Distribution Channel Management

UNIT 3
DISTRIBUTION CHANNEL
MANAGEMENT

 Distribution channel (also called sales channel or trade
channel) constitute an important factor or link in
effective sales management.
 It is the chain of businesses or intermediaries through
which a good or service passes until it reaches the end
consumer.
 Distribution channel can include wholesalers, retailers,
distributors, agents, dealers etc., known as
intermediaries, middleman or channel partners.
 Channels connect the producers to the ultimate
consumers – it is the route through which goods move
from the point of production to the point of ultimate
consumption.
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When goods reach consumers through various
intermediaries, it is called as Indirect selling.
In indirect selling, goods reach final consumers
through the distribution channel.
When the manufacturer sells directly to final
consumer it is called direct selling, or zero level
channel.
Then there are one level, two levels and three levels
channels depending upon number of intermediaries
involved in the distribution channel.
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BASIC CHANNELS OF CHANNELS OF DISTRIBUTION
(source: https://medium.com/@jpcueva/distribution-channels-dc07d3848e8c)
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MANAGEMENT OF DISTRIBUTION CHANNEL
 Channel management is a process by which a company
creates formalized programs for selling and servicing
customers within a specific channel.
 Number of individual entities comprising the channel of
distribution between producer and consumer is called
Channel length.
 Number of different entities available for providing the same
distribution function (as a distributor, wholesaler, or retailer)
at different stages in a distribution channel is called as
Channel Width.
 The channel management service refers to how companies
build tailored business streams to more effectively manage
their business within and across channels, setting
investment priorities and key areas of operational focus;
managing channel conflict; deciding on the right products
and services to better and more profitably serve customers.
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NEED FOR A DISTRIBUTION CHANNEL
 Every organization needs a good distribution channel so
that the commodity reaches the customer at the right
place and at the right time as per his convenience.
 There are many functions to be carried out in moving
the product from manufacturer to the customer and
each require funding and, often, specialist knowledge
and expertise.
 Distribution channel adds value to selling or the product
and the consumer. Value addition takes place through
place utility, time utility and possession utility
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NEED FOR A DISTRIBUTION CHANNEL
Supply of Information
Product Promotion
Financing of Operations
Maintaining Price Stability
Title of Goods
Creation of Place, Time and Form Utilities
Holding Stock
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NEED FOR CHANNEL MANAGEMENT
Channel Efficiency
Reduced Distribution Costs
Role Clarity
Reduced Channel Conflict
Ensure Timely Delivery of Goods
Ethical Practices
Maintain Price Stability
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TYPE OF CHANNEL PARTNERS
1. Wholesalers
A wholesaler is an intermediary in the distribution
channel who buys in bulk and sells to resellers rather than
to consumers.
“The wholesaler, or the wholesale trader, is a trader, who
purchases goods in large quantities from manufacturers
and resells to retailers in small quantities.” – S E Thomas
“Wholesaling is concerned with the activities of those
persons or establishments that sell to retailers and other
merchants, and/or industrial, institutional, and
commercial users, but that do not sell in large amounts to
final consumers.” – US Bureau of Census
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Functions of Wholesalers
• Assembling Goods
• Distribution of Goods
• Provides a Trained Sales force
• Marketing and Research
• Reduces Physical Distribution Cost
• Warehousing and Delivery facilities
• Credit Facilities
• Advertisement
• Finance – make advance payment and place the order
• Undertake Risks
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2. Distributors
A distributor is an intermediary entity between the
producer of a product and another entity in the
distribution channel or supply chain, such as a retailer’
The distributor performs some of the same functions that
a wholesaler does but generally takes a more active role.
Distributors sell to both – Wholesalers and retailers.
A distributor may be required under three circumstances:
o Entering a new town.
o Additional coverage in the same town.
o Replacing an existing distributor
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Consumer durable, electronics, hardware or other
equipment, medicines are perfect examples of sectors
which use distributors and not wholesalers.
A medicine retailer may have more then 1000 different
type of medicines. He cannot afford to visit wholesalers
who are stocking all these machines.
So the companies appoint a distributor who can distribute
the various medicines to the retailer who in turn sells it to
customers.
