Commodity Distribution Model

September 15, 2022November 4, 2022 by admin

Which Commodity Distribution Model to be used is the first key decision which a company has to take while entering a market. There are several models prevalent in the market. This decision dictates the marketing mix, logistics arrangement and often product specifications.

Selling Through Distributor/ Wholesaler

This is the most prevalent commodity distribution model, used by most of the conventional companies. Here the manufacturer appoints an Distributor for an area, who may or may not stock material in his godown. Together the Distributor and the company find potential retailers who can sell their material to the consumer.

The Distributor margins are set depending upon what costs are incurred by the company like secondary freight (freight from Distributor godown to Dealer shop), godown rent, material handling costs, etc.

The Distributor bears the risk of payment defaults by the Dealers. The Distributor, being small firms, are able to address the issues of the Dealers fast and keep the business running. Marketing is either directly done by the company or expenses are reimbursed to the Distributor. The branding guidelines are issued by the company for uniform message in the market.

Selling Directly to Retailer

In this commodity distribution model, the company does not have any Distributor. The retailers in an area are directly approached by the company and appointed as authorized stockists. These retailers sell the product to the consumer and company does the marketing activities in the area. This model is generally adopted in areas which are close to factory or depot of the company so that small load orders of the retailers can be serviced by the company. The Distributor margin, otherwise incurred by the company, is saved and spent on marketing or passed on to the customer.

Due to many retailers in the market and limited financial strength of the retailers, the churn rate in this model is high and companies have to keep looking for new partners.

Selling Direct to Consumer

This is a commodity distribution model in which the company opens retail counters on its own. In a few cases, company makes an existing shop in the marketplace its franchisee to sell its products exclusively in his shop. The franchisee shop cannot keep products of other brands and to a lay man, it will look like a company operated shop only. The engagement level of the company is very high and stock levels, branding and approaching the customers is done by the company personnel primarily.

Through online means, companies are trying to gather customer requirements and service them directly in areas close to their factories/ warehouses/ company outlets. The spend on digital marketing is significant. In this case, the role of logistics becomes very important.

It has been seen that companies do not adopt a single Commodity Distribution Model universally. Depending on the area, companies keep a mix of all three. It also acts as a deterrent from allowing any one player in the value chain to become dominating.

Commodity Handling Agents

September 12, 2022November 2, 2022 by admin

Commodity Handling Agents or Carrying and Forwarding Agents (CFAs) act as the bridge between the company and customers. Companies need them because they cannot manage the logistics in all the markets. Handling agents need to have a good liaison with the local labour unions, transporters, godown owners and often with the wholesalers.

Responsibilities of Commodity Handling Agents

The handling agents are responsible for receipt of material from the factories, upkeep of good stock in the godowns, data entry in ERP system etc.
They are responsible for the timely dispatch of goods to customers & invoicing.
If the material arrives by rail, handling agents also need to coordinate with local Railways Department officers for unloading of material from the wagons and transportation to the godown.
In case of damages in material during transit to the godown, commodity handling agents are responsible for the salvage or disposal of damaged material.
CFAs also have a role in controlling infiltration of material meant to be dispatched to one area but unloaded in other area, especially if CFA is also responsible for arranging the transport.

Commodity Handling Agents versus Distributors/ Wholesalers

A few large companies do not allow their CFAs to do wholesaling of their product or other brand in the same industry. This is done to avoid conflict of interest as the CFA might start using the godown premises or company’s transportation vehices to favour his own retailers over other those of other distributors serviced from the godown.

However, this has been implemented by a very few building materials companies as at the time of entering a new market, companies want to outsource the material handling work to someone who knows the product and industry well and an existing Distributor of the product in the area is well versed with the nature of the product. Also, it gives quick access to the retailers of that Distributor if he becomes his CFA also.

Market Research

September 12, 2022November 8, 2022 by admin

Conducting market research periodically is important for commodity companies. The market intelligence provides input for course correction in the marketing strategy. Survey can be with the channel partners, influencers and end users.

Attributes of Survey

The survey questionnaire for market research may not be very detailed. It need not be one involving several hundreds of respondents. However it should be systematic, fearless and unbiased.

Systematic means that the responses should be sought on similar questions from one type of respondents. There should be enough responses on any parameter to arrive at a conclusion from market research.
Fearless means that the respondents should be able to give their opinion in a free manner. Generally avoid to ask channel partners for feedback in front of company sales personnel as often they tend to give more negative feedback so to extract more benefits from the company. Some of them do not speak for fear of losing the goodwill of the company.

Ensure to cover all types of channel partners in the sample. This makes the survey unbiased. So, seek feedback from all types of respondents from the target segment in the survey- big and small, exclusive and multi-brand, young and old promoter-driven stores.

