Limitations of Network Marketing PDF

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Limitations of Network Marketing: The limitations of multi-level or network marketing are as follows: (i) Sales forecasting is difficult. This might result in under or over stocking of various items. (ii) Customer relationships are at the mercy of the distributors or subdistributors. (iii) Brand-building is very difficult without sales promotion and advertising. (iv) Distributors may become large customers and hence take over control of the company. (v) The company cannot control its sales team’s actions because of its excessive dependence on the network of distributors and subdistributors.

Lecture Notes on Marketing # 4. Organization Structure: Inside any company, a large number of activities are carried out by big groups of individuals, spread across multiple departments (e.g. Production, Sales, Marketing, Purchase, Human Resources, Administration, Inventory (Stock), IT Systems, Accounts etc.).

The activities within these departments must be properly coordinated such that every employee understands his responsibilities. Also, the employees need to understand the protocol for their communication and coordination within the department and also across various departments. Ideally, each department must be supervised by one single person, and the team within that department must report to her. That person remains responsible for the day-to-day decisions and performance of that department. This ensures a single line of command. Without a single command line, employee coordination is very difficult. If everybody takes decisions about everything, a lot of confusion and communication gaps may arise. In such cases, nobody will be responsible when things go wrong. This is usually observed in organizations which have grown without putting proper systems and processes in place. Of course, if the organization is very small where only one business leader takes care of all the activities, only he is the single command, but division of activities within the team is essential and applicable in such cases also. The tool to graphically represent the relationships and responsibilities within a company is called an Organization Structure. It is a tree-like graphical representation of the organization, starting

from the head of the organization at the top and the hierarchy below him shown downwards. As the name suggests, it is used to properly communicate the work and reporting relationships within the company in an organized and structured manner. Everybody on the roll of the company must be represented in the organization structure. In an organization structure, the person shown above is responsible for guiding and supervising the person(s) below her. The persons below are responsible to fulfill the work given to them and report the status to the person above. The reporting relationships must be determined very carefully. People’s seniority, experience etc. must be considered while deciding these relationships. If proper care is not taken in deciding the reporting structure, it may give rise to a lot of conflicts within the team. Ideally, every employee in the company must have one position in the organization structure. This means that there should be only one boss for every employee. Nobody in the company should have more than one reporting boss. If it is so, it creates a lot of confusion. If functionally a person performs multiple duties which fall under two or more departments, she may have functional reporting to

more than one bosses, but her administrative boss must be only one. This administrative boss should be the one who may grant her various permissions like leaves, reimbursement of expenses etc. The senior positions must be given to the persons with leadership and people skills along with the requisite technical skills and relevant experience. If the persons at higher positions lack leadership and people skills, they will eventually be ineffective in those supervisory roles. If these skills are not possessed, we must try to develop the same in them through proper training and coaching. The organization structure must be revised as and when the manpower changes occur within the company.

Notes on Marketing # 5. Channels of Distribution: A channel of distribution refers to a path or route that a good or service takes in order to reach the hands of the ultimate consumer. In other words, it is a chain of businesses or intermediaries through which a good or service passes until it reaches the end consumer. Distribution channels in marketing are a key element in the entire marketing strategy. It helps the business in expanding its reach and grows its revenue. Some important definitions of channels of distribution: A channel of distribution or marketing channels are the distribution

networks through which producers’ products flow to the market. — Cundiff, Still and Govoni This is a route taken by the title to the goods as they move from producer to the ultimate consumers or industrial users. —William J. Stanton There are various functions of distribution channels: (i) Transfer of title of the goods involved. (ii) Physical movement from the point of production to the point of consumption. (iii) Storage function. (iv) Communication of information concerning the availability, characteristics and price of the goods in transit, inventory and on purchase. (v) Most of the utilities of products are created by performing the function of physical distribution promptly and efficiently. (vi) Transactional function like buying from the manufacturer and selling to the consumer. (vii)Storing the goods and sorting them into quantities desired by customers. (viii) Channels of distribution also conduct marketing research and

gather data on market conditions, expected sales, consumer’s trends, competition etc. Thus giving valuable information to the manufacturer. (ix) Distribution channels help in maintaining the price too. By stocking the goods, a constant flow of goods to the market is assured. This equalizes the demand and supply factors which stabilize prices. Channels of distribution are very important for any firm because of the following: (i) Distribution channel is an important element of marketing mix of a firm and other elements are closely related with interdependence on the distribution channel. Other marketing decisions like pricing, promotion and physical distribution are highly affected by this. (ii) A sound distribution channel enables the firm to cut down cost and maximize its sales volume. (iii) The cost involved in the use of distribution channels adds up into the price of the product that the ultimate customer has to pay. Thus it is important to choose the distribution channel wisely. (iv) A product or service is really useful to the consumer only when it is available at the right time and at the right price. Distribution channels ensure this.

(v) Due to right distribution channels fluctuations in the production can be reduced which ensures steady employment and proper budgetary control.

