BAI Jian, MIAO Lan-ying, LIN Da-yong, WANG Hai-bo, LI Ye

(1.School of Business Administration, Shenyang Pharmaceutical University, Shenyang 110016, China; 2. Liaoning University of Traditional Chinese Medicine, Shenyang 110847, China)

Marketing Channel Selections
for Different Biological Reagent Enterprises in China

BAI Jian1,2, MIAO Lan-ying2, LIN Da-yong2, WANG Hai-bo2, LI Ye1

(1.School of Business Administration, Shenyang Pharmaceutical University, Shenyang 110016, China; 2. Liaoning University of Traditional Chinese Medicine, Shenyang 110847, China)

Objective To probe into marketing channel selections for different biological reagent enterprises. Methods Inf l uential factors on marketing channel selections for different biological reagent enterprises were discussed, and matrix model of product technical barriers-enterprise strength was built to study the causes and feasibilities of marketing channel selections for different biological reagent enterprises. Results and Conclusion It is suggested that the state-owned enterprises, foreign - invested enterprises, joint ventures should adopt directly- managed marketing channel, medium and small-sized enterprises adopt the agent marketing channel, patented the product- oriented enterprises adopt both the district agent marketing channel and the directly- managed marketing channel, and enterprises with low threshold technology adopt the multi-agent marketing channel.

marketing channel; matrix model; directly- managed marketing channel; agent system

With the increasing pace of China’s reform and opening-up, foreign high-tech enterprises have swarmed into Chinese market since 1980s. China’s bio-reagent sales market also has been growing rapidly. According to statistics from China’s customs, the total sales of imported biological reagents and related products reached 4.469 billion US dollars from 2008 to 2010, while the total sales of domestic biological reagents were more than 10 billion RMB[1]. On a macro level, the development of biological reagents sales is inseparable from the manufacturers’ marketing activities and standardized operations. On a micro level, the second source of enterprises’ core competitiveness stems from marketing[2]. Basically, the choice of marketing channels plays a vital role in sales and development of biological enterprises. Therefore, this paper analyzes possible factors influencing biological reagent enterprises to choose the marketing channels and provide practical approaches for relative companies.

1 Overview of biological reagent enterprises’marketing channels

Marketing channels mean that enterprises make a decision about their sales approaches before entering the market. This is important to part of business marketing. At present, there are two main patterns of marketing channels for biological reagent sales in China. One is the direct model and the other is the agency model[3].

The direct model means that biological reagent enterprises set up their own aff i liated agencies directly. This model started in the 1980s. At that time, a number of large state-owned enterprises began to reform and organized their internal sales teams to expand sales channels. As a traditional and mainstream sales model, it played a dominant role for large enterprises in the past.

The agency model means that enterprises, in order to improve product sales, seek for sales agents or agencies to sell their products in a certain area. According to the scopes of coverage, the agents can be divided into national and regional agents. The agency model began slightly later than the direct model which was in the 1990s. In a market economy, in order to optimize resources and respond more competitively, biological reagent enterprises tend to transfer their sale right to the sales agents and they merely focus on nurturing their core competitiveness through developing high-quality products. Agents may have suff i cient f i nancial and marketing resources and it will become mutually benef i cial to both parties.

2 The factors affecting biological reagent enterprises’ marketing channels

There are four factors affecting biological reagent enterprises to choose marketing channels, including product factors, market factors, business factors and customer factors. The comprehensive analysis of factors can help enterprises to ensure smooth and controllable sales.

2.1 Product factors

Due to the differences of products’ prices, technical content and life cycle, product factors have different influence on choosing marketing channels. Currently, the products with low market share, less demand and more varieties should choose direct model to obtain higher prof i ts. As for the conventional products with large market share, agency model should be used to increase the coverage of the products. From the aspect of technology, the products with high-tech can use direct model. From the perspective of the product life cycle, enterprises, in order to improve their own popularities, should choose direct model to obtain feedback from the market. Meanwhile, enterprises also can carry out agency model simultaneously to expand sales coverage and make it convenient for customers to buy products. Enterprises also can broaden sales width when the products are well developed.

2.2 Market factors

The characteristics of the target market play a vital role in choosing appropriate marketing channels. For some reagent products with low-tech and high demand such as immunological reagents ‘second antibody’, they should use agency model to broaden the width of sales channels, which def i nitely can help enterprises to expand coverage of products and meet the needs of customers. Since the users of biological reagents are almost concentrated in universities and research institutions, enterprises should set up aff i liated companies and take direct model to sell their products. For other areas which can not be covered effectively due to geographical and cost reasons, enterprises can use agency model. Based on this reason, some large enterprises have their own direct agencies in the central cities, and they choose agency model in other places which are not covered by their sales network. Finally, according to the different degrees of competition in the market, enterprises should use the direct model in highly competitive areas and develop their marketing strategies based on market changes. Companies can apply agency model in saturated market.