Objectives of Market Research

Collecting market intelligence can have various objectives. It can be done to understand customer preferences priorities. It can be done to estimate the market size. It can be done to evaluate the brand health or customer satisfaction with its products. It can be done to estimate the viewership or reach of its advertisement or what has been its impact on purchasing behaviour of customer. It can be done to gather competitor information.

Then companies also need to collect some information about the channel partners. They should be regularly updating their database of the retail counters and wholesalers present in the market, potential of each, financial background, brand preferences, market potential, etc. This will help in targeting specific channel partners who can add value to the existing network.

Company can conduct market surveys through its own staff or outsource the task to an agency.

Internal Marketing- 2 ways

May 22, 2016November 15, 2022 by admin

Why do commodities company care for Internal Marketing? The sales employee of a company is the first brand ambassador of the product, even for commodities. He addresses both the aspects: speaks positively about the quality of the product and company in front of the customers and acts as eyes and ears for the company, feeding important information about recent trends in the market. That is why, internal marketing for commodity companies is a critical input to transition from commodity to brand.

Internal Marketing for Employee Motivation

Internal marketing programs fall in two categories: individual motivation & team motivation.

Internal Marketing- 2 ways

Individual motivation

Individual motivation programs can have one or many goals. They are towards promoting product sales of an existing or new brand, increasing the network or increasing market share. They can also be aimed to increase repeat purchase volumes, new customer acquisition and other criteria or any other short-term goal of the commodity company.

Trainings on technical specifications and uniqueness of the product are the basic know-how needed. Marketing Department often gives them tools which makes them better sales personnel and enable them to sound more convincing in front of the customer. Sessions on company plans, salesmanship, customer psychology, marketing activities of competitors and communication and negotiation skills are the major trainings provided towards achieving the individual goals. Company also provides them technical support assurance to customers and quick access to customer profile information.

Empowerment is equally important for individual motivation. To empower them in front of the customers, company gives them authority to approve modest price discount authority. At the end, rewards for better than average performance are needed. Rewards in this program include cash awards/ recognition, promotions, company stock, paid time off, salary hike, special bonus, etc. Rewards are majorly dependent on the individual’s performance and is generally in the form of monthly or quarterly sales bonuses. The sales manager has a key role in this and he has to steer each person to achieving his target.

Team motivation

Companies indulge in Group motivation programs to boost the morale of the team, inculcate team playing behaviours and achieve short term goal through the team. For instance, the aim of a company is to increase the sales in a market. A sales target is assigned to the sales team and periodic updates are sent to the sales team about the achievement vis-a-vis target. In case of shortfall from a salesperson, other salespersons either try to absorb the deficit quantity in their influence areas or motivate the laggard salesperson. Such programs lead to sharing of marketing ideas and instill a team spirit. The marketing, logistics and technical teams are also generally part of such programs.

Enablers towards achieving the team goals are the slightly different from individual motivation programs. They include trainings on team spirit, working across cultures, company profile and industry overview among others. Rewards in this program include team recognition, company stock, team outing, special training programs, etc. Regular communications from the management also help in internal marketing of the products, especially if the communication is about new markets entered, industry updates or product enhancements.

A larger motivation program includes activities addressing the entire organization. This involves building a good corporate culture, imbibing the company’s values into the minds of employees, following good HR practices, regular communications from the top management about developments in the company and industry, transparency in dealing with employees for promotions, entry and exit and following industry-standards compensation and benefits policy.

Companies focusing on sales keep reacting to competitive activities or innovating new campaigns but often forget to motivate their salesforce. They must not forget that internal marketing is one of the legs in the tripod on which product marketing rests, the other two being creating customer pull and increasing the channel network presence.

5 Business Risks

May 18, 2016October 20, 2022 by admin

Marketing of commodities involves several business risks. However, most of the business risks can be categorized in one of the 5 Business Risk categories. Below is the list of business risks and the possible risk management methods adopted by companies. The list is not comprehensive and certain industries might face business risks peculiar for that industry. Business risks can be seasonal or perpetual. Also, severity can be different for different companies for the same risk.

