The assortment and quantity of products customers want may be different from the assortment and quantity of products companies produce. Producers are often located far from their customers and may not know how best to reach them. Customers in turn may not know about their choices. Specialists develop to adjust these discrepancies and separations.
Most producers seek help from specialists when they first enter international markets. Specialists can provide crucial information about customer needs and insights into differences in the marketing environment.
‘Discrepancy of quantity’ means the difference between the quantity of products it is economical for a producer to make and the quantity final users or consumers normally want. For example, most manufacturers of golf balls produce large quantities – perhaps 200,000 to 500,000 in a given time period. The average golfer, however, wants only a few balls at a time. Adjusting for this discrepancy usually requires middlemen – wholesalers and retailers.
Producers typically specialize by product – and therefore another discrepancy develops. ‘Discrepancy of assortment’ means the difference between the lines a typical producer makes and the assortment final consumers or users want. Most golfers, for example, need more than golf balls. They want golf shoes, gloves, clubs, a bag, and – of course – a golf course to play on. And they usually don’t want to shop for each item separately. So, again, there is a need for wholesalers and retailers to adjust these discrepancies.
Regrouping activities adjust the quantities and/or assortments of products handled at each level in a channel of distribution. There are four regrouping activities. When one or more of these activities is needed, a marketing specialist may develop to fill this need:
1. Accumulating. This involves collecting products from many small producers. Much of the coffee that comes from Colombia is grown on small farms in the mountains. Accumulating the small crops into larger quantities is a way of getting the lowest transporting rate – and making it more convenient for distant food processing companies to buy and handle it. Accumulating is especially important in less-developed countries and in other situations, like agricultural markets, where there are many small producers.
2. Bulk-breaking. This involves dividing larger quantities into smaller quantities as products get closer to the final market. Sometimes this even starts at the producer’s level. A golf ball producer may need 25 wholesalers to help sell its output. And the bulk-breaking may involve several levels of middlemen. Wholesalers may sell smaller quantities to other wholesalers – or directly to retailers. Retailers continue breaking bulk as they sell individual items to their customers.
3. Sorting. This involves separating products into grades and qualities desired by different target markets. For example, an investment firm might offer its customers a chance to buy shares in a mutual fund made up only of stocks for certain types of companies – high-growth firms, ones that pay regular dividends, or ones that have good environmental track records. Similarly, a wholesaler that specializes in serving convenience stores may focus on smaller packages of frequently used products, whereas a wholesaler working with restaurants and hotels might handle only very large institutional sizes.
4. Assorting. This involves putting together a variety of products to give a target market what it wants. This usually is done by those closest to the final consumer or user – retailers or wholesalers who try to supply a wide assortment of products for the convenience of their customers. A grocery store is a good example. But some assortments involve very different products. A wholesaler selling Yazoo tractors and mowers to golf courses might also carry Pennington grass seed, Scott fertilizer, and even golf ball washers or irrigation systems – for its customers’ convenience.
Specialists should develop to adjust discrepancies if they must be adjusted. But there is no point in having middlemen just because that’s the way it’s always been done. Sometimes a breakthrough opportunity can come from finding a better way to reduce discrepancies – perhaps eliminating some steps in the channel. For example, Dell Computer in Austin, Texas found that it could sell computers direct to customers – at very low prices – by advertising in computer magazines and taking orders by mail or phone. With such an approach, Dell not only bypassed retail stores and the wholesalers who served them, it also avoided the expense of a large field sales force. This cost advantage let Dell offer low prices and a marketing mix that appealed to some target segments.