Distribution Strategies And Marketing Performance
Successful distribution channel strategy selection, implementation, and management cannot only help to meet the shopping needs and habits of the target customers efficiently under the cost constraints of the seller; they must also mitigate the disadvantages caused by distribution channel conflicts such as double marginalization. Customer needs analysis plays a relatively small role in product development in these firms. Instead, product development is typically driven by process technology capabilities which often are the result of incremental process improvements. Unlike market-driven firms, where a focus on value (as defined by the customer) drives marketing decision making, marketing decisions in these firms often revolve around pricing issues, such as volume discounts, as the key to increasing the firm’s unit sales. The study found that the branch network, electronic pharmaceutical and multiple distributions were used by the organizations. Marketing strategies being employed by the organizations were aggressive marketing, mass marketing and value marketing. The marketing features employed by the organizations was close relationships with customers, product specialization, extensive market research, selective distribution, segmentation of market, high quality innovative products and controlled relationship with customers while increased relational norm with channel partners, intensive distribution to a mass market and low behavioral control on consumers were employed by the organizations to a moderate extent. The marketing distribution strategies results to increased sales, market share and profits, the organization being able to market changes more effectively and enhanced ability of the organization to generate, disseminate, and respond to market changes.
1.1 Background of the Study
As the economy advances, there is a narrowing of gap between producers and consumers due to the emergence of the advancement in technology and distribution fulfils the critical function of integrating the economy into society to serve human needs. The major reason for business is to sell its products and services, that can satisfy their customers at profit and also to ensure effective operation. The increases in output of goods and services necessitated the development of the channel of distribution. Every manufacturer requires consumers for survival but there is slim possibility that manufacturers will succeed in reaching all the consumers without using the services of market intermediaries (Ehikwe, 2002). The reasons are obvious because consumers are scattered in various geographical locations and the consumer’s demographic profiles to be examined includes lifestyles, age, education, sex, status, income, health and other relevant parameters of consumer’s interest.
In order to be efficient and effective, the Nigerian Pharmaceutical industries develop produces and market drugs for use as medications (Brian, 2011). Pharmaceutical companies are allowed to deal in generic and/or brand medication and medical devices. Pharmaceutical firms have devised distribution strategies that enable them to reach out to a wider spectrum of the society (patients) for patronage. The interaction of these strategies and the relevant environmental factors determines the performance of product marketing (Akinyele, 2010).
Today, obtaining and retaining a dominant position in the market has become very difficult due to the vast spread of products and services and the aggressive competition on one side and increasing customer demand on the other side.
The poor choice of distribution strategy is one of the challenges that have left many manufacturers crumbling with their high quality products. There are chances that the strategy selected may not be effective when confronted with task of withstanding the pressure from competitors. To compete, an organization must understand the basis of competition for each product group within the distribution channel. Furthermore, Harrison and Hoek, (2008) stated that “the key advantage provided by distribution is availability of conforming product in the marketplace at low cost”.
The Pharmaceutical industry according to Whewell (2009), is a very complex industry with many markets, products and regulations. Pharmaceutical products are used by every person at one time or the other in life. Sale and distribution of pharmaceutical products is emerging as a major issue for pharmaceutical firms. In Nigeria setting health workers have accounted for some pharmaceutical sales while majority of pharmaceutical products are distributed through various wholesale and retail channels. Typically, the manufacturer sells the drugs to a wholesaler who in turn distributes to retail pharmacies.
It is nevertheless crucial to acknowledge the factors affecting the good or bad of performance of Pharmaceutical firms. If the Pharmaceutical firm is doing poorly, it has to unravel the reason for the current situation so that it can form a plan for a brighter future. On the other hand, a firm doing well must understand what the most influential factors behind its success and what can sustain its competitive position in the future. To emphasize the importance of understanding long term value of company resources, (Reed and Defillippi, 1990) state that “ambiguous causalities in relationship between competitive advantage in the market place and competitive advantage in resource may lead to allowance of dissipation of comparative resource advantage”. The contribution of (Nwokoye, 2000) is highly instructive and conclusive, in all discussion that the choice or selection of distribution strategy relates directly to distribution function.