Classification of Business Risks:

5 Business Risks

Sl.	Risk Identification	Assessment of identified risk	Risk Severity	Risk Management
1	Manufacturing Risks
a	Non-availability of raw materials/ consumables	Company did not identify multiple sources for raw materials	High	Alternate vendors/ mines should be identified.
b	Breakdown in machinery	Equipments might face breakdown	High	Scheduled preventive maintenance should be done on time. Spare parts should be stocked.
c	Labour issues	Labour might go on a strike or might be unavailable for a few days due to a festival in the region or might get infected with a pandemic at the same time.	Low	Labour should be trained on multiple tasks to bring flexibility. Automation will also help in bringing down the dependence on manual labour.
d	Disruption in power, water supplies, gas, etc.	There might be disruption in public utilities.	Low	Back-up for a few days for power, water, gas, etc. should be ready with the factory.
e	Quality spills	The quality of the product might deteriorate.	Low	Staff should be encouraged to undertake quality improvement/ defect reduction projects.
2	Risks in Marketing
a	Change in preference/ Technology disruption	Company did not foresee the changing preferences of consumers or a new player has entered which has changed the way customer was earlier doing transactions.	Medium	Company should routinely survey customer satisfaction with the company’s services/ products and track any changes in the market trends.
b	Inadequate promotion	Company might not be spending enough to build awareness for its products or to convert interest into sales.	Medium	Right mix of the various advertising media along with right timing needs to be strategized for maximum return.
c	Weak USP/ Incorrect marketing communication	Benefits highlighted for the product might not be resonating with the consumer or the message is not very clear.	Medium	Market survey should be done to understand stated as well as tacit needs of the customer/ influencer.
d	Wrong choice of channel partners	Distributors and retailers selected might not be enterprising enough or have too little financial strength to promote the product	High	Financially stable, enthusiastic and preferably well-connected channel partners should be selected in a new market.
e	Misdirected advertisement	Marketing communications might not be reaching the correct target audience	High	Proper selection of advertising media should be done.
f	Wrong pricing strategy	Pricing might not have been set correctly for the customer to see correct value of the product	High	Pricing should be done keeping the value perception, competitor pricing and customer purchasing power.
g	Insufficient sampling	Company might not be distributing enough samples in the market or not	Medium	Provide enough samples and proof of concept in the market.
h	Poor after sales experience for the customer	Company might not have put in place a robust after sales customer support team or might not handhold the customer during installation	Medium	Dedicated after sales team should be built. This job should not be left to regular sales team.
3	Material Handling & Logistics Risks
a	Carrying & Forwarding Agents (CFA) not executing orders not time.	CFAs might not be very efficient in servicing customers, leading to delays in customer service.	Medium	Payments done on monthly basis, so there is incentive for CFAs to perform well.
b	Inefficiency in clearing stock from rake point resulting in higher demurrage & wharfage charges	Difficult to monitor whether the CFA is working efficiently or not.	Medium	Logistics officers appointed in major markets to oversee such issues.
c	Claim of higher shortages & damages by CFAs	Difficult to inspect the entire incoming material, especially from rake.	Medium	Logistics officers appointed in major markets to oversee such issues.
d	Transport vehicle meeting with accidents on the way.	Possibility of trucks meeting accidents on the way due to negligence of drivers or other reasons.	Low	Drivers asked to stick to speed limits by the transporters.
e	Stealth of material by transporter	Trucks not tracked on the way to the destination.	Low	GPS tracking system installed on trucks.
f	Transport Unions strong in certain markets	Transport unions make secondary movement expensive or difficult in certain markets.	Medium	Complying with the local requirements
g	Natural calamity at godowns	Calamities like earthquake, floods, fire, etc. can strike the godowns and damage the material stored.	Low	Swift action taken by company to salvage the stuck material.
h	Illegal land/ restrictive areas	Depots can be located in areas where government might impose transport restrictions or land can be declared as illegal possession by landlord.	Medium	Marketing officers do due diligence while recommending godowns. All papers checked as per legal requirements.
i	Stealth of material from godowns	Difficult to monitor to godowns round the clock.	High	Material in depots audited periodically by marketing team, Cameras installed in godowns.
4	Risks from Customers
a	Credit risk	Customers given much higher credit than the security deposits	Medium	Credit limits set and increased only after due diligence.
b	Outstanding	For some customers, outstanding is high and might be difficult to collect.	High	Constant follow-up done with customers for timely payment. Bank Guarantees available for major Non-Trade customers.
c	Material against concessional tax rates	Clients might not be able to give the required documentation in time.	Medium	Constant follow-up done with customers.
d	Supply issues	Supplies might not reach the customers as per promised schedule or not match their quality requirements.	Medium	Officer following up with the transporters and separate quality team functional.
e	Market price dilution by big wholesalers	Big wholesalers might try to average out their earnings.	Low	Discounts structured to not allow a big wholesaler influence market prices.
f	Inadequate profit margin to channel partners	The competition might be offering better ROI for the channel partners.	Medium	Frequent checks by the company to assess the profitability of the channel partners need to be done.
5	Risks from Environment Changes
a	New players entering the market	Can affect our market share and prices in the market	Low	Constant market feedback taken from regional offices.
b	Non-availability of other associated commodities like sand and gravel for cement, etc.	Can affect sales of commodity	Low	Constant market feedback taken from local marketing people.
c	Economic recession/ Natural calamity	Can affect spending power of consumers	Low	Company closely watching the economic scenario.

