Watching the 2016 Rio Paralympics Games (a major international multi -sport event for athletes with disabilities), reminded me of the workshop on Prosthetics and Orthotics which I attended in Dubai. The workshop was conducted by “Ottobock”, a German prosthetics company. The Ottobock Corporation has been responsible for several innovations in prosthetics, orthotics and wheelchairs ( Ottobock).
Successful Value creation needs successful Value delivery
The appropriate assortment of products must be at the right place, at the right time and in the right condition to maximise customer perceived value and satisfaction. Companies are looking at customer segments and considering a wide range of new and different means to sell , distribute and service their offerings (Gherasim & Gherasim 2016). Hence companies are integrating marketing channels and developing value networks to best serve their customers. Ottobock has partnered with some of the leading hospitals in Dubai as its distribution channel.
Marketing channels are sets of interdependent organizations or ‘intermediaries’ engaged in the process of making manufacturers’ (or producers’) products or services available to their end-users . Channels are broken into direct and indirect forms, with a “direct” channel allowing the consumer to buy the good from the manufacturer, and an “indirect” channel allowing the consumer to buy the good from a wholesaler or retailer(Krafft et al., 2015).
A one level channel is one where the producer sells directly to a retailer ( in this case the hospital ), who then sells the product to the end consumer.
Channel Selection Strategies
Determining the appropriate channels to go to market is fundamental to the marketing mix . In its most basic form, the decision involves whether to sell directly to customers and assume all channel responsibilities or to use channel intermediaries. To design a marketing channel system , marketers analyse customer needs and wants , established channels objectives and constraints , and identify and evaluate major channel alternatives (Rangan, Menezes & Maier .,1992).
The Resource-Based Theory argues that firms develop, augment, and leverage resources that are valuable, rare, and imperfectly imitable (referred to as VRIO), so as to gain sustainable competitive advantages. Resources (physical, financial, human, or organizational) are assets that an organization can exploit to accomplish its objectives (Barney and Clark 2007).Firms do not always own the VRIO resources they need to implement a competitive strategy. By interacting with other channel members ,firms can create sustainable competitive advantages (Watson et al.,2015)
Analysing Customers Needs and Wants
Customers may choose the channels they prefer based on price ,product assortment and convenience. To meet customer’s requirements, Channels should produce the following service outputs (Kotler 2012):
Lot Size:- The number of units the channel permits a typical customer to purchase on one occasion.
Waiting and Delivery time :- The average time customers wait for receipt of goods. Customers prefer faster delivery channels.
Spatial Convenience:- The degree to which the marketing channel makes it easy for customers to purchase the product.
Product Variety:- The assortment provided by the marketing channel.
Service Backup :- Add-on services (example : delivery, installation , repairs) provided by the channel.
The value added Partnership
To customer, the channels are the company. To facilitate channel member selection, manufactures should consider both the customer needs and the service reputation of the intermediaries. By opting for Hospitals as their distribution channels, Ottobock ensure that the following objectives are accomplished:
Increase the availability of the product to potential customers when they need the product the most:- Firms expand channels into new markets to exploit the advantages of
existing firm resources or to develop new channel resources to exploit in current or new markets, such that they develop a sustainable competitive advantage through multiple tactics, including mergers, partnerships, or direct acquisitions (Cui 2013).By making its range of products available in hospital , customers can easily access the products after an injury or surgery. Also since the hospital pharmacy is open 24/7,the orthotics product can be purchased anytime.
Satisfy customer requirements by providing high levels of services:- Services provide a way for firms to have an edge on their competitors because of the difficulty of duplicating service provision, the opportunity to build ongoing channel relationships, and the relative geographic exclusion of competitors, due to the necessity of co-production(Montoya-Weiss et al., 2003). Through its partnership with the hospital, Ottobock ensure that highly qualified medical staff are available 24/7 to monitor patient progress and provide post purchase technical support . The existing facilities available at the hospital such as MRI , X-rays and physiotherapy can be used so that customers can get all services under one roof. On the other hand , the hospital find its revenue increasing as more customers are using its services.
Ensure promotional effort :- Another common channel objectives is to obtain strong
promotional support from the Channel members for the firm’s product, including the use of local media , Marketing of products on hospital website , display of products and posters in hospital pharmacy and patient waiting area and cooperation in special promotion events. On the other hand, firms can implement training and other capability -building programs to motivate and improve hospitals staff performance. Also firms must constantly communicate that intermediaries are crucial partners in a joint effort to satisfy end users of the products (Kotler 2012).
Obtain timely and detailed market information:- Because of their proximity to the marketplace , middlemen are often relied on for fast and accurate feedback on information such as sales trends , inventory levels , and competitors’ action. A high level of channel feedbacks is particularly important for firms in highly competitive industries characterised by rapid changes in product technology or customer preference. Hence firms can revise their strategy to remain competitive (Mullins & Walker 2010). Since the Health Professional are constantly in touch with the patients, therefore they can collect feedbacks from their patients and update the manufacturer. The Manufacturer can then initiate new strategy such as reduction in price or better postpurchase services so as to remain the supplier of choice among the customers.
Selecting the right distribution channel base on the product and customer needs has been a fruitful marketing strategy for Ottobock.
Written By : Garveeta Sookram