Dlm Module 1 &2


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Dlm Module 1 &2

  1. 1. Distribution channel management - an introduction
  2. 2. <ul><li>‘Marketing channels can be viewed as set of interdependent organizations involved in the process of making a product or service available for consumption or use’ </li></ul>
  4. 4. How do distribution channels contribute <ul><li>Intermediaries can improve the efficiency of the exchange process </li></ul><ul><li>Channel intermediaries adjust the discrepancy of assortment through the performance of the sorting process </li></ul><ul><li>Marketing intermediaries hang together in channel arrangements to provide for the routinisation of transactions </li></ul><ul><li>Channels facilitate the searching process </li></ul>
  5. 5. <ul><li>Sorting out </li></ul><ul><li>involves breaking down a heterogeneous supply into separate stocks that are relatively homogeneous. </li></ul><ul><li>Accumulation </li></ul><ul><li>bringing similar stocks from a number of sources together into a larger homogeneous supply </li></ul>
  6. 6. <ul><li>Allocation </li></ul><ul><li>breaking a homogeneous supply down into smaller and smaller lots </li></ul><ul><li>Allocating at the wholesale level is referred to as breaking bulk </li></ul><ul><li>Assorting </li></ul><ul><li>building up an assortment of products for resale in association with each other </li></ul>
  7. 7. Role of distribution channels <ul><li>To adjust the discrepancy of assortment through the process of sorting, accumulation, allocation, and assorting </li></ul><ul><li>To minimize the distribution costs through routinising and standardizing transactions to make exchange more efficient and effective </li></ul><ul><li>To facilitate the searching process of both buyers and sellers by structuring the information essential to both the parties </li></ul><ul><li>To provide a place for both parties to meet each other and reducing uncertainty </li></ul>
  8. 8. Discrepancies in the process of exchange <ul><li>Spatial discrepancy </li></ul><ul><li>Temporal discrepancy </li></ul><ul><li>Need to break the bulk </li></ul><ul><li>Need to provide assortment </li></ul>
  9. 9. The cost and control aspects of intermediation Direct Distribution Indirect distribution Control Cost efficiency
  10. 10. Distribution channel strategy <ul><li>Setting distribution objectives in terms of the customer requirements </li></ul><ul><li>Finalizing the set of activities that are required to be performed to achieve the channel objectives </li></ul><ul><li>Organizing the activities so that the responsibility of performing the activities is shared among the entities who are meant to perform these activities </li></ul><ul><li>Developing policy guidelines for the smooth functioning of the channel on a day to day basis </li></ul>
  11. 11. Distribution channel management (contd.) <ul><li>Distribution channel management encompasses all activities dealing with the distribution function of the firm </li></ul><ul><li>The distribution strategy provides guidelines for decision making </li></ul><ul><li>The distribution management function can be viewed as happening in two phases: the ex ante phase and the ex poste phase </li></ul>
  12. 12. Distribution channel management (contd.) <ul><li>The ex ante phase involves all the activities that are associated with the design and establishment of the distribution channel. These activities actually take place before the distribution channel actually starts functioning. </li></ul><ul><li>The ex poste phase involves managing the day to day activities of the channel wherein the behavior of the individual channel members are coordinated </li></ul>
  13. 13. Channel Management tasks <ul><li>Distribution Channel Strategy </li></ul><ul><ul><li>Channel Objective </li></ul></ul><ul><li>Activity Finalization </li></ul><ul><li>Organizing the activities </li></ul><ul><li>Developing Policy Guidelines </li></ul>Design of the channel structure Establishing the channel Motivating Channel Members Resolving Conflicts among channel members Ex ante Phase Ex Poste Phase