Table showing the 5 Business Risks

The various steps in risk management plan are enlisting all the possible risks, their likelihoods of occurrence, their expected impact or severity and making preparations for risk mitigation.

Market Price Control

May 14, 2016November 17, 2022 by admin

One of the key requirements of the commodity companies is to have effective market price control. Once the pricing strategy is decided, next step is the control. When there is no price uniformity in the market, doubts start creeping in on the business practices of the company and ultimately the quality of the product. Channel partners begin questioning the modus operandi of company officials and start drifting away from the brand. Proper market price control

The material flows from the company to the end user through several intermediaries and market price control at each stage is important for the company.

Material flow

Challenges to Market Price Control

Several factors in the business environment can be impediments to a company for market price control. Companies must have robust systems to control the elements causing variation of prices in the market. A few factors causing variations are here.

1. Great variation in quantity lifted by wholesalers. Big wholesalers will be able to avail high quantity discounts and pass it on to the market while small wholesalers might not be able to do so. Companies must try to keep a balance between small and big dealers. In any market, the company should not be dependent for more than 30% of sales one wholesaler. It is a good practice to restrict big wholesalers from doing retail sale.

Finally, a reliable retail network is needed so that the material reaches the end customer. Often the handling agents for the commodity companies can also sell material. The handling agents are generally moneyed people because the volume of work they do for the companies needs money and muscle power. While trading, they are able to trade much more quantities than other wholesalers because they can give material on credit to retailers for longer periods.

2. Diversion of low priced material to high price markets because of no control on the transport. Logistics is the key for commodities. If the route to low price market is through a high price market, some dealers can show on paper that they are booking the material for the low price market but unload the material in the high price market, thereby having an arbitrage opportunity in the high price market. Commodity companies must have control on the material logistics. The material billed for a certain place does not get unloaded at a different place. The company needs to develop some system for this. This does not necessarily mean that the company arranges the transport vehicles.

3. Sudden price rise or fall when enough material already exists in the market. Prices are changed by commodity companies overnight. However, all the material is not consumed in the market. Old priced product is still available with some sellers. They do not mind selling it according to the old purchase price. Companies must be very vigilant and announce immediate price discounts to the existing material in the market when they reduce the price or announce the new wholesale price in the market immediately when they increase the price.

4. Variation in perception of a commodity brand in various pockets of the market. This will however not cause variation in the wholesale price within a pocket.

5. Availability of institutional material at select retail counters. Generally material for institutional sale have “Not for resale” marked on them. It is mostly sold at concessional rate by the manufacturers. The problem arises when this institutional material creeps into the retail market and disturbs the market prices. Companies must have a good vigilance system to monitor any outflow of institutional material into retail market.

6. Availability of counterfeit material in the market. This is applicable more for the known brands. The counterfeit material causes confusion in the market. Their price tends to be lower than the announced market price as sellers can average out their earnings.

7. Other factors: Stealth of material from the godowns without the knowledge of the company, cartelization by low price brands and leakage of impending price change information to selected channel partners are other causes which can hamper market price control measures of the company. Companies should develop full-proof systems for effective market price control mechanisms. Companies need to immediately and effectively communicate any price changes, especially hike to the traders and distributors. For this, technology can be the best medium as letters or updated price posters or salesman visit will have a lag time.

Apart from market price control, there are other risk factors also. For this, read the blog on Risk Management.

Retail presence- 4 Ways to conquer

May 14, 2016November 1, 2022 by admin

At the endpoint of the supply chain of commodities are the retailers. Initially restricted to influencing the wholesalers only, commodity companies are now-a-days trying to improve their retail presence. They are increasingly engaging with the retailers directly. They are trying to reduce their dependence on the push sales from the wholesalers only. With increasing use of technology, it is now easier for very big companies also to directly interact with the retailers.

4 Ways to conquer Retail Presence

The retail shops are generally located in busy markets. Here, due to high rents, brands do not have too much of display space. Apart from Advertisement for Commodity brands, effective marketing also includes ensuring the display of the company’s product in the most visible position. All cement, paints, tiles, etc. brands try to be in the front, not stacked in the backyard godown of the retailer.

Attractive Packaging

The product packaging, if attractive, sometimes forces the retailer to display the product. Certain products are such that it is not possible to make brand name very visible on the packing. This is due to the product structure, like in the case of steel, glass and asbestos sheets. Hence, companies will put prominent advertisement at the retail counters. To ensure retail presence, companies are giving extra incentives to retailers to display the products at the most visible position.