Notes on Marketing # 6. Direct Marketing: Direct marketing refers to an element of marketing communication that facilitates organizations to reach their customers directly without any intermediary. This element of marketing communication involves sending direct mails through the Internet and providing catalogs and coupons to customers. It also includes telemarketing that requires calling customers through telephones. This type of marketing does not necessarily involve face-to-face interaction with customers. Direct marketing proves to be an extremely effective element of marketing communication process that practices a targeted marketing approach to lure customers. It helps in creating valuable and lasting relationships with customers in the long run. Oriflame Cosmetics is one of the best examples of an organization practicing direct marketing. The organization sells cosmetic products all over the world (62 countries). The customers of Oriflame themselves act as consultants by taking its membership to sell products to other customers with the help of a catalog. Direct marketing is generally an unsolicited practice and can be seen as a nuisance by people as they do not like to be disturbed by

sales representatives. The practices of direct marketing, such as telemarketing, e-mailing, and junk mailing are generally not entertained by customers. These practices distract the routine of customers. Thus, the tools of direct marketing need to be used with caution. Significance of Direct Marketing: Direct marketing facilitates an organization to target a specific segment of customers. It assists the customers in making purchase decisions by showing them product demonstrations. An organization can design a number of suitable ways to serve its customers as per their unique needs and make more efficient and effective marketing efforts. Direct marketing is a relatively cheaper way to reach out to a huge number of customers at a personal level. Thus, it helps an organization to build a relationship with customers. Advantages and Disadvantages of Direct Marketing: Following are the advantages of direct marketing: a. Involves high conversion and success rate as customers can be approached directly b. Serves as a basis for testing the chances of success of new products in the market c. Facilitates rapid delivery of products.

Following are the disadvantages of direct marketing: a. Evokes the resistance of customers when extra persuasion is used to sell the products b. Having less sales orientation and more customer-relationship orientation c. Pestering customers by sending bulk mails and making telemarketing calls.

Notes on Marketing # 7. Marketing Orientations: An orientation, in the marketing context, relates to a perception or attitude a firm holds towards its product or service, essentially concerning consumers and end-users. The marketing orientation evolved from earlier orientations namely the production orientation, the product orientation and the selling orientation. Product Orientation: The industrial revolution of the 17th century brought about the production era, which continued till the late 1920’s. Up to 1950s firm focused on a production orientation specializes in producing as much as possible of a given product or service. Thus, this signifies a firm exploiting economies of scale, until the minimum efficient scale is reached. A production orientation may be deployed when a high demand for

a product or service exists, coupled with a good certainty that consumer tastes do not rapidly alter. Companies focused on manufacturing processes and they looked for ways and means to produce the goods faster, more efficiently and at low prices. Product features were not given any importance because it was felt that customers were concerned only about the availability of the product, and not about its features. Sales Orientation: The sales era began in early 1960s. A firm employing a product orientation is primarily concerned with the quality of its own product. A firm would also assume that as long as its product was of a high standard, people would buy and consume the product. Manufacturers believed that the success of their business depended on outselling the competition. Companies realized the need for product promotion and distribution. In this era, marketers focused their efforts only on selling their products to the customers. Companies realized that they could increase their demand by promotional methods like advertising, product promotion etc. Marketing Orientation: 1970’s to present day, the marketing orientation is perhaps the most common orientation used in today’s marketing. It involves supplying products and services according to consumer tastes. Marketers wants to know their customers in better way, by the R&D they develop a product attuned to the revealed information, and

then utilize promotion techniques to ensure persons know the product exists. During the sales era, companies ignored consumer wants and needs. They focused simply on selling their products. Critics of sales era believed that products in sales era were sold without looking at consumer needs and wants. At this stage, companies focused on marketing, rather than on selling; they also embraced the concept of coordinated marketing management, which was directed toward the twin goals of customer orientation and profitability. Companies are now shifting their focus towards customer relationship, and began attempting to fulfill customers’ needs according to their preferences.

Notes on Marketing # 8. Marketing Environment: A company’s ability to develop and maintain successful transactions with its target customers is affected by company’s marketing environment. Marketing environment consists of the forces close to the company that affect its ability to serve and satisfy its customers in the context of their needs and requirements. All firms must identify, analyse and monitor external forces and assess their potential impact on their goods and services. Although external forces are outside the marketing manager’s control, they must be considered together with the variables of the marketing mix (i.e., product, price and promotion) in developing marketing plans and strategies. An attempt has been made to study the impact of various kinds of external environmental variables on the decisions

to be taken by marketing managers. The term ‘marketing environment’ denotes all the external factors and forces that affect a firm’s ability to develop and maintain successful transactions and relationships with the target customers. Thus, marketing environment includes all forces that affect marketing policies, decisions and operations of a firm. The external forces which constitute uncontrollable environment include (a) micro factors such as suppliers, customers, intermediaries, competitors and general public; and (b) macro factors such as demographic, economic, natural/physical, technological politico-legal and socio-cultural factors. The internal environment of a firm which is controllable includes product design, packaging, pricing, promotion, and distribution policies of the firm. As a matter of fact, these forces constitute the marketing mix of a firm....