Mapping Channel Flows in the Music CD industry

In the music CD industry, the choice of the efficient marketing policy is one of the crucial factors in the success of the particular brand. CD’s are one of low-involvement products which can be bought by the customers out of the large selection. In order to be successful, every particular producer in the music industry has to define the marketing mix of the product which includes product, price, promotion, and place. While the first 3 components of marketing mix are very important, the last one which is place seems to “catch all” of the 4 P’s.

Place is a very complex component of marketing mix because it includes such important areas of marketing as decisions about channels, logistics, retailing, customer support and many other issues. The right choice of distribution policy and channels are very important for the success of the producer, and those aspects cannot be neglected.

The easiest way for the producer to sell the products to the final customers is by direct selling. The dialog between the supplier and the buyer is the easiest way in which the product can be purchased. However, most industries do not have such a luxury. It becomes inefficient for the producer to sell items directly to the customer, and he gives those functions to all types of intermediaries. In most cases, complex industries have a whole chain of intermediaries which bring the product to the end-user. This system of distribution represents a kind of a channel through which from the producer to the first intermediary and from the first intermediary to all others one by one product, payments, and information flow are channeled.

Whenever the chain is very long, it’s obvious that every member in the chain, as well as the end-user has his specific needs, which all have to be taken into account by the producer. It’s very important to make sure that the information flow through the channel does not break. The more intermediaries there are between the producer and the end-user, the more complicated the relationships inside the channel become, and more attention has to be paid by the producer so that the quality of the product remains high as in the very beginning of the chain. CD’s industry deals with rights on a particular part of property, therefore it’s very important to maintain the chain of suitable distributors which provide the highest quality of the music record companies products.

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The most widely-used forms of “channels” of distributions used by the companies include the following:

v Selling direct (with the help of salesforce);

v Mail order (including telephone sales);

v Retailer;

v Wholesaler;

v Agent (who acts on the behalf of the producer) (Mercer, 467)

In order to maintain the quality of the production, it’s necessary for the producer to keep some control over the members of the distribution channel. Most music record companies pay close attention to that. Once the control is entirely lost, it might be hard for the producer to monitor the sales and the quality. The most efficient structure is when the producer structures the distribution channel by himself. Depending on what market the producer is in, this issue touches him in a different way. For example, when the producer produces mass consumer goods and there are many competitors in the market offering the same type of product, it’s not that important for the producer to control all the distributors who offer his product.

The producer’s goal is to increase the number of distributors offering his product because he wants to have a large share of the market. In the opposite case, when the goods produced by the company have some unique features and the company competes with competitors mostly in quality, it has to take responsibility over the quality of the products which it offers and may suffer losses if the quality of the products end-users receive is low. Therefore, the producer will very much care in such a case about the quality of the goods which are offered to the end-users, and do his best to determine only very reliable distributors of his production in order to have a strong emphasize on quality. The mentioned approaches which can be used by the producer in the distribution policy therefore include:

1.      Intensive distribution;

2.      Selective distribution;

3.      Exclusive distribution.

In the case of the intensive distribution, the main emphasize is made on the number of distributors selling the company’s product. The price competition is evident in such a case and quality of all the similar goods offered in the market is pretty much the same.

Selective distribution means that the producer selects suitable distributors to re-sell the product. Those distributors who have a good reputation get a chance to sell the company’s products. The selection can be quite wide, and the producer in such a case in not very concerned about the top quality of the products which he is offering. Exclusive distribution is common in such fields where companies offer products with unique characteristics and the main point of the marketing policy of the company is offering goods of the highest quality. Every little detail of the product is important in such a case.

Therefore, companies choose a very limited selection of distributors who will be re-selling their product in order to maintain the highest quality. The main partners of the company in the distribution channels include such establishments as specialty outlets, supermarkets, department stores, and discount outlets. Specialty outlets have a narrow product line (Mercer, 473). For example, in fashion industry specialty outlets aim at women of a specific age group with a specific taste. Such distributors offer a greater degree of personal service and usually the selection of products for the targeted group of customers is very large.