Retailer Schemes

To ensure loyalty from the retailers, companies run Trade Partner schemes. Reward of the scheme is in the form of shiny metal, tours, white goods and often cash. A lot of companies are even servicing the retailers directly, bypassing the wholesalers. Organizations are incentivizing the retailers if they maintain a certain percentage of their sales with the company’s brands or grow it by a certain percentage.

Often, companies run short term competitions to drive retail visibility. At the end of the competition period, the highest achiever retailer is recognized in front of other retailers. Relationship building activities like family get-togethers, festival/ birthday/ anniversary gifting, training sessions for product knowledge enhancement, etc. are conducted by commodity companies to keep the retailers to the loyalty-fold.

Relationship building

To emotionally bind the retailers so that they stock the product, commodity companies are engaging with them in non-business ways also, like birthdays, festivals, get-togethers etc. This helps in ensuring the retail presence at the the outlets even though the sale might not be very high from them initially.

Strong retail reach is a prerequisite for commodity marketing success. Heavy advertisement will make the brand visible but if the brand is not present even in small quantities at a multitude of retail shops, it will not be a success story. To ensure retail presence, companies must engage with the end customers and make them feel so much comfortable with the brand that they ask for it at the retail shops.

3 Types of consumers

May 14, 2016October 20, 2022 by admin

Most companies do not sell material directly to the end user. There are often channel partners in between. But they have realized the importance of various types of consumers because end customers will recognize the commodity as a brand only if they have had an experience with the brand. As a result, companies are trying to have touch points with all types of consumers.

The engagement with the customers happens sometimes even before they start using the product. For instance, building materials companies are getting information from retailers about new construction activity to start in their area and sending handbooks on good construction practices to the house builders. The handbooks also promote a specific brand.

Similarly, when the house builder is doing roof-casting, the companies are sending their technical personnel to supervise the work. At the site, the technical person is also demonstrating how their brand is superior to the customers. A paint company is providing complete house painting as a service. Customers just need to call their customer care and the company sends its personnel with the catalogue for colour selection. After the customer has made his choice, the company arranges for painters to paint the house under their supervision.

It is due to the recognition of importance of consumers that commodities companies are now-a-days participating in trade shows. There is no guarantee of getting any order there but it will increase their brand recall. Company personnel also get an opportunity to interact with the house builders and understand the latent needs of the market. This also gives an opportunity to gather Competitive Intelligence.

Companies are trying to even make the purchasing of the commodity also an experience for the customers. Case in point, Ultratech Building Solutions shoppe, where the customers just don’t get cement only, but also all other building materials like paints, white cement, steel, etc.

It is due to the recognition of the importance of consumers that companies are conducting awareness meetings with the customers, wherein they explain their products’ USP. To incentivize them to taste their product, they are running short-term offers like freebies, scratch cards, etc. Surveys are conducted with the customers to understand the brand’s strengths and weaknesses to get pointers for any course correction if needed. End users are gradually becoming the primary focus for commodity companies and those who realized it first are the brand leaders now.

Types of Consumers

While it is important to recognize the importance of consumers, it is also imperative to understand the types of consumers. Customers come in all shapes and sizes and have to be dealt accordingly.

Types of consumers

Followers: Most of the customers will fall in this category. They are looking for functional need satisfaction. Their dealings with a brand very transactional. They enquire about the various options available from the retailers or influencers and purchase the best option. They are more influenced by the influencers like masons & retailers, advertisements, celebrity endorsements, etc. If they like the product after usage, they keep this to themselves. If they don’t like a product, they follow up with the company’s customer complaint redressal channel and are satisfied with refund or replacement.
Independents: Apart from hearsay, the independent customers also gather information from other sources like online reviews or talking to users known to them. They have more specific functional needs than the followers and compare the various options available in the market on various parameters.
Promoters: The promoters are emotional customers. They go an extra mile to actively promote a product if they like it. They will post messages online on why they are liking the product, like social media pages of the company and actively promote the product to their acquaintances/ followers. In case of a dissatisfaction also, they will go an extra mile and do negative propaganda of the product.

Despite a few distinct characteristics of each type of consumer, it is difficult to bucket every consumer in one type. Also, the characteristic changes for different types of products.

Advertisement for Commodities

May 14, 2016November 1, 2022 by admin

Advertisement for commodities plays a major role in forming perception of a brand, especially because the quality of a commodity is not easily measurable or visible. All cement brands are grey in colour, all glass look equally transparent and all steel rods look equally strong.

Proper choice of media to ensure maximum reach is very important. In their zeal to advertise, companies often reach out to those people who are not the potential buyers or influencers, leading to spillage.