1.2 Statement of the Problem
Indigenous producers in the pharmaceutical industry in Nigeria, specifically in Delta State are faced with fierce competition from the importation of pharmaceutical products, most especially from China and India. This situation is worsened as a result of regulations governing the industry, government policies affecting the industry, lack of assessable roads to aid smooth distribution of the products, low level of consumer knowledge, counterfeit of drugs, high cost of production and poor credit facility to producers, wholesalers and retailers have affected the quantity produced, purchased and sold. Though distribution is very important to the productivity of indigenous firms (Mavondo, 2000), it is therefore necessary for local manufacturers to manage efficiently the various resources available to them especially their distribution activities, since it is very costly to attract and maintain an effective sales force.
Many of the pharmaceutical firm’s products remain unsold as a result of these problems which in turn affects the marketing performance of the firm, which this research intends to address.
1.3 Objectives of the Study
Distribution of pharmaceutical products is worth studying because in Nigeria majority of person’s is suffering from one ailment or the other. Therefore the overall objective of this study is intended to determine the relevance of distribution strategy on marketing performance of pharmaceutical industries in Nigeria and the specific objectives will be:
- To determine the impact of distribution channel on market share.
- To ascertain the impact of transportation on sales volume.
- To ascertain the impact of distribution technique on customer acquisition and retention.
- To determine the distribution technique that leads to increased profitability.
1.4 Research Questions
Based on the aforementioned, the study will attempt to provide answers to the following research questions:
- To what extent does distribution channel impact on market share?
- To what extent does transportation impact on sales volume?
- To what extent does distribution techniques adopted by pharmaceutical firms impact on customer acquisition and retention?
- To what extent does distribution technique adopted by pharmaceutical firms leads to increased profitability?
1.5 Significance of the Study
Findings of the study will be useful to researchers and scholars as it will contribute to the body of knowledge in the area of non-performing of loans. It will also assist other researchers to further their studies on areas of interest not yet exploited.
It will assist the management of pharmaceutical firms to evaluate how effective they have been in adopting appropriate distribution channel strategies of their services and products. This may enable them identify gaps in their strategies which may enhance their strategic response as a result move to effectively manage the existing strategies which will improve their financial performance.
This study will benefit the government and especially the Ministry of Finance for making policy decisions whose overall objectives are to reduce bottlenecks in distribution of pharmaceutical services and at the same time accelerate the rate of growth in the pharmaceutical industry and take advantage of the improved economy thus more lending to individuals and institutions.
It will be useful to the shareholders of the organization in evaluating the effectiveness of the organizations distribution strategies as they cope with the increasingly competitive financial market locally. Other organizations can also use the distribution strategies employed by the organization to improve their performance. In addition the study will be an invaluable source of material and information to the many other organizations operating in the country since the pharmaceutical industry has a great role to play in the country’s quest to become a middle income country as envisioned in the Vision 2030. By identifying the appropriate distribution strategies, the industry will also be able to achieve their objective much faster and growth of the individual firms.
1.6 Scope of the Study
The study was carried out on distribution strategies and marketing performance. This study was delimited to selected pharmaceutical firms in Nigeria.
The following limitations were anticipated in this study:
- Since the study was only carried out in only one province, the results may not be generalisable to the whole country. The researcher collected data on his own without research assistants.
- Financial constraints were also anticipated in the current study. Although the researcher received assistance from the bursary, it was not possible to carry out the study at national level.
- The researcher is a full time employee so time to carry out the study was limited.
1.8 Organization of Study
The study is organized into five chapters. Chapter one deals with the study’s introduction and gives a background to the study. Chapter two reviews related and relevant literature. The chapter three gives the research methodology while the chapter four gives the study’s analysis and interpretation of data. The study concludes with chapter five which deals on the summary, conclusion and recommendation.