For instance, Samsung Smart phones are distributed to all
stores and the distributors may visit all the shops within a
region to ensure that the material is on display by the
retailers. There is no wholesaler of Samsung but only
retailers and distributors.
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Functions of Distributors
• Selling
• Promotion
• Customer Service
• Market Research
• Financing
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DISTRIBUTOR WHOLESALER
Generally works on
contractual basis with the
manufacturer
No contract is required
Customers can be retailers,
wholesalers and end users.
Customers are the retailers
Wider area of operation Limited area of operation
Require promotion to sell No promotion required
Exclusive suppliers Bulk buyers
Earns from the service fees
charged
Gains profit from the price
discounts on bulk purchases
Exclusively sells one brand at a
time.
Deals in a variety of brands
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3. Retailers
Retailer may be defined as a dealer or trader who sells
goods/ services in small quantities to consumers for
personal or family use.
According to Philip Kotler “Retailing includes all the
activities involved in selling goods or services directly to
final consumers for personal, non business use”
Retailing is a set of business activities that adds value to
the products and services.
Retailing may be understood as the final step in
distribution of merchandise, for consumption by the end
consumers
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Any organization selling to final consumer is retailing,
whether they are:
A Manufacturer
A Wholesaler
A Retailer
It does not matter how they sell or serve by -
Person
Mail
Telephone
Vending Machine or
Internet
Social Media
Or
Where these are sold - A store, street or consumers house
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Functions of Retailers
• Providing Assortments
• Breaking Bulk
• Holding Inventory
• Providing Goods at Convenient Locations and Timings
• Providing Services
• Feedback
• Increasing the Value of Products and Services
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(Ref.: https://www.marketing91.com/difference-between-wholesalers-retailers-and-
distributors/)
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(Reference: https://difference.guru/difference-between-a-wholesaler-a-distributor-
and-a-retailer/)
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DISTRIBUTION 4.0
Asian Paints recently realized from market research that its
consumer is the woman of the house who was making the
choice of home decor. The conventional profile used to be the
male consumer, 35-45 years of age. The findings from the
research compelled the company to start looking at the female
consumer strongly. "We have aligned our decor orientation at
Asian paints to the woman of the house," said Amit Syngle,
president, technology, sales & marketing, Asian Paints, adding
that "all marketing initiatives, even in the social media space,
are targeted at the woman".
The company has roped in Deepika Padukone as the brand
ambassador and is also keen to improve its gender diversity,
which currently stands at 7%. Asian Paints believes it has now
developed a better connect with its audience. "We have hit the
arrow at the right spot and it is showing clearly in terms of the
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APPLE MAY TWEAK INDIA STRATEGY IN BID TO INCREASE MARKET SHARE
(MINT, 02 MAY 2019, 10:00 AM IST)
Apple Inc. is likely to make some adjustments to its India
strategy to improve its market share in the world’s second-
largest market for mobile phones. As part of the strategy, the
iPhone maker is expected to boost its manufacturing capacity
and open branded retail stores.
After announcing its fiscal-second-quarter earnings on
Tuesday, chief executive Tim Cook told analysts that Apple,
which only assembles the iPhone 7 in India, will increase local
manufacturing, Press Trust of India reported.
According to Cook, a temporary 22% drop in price for the
iPhone XR in April taught Apple something, as it helped the
company increase sales.
Apple iPhones account for less than 1% of the Indian
smartphone market, largely dominated by vendors such as
Samsung and Xiaomi
The slowdown in the Chinese market is yet another reason for
Apple’s renewed interest in India.
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ENO PARTNERS WITH GOOGLE FOR 'WHAT A RELIEF' CAMPAIGN
(ETBRANDEQUITY, SEPTEMBER 09, 2020)
GSK Consumer Healthcare’s antacid brand, Eno has partnered
with Google to create a campaign where the communication is
customised as per the recipe being searched by the user,
based on search data from Youtube that said in-home food
experiments continue to be a relevant trend.
With this, it has launched the third phase of the #WhatARelief
campaign to drive relevance for the brand. With this
campaign, the brand aims to drive relevance via contextual
conversations and present itself as a reliable ally against
acidity.
The brand first picked up the top recipes being searched on
YouTube and then developed customised six second creatives
for each recipe. The Eno advertisement is customised on the
basis of the recipe searched and played before the recipe
video commences.