Drafting the message in the advertisement for commodities is a very skillful task. The communication should strike the tacit needs of the customers. In my experience of cement, I observed that strength has become an over-used word in the industry. So, at the time of launch of Solid HD+ cement in Odisha, we tried to distinguish enduringness of structures from the initial strength of concrete. Also, market study told us that aesthetics had become an important consideration for home builders. So cement also has to contribute to the aesthetics of the house. This led to High Durability & High Designability as the positioning USP for the brand and all marketing communications harped on these two promises of the product.

Tag lines and USPs to be promoted need a lot of consideration before finalization.

Media of advertisement for commodities

There are several media of advertisement for commodities, which can be broadly classified under one of the three types.

Above the Line (ATL): Untargeted like TV advertisement, newspaper, radio, hoardings, etc.
Below the Line (BTL): Targeted to a specific audience or region like fliers in newspaper in a specific area, customer meetings, in-shop advertisement, email marketing, trade shows/ exhibitions, event sponsorship, targeted Search engine optimization (SEO), etc.
Through the Line (TTL): It is an integrated approach where both ATL and BTL advertisement strategies are combined. Digital marketing where objective is both brand building among a large audience as well as targeted marketing for a specific online customer is an example of TTL.

All media, including print, electronic (TV/ radio/ theatre), out-of-home, online, marketing literature, point-of-purchase, events etc. have varying roles to play in the advertisement for commodities. Selection has to done basis the their reach and type of consumers. If there is need of mass coverage, consciously select print or TV media. The thumb rule is to advertise at least in the top two newspaper publications if print is the selected medium. Similarly, advertise in TV channels with good TRP if electronic media advertisement is the requirement. Celebrity endorser, if any, has to be in-line with the ethos of the brand.

OOH and POP advertising need proper recce of the geographies to ensure maximum visibility. Advertisement for commodities should also ensure that the captive audience gets the message sound and clear from the advertisement.

Digital marketing and development of brochures & leaflets should be done by specialized agencies if the expertise is not there in the company because among all media, they provide the most detailed information about the product and should achieve the correct positioning of the brand. Promotional events like trade shows, on-ground activation, customer/ influencers meetings, cause marketing activities and public relation events are opportunities where the customer gets to interact with the company personnel. In all these events, a uniform messaging is a must. The brand equity should not get diluted.

Advertisement is often the second largest expenditure for sales promotion, after channel discounts. So, it requires close monitoring during execution. Companies often depend on the agencies for execution of marketing activities. They do not monitor the execution closely. Later, reality strikes and they is no clue as to why there is no uptick in sales, despite such heavy spend.

Advertisement for commodities

Effective Marketing Communications

May 14, 2016November 3, 2022 by admin

Due to increasing tussle between the companies, marketing communications have become important even for commodities. Effective message delivery helps a brand distinguish itself.

Messages in Effective Marketing Communications

Most of the companies are still promoting themselves basis their superiority in the fundamental attributes of the commodity. But a few companies have taken the lead and come out of the clutter. Some of the impactful communications recently are hinged on technology/ quality, environment-friendliness or customer-service. Companies have adopted innovative ways to drive home their USP. Ambuja Cement using heavyweight Khali to show that houses built with its brand have good strength became an online craze.

A lot of companies also use communications centred around happy family, value for money, legacy and scale of operations, etc. However, very few communications leave any recall in the consumers’ mind. But at the same time, it is getting more difficult to drive home the point of uniqueness with these approaches. A very recent trend has been commodity companies talking about aesthetic beauty. For example, Solid HD+ cement is harping on High Designability as one of its two USPs, the other being High Durability. Ultratech Cement is promoting its brand through its Build Beautiful campaign.

Themes for Effective Marketing Communications

Objectives of MarComm

Marketing communications should achieve two objectives. First objective is to tell the target audience what are the benefits of using the product. Second objective is to communicate how is the product unique from the competitors.

MarComm is not restricted to churning out product literature only in the form of brochures/ leaflets/ in-shop posters, TV/ radio commercials, sign boards/ hoarding/ OOH media advertisements, etc. Marketing Communications also include using innovative ways of sampling, product packaging, social media advertisements, email marketing content and CSR initiatives to drive home the point.

A glass company wanted to communicate that its glass sheets are actually of the thickness as promised in the specifications against the non-compliant ones by its competitors. So, it distributed a small U-shaped tool to all its retailers to measure the thickness of a set of 5 or 10 glass sheets. This helped the retailers in demonstration in front of the end consumers. Several cement companies have mobile technical labs or toll-free customer care numbers. They make it a point to advertise about these customer services.