  14. 14. Functions in marketing channels <ul><li>Different functions to be performed by all intermediaries are </li></ul><ul><li>charting the process of distribution </li></ul><ul><li>arranging transportation and storage facilities </li></ul><ul><li>site analysis for warehouses </li></ul><ul><li>stocking and reordering procedures </li></ul><ul><li>ordering and payment procedures </li></ul>
  15. 15. <ul><li>Credit Financing </li></ul><ul><li>Repair and warranty Services </li></ul><ul><li>Technical Support </li></ul><ul><li>Financing customer purchases </li></ul><ul><li>Providing management services </li></ul><ul><li>Taking Risks </li></ul>Facilitating functions <ul><li>Buying Based on interpretation of customer needs </li></ul><ul><li>Dissemination of information </li></ul><ul><li>Promotion </li></ul><ul><li>Gathering customer information </li></ul>Communication Function <ul><li>Sorting products into desired quantity </li></ul><ul><li>Assorting items into desired variety </li></ul><ul><li>Delivery </li></ul><ul><li>Storage </li></ul><ul><li>Breaking Bulk </li></ul><ul><li>Accumulating Bulk </li></ul><ul><li>Creating Assortments </li></ul><ul><li>Transportation </li></ul><ul><li>Storage </li></ul>Logistical functions Facilitate Customers Facilitate Suppliers Functions of Intermediaries
  16. 16. Flows in Marketing channels <ul><li>A flow is a set of functions performed in sequence by channel members. </li></ul><ul><li>There are basically eight universal flows- </li></ul><ul><li>Physical </li></ul><ul><li>Possession Ownership </li></ul><ul><li>promotion </li></ul><ul><li>Negotiation </li></ul><ul><li>Financing </li></ul><ul><li>Risking </li></ul><ul><li>Ordering </li></ul><ul><li>Payment </li></ul>
  17. 17. Marketing Flows in channels Producers Wholesal- -ers Retailers Consumers Industrial And Household Physical Physical Physical Possession Ownership Possession Ownership Possession Ownership Promotion Promotion Promotion Negotiation Negotiation Negotiation Financing Financing Financing Risking Risking Risking Ordering Ordering Ordering Payment Payment Payment
  18. 18. Designing customer-oriented marketing channels
  19. 19. Distribution System for various Product categories Direct Mfg.’s website Direct call By Sales Force/ Phone call/ Mail Order etc Own store Indirect Dealer/ Retail Store C&F Agent Stockist Retailer Central and/or Distribution Warehouse Wholesaler/ Distributor Retailer Manufacturer/Service Provider Customers
  21. 21. <ul><li>Types of Direct Distribution System </li></ul><ul><li>Personal Selling </li></ul><ul><li>Direct Mailing </li></ul><ul><li>Catalogue Marketing </li></ul><ul><li>Telemarketing </li></ul>
  22. 22. <ul><li>Types of Indirect Distribution System </li></ul><ul><li>One Tier Distribution System </li></ul><ul><li>Two Tier Distribution System </li></ul><ul><li>Multi Tier Distribution System </li></ul>
  23. 23. DESIGNING CHANNEL STRUCTURE <ul><li>Determining Distribution Objective </li></ul><ul><li>Distribution System Alternatives </li></ul><ul><li>Determining Intensity of distribution </li></ul><ul><li>Factors affecting Choice of Distribution </li></ul>
  24. 24. 1. Determining Distribution Objective <ul><li>Higher Growth and Long Term performance of business </li></ul><ul><li>Greater market coverage, dominance and penetration </li></ul><ul><li>Sustainable competitive Advantage </li></ul><ul><li>Distribution cost containment </li></ul><ul><li>Development and maintenance of partnering channel relationships for qualitative outcomes of marketing </li></ul><ul><li>Improvement of Social and Economic welfare </li></ul>
  25. 25. 2. Distribution System Alternatives <ul><li>Direct Distribution System </li></ul><ul><li>One Tier Distribution System </li></ul><ul><li>Two Tier Distribution System </li></ul><ul><li>Multi Tier Distribution System </li></ul><ul><li>Multiple Channel System </li></ul>
  26. 26. 3. Determining Intensity of distribution <ul><li>Channel Number </li></ul><ul><li>Channel Length </li></ul><ul><li>Channel Width </li></ul><ul><li>Intensive Distribution </li></ul><ul><li>Exclusive Distribution </li></ul><ul><li>Selective Distribution </li></ul>
