Essay on Marketing
Marketing channels represent the set of interdependent organizations grouped together in order to make the service pr product available for the end customers (Kotler & Armstrong, 2010). Use of marketing/distribution channels allows the company to gather and distribute information more effectively, perform matching of the product or service to prospective customers, cover physical distribution and financing (Cheventon 2004). Diversified channel management decisions allow the company to minimize risks and to reach a greater number of potential customers. Channel management solutions are of major importance for the Yellow Cab, since the company is trying to enter a new area of services and one of its targets is to inform and attract potential customers in all possible ways. Financial stability and growth of the company depends on the effectiveness of distribution channels.
Horizontal distribution channels involve groups of same-level organizations targeting various market segments; vertical marketing channels include the line of intermediaries between the producer and consumers (Cheventon 2004). Vertical marketing systems can be classified as corporate (single ownership), administered (power influence of one or more channel members) and contractual (leasing, franchising). Multichannel distribution systems, also referred to as hybrid marketing channels (Kotler & Armstrong, 2010), are becoming popular nowadays since they improve competitive position of the company.
Yellow Cab should also involve hybrid distribution channels in order to gain popularity and to inform customers of the new delivery service. First of all, the company can successfully utilize existing brand image and loyalty of customers through a direct distribution channel. Taxi drivers can inform clients of their new service and provide promo materials (e.g. calendars) describing the new service to the clients. Discounts and rewards can be offered for clients who participate in promotion and delivery of the new service to new people. Costs of such distribution channel are minimal; however, the scope of reaching potential customers is also quite limited in this case, and the company should join this strategy with other channels.
Secondly, Yellow Cab can utilize horizontal distribution channels by partnering with local shops, stores of home goods, cafes, laundries, and other service providers where delivery can be required for the purposes of partnership and service distribution. Signing contracts with such companies and offering delivery services on a permanent basis can become a stable source of financing for the new project and will help to expand customer base. Regarding horizontal level, it might even be useful to contact competing delivery companies and provide them support in the times when these companies have busy hours. The reputation of Yellow Cab and quick response of the competitors to customer needs will benefit both parties. In cases of horizontal service distribution, Yellow Cab should utilize its competitive advantage – provision of two non-competing complementary services. Such partnerships are considered to be cost-effective, since all parties are interested in joining their services and making them more convenient for the customers. Certain promotion and advertising costs can even be shared, in this case.
The company should also consider B2B opportunities (Kotler & Armstrong, 2010) such as companies offering logistics services or the companies dealing with interstate delivery of goods. Offering “all-in-one” packages and including Yellow Cab delivery to the office of the transportation company and from the office in another town is likely to generate good revenues for both companies and become very convenient for customers. It should be noted that in this case, customers can be individuals and businesses (most likely, small or medium private companies). The costs of vertical distribution channels are generally higher compared to other channels; however, potential revenues are also significant, and the expenses on intermediaries are reasonable. Franchising options in the cities where Yellow Cab is not operating can be considered; however, in this case the costs of franchising should be compared with the costs of deploying the company’s services in this location. In general, franchising can be a successful distribution channel, too.
Finally, partnering with online businesses as a part of horizontal distribution strategy (e.g. online shops, large retailers, mail order services) as well as the modification of own website for establishing direct channel with online customers should be considered. The costs of online distribution are expected to be medium, with high potential of revenues and reaching new customers. Thus, Yellow Cab should choose a multichannel distribution system, including direct channels, horizontal and vertical marketing channels and online opportunities in order to deliver the service to the maximal number of customers.
