4.2.6.5 Marketing channel and distribution

Distribution, as a marketing function, serves consumption by making products available to consumer in the right form, time and place (Meulenberg 1997). In some markets, distribution can stimulate demand by making products available at a specific place and time.

The two main objectives in the distribution for neem products are to maximise the access to target groups, and to minimise the distribution costs. Storage and transport are core elements in a distribution process.

Storage. According to economic theory, identification of the quantity of stock which minimises total inventory costs per time period depends on the order quantity, carrying costs per unit of time period, ordering costs per order, and product demand per time period. Moreover, the quality of neem products are negatively influenced by longer storing periods. The neem company should avoid stocking the products for a long time but deliver them at exactly the right time. So the appropriate stock for a neem company will have to be tailored to match these demands. Since the Thai Neem Company is already producing on demand and holds only low stocks, not much can be improved at the present stage.

Transport. The choice of a transport mode is based on a trade-off between customer service and transportation costs. For example, sending neem products via the railways or a contracting transport agency for the supply of certain customers might be cheaper than distributing the product via the company's own transport facilities. Nevertheless, selecting the appropriate mode of transportation depends on the operating characteristics such as speed, availability, reliability, capability, and frequency (Meulenberg 1997). In addition, transport planning is another important element in marketing management for a neem company. In economic theory, there are transportation models available to minimise the transportation costs. However, this might be too sophisticated for a small-scale neem company. Nevertheless, a company should keep transportation planning in mind to minimise total transportation costs, to satisfy the requirements of the demand in a certain location, and not exceed the capacity constraints of the vehicles.

To summarise, the performance of distribution of neem products can be improved by better planning methods, integrated planning of purchasing inputs, management in the factory, and the physical distribution of final products.

Distribution strategy. Access to the target group, distribution efficiency and marketing channel power are the key elements of distribution strategy. For a neem company, an intensive distribution strategy is more appropriate than selective or exclusive distribution. That is to say a neem company should sell the neem products through as many channels as possible.

Marketing channel.

For producers and distribution chains see Figure 6.

In 1996, there were about 28 formulators, 68 repackaging plants, 438 distributors and around 4,095 retailers conducting pesticide business in Thailand. Distribution of agro-chemicals in Thailand goes from the producer to the dealers and afterwards to sub-dealers or retailers. The pesticide companies employ sales personnel for the wholesale business, as well as for retail at the farmer's level (see Figure 6).

Pilot plant at the Toxic Division of the Department of Agriculture, Thailand

Filling the extractor of the pilot plant with neem cake

Bottling the neem extract

Neem products from the Thai Neem Products Company Ltd

Figure 6: Marketing channels of synthetic pesticides and neem products in Thailand

Note: Numbers in parenthesis are the numbers of producers, dealers, etc.

Wholesaling is a recommended marketing channel for neem products. A study showed that farmers in Thailand have changed their purchasing behaviour from local markets to wholesale supermarkets such as Macro (Matichon 1999). The advantage of wholesalers is that they are more effective distributors because of their market knowledge and handling of large product volumes. The wholesale market for neem products supplies local pesticide shops in every province and wholesale supermarkets e.g. Lotus.

Retailing is another option for a marketing channel for neem products. A low price, such as by discounting, is an example of a recommended retail price strategy for some neem products, e.g. neem powder. This is because price and product policies are correlated. Low price strategy is suitable for a product which require limited advise, has low purchase price and quick inventory turnover.

A high price strategy is appropriate for high quality products and the offer of a better service. This could be achieved by labelling the products and providing information on them. Due to the current concern about natural resources and the environment, labelling is another marketing strategy for promoting neem products.

Additionally further complementary products beside neem, such as Bt and virus products, should be offered within a "green mark" system. This is also another attractive marketing strategy.