Having realized the importance of each of the elements for promotion like advertisement, targeted marketing, customer meetings, wholesaler meetings, etc., the companies are adopting Integrated Marketing Communications for branding their products. Companies use TV commercials, newspaper advertisements, radio jingles, brochures, leaflets, outdoor displays, retail shop branding, etc. to communicate their USPs. Previously each medium was treated as a silo. Different message was coming from each medium as there was no Centralized or Integrated planning. But now trends have changed. It is Marketing Communications department (MarComm) responsibility to achieve coherence in all the communication campaigns.

A commodity brand might have been introduced at a certain price in the market but if the communications strategy is not aligned with the marketing objective, the desired positioning in the market cannot be achieved. Also, proper market research has to drive the marketing communications planning. Research will let us understand what the consumer desires. As a result, commodity companies are using market survey companies now-a-days before embarking on a new marketing campaign.

Wholesaler Promotion- How to achieve

May 14, 2016December 8, 2022 by admin

Wholesalers are the first contact for the company’s for B2C sale. It is the wholesaler who pushes the brand to the retailers and other bulk consumers. He plays a big role in maintaining the price in the market. So, wholesaler promotion or motivation is an important task for the companies.

Why should commodity wholesalers be promoted

If a wholesaler is able to generate good business through a brand, he might also take steps to promote the brand. A dealer of my cement company was so happy with our services that to boost sales in his region, he got advertisement sign-boards installed, distributed Point-of-Purchase material to his retail network and conducted promotional meetings at his cost. A wholesaler will give a brand he trusts on credit to his retail network with confidence that his investment will not sink as the retailers will be able to liquidate the product. Same cannot be said for untrustworthy brands.

Remember, having quality wholesalers in the network reduces the effort of the company towards push sales and company can concentrate on creating a pull from the market. They can make or break a brand in the market. They are so closely associated with companies that often customers cannot distinguish them from the company. That is why wholesaler promotion is an important strategy element.

Wholesaler Promotion requirements

Wholesaler promotion needs to fulfill two needs of wholesaler from the brand point of view: monetary & psychological. Companies need to fulfill both these needs in their wholesaler promotion plan.

Monetarily the commodity brand should be as rewarding or better than the competitor brands. Only exception is when the commodity is having a good brand equity and despite lower returns, the wholesaler is able to quickly rotate his money and does not need to give material on credit in the market. Apart from the mark-up on the billing price of the company, the wholesalers also earn through the discounts and schemes run by companies.

However, if the company gives entire discount along with billing itself, there is a possibility that the wholesalers will pass it on to the retailers due to pressure to clear the stock. This will put a downward pressure on the prices in the market. So the companies pass on some discounts at the end of the year. This is not informed to the wholesalers initially and is an additional profit for him. Also, often schemes benefits are in the non-cash form like gold, white goods, vehicles, etc.

Psychological satisfaction is the second thing wholesalers look for when dealing with commodity brands. It is due to this reason that companies conduct competition for highest sales at district, state or national level as part of their wholesaler promotion plan. To encourage small wholesalers, companies often have various other categories, like highest growth, highest market share, etc.

Big wholesalers always want a treatment different from the smaller ones. A few big wholesalers are so egoistic that they do not like to stay in the same rooms as small wholesalers when the company takes them to tours. Companies need to be careful while handling such wholesalers. At the same time, the small wholesalers should not feel step-brotherly treatment. There should be an endeavour to reduce company’s dependence on the egoistic wholesalers.

A tertiary need of some wholesalers is the relationship building by the companies. Companies organize picnics, festival get-togethers, movie shows, etc. to allow wholesalers interact with company personnel in a non-business set-up. Company personnel personally give birthday and anniversary gifts to Wholesalers. Companies are trying to have formal systems to track this initiative also. Automatic messages are sent to local salesperson, reminding him of the birthday or anniversary of the wholesaler. On festivals or important occasions, greetings are sent by the company directly to the wholesaler or through the sales personnel. All these initiatives are taking wholesaler promotion to a new level.

Wholesaler promotion- How to achieve

Pricing Strategy for commodities

May 14, 2016December 8, 2022 by admin

Pricing strategy for commodities, especially right at the time of introduction is another important element of the marketing strategy. Typically in commodities, there is a range of brands available for a wide spectrum of prices. Generally there are one or two price leaders in a market. As we go lower in the price spectrum, the number of brands increases at each price level. After introduction of the brand, most of companies follow market-based pricing strategy for commodities.

Types of Pricing strategy for commodities adopted by companies

Below are the various pricing strategies adopted by commodity companies. Cost plus pricing and competition based pricing are the most prevalent ones in the market and easy to ascertain. Value based pricing needs some research into the usage patterns of the product by the consumer and can change with geography. Penetration pricing and price skimming are used during production introduction phase.