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AMAZONS BUSINESS MODEL IN INDIA
Amazon is an American international e-commerce
company. It was started by Jeffrey P. Bezos in the year
1994 and it was launched in India in June 2013.
Few years back, Amazon had no infrastructure in India,
and now it dominates the Indian markets.
At the very start it was perception of investors that in
India It will not go long like China as in the year 2004
when Amazon entered in China it hasn’t seen much
success there with Alibaba, its Chinese competitor,
dominating the e-commerce market.
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CASE STUDY
Mr. Desai, the president of ‘Tracks Company’, leaned back in his
chair and reflected on the success of his firm, which produces
and distributes a line of farm equipment across India. He held a
meeting of all his senior managers from different states and
expressed his urge to introduce new models of farm equipment
to satisfy changing demands of the customers (farmers).
Distributors also suggested many modifications in the
companys products. One of the managers, who had an
engineering background, recognized the implications of the
suggestion that came from the distributors. He said that the
implementation would require greater investments in research
and development. Furthermore, the changes in the highly
automated production line would be very costly. Also having a
wider variety of models would require stocking many more
spare parts depending on the kinds of changes, workers might
need to be retained.
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CASE STUDY
Reflecting on the previous staff meetings, the president realized
that sales or marketing people always wanted a greater variety
of models but never acknowledged costs involved in changing
models. Till date the company had been extremely successful
with just a few models. Consequently, the president decided
against the introduction of new models. Instead he considered
improving the current models and reducing the cost and price.
He felt that what the customer really wants was value.
Nevertheless, to test his judgement, the president asked a
consultant for an opinion.
Questions
1. What do you think are the opportunities and threats in the
external environment?
2. How would you go about evaluating the strength and
weakness of the firm?
3. Discuss the role of distributors in selling farm equipment
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CHOICE OF DISTRIBUTION SYSTEM
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1. Intensive Distribution
Intensive distribution aims to provide saturation coverage of the
market by using all available outlets. The objective is to distribute
the product as extensively as possible. For many products, total
sales are directly linked to the number of outlets used.
Intensive distribution is usually required where customers have a
range of acceptable brands to choose from. In other words, if one
brand is not available, a customer will simply choose another. This
alternative involves all the possible outlets that can be used to
distribute the product.
This strategy is particularly useful in low involvement products like
soft drinks where distribution is a key success factor. Here, soft
drink firms distribute their brands through multiple outlets to
ensure their easy availability to the customer. Hence, on one hand
these brands are available in restaurants and five star hotels and on
the other hand they are also available through small soft drink
stalls, kiosks, sweet marts, tea shops, and so on.
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2. Selective Distribution
Selective distribution involves a producer using a limited
number of outlets in a geographical area to sell products. It
ensures more control over the outlets. An advantage of this
approach is that the producer can choose the most
appropriate or best-performing outlets and focus efforts like
training on them. Selective distribution works best when
consumers have a preference for a particular brand or price
and will search out the outlets that supply.
This alternative helps focus the selling effort of manufacturing
firms on a fewer outlets. It also enables the firm to establish a
good working relationship with channel members. Selective
distribution can help the manufacturer gain optimum market
coverage and more control but at a lesser cost than intensive
distribution.
E.g. Dior or Prada perfumes are available at some department
stores.
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3. Exclusive Distribution
Exclusive distribution is an extreme form of selective
distribution in which only one or maximum two -
wholesaler, retailer or distributor has the right to sell the
brand. When the firm distributes its brand through just
one or two major outlets in the market, who exclusively
deal in it and not all competing brands, it is said that the
firm is using an exclusive distribution strategy. This is a
common form of distribution in products and brands that
seek a high prestigious image.
Typical examples are designer wear, major domestic
appliances and even automobiles. By granting exclusive
distribution rights, the manufacturer hopes to have
control over the intermediary’s price, promotion, credit
inventory and service policies.
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FACTORS AFFECTING DISTRIBUTION STRATEGY
Locational Demand
Product Characteristics
Pricing Policy
Speed and Efficiency
Distribution Cost
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SELLING & DISTRIBUTION STRATEGIES
Chandubhai Virani, the 60-year-old founder and director of
Balaji Wafers Private Limited, started making potato wafers in
1982 with a minuscule investment of Rs 10,000 at a shed
erected in the compound of his house. He then went on to
build a company that has reaped Rs 1,800 crore as turnover in
2017.
