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Lectre 1 distribution_mgmt.
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Lectre 1 distribution_mgmt.


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    CHAPTER NO : 8
  • 2. 2
    Learning Objectives
    Role of distribution management in the marketing mix
    Why distribution channels are required
    Distribution channel strategy
    Overview of distribution channel members
    Intensity in the distribution effort
  • 3. The Marketing Mix
    Distribution channels help in the ‘place’ aspect of the marketing mix
    Distribution provides place, time and possession utility to the consumer
  • 4. Example
    Consumer wants to buy a tube of toothpaste
    Made available at a retail outlet close to her residence – place
    Made available at 8 pm on a Tuesday evening when she wants it – time
    She can pay for the toothpaste and take it away – possession
    The company distribution function has made all this possible.
    The situation would be similar if a customer wants to buy a refrigerator or medicines or even an electric motor
  • 5. Players Involved
    The company and its distribution network
    Direct company to consumer
    Company to a C&FA / distribution center to distributors to retailers
    Distributor to wholesaler to retailer
    All these intermediaries help the process of ‘exchange’ of the product or service.
    What is distribution management?
  • 6. Distribution Management
    Management of all activities which facilitate movement and co-ordination of supply and demand in the creation of time and place utility in goods
    The art and science of determining requirements, acquiring them, distributing them and finally maintaining them in an operationally ready condition for their entire life.
  • 7. Distribution Channels
    Are intermediaries or middlemen
    Exist because producers cannot reach all their consumers
    Multiply reach and provide efficiency to the marketing process
    Facilitate smooth flow and create time, place and possession utilities
    Have the core competence and reach
    Provide contact, experience, specialisation and scales of operation
  • 8. Listing of Channel Members
    Company own sales team
    C&FAs and CSAs
    Distributors, dealers, stockists, value-added re-sellers
    Agents and brokers
    Electronic channels
  • 9. C&FAs / C&SAs
    C&FA: carrying and forwarding agent and C&SA: carrying and selling agent – both are on contract with a company
    Both are transporters who work between the company and its distributors
    Collect products from the company, store in a central location, break bulk and despatch to distributors against indents
    Goods belong to the company
    C&SA also sells the goods on behalf of the company but remits proceeds after sale
  • 10. Distributors, Dealers, Stockists, Agents
    Name denotes the extent of re-distribution done by them
    Distributors invest in the products – buy products from the company
    Are on commission, margins or mark-up
    May or may not get credit – but extend credit
    Distributors cover the markets as per a beat plan. All others merely finance the business.
    Distributors could be exclusive for a company
    Agents bring buyer and seller together
  • 11. Wholesalers
    Operate out of the main markets
    Deal with a number of company products of their choice
    Are not on contract with any company
    Sell to other wholesalers, retailers and institutions
    Negotiate about 15 days credit from company distributors – also provide credit to their customers
    Operate on high volumes and low margins
  • 12. Retailers
    The final contact with consumers
    Operate out of their shops and sell a large assortment and variety of goods
    Located closest to consumers
    Buy from company, distributors or wholesalers
    Highest margins in the network
    Provide personalised services to their customers
  • 13. Industrial Products
    Customers may also direct from company sales force
    Industrial Distributor
    Industrial Distributor
    Industrial Customer
    Industrial Customer
  • 14. Consumer Products
    Retailers may also direct from company sales force
    Customer /
  • 15. Patterns of Distribution
    Determines the intensity of the distribution
    Intensity decides the service level provided
    Types of distribution intensity:
  • 16. Distribution Intensity
    Intensive: distribution through every reasonable outlet available – FMCG
    Selective: multiple, but not all outlets in the market – pharma, frozen food
    Exclusive: may be only one outlet in a market - car dealers
  • 17. Intensive Distribution
    Strategy is to make sure that the product is available in as many outlets as possible
    Preferred for consumer, pharmaceutical products and automobile spares
  • 18. Selective Distribution
    A few select outlets will be permitted to keep the products
    Outlets selected in line with the image the company wants to project
    Preferred for high value products
    Tanishque jewelry
    Keeps distribution costs lower
  • 19. Exclusive Distribution
    Highly selective choice of outlets – may be even one outlet in an entire market
    Could include outlets set up by companies – Titan, Bata
    Producer wants a close watch and control on the distribution of his products.
    Channel strategy…
  • 20. Distribution Channel Strategy
    Derived from the corporate strategy and the marketing strategy
    Steps for designing the distribution strategy are:
    Defining customer service levels
    Distribution objectives and steps
    Structure of the network required
    Policy and procedure to be followed
    Key performance indicators
    Critical success factors
  • 21. Distribution Organization
    Extent of company support and outsourcing to be decided
    Budget for the cost of the distribution effort
    Select suitable channel partners – C&FAs, and distributors
    Setting clear objectives for the partners
    Agree on level of financial commitments by the channel partners.
    Policy and procedure..
  • 22. Key Performance Indicators
    For measurement of effectiveness. Some of these could be:
    Consistent achievement of targets by product groups, periods and territories
    Achievement of market shares
    Achievement of profitability
    Zero complaints from customers
    No stock returns
    Ability to handle emergencies and sudden spurts in demand
  • 23. Key Performance Indicators
    For measurement of effectiveness. Some of these could be:
    Balanced sales achievement during a period – no period end skews
    Market coverage with ready stocks
    Excellent management of accounts receivables
    Minimize losses on account of stock-outs
    Minimize damages to products
  • 24. Critical Success Factors
    The distribution strategy also needs the support and encouragement of top management to succeed
    Some of the CSFs could be:
    Clear, transparent and unambiguous policy and procedure
    Serious commitment of the channel partners
    Fairness in dealings
    Clearly defined customer service policy
    High level of integrity
    Equitable distribution at times of shortage
    Timely compensation of channel partners
  • 25. Logistic Needs
    Land – Sufficient land so that industrial or business operations may be conducted smoothly.
    Water – distribution
    Energy – Sufficient electric power or alternative resources of power so that operations may go unhindered.
    Storage for equipments, construction goods.
    Machinery and spares.
    Warehousing space for movement of goods/temporary storing till the goods reach final destination.
    Transport equipments, trucks, trolleys, etc.
    Telephones, telefax and other communication equipments.
  • 26. Logistic Management
    Logistic management is a field of management which primarily deals with the co-ordination of resources in an organization.
    The term logistic is used in the army for supplying/meeting the requirements of the troops. It means ‘art of moving’.
    In the present times the term is applied to the movement of store activities, important not only to the military, but also to every business activity in the economy.
    The term is common in the field agriculture, industry, trading.
  • 27. Definitions of Physical Distribution
    “The term ‘Physical Distribution Management’, is employed in manufacturing and commerce to describe the broad range of activities are:
    “Physical Distribution is the art and science of determining requirements, acquiring them, distributing them and, finally, maintaining them in an operationally ready condition for their entire life”.
    “Physical Distribution Management is specifically concerned with the flow of goods through the economic system.
  • 35. Functions of Physical Distribution
    In main, physical distribution functions may be listed as follows:
    Locational analysis
    Material handling
    Order processing
    Inventory control
    Customer sales service.
  • 36. Key Learnings
    Companies use distribution channels to reach their large customer base
    The channel members could be nominated like distributors or freelance like retailers
    Distribution channels provide the time, place and possession utility for consumers for the company products
    Distribution channels could be sales, service or delivery focused
  • 37. Key Learnings
    Companies could also choose the intensity of distribution based on their products and distribution objectives
    Distribution could be intensive, selective or exclusive
    The distribution strategy takes care of service levels, objectives, activities, organisation to deliver the service, measurement of performance and critical success factors