Types of Pricing strategy for commodities

Initial Pricing strategy for commodities

Initial pricing is determined by what does the company want to achieve. If it wants quick sales numbers, then pricing at the lower spectrum makes sense (penetration pricing). However, so strong are the perceptions in the minds of wholesalers, retailers and customers formed about a product that it is very difficult to drastically change price relative to alternatives/ competitors after a certain period. Prices of commodities are always determined with respect to the price leaders. The price gap with the price leader remains more or less the same for long period despite the market seeing price fluctuations several times. Also, it is prudent to initially make more profits when the competition is not intense (price skimming).

Price Leader vs Volume Leader- Whom to follow

There are generally two types of markets, one where the price leaders are also the volume leaders and second where the lower-priced brands command the major market share and the premium priced brands have limited presence. Penetrating the market and getting some early sales is easier in the first scenario than in the second. However, positioning in the premium segment requires a whole lot of marketing effort. The switching costs are higher for consumers in the premium segment. The brand equity and thus loyalty of premium brands is already high. Company will have to invest heavily in advertisement as it will help in image building.

In markets dominated by low price leader, without a comparable price, entering the market itself is an uphill task. However, at low price, the new entrant might not be profitable as its costs might be higher than an established player in the market. The pricing strategy for commodities have to be such that the users see that the new product is giving a better value to the customers despite a higher price. Influencers like contractors and architects in case of building materials will have to be lured to promote the new brand. To operate at low price means that the input costs also have to be low, which means that all cost centers have to be very efficient.

Discounts for channel partners- Important aspect of pricing strategy for commodities

The pricing strategy for commodities becomes more complicated because of the various types of discounts floated by competitors. Often the billing price of the company has no correlation with the existing wholesale prices in the market. What is more important is the landing cost for the wholesalers. As part of the pricing strategy, companies need to closely monitor their wholesale and retail price. This will help to maintain the desired positioning in the market. Companies need to periodically adjust the billing price and discounts. This ensures that price fluctuations do not affect the wholesalers and retailers earnings per unit. They need to conduct marketing activities appropriate to maintain the brand positioning in the market.

Pricing strategy for commodities must also consider the influence of a few stakeholders in the market. Companies must also ensure that a big wholesaler does not disturb the prices in the market as it shakes the confidence of small retailers in the control mechanisms of the company. There should not be arbitrage opportunity for the wholesalers by way of bringing material from one region and selling in another. This becomes important because commodity prices vary drastically every few kilometers due t high freight involved in their transportation.

Role of influencers

May 14, 2016November 17, 2022 by admin

No industry will be so peculiar like building materials wherein the consumers’ decision is shaped so much by the influencers. The role of influencers like masons/ glaziers, engineers, architects, retailers, shop managers, friends, family members, contractors and star endorsers is immense, not to forget the influence by the wholesalers/ distributors. Their influence is because consumers do not know much about these products and there is no second opportunity for them to build a house. It should not come as a surprise if the mason is insisting on a specific cement or steel brand or the contractor is insisting for one paint brand.

The role of influencers is so high that companies are running incentive schemes for these influencers so that they promote their brand more often. Companies are sending the engineers & architects for foreign leisure tours, giving white goods to masons and shop managers and felicitating high sales volume retailers.

Role of influencers varies with awareness level of end user

Role of influencers

Masons, glaziers, plumbers, electricians, painters etc.

Role of influencers, who have become specialists in their job, because of their know-how earned through years of experience, have a lot of clout among the customers. Their influence is higher in rural areas. As these people have worked with the commodities like cement, steel, pipes, cables, paints, etc., consumers think that they will provide correct feedback. Consumers often go against the other influencers and well-wishers’ advice to procure the brands suggested by this lot. Their influence reduces in urban places where they act on the recommendations of the contractors.

Contractors

Individual house builders are now-a-days outsourcing construction to contractors. Here, the contractors becomes the biggest influencer. The contractor recommends brands with which cost of construction is minimum or there is a special incentive for promoting a brand.

Engineers & architects

In urban areas, it is a trend to hire engineers and architects/ interior designers for house construction. These technical people often recommend certain brands according to the durability and design needs. Brands try to bring them under their loyalty fold by creating awareness programs for them and through referral programs.

Retailers & Shop managers

Role of retailers or shop managers appears at the point of purchase, especially if the customer has not come with a pre-determined brand in mind. They are often able to influence him to the brand which is most profitable to the store’s business.

Other influencers

There is another set of influencers like friends and family, and celebrities promoting a brand in advertisements. That is why we see that several actors and sportsmen now-a-days are advertising for cement, steel, paints, etc. The role of influencers varies with awareness level of end user.