Balaji Wafers, the largest regional potato wafer and snack
brand and the second biggest player in the potato wafer
segment in the country, started small.
Now, despite being concentrated in the western States of
Gujarat, Maharashtra, Goa, Rajasthan and Madhya Pradesh, it
is a household name thanks to its strong distribution network.
As one enters the premises of Balaji Wafers Private Limited in
the village of Vajdi (Vad) around 20 km from Rajkot, a small
Balaji temple in the forefront of the 50-acre factory area, is
proof of the faith the owners have in Lord Balaji, from where
the brand name ‘Balaji' came.
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It was in 1972 that Chandubhai’s father, the late Popat
Ramjibhai Virani who was an ordinary farmer, gave three of his
sons – Meghjibhai, Bhikhubhai and Chandubhai – the sum of
Rs 20,000 to invest it wisely.
The family then lived in Dhundoraji in Jamnagar district - about
79 km from Rajkot - and Chandubhai was only 15 years old.
His elder brothers invested in agricultural tools and fertilisers,
but lost the money. Forced to leave in search of earnings by a
poor monsoon and subsequent severe drought, the three
brothers came to Rajkot in 1974 while the youngest Kanubhai
stayed back with his parents and two sisters.
Chandubhai, a Class X pass, found a job in Astron Cinema.
While his main job was to serve at the canteen, he also did
odd jobs like sticking film posters, door-keeping and ushering,
all for a monthly salary of Rs.90.
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“At night after the show, I repaired torn seats and in exchange
got a plate of chorafari (a Gujarati snack) and chutney,” shares
Chandubhai. “We lived in a rented place, but one night we ran
away from there because we did not have even Rs 50 to pay as
rent.” (He later paid the landlord back.)
The brothers started selling various items in the canteen
including potato wafers bought from a supplier, who was
always late. This spelt disaster at a movie hall! “After changing
suppliers three times,” says Chandubhai, “I thought – why not
make our own potato wafers?”
By 1982, the whole family had moved to Rajkot and Ramjibhai
had bought a house with a large compound. The family made
‘masala’ sandwiches for the canteen; it was a hit, but a
perishable product and Chandubhai saw a future in wafers
because they could be carried anywhere and everywhere.
With an investment of Rs 10,000, Chandubhai set up a small
shed in the compound and began his experiments with making
chips, after canteen work.
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Jumbo king was founded by Dheeraj Gupta, a third-
generation entrepreneur from his family. Dheeraj’s family
has been in the hotel and catering business and also had
their sweet shops. Therefore on completing his MBA from
Symbiosis, Pune, Dheeraj decided he will export sweets to
markets with heavy India population, like Dubai. However,
this attempt at exporting sweets didn’t work out well and
Dheeraj had to shut shop. His second entrepreneurial
outing was with street food and he opened an outlet in
suburban Mumbai, in Malad under the name of Chaat
Factory. As business grew, Dheeraj realized the best selling
item on their menu was vadapav and decided to do a
more thorough job with this particular food product. Thus
began the journey of Jumboking.
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Jumboking opened its first outlet in 2001 and priced the
vadapav at a premium of Rs 5 when the roadside offering
was being sold at Rs 2. “People were very curious to try a
vadapav in the shop, but they did come,” says Dheeraj.
Being hygienic was their first differentiation. Soon there
were flavours and variety -- cheese vadapav, butter
vadapav, schezwan vadapav -- that they started offering.
Sales started picking up and the company continued to
constantly innovate as it chugged along. One of the
earliest things Jumboking did was to open franchise stores
in Tier 1 -2 cities, in areas where there were high footfalls
– like outside a railway station. 200-300 sq. ft. stores that
fit well with the locations, and the customer base was the
crowd rushing to catch that 5.45 local back home, or take
the 9.15 train to rush for that meeting.
