Distribution

1. DISTRIBUTION
DISTRIBUTION 1

2. DISTRIBUTION / PLACE – ISSUES
At the end of this module the learning
outcomes are:
1. What are the roles and functions of
channel partners?
2. Various types of channel levels.
3. What are considerations in channel
design decisions
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3. DISTRIBUTION / PLACE – ISSUES
SUGGESTED READINGS
1. Marketing management by Kotler,
Millineium edition, chapter 16.
2. Marketing management by Ramaswami
and Namkumari, chapter 21.
DISTRIBUTION 3

4. DISTRIBUTION / PLACE – ISSUES
DISTRIBUTION ISSUES – PLACE
• Why do you use
- Dealers
- Stockist
- Distributors etc…
• How does the product becomes available
to customer
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5. DISTRIBUTION / PLACE – ISSUES
Marketing channels
Set of interdependent organizations
involved in the process of making a
product for use or consumption
Example
- Dealers
- Distributors
- Retailers
- Agent
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6. DISTRIBUTION / PLACE – ISSUES
Marketing channel
- Hindustan lever – Lifebuoy
• Goes to villages
• 5 lakhs villages in India
• Can Lever set up 5 lakhs offices?
• Do they have such resources?
• No
• Probably no company in this world has
• Need of partner
• Help you to reach your target customers
Role of channel partner required.
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7. DISTRIBUTION / PLACE – ISSUES
CHANNEL FUNCTIONS & ROLES
1. Information gathering / feedback
- Potential / current customers
- Competitors
- Used by companies to alter marketing
mix
- Can take actions to counter competition
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8. DISTRIBUTION / PLACE – ISSUES
2. Supply products in assortments
Example – Pepsi
• Pepsi supplies in case of 24 bottles
- Crate
• Suppose consumer requires
- 1 Pepsi
• Shopkeeper
- Provides 1 Pepsi
• Breaks products in assortments
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9. DISTRIBUTION / PLACE – ISSUES
3. Risk sharing
- Channel members
- Buy goods from producers
- If the goods do not sell?
- Who bears the risk
- Channel partner
Risk sharing is critical
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10. DISTRIBUTION / PLACE – ISSUES
4. Helps merchandise the product
• Merchandising
• Attractive display
• Increases
- Awareness
- Interest
Music world
• Wide display of music
• Can try
• Attractive display
• Décor
• Invested in space, display
• Sales personnel, warehouse, trucks
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11. DISTRIBUTION / PLACE – ISSUES
5. Provides salesmanship
6. Assists in sales promotion
7. Provides pre-sale and after-sale
service.
- TV servicing in rural areas
- Company or channel
- Done by channel partner
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12. DISTRIBUTION / PLACE – ISSUES
7. Extend credit to select customers
- Buy now, pay later.
8. Helps in test marketing
- Testing products before launch
- Use channel premises
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13. DISTRIBUTION / PLACE – ISSUES
CHANNEL LEVEL
• No of channel partners between
producer & consumer
• Various levels are
1. Zero – level
2. One – level
3. Two - level
4. Three – level
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14. DISTRIBUTION / PLACE – ISSUES
1. Zero – channel
• No channel partners
• Producer directly to customers
Examples
• Eureka Forbes
- Door – to – door selling
• Boeing
- Directly to Indian airlines
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15. DISTRIBUTION / PLACE – ISSUES
2. One – level channel
One intermediary
Example
Competent motors
· Channel partners for Maruti
3. Two - level channel
· Two intermediary
Example
Onida black & white TV
· Onida sells to distributor in each district
· Retailer buy from distributor 15
DISTRIBUTION

16. DISTRIBUTION / PLACE – ISSUES
4. Three – level channel
• Three intermediaries
Example – Hindustan lever
Company
Stockist …. (district level)
Wholesaler …… (town level)
Retailer…… (village level)
DISTRIBUTION 16

17. DISTRIBUTION / PLACE – ISSUES
Analysing customer’s Desired
Service output levels
- What kind of service levels are
expected by target customers
- Five Service Output levels
1. Lot Size
2. Waiting time
3. Spatial convenience
4. Product variety
5. Service backup
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18. DISTRIBUTION / PLACE – ISSUES
1. Lot size
• No of units the channel permits a typical
customer to purchase on one occasion
Example
Purchase of Air-conditioners
A. Maruti
• Prefer a channel from where it can buy 100
Air – Conditioners
B. Household
• Buying a lot size of 1 Air – conditioner.
• Shop
DISTRIBUTION 18

