — Factors such as the type of product stage of product in product life cycle, availability of the product influence choice of channel strategy.
• Producer factors — Such factors include firm's objective to tap the desired market, build desired product or brand image. For example: selling the product in exclusive stores to maintain exquisiteness.

There are three main intensity levels in channel distribution that firms can opt from are discussed below:
• Intensive — Used to achieve maximum market coverage. Several intermediaries are required.
For example: wafers, candies, stationery items.
• Selective — Selected intermediaries are worked with to sell specialty goods. For example branded printers, branded apparels, etc.
• Exclusive — Single intermediary is worked with to sell luxury or specialty goods. For example luxurious made-to-order cars, diamond watches, etc.
Some of the products and their distribution intensity are discussed below: PG WATCHES
Distribution intensity The firm follows selective distribution intensity. It works with few intermediaries to make their branded watches available at stores of repute only.
LR Sports Utility Vehicle:
Distribution intensity - The firm follows exclusive distribution intensity. The specialized luxurious sports vehicle is a status symbol. The vehicle is made available through company
outlets only.

(C) Basic Channel structure for Scoops, market, product and producer factors that will affect the final channel structure:

Factors that affect the choice of channel distribution are as follows:

Product factors: Some of the product factors that the producer needs to while making choice of distribution channels are as follows

Market consideration:

Producer’s factors:

The unit price of the product: If unit price of a product is high then producer should go for the small distribution channel. This is because involving intermediaries or following long channel will add extra cost to the product. Thus, it will further increase the price of a product. And, if unit price of a product is low then the producer can opt for the long distribution channel.

Standardizes or customized product: If producers product is a standardized product he /she can opt long distribution channel. Reason for this is that the product has pre-determined standard s that can’t be copied or altered .but if the product is customized then it’s better to go for small distribution channel or selling face to face or with direct contact with customers.

Perishability: If products are perishable and have a small life then it should be marketed by using a small channel. But if the product has long useful life or is non-perishable the n it can be distributed by using long distribution channel.

Technical nature: If the product is of technical nature then, it would be better to directly supply to the consumer. This will help the users to know its functionality.

A number of buyers: If producers have a large number of the buyer then he/she should opt middlemen so that they can target large section of the population. But if there are few number of buyers then producers should directly distribute its product.

Type of buyers: If products are of general use then long distribution channel can be used. If products are of industrial use then the manufacturer should directly distribute the product without the involvement of middlemen.

Buying quantity: If the products are bought in small quantity then middlemen should not be incorporated in the distribution system.

Size of market: If markets of producer products are widely scattered and large then they should opt for large distribution channel

Goodwill: Producers goodwill also affects the distribution channel. If the producer has good reputation then he/she doesn’t need middlemen to distribute its product. He/she can directly distribute its product through its outlet.

The desire to control the channel of distribution: If producers don’t have the ability and desire to control the distribution channel then he/she doesn’t go for the long distribution channel.in such case, they directly deal with their customers.

Financial strength: If producers are financial sound then they can opt for long distribution channel because they would not mind incurring the extra cost or sharing profit to the middlemen. But if producers are not economically sound then they should not sacrifice their profit by involving middlemen.

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