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DISCUSS THE DISTRIBUTION STRATEGIES
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FACTORS AFFECTING EFFECTIVE MANAGEMENT OF
1. Channel Design
2. Channel Policy
3. Channel Conflicts
4. Resolution of Conflicts
5. Motivating Channel Members
6. Selecting Channel Partners
7. Evaluating Channels
8. Channel Control
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CHANNEL DESIGN
Channel design is the pattern of channel which is suitable
for marketing its products.
It includes the decision about the structure -
 Length of the channel
 Number of members required in the distribution
network.
 Activities to be performed by channel members.
 Role and responsibility of channel members.
Firms can use different channels to reach different
segments of the market or different channels for reaching
the same market.
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CHANNEL DESIGN
The channel selected should be best suited to the firms
requirements for the particular segment.
It should focus on:
Customers Needs and Wants
Selling Objectives
Constraints
Customer Convenience
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CHANNEL DESIGN
Steps in Designing the Channel
Analysis of Customer
Needs and Wants
Establishing Objectives
and Constraints
Identifying and Evaluating Major
Channel Alternatives
Evaluating the Variables
Affecting Channel Design
Selecting the “Best”
Channel Structure
Review
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CHANNEL POLICY
Channel Policy has to be reviewed at regular intervals from
time to time.
It is framed in the areas of
 Market Coverage – Extent to which manufacturers cover the
market through the distribution channels.
 Channel Coverage – Use of various channels (direct and
indirect) to reach diversified group of customers through
different pricing strategies.
 Product Lines – Group of products that are closely related
because they function in similar manner, are sold to the
same customer groups, are marketed through the same
types of outlets or fall within given price ranges. E.g. Bata
 Pricing
 Choice of Channel Partners
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CHANNEL CONFLICTS
Channels are managed by individual businessmen who are
motivated by personal goals
Each channel member is interested to increase sales and
make profits.
When one channel members actions prevent another
channel from achieving its goals, channel conflicts occur.
Channel conflict is a situation in which channel partners
have to compete against one another or the vendor's
internal sales department.
Channel conflict can cost a company and its partners
losses as partners try to undercut one another.
It can also lower morale within the channel and cause
some partners to consider other vendors.
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CHANNEL CONFLICTS
Channel conflict causes unnecessary hurdles, problems in
sales and reducing efficiencies of the channel partners.
To prevent channel conflict, partners sometimes enact
agreements such as deal registration between
manufacturer and the channel partner
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CHANNEL CONFLICTS
Types of Channel Conflicts
1. Vertical Channel Conflict: Relates to different levels
within the same channel. E.g. Conflict between
Manufacturer and Distributor
2. Horizontal Channel Conflict: Takes place on same level
of distribution. E.g. One dealer may overlap and
interfere with sales territory assigned to the other
dealer and adopt price cutting.
3. Multi Channel Conflict: When the manufacturer uses
two or more different channels to sell the product to
the same target market. E.g. A manufacturer may sell
his product through an agent and also online at the
same time
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REASONS FOR CHANNEL CONFLICTS
Role Ambiguity
Goal Incompatibility
Mismatch of Market Perception
Bias or Target fixing
Competitor Inducement
Demand for Higher Commission
Stocking of Competitive Brands
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RESOLUTION OF CHANNEL CONFLICTS
Channel conflicts should be avoided to maximize profits
and achieve overall goals and objectives.
Conflicts can take different forms such as hostility,
incompatibility, disagreement etc.
Thus every effort should be taken to resolve conflict by
 Effective communication
 Understanding the nature and intensity of the conflict
 Finding out the source of conflict
 Arbitration
 Formation of Dealer Councils
 Mediation etc.
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KENNETH THOMAS’S 5 STYLES OF CONFLICT RESOLUTION
Kenneth W. Thomas and Ralph H. Kilmann developed five
stages of conflict resolution
It assess individuals behaviour in conflict situations.
In such situation, a persons behaviour can be described
along 2 dimensions:
a. Assertiveness, the extent to which the individual
attempts to satisfy his own concerns
b. Cooperativeness, the extent to which the individual
attempts to satisfy the other persons concerns.
The two dimensions of behaviour can be used to define
five methods of dealing with conflict.
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1. Competing: is a power – oriented mode
It is assertive and uncooperative.
Competition results from the desire to survive.
An individual may follow his own concerns at the other
persons expense.