19. DISTRIBUTION / PLACE – ISSUES
2 Waiting time
• Average time customers of that channel
have to wait for receipt of the goods.
• Customer normally fast delivery channels
Bread / Newspaper
• Customer want newspaper every day
morning
• Will you wait for newspaper till evening ?
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20. DISTRIBUTION / PLACE – ISSUES
3. Spatial convenience
Degree to which the marketing channel makes it
easy for customer to purchase the product.
Maruti Baleno vs Honda City
• Maruti
About ten dealers in Dealers in Delhi
• Honda
About 2 dealers
• Maruti offers greater spatial convenience than
Honda
• Repair and search cost lower in Maruti.
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21. DISTRIBUTION / PLACE – ISSUES
4. Product variety
• Variety
• Normally customers prefer variety
• More choice
Example
• Shoppers Stop vs. Snowhite
• Wide variety in Shoppers Stop
• Snowhite – only garments
DISTRIBUTION 21

22. DISTRIBUTION / PLACE – ISSUES
5. SERVICE BACKUP
• Add – on services
- Credit
- Deliver at home
- Installation
- Repairs
• Provided by the channel
Higher the service backup, greater the work
provided by the channel.
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23. DISTRIBUTION / PLACE – ISSUES
6. MAJOR CHANNEL ALTERNATIVES
Has three elements
1. Types of intermediaries
2. Number of intermediaries
3. Terms and responsibilities of
intermediaries
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24. DISTRIBUTION / PLACE – ISSUES
A. Types of Intermediaries
1. Company salesforce
• Sales personnel from company directly
• Products are complicated / not
understood
Boeing
• Aircrafts
• Complex
• Can take one yr to finalize the sale
• Own sales force Trained
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25. DISTRIBUTION / PLACE – ISSUES
2. Dealers
• Appoint middleman in different territories
Example – LG
• Sells TV through multibrand dealer outlets
- Pankaj Electronics
3. Canteen stores department (CSD)
• Buys on behalf of defence services in India
• Defence personnel can buy
LG
• BPL supplies in CSD canteens all over India
• Defence personnel buy from CSD departments.
DISTRIBUTION 25

26. DISTRIBUTION CHANNELS
CEAT Tyres
1. Company Salesman
• Supply to large Automobile
Manufacturers
- Maruti, Ford, Hyundai
2. Dealers
• Multibrand Shops all over India
3. Ceat exclusive showrooms
• Exclusive shops dealing with Ceat tyres
only
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27. DISTRIBUTION CHANNELS
B. Number of Intermediaries
Three types of strategies
1. Exclusive distribution
2. Selective distribution
3. Intensive distribution
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28. DISTRIBUTION CHANNELS
1. Exclusive distribution
• Limiting the use of intermediaries
• Not allowing competing brands
• Maintain control
• Total commitment of intermediary
Maruti
• Exclusive dealers
• Huge investments by dealers
• Maruti provides support
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29. DISTRIBUTION CHANNELS
2. Selective Distribution
• Use of more intermediaries
• Compared to exclusive
• Need more visibility
• More control
• Less cost
Shahnaz Hussain Herbal products
• Not available from every Grocery shop
• Available at select outlets
• Maintain Image
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30. DISTRIBUTION CHANNELS
3. Intensive Distribution
As many outlets as possible
Multiple channels
Consumers widespread
Reach critical
Problems of control
Example
Lux Soaps, Lifebuoy, Colgate
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31. DISTRIBUTION CHANNELS
C. Terms and responsibilities of channel
Members
• Profitable relationship
- Producer
- Channel partner
• Rules of the game
• Channel partner responsibilities
- Prices
- Discounts
- Terms & conditions of sale
– Credit policies
– Defective return policies
– Merchandise
Do’s and Dont’s
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32. DISTRIBUTION CHANNELS
- Territorial Limit
- Scope of each other’s activities
• Both work united
• Conflicts happen when their roles are not
clear
DISTRIBUTION 32

33. Channel-Design Decisions
Criteria for Channel Alternative
Evaluation
Economic Control
Adaptive
DISTRIBUTION 33

34. Channel-Management Decisions
The Channel Development Process
Channel Member
Selection Training
Motivation Evaluation
Modification
Channel Channel
DISTRIBUTION 34