Supermarkets can be characterized by the following principles: self-service and self-selection displays; centralization of customer services; large scale; a strong price emphasize; a broad assortment of merchandise. The most famous supermarkets include Sainsbury, Tesco, Wal-Mart, and others. Department stores cover a large variety of products in different departments of the stores and offers great competition for supermarkets. Examples of department stores include Boots, Marks & Spencer, British Home Stores. Discount outlets specialize in a “high turnover at low cost”. They usually specialize in products of one field and get a 30-day credit from their suppliers. For example, they include Dixons in consumer electronics/electrical; MFI in furniture.

A major feature of the distribution channel is that there is a “value-add’ of every level of channel. Just as the product and information are channeled from one level of the channel to another, the value is also added at every level step by step. For example, in the music industry, the value is first added by the manufacturer who makes the music label, then the CD’s are passed to distributors, sometimes on a couple of levels until they reach the customer. At every level, the value is added because more companies participate in the process.

The manufacturer is the one who owns the music label and therefore is the main player in the game. He adds the most value to the product, which consists of the cost of production and the profit. However, without the distributors the CD would not be able to get the end-users, so at every level of the channel new value is added to the primary product. The first level of distributors can be wholesalers, the second level can consist of retailers. Therefore, value is added at 3 levels until it reaches the end-user.

In the music industry, the efficiency of channel members is very high. Companies producing CD’s pay close attention to the distributors who specialize in selling CD’s and for the most part, those channels fall into the category of selective distribution. The channel distribution in the music industry is very complex due to the characteristic features of the industry. Nowadays, there are many companies which produce CD’s (give the music label) and there are many customers in the market who are willing to buy those CD’s.  For example, Sony Records, Inc. is one of the leaders in the music industry production.

However, it faces some competition in the market. Customers can give preference to CD’s produced by other companies as well. Therefore, every music record company needs to make sure there are many distributors who are brining CD’s to the end-users and also maintain high quality of the product. The distributors in the music industry include music stores which deal with CD’s in particular, supermarkets where one can also find this product, and Internet distributors which specialize in music CD’s. The chain of distributors is quite large in the music industry. It’s very important for music record companies to provide the highest quality of their musical CD’s.

One of the reasons of the need in high quality is that nowadays music record companies face sharp competition from the Internet. It has become very simple for people who are fond of music to download music files from the Internet, and they no longer need to go into the music stores in order to get the CD’s. The files which people can download from different sites are free of charge, and no money goes to the singers from those operations. One of the ways to fight with that competition for music record companies is by offering the highest quality of their products. If a person can buy a CD of the highest quality in the music store, he might stick to it and not use Internet for getting his favorite music albums.

Another way is to include Internet distributors of music products which can compete with free music upload by offering additional services. Such distributors as Amazon.com for example can guarantee high volumes of CD’s sales due to its closeness to the customer. It’s common truth that many people who use Internet are interested in music. As long as they can order their favorite CD’s on Amazon.com, they will keep their hands off the free file upload. However, in such a case the emphasize on the quality is important as never: the customers will order CD’s from Amazon.com as long as the quality of CD’s is beyond competition. In addition to that, it’s important to make sure Internet users get some additional benefits together with CD’s, for example, suggestions about their future possible purchases, discounts, or free information about their favorite singers.

The efficiency of the CD’s and payment in the music industry through the distribution channel is very efficient but there can be some developments made in it. The most important is to keep in mind the importance of Internet in the distribution of CD’s. It’s also possible to devote some attention to such types of direct marketing as teleselling, direct mail, and direct selling. By mailing catalogues to potential customers, large volumes of sales can be achieved. For maximum efficiency of distribution in music industry, it’s necessary for music record companies to devote lots of attention to maintaining a large chain of distributors but at the same time monitor the quality of the products which are being offered to end-users.

Bibliography.

David Mercer. Marketing. Blackwell Business. 1992.
J. Barry Manson, Moris L. Mayer, Hazel F Ezell. Foundations of Retailing. Business Publications, Inc., 1984.
Kevin J. Clancy, Robert S. Shulman. The Marketing Revolution. HarperBusiness, 1991.
Kotler. Marketing Management. 1986.
R.M. Johnson. Market segmentation: a strategic marketing tool. Journal of Marketing research, vol. 7, 1981.

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