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Route to market

Route To Market (RTM) is the method organisations use to get their products or services to their customers. There are two methods organisations use, physical and psychological RTM. Physical RTM includes selling to retailers, wholesalers, franchisees, sales agents and other distribution channels. Psychological RTM covers various ways an organisation uses to create awareness about their products, how they will benefit customers, where the products will be found and other promotional activities.

By Godfrey Dube

Distribution is part of RTM. Distribution as one of the four elements of the marketing mix is an inseparable part of marketing decisions of the company that covers all decisions on delivering of the product to the final consumer. As competition in the market place intensifies and new technologies evolve, firms are taking fresh looks at their distribution channels to squeeze out inefficiencies.

RTM is a distinct process through which a product or service can be selected, purchased, ordered and received by a customer, it is the mix of channels and type of channel intermediaries chosen by a company to facilitate the flow of its products/services from its warehouse / service delivery location to its multiple target customer segments.

RTM should thus be looked at as a way that a company aligns to the evolving needs of its customers — it is the interface at which the company sells to and serves its customer base and interacts with new prospects.

RTM is more than just the distribution of products and services; “it is a way of thinking, a way of making new connections with customers to exploit new commercial opportunities. It is the essence of the way customers and a business interact.”

A variety of routes to market exists, such as salesforce, retailers, company-owned outlets, call centres, distributors,

wholesalers, catalogues, and web stores. Each route is a package of different levels of service outputs, search convenience, and costs. Because different routes to market provide different levels of such service outputs as product information, breadth of assortment, level of social interaction, hours of business, order size, ease of negotiation, credit availability, payment options, transaction security, delivery time, return policy, and post purchase support among others, firms adopt a broader variety of routes to fulfil the varying customer needs

At the core of each route to market is the customer. Because a firm, irrespective of its power as a manufacturer or service provider, must make its products and services available wherever, whenever, and however customers want them, the role of the customer should be brought to the centre stage of route to market.

Two broad factors that may influence the route to market strategy in the firm is customer orientation. Customer orientation is about creating customer value, understanding customer needs, and providing and measuring customer satisfaction. This orientation is manifested, for example, in the target marketing strategy followed by a firm, which influences customer value through criteria such as quality, price, and brand image. Without the right route to market, it is difficult to reach the target market. Many industrial companies have been identified as struggling with access as they have not been able to identify the right channels that “will take their products” to the market.

Most effective and efficient route to market strategies are designed from the market back, ensuring that they are properly aligned with customer and consumer needs. The structure of a route to market model should have a foundation of quantitative and qualitative characteristics of customer segments, including growth potential, the stated and unstated needs of customers in a segment, geographic footprint and location, sales volume, and profitability.

Companies should consider costs, very few companies can tell what it costs to sell through a particular route to market whether that be direct, one tier or two tier distribution.

Building access can be expensive, requiring extensive internal systems and infrastructure to be able to sense market demand, gather and evaluate sales forecasts, deploy marketing programmes and promotions, plan and execute complex logistics. It is a tough balancing act to increase access to the market while ensuring your network is profitable and capable of handling the growth you want. In many industries, a significant proportion of the final price of goods and services is accounted for by distribution costs.

The necessity of distribution as a specific economic activity arises from the gap, mismatch between the production of products and consumption place, time, quantity and quality. Choosing the right distribution channel to move products or services to the end user is a long-term strategic decision and varies according to the product, service, and market.

A well-chosen channel is necessary because it constitutes a significant competitive advantage, and it is designed to save costs, improve and increase efficiency, provide regular transactions, provide a larger customer base, and allow businesses to focus on other aspects of the organisation.

The main function of a distribution channel is to provide a link between production and consumption, thus overcoming the time, place, and possession gaps that separate goods and services from those who need and want them.

A channel performs three important functions which are:

l Transactional junctions — buying, selling and risk assumption

l Logistical functions — assembly, storage, sorting, and transportation

l Facilitating junctions — post-purchase service and maintenance, financing, information dissemination and channel coordination or leadership.

When choosing a distribution strategy, it is important to determine what value a channel member adds to the firm’s products and/or service.

The structure of channels requires a set of strategic decisions: The first decision determines the appropriate intermediary type, e.g. wholesaler, retailer, franchise, broker, direct sales force; second is distribution intensity.

Deciding which channels to use and in what combination (including at what time and with which segments) is a matter of being aware of the channel members and channel options available and then evaluating them in the context of the company’s business situation.

This process requires an understanding of the nature of each channel type, including how it functions, and what benefits and limitations it offers.

The economics of channels and the relative degree of use of alternative channels by different customer segments will have significantly different profit outcomes.

The second strategic decision in a channel, distribution intensity, is a key element of the channel strategy, and often dictates all the channel structures influencing the type of intermediary, the coverage of the market, and the kind of distribution (direct or indirect).

Intensive distribution is at one end of the scale where the policy is to distribute to as many outlets as possible. Extensive distribution, on the other hand, is at the other end of the scale where the policy is to distribute to only one intermediary at a given level in a given geographical area. In exclusive distribution, the producer severely limits the number of intermediaries.

Companies should use a holistic approach to RTM. An integrated, or holistic route to market strategy includes a methodical analysis of markets, customer segments, channel economics, offerings, value propositions and a host of other enabling factors that are involved in formulating an integrated strategy.

In order to build market-driven, coherent, balanced, and flexible routes to market, companies need to adopt a new perspective on route to market design and management. Too often, companies approach their work in a piecemeal fashion and without a holistic view of the routes to market they are building.

l  Godfrey J. Dube is the Standards Association of Zimbabwe head of marketing and sales. He has over 29 years marketing/sales and supply chain working experience. He is a Fellow of the Zimbabwe Institute of Management (FZIM), A Fellow of the Marketers Association of Zimbabwe (MAZ), a Chartered Marketer (CIM, UK).

He is one of the pioneers, past president and current chairman of the Advisory Council of the Marketers Association of Zimbabwe and board member of the Marketing Department of the Bindura University of Science Education. He is also a marketing part time lecturer on the University of Gloucestershire.

*This article was contributed on behalf of the Marketers Association of Zimbabwe, a leading body of marketing professionals promoting professionalism to the highest standards for the benefit of the industry and the economy at large. For any further information kindly contact mazmembership@mazim.co.zw or visit the website on www.maz.co.zw. Follow this column we will be further developing how to apply effective marketing strategies as well as other marketing matters.

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