Competing can emerge as a winning strategy when
assertive individuals are on the job.
2. Collaborating:
It is assertive and cooperative
People try to meet the needs of everyone and
acknowledge them.
Conflict resolution requires mutual respect, a willingness
to listen to others and creativity.
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3. Compromising:
Moderate in assertiveness and cooperativeness
Find solutions that will satisfy everyone to some extent.
It is a situation in which both the parties sacrifice to get a
midway solution of the problem.
They call for meetings, understand the nature of the
problem and get a solution to the problem
4. Avoiding:
It is unassertive and uncooperative
Avoidance is used by the weak or disinterested members
of the channel.
Members who cannot solve a problem try to avoid or
ignore the problem.
Solution of the conflict is postponed or avoided.
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5. Accommodating:
It is unassertive and cooperative
Accommodation is a solution through surrender and
understanding.
In accommodation one channel member allows the other
party to achieve goals without being concerned about his
own interests.
Only those people willing to sacrifice their ego can adopt
this strategy
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MOTIVATING CHANNEL MEMBERS
MotivatingChannelMembers
Referent Power
Expert Power
Reward Power
Legitimate Power
Coercive power
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1. Referent Power - Image or recognition that a company
enjoys in the market. Such position gives the company
power of reference. Members feel proud to be associated
with such a company and it naturally motivates them to be
associated with the company. Companies like ITC, HUL,
Bisleri, Sony and many others enjoy referent power.
2. Expert Power - refers to some skills or capability that a
company possesses which can be imparted to the channel
partners. Channel members can thus learn more about the
technology and business and hence get motivated to be
associated with the company. Technology oriented
companies in automobiles, electronics and
telecommunication use this expert power.
3. Reward Power - Companys willingness to reward the
channel members in order to motivate them. It may be
conventional reward or incentive system used by
companies for better results. Rewards can be financial,
non financial or both.
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4. Legitimate Power: refers to power or authority derived by
a company from any contract or agreement signed by the
company with its channel partners like distributors. The
agreement gives the company legal powers to expect the
members to perform as per the expectations or members
are obligated to do so. However the legitimate power
should be used as a source of motivation rather than
means of pressuring the channel partners to perform.
5. Coercive power: refers to use of threat by a company to
make the channel members perform. Large companies
which are very powerful due to their strong positions
make use of these powers to ensure that the work is done
through the distributors. Coercion or threat should be
avoided as it is not a motivating factor.
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SELECTING CHANNEL MEMBERS
Finding the right channel partner may not be an easy task.
Channel partners must efficiently perform the distribution
tasks necessary to implement the channel strategy.
Motivation of channel members can become much easier
if the correct channel partners are selected.
In case of FMCG products, channel members like
wholesalers and retailers are already present and become
a part of distribution network to the company.
For consumer goods like automobiles and electrical
goods, dealers have to be selected or appointed.
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While selecting the channel partners, company must
evaluate their various characteristics such as:
 Reputation
 Location
 Number of years in business
 Profit Records
 Cooperativeness
 Line Specialization
 Size and Quality of Salesforce
 Future Growth Potential
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A checklist of indicators that can be taken into consideration
before selecting a channel:
• Knowledge of market
• Local presence
• Relationship with customers
• Reputation in market
• Financial stability
• Sales area coverage
• Selling skills
• Competitive service skills
• Marketing support to manufacturer
• Shared values and culture
• Ethical practices
• Necessary leadership skills
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CRITERIA FOR SELECTING CHANNEL MEMBERS
Channel
Partners
Selection
Market
Factors
Product
Factors
Channel
Factors
SWOT
Analysis
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1. Market Factors- Existing market structure of the product(s).
This includes the process of buying and selling, consumer
location and preferences and behavior, competition, existence
or proportion of industrial or organizational buyers etc.
2. Product Factors - Product characteristics - physical properties,
technical or technological aspects, life cycles, consumer
perceptions, market position etc.
3. Channel Factors - Different aspects, characteristics and
capabilities of channel members, such as, financial
trustworthiness or reputation, product promotion capabilities,
selling abilities, after-sales service facilities or abilities
(wherever applicable), and, finally, willingness or availability of
particular channel members.