  27. 27. 4.Factors affecting Choice of Distribution Market Variables Product Variables Firm’s Variables Marketing Intermediary Variables Nature of Market No. of Potential customers Geographic concentration of the market Order size Customer Value models Customer Buying Habits Unit sale value Bulk and Weight Perishable Nature Technical Products Product Line Nature of The product Financial Soundness Desire for Channel control Direct Distribution Strengths Managerial Capabilities Cost of each Proposed channel Contribution of Middleman in Value addition Availability of Desired middleman Firm marketing Intermediary Relationships dynamics
  28. 28. <ul><li>Channel Design </li></ul><ul><li>The channel design is normally meant to give a clear idea about: </li></ul><ul><li>The number of channel entities in the channel network, </li></ul><ul><li>The way in which they are linked, </li></ul><ul><li>The roles and responsibilities of the entities in the network </li></ul><ul><li>The rewards for participating in the activities and also </li></ul><ul><li>Clear cut guidelines for the major activities to be performed during the normal functioning of the channel. </li></ul>
  29. 29. What are the service outputs <ul><li>Waiting time </li></ul><ul><li>Breaking the bulk </li></ul><ul><li>Spatial convenience </li></ul><ul><li>Assortment </li></ul>
  30. 30. Distribution channel design To consume a product Service outputs have to be delivered Channels Participates in channel flows Activities have to be performed Thus performs activities
  31. 31. Example of a service output delivered template Available Consumer financing 7. Free for first two years, but available on payment afterwards. Also available at every city from where the product was bought. After sales support 6. Available Installation support 5. Other consumer goods items including that of other competitors are available at all the outlets where the products are otherwise Available Assortment 4. Not more than 2 days for any model Waiting time 3. There is at least one outlet for almost every 3 km radius excluding of course thinly populated areas Spatial convenience 2. Units are delivered in ones Bulk-Breaking 1. Service output delivered Service dimension Sl.No.
  32. 32. Channel flows and contribution to service outputs Bulk breaking, spatial convenience, waiting time Payment Bulk breaking, spatial convenience, waiting time Ordering Assortment Spatial convenience, waiting time, bulk breaking Financing Waiting time, bulk breaking, spatial convenience Risk taking Assortment Spatial convenience, bulk breaking Negotiation Is a service output in itself Spatial convenience Promotion Spatial convenience Ownership Assortment Spatial convenience, bulk breaking, waiting time Physical Possession Other contribution Indirect contribution Direct contribution Flow
  33. 33. Channel design effort decisions <ul><li>The service output levels </li></ul><ul><li>The flows or activities that are associated with the achievement of the service output levels </li></ul><ul><li>The type of entity who would be entrusted with the performance of each of these flows </li></ul>
  34. 34. Parameters for comparing channel designs <ul><li>Efficiency </li></ul><ul><li>Effectiveness </li></ul><ul><li>Equity </li></ul><ul><li>Scalability </li></ul><ul><li>Flexibility </li></ul>
  35. 35. The channel establishment plan (contd.) <ul><li>The main purpose of the channel to be set-up </li></ul><ul><li>The profile of the customers who are the target market for the channel </li></ul><ul><li>The needs and requirements of the target market with regard to the identified service outputs provided by the proposed/ existing channel: </li></ul><ul><li>Analysis of the operations of the existing channels that deal in similar product/service lines </li></ul><ul><li>Detailed activity chart for achieving the service output objectives </li></ul>
  36. 36. Plan….. Contd. <ul><li>Details about the various channel constituents who will be performing these tasks </li></ul><ul><li>The cost of performing the activities </li></ul><ul><li>The designated roles and responsibilities of the channel constituents </li></ul><ul><li>The proposed remuneration for performing these roles and responsibilities </li></ul><ul><li>Standards for measuring the performance </li></ul><ul><li>Procedures for reporting and information sharing </li></ul><ul><li>Monitoring mechanisms </li></ul><ul><li>Criteria for appointing the channel members </li></ul>