Distribution and Business Communication in Spain
Concept and Importance of Distribution
Distribution, a crucial marketing tool, encompasses strategies, processes, and activities that bring products from manufacturing to the end customer (consumer or industrial user). This ensures the right quantities, optimal conditions, and timely availability at the desired location.
Channels of Distribution
A distribution channel is a network of interconnected entities that provide customers access to a manufacturer’s products and services. These channels can be:
- Direct: The manufacturer sells directly to consumers.
- Indirect: The product reaches the buyer through one or more intermediaries.
Intermediaries
Intermediaries act as salespeople for manufacturers and purchasing agents for consumers. Some agents operate independently, buying and selling products while assuming the associated risks. Others, like wholesalers and retailers, buy and sell without owning the products.
Types of Intermediaries:
- Commission agents, brokers
- Manufacturers and distributors (also called stockholders) who sell to other wholesalers, retailers, or businesses closer to the producers.
- Wholesalers at the destination, operating near the end buyers.
- Retailers who sell directly to the final purchaser and sometimes to other retailers.
Distribution in Spain
The Spanish market is highly fragmented, with numerous competing companies. Small shops, representing 98% of businesses, offer proximity to customers, personalized service, and specialization in specific products.
Other Retail Formats:
- Supermarket chains: Located near consumption centers, they offer high service levels, loyalty programs, competitive food prices, and a diverse product assortment.
- Hypermarkets: Featuring free parking and a vast assortment of high-turnover products at low prices, they prioritize self-service and generate significant profits from food sales. However, they require substantial investment and authorization.
- Department Stores (Shopping Centers): Large buildings housing a collection of independent stores, often anchored by a hypermarket, thematic center, or leisure facility. They offer entertainment and a family-friendly shopping experience. Retail parks, located on the outskirts of large cities, are a variation of this format.
- Specialized Hypermarkets: These focus on a specific product type with a wide selection, located in high-traffic areas. Their expertise provides an advantage against general retailers. Some offer branded products (e.g., toys, DIY, furniture).
- Discount Stores (Discount, Hard Discount): By minimizing profit margins and services, they offer lower prices than supermarkets and traditional stores while maintaining quality. They are typically located near customers and have a limited product assortment, selling both own brands and manufacturer brands.
- Franchising: Introduced in Spain in the 1950s, this involves a contract where a company (franchisor) grants another (franchisee) the right to operate a franchise and market specific products or services in exchange for financial compensation.
Business Communication
Besides customers, a company’s staff is crucial, requiring effective internal communication.
Internal Communication:
This encompasses information flows within the organization, designed for employees. Proper internal communication enables employees to improve their understanding of the company, modify their perspectives and attitudes, embrace company values, enhance commitment, foster creativity, improve the corporate image, strengthen cohesion and integration, and change behavior.
External Communication:
This involves bidirectional information flows between the company and the market, including personal communication and mass communication.
Communication Planning Steps:
1. Setting Objectives:
The primary goal of communication is to stimulate demand from potential and existing customers. Objectives should be specific and quantifiable.
2. Target Audience Determination:
The target audience (target group) comprises potential consumers, but can also include prescribers (opinion leaders), buyers, distributors, and public opinion. The focus should always be on people.
3. Communication Strategy Selection:
Communication decisions must align with other marketing mix policies. Companies can communicate through various means:
- Voluntary initiatives
- Actions integrated with other marketing variables
- Responses to specific events that impact the market
4. Media Selection and Mix:
This involves choosing the right combination of personal (sales, customer service, direct marketing) and non-personal (advertising, sales promotion, public relations) communication tools.
5. Budget Allocation:
Every communication initiative is constrained by its budget. An organization’s turnover is closely linked to its communication investment.
6. Control and Evaluation:
If objectives are quantifiable, actual results can be compared with expectations. This allows for analysis of communication costs and the effectiveness of the achieved results.
Communication Tools:
Advertising:
According to the American Marketing Association, advertising encompasses paid announcements and persuasive messages in various media, used by businesses, non-profit organizations, government agencies, and individuals to inform and persuade a target market or audience about their products, services, organizations, or ideas.
Sales Promotion:
This communication tool aims to increase short-term sales by offering incentives to retailers or consumers.
Public Relations:
These are planned communication actions directed at the general public, aiming to positively influence public opinion about an organization without immediate sales goals.