2.3 Business factors

Typically, the complexity of marketing channels and the size of enterprises become direct ratio. For some enterprises with technical and financial superiorities, they can adopt to a major marketing model supplemented with a variety of marketing channels to maximize their sales coverage. Take ZhongShengBeiKong Biotechnology Co., Ltd. as an example, this company was affiliated with the Institute of Biophysics before restructuring, which was a part of Chinese Academy of Sciences. With the scientific and f i nancial strength from Chinese Academy of Sciences, this company has set up their own marketing network. It also chooses agency model to cover some regions where their sales network can not reach. By doing so, it has already established eff i cient and stable sales network covering more than 30 provinces, municipalities and autonomous regions with more than 600 distributors.

2.4 Customer factors

Universities, research institutions, hospitals and various types of bio-technology companies are the users of biological reagents. With higher education levels and relevant professional background, they are able to analyze technical parameters independently and determine which products they should buy. This feature determines that traditional sales model is not an effective approach to sell biological reagents[4]. For example, the sales pitches and rebates from wholesalers and, retailers are not effective ways. Due to customers’ high selectivity, enterprises should choose third-party electronic platform to promote their products and keep marketing channels running effectively and smoothly.

3 Choosing marketing channels for China’s biological reagent enterprises

Biological reagent enterprises should choose matching marketing channels to obtain long-term and sustainable development[5]. By analyzing key factors, we can see that the choice of biological reagents enterprises’ marketing channels can be attributed to product factors and business factors. Through the analysis of “products technical barriers and enterprise strength” matrix model, enterprises can choose the best marketing channels (Figure1)

Figure 1 Products’ technical barriers and enterprise strength matrix model

3.1 Direct model plus agency model

Some biological reagent enterprises with high-tech and patented products can obtain higher prices due to less competition, and they have more profits to maintain and develop their own sales teams. Meanwhile, they can also choose one or several agents in particular areas where their sales teams can not cover directly. Biological agents are only responsible for distribution and collecting payment. Enterprises directly participate in the promotion activities, after-sales service and technical support. In China, the vast majority of joint ventures enterprises and some restructured state-owned enterprises choose this marketing channel. As for large enterprises like ZhongShengBeiKong Biotechnology Co., Ltd., Sigma-Aldrich Group, Invivo Gene Group, they adopt to direct model.

3.2 Exclusive agency model

Some biological reagent enterprises have accumulated a certain amount of capital and established their own brand advantage in the industry after years of development. However, the category of products is simple and the technical content is not high, too. Then exclusive agency model is one of best choices for them. Market operations are fully completed by the agents alone, and agents’ payment is usually the floor price. This model will render enterprises to take more market risks, but they can get more profits. Take Bao Biotechnology (Dalian) Co., Ltd. (Dalian TaKaRa Company) as an example, this company was established in 1993 and it has nearly 20 years development in China. This company has established a good reputation in relative f i eld and its products include DNA restriction enzyme kits, DNA modifying enzymes kits, PCR kits and so on which occupies considerable market share.

3.3 Direct model plus regional agency model

Some high-tech biological enterprises allocated their capital to R&D in their early stage and they did not have enough funds to expand the market. Meanwhile, the traditional direct model needs more capital which is hard for these biological reagent enterprises to provide in a short time. Therefore, some enterprises in the infancy are not keen on using this marketing model. They prefer to apply agency model as the main marketing channels. Meanwhile, they can also run direct model in a certain area where their sales network can cover so that they can exercise the marketing teams and gain experience. In some areas that can not be covered by their sales network, agency model will be taken in order to achieve sales and maximize the accumulation of capital. Take TIANGEN (Beijing) Company as an example, it was founded in 2008 and it mainly sells antibodies. Compared with other domestic products, its products have quality advantage, while compared with foreign products, its prices are pretty low. Consequently, therefore, it quickly occupied a big market share. At present, direct model is mainly used in Beijing, and agency model is used in the Northeast and Northwest of China, Shanghai, Guangzhou and other cities and region.

4 Multiple agencies model

Multiple agencies model is adopted widely by small and medium size enterprises in China. Due to the restrictions of less capital and low technology, these enterprises are not able to complete the market development and promotion. Therefore, they need the distributors to sell their products. Products sold by these distributors are lowtech and easy to imitate, so enterprises do not have high requirements for dealers. Meanwhile, manufacturers just seta contract price with the distributors so that they can make prof i ts by expanding the sales network.

Overall, by analyzing the marketing channels for different biological reagent enterprises, we can see that product factors and business factors play a decisive role in choosing marketing channels. Through the establishment of‘products’ technical barriers and enterprise strength’ Matrix model, combined with China’s actual situation, we can draw the following conclusions: State-owned enterprises, full foreign-owned enterprises or joint ventures are suitable for direct model, and vice versa; large scale enterprises should build their own sales teams by using direct model, but medium or small size enterprises should chooses agency model; enterprises with patented products or high-tech products can choose regional agency model combined with direct model; enterprises with low-tech products are suitable for multiple agencies model.

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Author’s information: BAI Jian, Lecturer. Major research area: Social pharmacy. Tel: 024-31207435, E-mail: baijian988@ hotmail.com