Write a short note on Channels of Distribution and Gaining Competitive Advantage.

CHANNELS OF DISTRIBUTION
The standard product pricing theory does not provide insight to what should be one’s policy toward distributor margins. The distributor performs a number of functions on behalf of the supplier which enables which enables the exchange transaction between the producer and the customer. There are a number of devices available for compensating the trade intermediaries, most of which take the form of discounts given on theretail selling price to the ultimate customer.

1. Trade discount – This is the discount made on the list price for services made available by the intermediary. e.g. holding inventory, buying bulk, redistribution etc.

2. Quantity discount – A quantity discount is given to intermediaries who order in large lots

3. Promotional discount – This is a discount given to distributors to encoutage them to share in the promotion of the products involved.

4. Cash discount - In order to encourage prompt payments of accounts, a small cash discount on sales price can be offered.

Gaining Competitive Advantage
It is possible to use price as a strategic marketing tool. The aspects of competitiveness have been listed below:

1. Reduce the life cycle/ alter the cost mix – customers are often willing to pay a considerably higher
initial price for a product with significantly lower post-purchase cost.

2. Expand value through functional redesign. E.g. a product that increases customers production capacity or throughput, product that improves quality of the customers product, product that enhances end-use flexibility.

3. Expand incremental value by developing associated intangibles. For example service, financing, prestige factors etc.