A commercial policy can be understood as the set of actions that define what, when, how and to whom a given product should be sold in order to turn a profit.
As such, this practice involves a wide range of activities aimed at identifying the needs of potential consumers, designing the product, and more.
The sales department is common in medium-sized and large companies. Its main function is to make the products and services that producers offer known to customers, but it also handles other tasks, such as:
- Setting the price.
- Promoting the product and bringing it to market.
- Motivating consumers to buy it.
Since the arrival of new technologies, the evolution of the economy and market competition have forced marketing to advance rapidly and become effective. As a result, the sales department has taken on great importance within companies, to the point of becoming indispensable.
You will need to organize how the sales department operates by defining the processes and techniques it uses, following the guidelines below:
- Set the basic procedures to keep in mind when supervising the customer service provided by the staff you manage.
- Describe the order management techniques required to fulfill orders correctly and deliver them within the agreed timeframe.
- Establish the methods for balancing and closing the till.
- Identify the different payment methods: cash, deferred payment, credit, and others.
- Explain the methods for valuing products and services based on the materials and raw materials used, production time, and other parameters.
- Explain the techniques for stocking and controlling merchandise on the sales floor and in the display area.
Distribution functions and types
Distribution channels are the routes each organization chooses to distribute its products or services as efficiently, thoroughly and economically as possible, so that customers can buy them with the least effort.
In short, distribution channels are the set of individuals or companies that take part in, or take ownership during, the transfer of a good or service as it moves from the manufacturer to the customer or industrial user.
Distribution channels are all the means marketing relies on to get products to consumers in the right quantities, at the right time, and at the prices most convenient for both parties. A great deal of the satisfaction that products bring to customers is thanks to well-maintained and well-chosen distribution channels.
Once a product has finished its production stage, it has to be made available to the buyer. This is handled by the third variable of the marketing mix: commercial distribution.
For a long time, companies’ marketing efforts seemed to focus on product, price and communication, giving distribution no more importance than that of a burden to be used so that products would be accessible to consumers.
Over time, the tremendous importance of distribution as a marketing variable has been recognized, thanks to its key communicative role and its impact in economic, organizational and production terms. It has gone from being considered a burden to being a relevant factor in marketing strategy.
Channel functions
A distribution channel does the work of moving products from manufacturers to customers. It bridges the main gaps in space, time and ownership that separate goods and services from those who buy them.
The members of a distribution channel carry out a number of key functions:
- Research: Gathering the information needed to facilitate and plan the exchange.
- Promotion: Spreading and creating persuasive messages about the product.
- Contact: Finding potential customers and communicating with them.
- Adaptation: Adjusting and shaping the good to the customer’s requirements. This calls for activities such as manufacturing, assembly, packaging and sorting.
- Negotiation: Trying to reach a mutually satisfactory price so that the transfer of possession or ownership can take place.
- Physical distribution: Storing and transporting the goods.
- Financing: Obtaining and using the funds needed to cover the costs of these activities.
- Risk-taking: Assuming the risk that comes with carrying out the channel’s own functions.
The first five functions serve to carry out transactions; the last three serve to complete them.
Characteristics of the different channels
It is worth stressing that in international marketing there are no miracle solutions, and that each go-to-market formula is generally either a failure or a success.
It all depends on how it is driven and who drives it. Only the systematic application of marketing plans and their ongoing review will make it possible to meet the set objectives.
Traditional long channel
Advantages
- From the exporting organization to the distributor-importer, and from the latter to consumers and retailers.
- It does not require a team of sales reps, since operations are negotiated within an agreement by the person in charge of international marketing.
- The credit limit granted can be secured appropriately and studied well in advance.
- Shipping costs are reduced because the optimal shipment quantity has already been decided.
- The product achieves a presence throughout the entire agreed geographic segment.
- Production can be planned better and with hardly any substantial changes.
Drawbacks:
- The wide commercial margin that must be granted to drive sales.
- The possibility that the importer will offer competing producers’ products to local retailers.
- The lack of contact with consumers and retailers.
- The difficulty of connecting with good importers who perform their duties effectively and deliver the expected results.
Specialized long channels
From the exporting organization to a retailers’ buying group, from there to the associated merchants, and finally to the customers.
Greater proximity to the market.
Disadvantages:
- The strong pressure the buying group exerts on purchase prices.
- The possible requirement to ship directly to retailers on behalf of the buying group.
- The product’s presence being limited to associated establishments, which can drive up shipping costs.
Classic short channel.
This covers supplying the independent retailers of a geographic segment through the organization’s own sales network. It is typical of the distribution of durable consumer goods such as appliances, textiles, IT equipment, furniture, and so on.
Advantages of this channel:
- Better control of the market, faster and better service, greater cooperation with retailers on promotional campaigns, and the diversification of commercial risk.
Drawbacks:
- The increase in sales costs caused by the sales network the organization needs in order to reach a large, dispersed customer base.
- A possible drop in profitability as a result of splitting up shipments.
Integrated short channel.
This runs from the organization to a central buying office of a consumer cooperative or a department store, or of a company specializing in mail-order sales.
Advantages for the company:
It simplifies commercial contacts and enables significant scheduled sales.
Disadvantages:
- The great bargaining power of the central buying office in terms of discounts, long payment terms, prices, and a compulsory contribution to its promotional costs, thereby distorting the company’s budgets and plans.
- Specialized short channel.
- From the company to a retailer under a franchise arrangement.
Ultra-short channel
The company sells directly to the end customer, with no intermediaries. This is very common for marketing large equipment or specialized industrial products.
It can also be used for consumer products, but it demands a strong logistics capability.