4. SWOT Analysis refers to the overall appraisal of prospective
channel members before selection. Different channel members
may exhibit different strengths and weaknesses in the existing
market environment, i.e., opportunities and threats. Some
channel members may be effective in pushing slow-moving
products into the market while some other channel members
may be effective in selling Industrial goods.
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EVALUATING CHANNELS
Evaluation is more commonly done on monthly basis;
some companies do on quarterly basis; and some other
companies do on monthly and quarterly basis.
Performance evaluation is done on the basis of prescribed
standards, tasks and targets.
Tasks and targets can relate to sales volume, channel
inventory level/management, efficiency, profitability etc.
Evaluation norms or criteria are usually agreed between
the company and a particular channel partner.
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EVALUATING CHANNELS
Measures for evaluating performance of channel
members:
 Effectiveness - assessed in terms of delivery and
proficiency to satisfy customer needs.
 Efficiency/ Productivity - involves controlling costs
incurred by intermediaries, maximizing output for a
given level of input
 Equity - the extent to which distribution channels serve
markets/ segments such as distant or isolated consumer
pockets along with normal consumers (Accessibility of
channel among customers)
 Profitability – concerns financial that brings revenue to
the manufacturer.
Dr.ParveenNagpal

CHANNEL CONTROL
Channel control refers to verify whether specified
functions have been carried out in accordance with the
pre-determined targets and to rectify the errors, if any.
Channel control ensures that operations are on the right
track in prescribed norms and standards.
Channel control can be physical, financial, qualitative,
quantitative, formal or informal.
It depends on the company what kind of control system it
plans to design.
The control system is then administered through
instruments of control, known as control devices
Dr.ParveenNagpal

INSTRUMENTS OF CHANNEL CONTROL
Channel
Control
Contract or
Agreement
Distribution
Audit
Budgets and
Reports
Dr.ParveenNagpal

1. Contract or Agreement: The most traditional, oldest,
instrumental method of exercising control over
channel members functioning or operations. Most of
the companies enter into a written agreement that
specifies details of association between the parties
and also the terms of operations such as:
• Products handled.
• Territories handled.
• Categories or types of customers.
• Selling price and margins.
• Sales promotion responsibility of channel partner.
• Payment and credit mechanism.
• Inventory levels – management by the channel partner
Dr.ParveenNagpal

2. Budgets and Reports: Budgets are prepared well in
advance and enables rational utilization of financial
resources. Budgets indicate the framework within
which the entire operation is to be completed. It also
includes the commission/ incentives that are to be
paid. To ensure that the channel is functioning
smoothly, reporting must keep the channel members
informed about what is going on.
Monitoring and control become very easy and
effective if there is a proper reporting system. Weekly
reports can be short and precise showing immediate
results. Monthly and quarterly reports can be more into
detail showing targets and planning parameters.
Dr.ParveenNagpal

3. Distribution Audit: It is systematic and objective
criteria to study the distribution efficiency and
evaluate the distribution policies of the manufacturer.
Its objective is systematic analysis of activities, targets
and results of a channel member. Every manufacturer
wants to minimize the costs by eliminating wastage
and utilizing manpower optimally.
Distribution audit can easily identify any
shortcomings in operations of a channel. These issues can
be deliberated upon and improvement measures can be
undertaken by channel members on the basis of the
review.
Dr.ParveenNagpal

REFERENCES
1. Nag, Sales And Distribution Management, Mc Graw
Hill, 2013 Edition
2. Richard R. Still, Edward W. Cundiff, Norman A.P.
Govoni, Sales Management, Pearson Education, 5th
Edition
3. Krishna K. Havaldar, Vasant M. Cavale, Sales And
Distribution Management – Text & Cases, Mc Graw
Hill Education, 2nd Edition, 2011
4. Kotler & Armstrong, Principles Of Marketing – South
Asian Perspective, Pearson Education, 13th Edition
5. Nagpal, Sharma, Kukreja - Sales And Distribution
Management, TYBMS, Sheth Publishers.
Dr.ParveenNagpal

THANK YOU
Dr. Parveen Nagpal
www.linkedin.com/in/dr-parveen-kaur-nagpal-82965b15
Dr.ParveenNagpal

Distribution Channel Management

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