Summary, Conclusion and Recommendations
5.1 Summary of the Findings
The respondents agreed that the marketing strategies being employed by the organizations were aggressive marketing, mass marketing and value marketing. The study found out that the characteristics employed by the organizations was close relationships with customers, product specialization, extensive market research, selective distribution, segmentation of market, high quality innovative products and controlled relationship with customers while increased relational norm with channel partners, intensive distribution to a mass market and low behavioral control on consumers were employed by the organizations to a moderate extent.
The marketing distribution channel strategies being used by pharmaceutical firms was branch network, electronic pharmaceutical and multiple distribution. The respondents were in agreement that marketing through branch network strategy would result to access to a large geographical and segment market, efficient in meeting customer wants, enhance face to face with the customer, targets a large market segment, service costs to customers was higher than other networks and that it requires a high level of trust. This marketing strategy however, leads to enhanced legal and technical security challenges and being expensive to undertake than other distribution strategies.
The electronic marketing strategy targets a large market segment and that it is efficient in meeting customer wants. It does not however leads to enhanced face to face with the customer, expensive to undertake than other distribution strategies and that service costs to customer was higher than other networks. On the use of multiple marketing distribution strategy, the respondents were in agreement that it is efficient in meeting customer wants, targets a large market segment, gives access to a large geographical and segment market, it is expensive to undertake than other distribution strategies, service costs to customers is higher than other networks, leads to enhanced face to face with the customers and enhanced legal and technical security challenges. The respondents found out that the marketing distribution strategies results to increased sales, market share and profits, the organization being able to market changes more effectively and enhanced ability of the organization to generate, disseminate, and respond to market changes.
This study has presented the results of some descriptive survey research into the effects of marketing distribution channel strategies on a organization’s performance among pharmaceutical firms in Nigeria. Effective marketing requires a clear understanding of the arena in which a firm is competing and the nature of its performance. For strategy to be truly marketing-oriented, both the definition of the competitive arena and the need for performance improvement must be demand-driven. In services in general and financial services in particular, certain characteristics, namely intangibility and complexity, affect consumer evaluation processes. As consumers become increasingly reliant on credence qualities in evaluation and as services become more complex, the process of improving firm performance becomes more difficult.
The results establish that a large majority of pharmaceutical firms attach great importance to offering one or several of the distribution channels to their customers. The distribution strategies affect the performance of pharmaceutical firms and especially with increased customer understanding, either because consumers are more knowledgeable or because the products are relatively simple, or both, then elements such as distribution channels, price and specific service features may become more important in adding value and improving its performance.
5.3.1 Recommendation with Policy Implication
The study found out that the pharmaceutical firms adopts various marketing distribution strategies. It is therefore recommended that the pharmaceutical firms should adopt those marketing distribution strategies that ensure the performance of the organization is improved and do away with those which adds costs so that the organizations can compete effectively with the others.
The pharmaceutical firms have created unique position in the market through provision of goods and services through different marketing distribution channels. It is therefore recommended that they continue investing in coming up with unique products so that they can differentiate themselves. The pharmaceutical firms distribution channels service costs varies and it is recommended that before pricing its products, they should study what the market charges so that they set at a price which is acceptable to the current and potential customers. The study established that the pharmaceutical firms use electronic pharmaceutical in order to ensure that its customers carry out its transactions anywhere and anytime. It is recommended that they should embrace the concept whole heatedly by adopting electronic pharmaceutical as the next battle for the organizations will be the technology usage which should be one which offers customers more features.
5.3.2 Recommendations for Further Research
The study focused on the effect of marketing distribution channel strategies on the pharmaceutical firm’s performance; however the competition in the pharmaceutical industry has become intense and therefore necessitates the study to establish the factors that affects the performance of pharmaceutical firm’s performance.
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