Tag: transition to brand

Commodity Distribution Model

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.

Commodity Distribution Models

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 Logistics

by admin

Commodity logistics is an essential ingredient for building brand of commodities. There are several roles which commodity logistics division has to do for commodity servicing.

  1. Timely supply: The customers are very used to fast delivery. In order to supply them material on time, dealers also need to get timely supply of material from the manufacturers. Also, limited storage space at retail shops demand that the shops need to maintain minimum inventory.
  2. Good geographical reach: Small size trucks to reach far-flung areas as rodas might not be there for large trucks.
  3. Arranging various sizes of trucks to service different size orders & maximum utilization of the loading capacity of the trucks: Each dealer has a different stockyard size and cash flow cycle. So, the order size of each dealer is different which company logistics need to serve.
  4. Managing Carrying and Forwarding Agents or Handling Agents: CFAs make or break the reputation of the company in the market as often they influence the timely delivery, quality and a few pre-sales/ post-sales activities (proforma invoice, customer complaints, sample delivery etc.) from the godowns. So, both strict control on their working so that the dealer’s experience with them is good as well as empowering them enough for speedy resolution of customer complaints are important.
  5. Paperwork to meet statutory requirements: There is a lot of documentation needed to be submitted to the local authorities.
  6. Fleet maintenance: This often involves the complexity of managing Company trucks, outsourced transporters and customer trucks.
  7. Depot stock management: Stock at godowns need to be properly kept. FIFO needs to be maintained. Any manufacturing defect observed in the incoming material need to be immediately informed to the QA personnel so that bad material does not creed into the market.

Commodity logistics is at the heart of customer satisfaction and significant planning needs to be done for this.

Why should we have Data Driven Approach

by admin

Data is a collection of numbers, labels, or symbols, collected through observation. It can be qualitative or quantitative variables about one or more persons or objects. When there is no structure to data, nobody can make meaning out of the numbers and names. Data organized in rows and columns carry specific meaning. A commodity company with a data driven approach takes decisions basis the data. Its transition to a brand will be faster than one which ignores data, other factors being constant.

To look at data and to make meaning out of it needs focus. It has to be inculcated as a culture in the company. It is necessary that all decisions are based on a data driven approach. All reviews must be backed with data.

Types of data

Types of data available with the company fall in three categories:

  • System data: This includes data registered in company’s system through a standard software. Chances of error in data due to human estimation is minimal. A few examples of system data are sales volumes of customers, number of outlets selling our brand, purchase frequency of the customers, company’s production figures, number of quality complaints logged, etc. Company’s ERP system captures this data from the invoices.
  • Market data: This includes data where the employees make estimates of numbers like competitor brands’ sales volume or shop share, retailers profile, number of outlets selling competition brands, production volumes of competition, quality of the competition brands, competition pricing, etc. are examples where of market data where the employees make estimate basis the interaction of people operating in the market. This is often accepted with a pinch of salt by the management as the biases of the sales person creep into this data collection.
  • Agency data: This includes data collected by agencies either independently or for a commodity company when asked to do so. Data collection happens either by sample survey of consumers or through interaction of the trade partners/ influencers. Changes in consumers’ consumption behavior, growth trend of the industry, market share of the various brands, media consumption trend of the consumers, etc. are examples of agency data. This data is considered more credible by the management as there are no biases from the market research company.

Benefits of Data Driven Approach

There are several decisions which can be taken with more diligence if data is looked closely. They will yield better results. A few examples are below:

  1. Sales planning- If the sales team closely follows the purchase frequency of trade partners/ consumers, seasonality of the product and recent growth trends, it will be able to predict the sales forecast with more accuracy.
  2. Trade scheme devising- Last scheme’s achievement, timing of the last scheme, type of scheme influencing various types of trade partners, are important parameters, which if tracked will help in devising the next schemes. Often companies do not evaluate the scheme’s performance after scheme closure, thereby not learning from the failures.
  3. Pricing decision- The pricing strategy of a commodity company will be successful only if it has information of the price waterfall existing in the market vis-à-vis competition or various element of the value chain.
  4. New product launch or capacity expansion- Companies should invest in new production facilities or storage facilities only if it has concrete information on the existing market size and competition market share. Basis this information only, the company will be able to decide the positioning strategy for its product. Similarly, when coming out with new products, the company must have all market data including consumers’ changing consumption trends.
  5. Advertising strategy- An important input is the media consumption data of the target audience. This data driven approach helps commodity company strategize media campaign diligently.
Importance of Data Driven Approach
Importance of Data Driven Approach

In a nutshell, data driven approach avoids decisions being taken on a gut by an individual. In a way, the decision maker takes the responsibility of the decision.

3 Types of consumers

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
Types of consumers
  1. 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.
  2. 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.
  3. 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.

Effective Marketing Communications

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
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.