Trade development

Marketing and sales management overlap considerably, the sales organization being charged with field implementation of the marketing strategy. As a starting point to discussing an approach to trade channel mapping,the sales manager should recognize that selection of suitable trade channels and management of distribution through trade channels are critical to strategy implementation.

That means considering aspects of market segmentation illustrated in Figure.

The sales manager has responsibility for identifying and prioritizing those trade channels that the company has the best chance of supplying and servicing profitably. Distribution to the priority segments will be obtained through some or all of the trade channels serving the network of users and consumers.

Trade channel mapping is just a term for plotting the structure of the trade channels Gina market, and noting which market segments they serve and their relative importance in the market place. It is essential that the sales manager understands the structure of distributive trade channels in each of his markets, as this knowledge influences strategic decision son where to target products.

Not every company has the resources to target either all market segments or all of the trade channels serving the market segments, and decisions need to be taken that reflect the most profitable opportunities and the distributive strengths and expertise of the supplying company. Sales managers frequently knowledge about the structure and size of trade channels, their relative importance in supplying market segments,and their sales volumes in the product category.

The objectives of trade channel mapping are to:

• identify the trade channels for the exporter’s products
• identify the key accounts in each trade channel
• develop a trade channel strategy.

The sales manager will want to know:

• how many trade channels there reserving each market segment
• who are the main customers in each trade channel, the key accounts
• where they are located
• how many outlets they have
• what share they have of any trade channel.

This information is essential to planning the correct allocation of sales resources, and marketing and promotional budgets. It can be illustrated diagrammatically as in Figure.

Typically, in consumer goods markets (and for some industrial products) one of the trade channels in each market segment would be wholesalers, and the other would be direct customers of the supplying company.

For example, if trade channel A is a wholesaler trade channel, then the wholesalers would normally service a certain range of larger(key) accounts where they have special relationships or provide a special service, such as a broader product range than just your company’s products, and a bigger network of smaller customers who might not be able to purchase the minimum quantities set by suppliers for direct supply.

There is no standard format for a trade channel map. It is just a device for presenting data on the respective volumes of a particular product, or category of products, and shares of sales through the various trade channels distributing the product. An illustrative trade channel map for a supplier of soft drinks might look something like Figure.

Here the map shows two main market segments:the ‘on trade’, where product disserved for consumption on the premises; and the ‘off trade’, where product is sold for later consumption at home.

Figure gives an outline trade channel structure for an industrial product, industrial cleaning fluids. Two of the trade channels served directly by suppliers are also acting as wholesalers into other trade channels, illustrated in the subordinate diagrams, and the supplier would ideally want to know their split of sales into these channels if any data is available.

At the very least a trade channel mapping exercise, done on a market sector by market sector basis, should:

• identify and highlight the trade channel structure
• give approximate shares or turnover in the product category
• identify the key accounts within each trade channel with an estimate of their product category turnover that can be compared with the exporter’s sales through the respective accounts.

Using trade channel data

A schematic diagram showing the trade channel structure needs to be supported by estimates of the values of the product category sales going through each trade channel to assist in taking decisions on where to focus sales effort, particularly in targeting key accounts. In most market sectors, whether for industrial or consumer goods, there will only be handful of key accounts in each trade channel.

It can then be useful to prepare a list that highlights the relative importance of each of these to your business over time, such as by using a simple form as in Table. This is the type of data that a sales team should assist in collecting or developing, within whatever limits of accuracy available data impose on you. Table illustrates how data can be tabulate din a simple format that highlights the relative importance of the various trade channels distributing to a market segment.

This example shows a company supplying table glassware to the two main market sectors, retail outlets for sale to households, and food service sales into businesses providing food and drink for consumption on the premises. While our example company has a decent overall market share of 16 per cent, compared with only 12 per cent coverage of outlets in each sector, indicating a perfectly reasonable deployment of sales resources, there are some opportunity areas.

In the retail sector the supplier is performing well in the major channels of department stores, hypermarkets and supermarkets, but is weaker in outlet coverage and sales to gift and specialty stores and the sundry retailers’categories. Those weaknesses might be addressed by developing a network of wholesaler distributors (if sales resources are not available to expand direct coverage), as this analysis currently indicates the company does all its sales direct.

The company is achieving 34 per cent of its sales into the food service sector, compared with 25 per cent of total glassware sales to that sector. Clearly it is using its resource swell there. It has an unusually high share of the hotel trade (40 per cent), clearly to be envied and defended. It is weak, however, in bars and in the others and snack bar sector. These weaknesses could be addressed either by developing sub-distributors (wholesalers)to service those channels, or by improving it sown coverage.

Its weakness in bars could result from salespersons calling when buyers are unavailable, and some evening sales calls might be necessary to increase sales to that channel. Snack bars are likely to be small and busy, in key locations where it can be difficult to park, and also purchasing in limited quantities,so they might be a good trade channel to service through distributors, who will supply multiplicity of products meeting their needs.

By building a picture of the trade channel structures and developing data that enables you to know the pattern and relative volumes of trade through the various trade channels you can compare your own performance to the overall pattern, and take informed decisions on your relative strengths and weaknesses.