Distribution strategies


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This aspect of marketing provides place, time & possession utility to the customer. If a consumer wants to buy a tube of Colgate toothpaste, then the company ensures that toothpaste is made available to this consumer at a retail shop near by his residence- thus providing the ‘place utility’.

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Distribution strategies

  1. 1. Distribution Strategy
  2. 2. Concept of Distribution • This aspect of marketing provides place, time possession utility to the customer. & • If a consumer wants to buy a tube of Colgate toothpaste, then the company ensures that toothpaste is made available to this consumer at a retail shop near by his residence- thus providing the „place utility‟. • If this customer wants to buy this pack of toothpaste @ 8pm on Tuesday, the company ensures that the product is available at the retail counter at this chosen time of the consumer- thus providing the „time utility‟.
  3. 3. • When the consumer goes to the retail shop to buy the tube, he can pay for it & take it home whereby he becomes the owner of the tube and thus the „possession utility‟ has also been provided for. • Thus distribution management is the art & science of determining requirements, acquiring them, distributing them and finally maintaining them in an operationally ready condition for their entire lifes.
  4. 4. Distribution Channel • A distribution channel is a group of people & firms involved in the transfer of title or ownership as the product moves from the producer to the ultimate consumer. • The American Marketing Association describes a distribution channel as: “the structure of intra company organization units & extra company agents, dealers, wholesalers and retailers through which a commodity, product or service is marketed.”
  5. 5. It can be further classified as: 1. Sales Channel- which has the functions of motivating buyers, sharing information between the consumer & the company, negotiating fair bargains for the consumer and financing the transactions. 2. Delivery Channel- which is only meant for physical transactions. This is the primary job of C&FA. 3. Service Channel- which performs after sales service like a Maruti service station.
  6. 6. A distribution Channel includes manufacturer C &F As Distributors Customer / Consumer Retailer Wholesaler
  7. 7. Factors required for designing an effective distribution strategy 1. Defining customer service levels: • Companies should think in terms of categorizing their customers into A, B & C (Pareto‟s law) to decide different levels of service. • Category A customers, who contribute the maximum to the company volumes & revenue will obviously get special treatment. An automobile company takes extra care of the services of this category who may contribute maximum to the sales of its trucks.
  8. 8. Cont… • B category are the next set of customers who contribute regularly but in moderate levels to the business. They get second priority in service but are important as they have potential to become “A category.” • C category customers are low contributors and may not even be regular. They can be handled as part of the routine marketing plans.
  9. 9. 2. Setting distribution objectives • Apart from the firm‟s decision on the service levels to be provided, the customers also have certain expectations from the company and its channel partners. • E.g. retailers selling HUL Products, the distribution objectives to be worked out in this case will be to take care that the retailers & distributors should hold minimum stock, they should never run out of stock, the desired levels of customer service should meet their expectations etc.
  10. 10. 3. Set of activities • Periodic (normally monthly) sales forecasts by geography. • Arranging for dispatch of the products from the plants or C& FAs to a point closest to the market normally the distributor‟s point. • Developing beat plans for market coverage, service engineers. • Market visits to sell the product. • Collection of sales proceeds. • Carrying out promotional activities. • Calling regularly on “A category” customers to build long term relationships.
  11. 11. 4. The distribution organization • Who will do to what extent of in-company support (own sales team) and outsourcing (use of channel partners) is the big question. • The planning of inventory, arranging for dispatches etc. are done by the company personnel. • „ Affordability ‟ is an important factor as far as the selection of the channel partners are concerned. Own sales team means high fixed costs whereas a bigger outsourced network may mean higher variable costs if the volume goes up.
  12. 12. Cont… • Selecting of the channel partners including C&FAs and distributors, stockists or agents establishes that the channel cannot be easily and frequently changed. • Clear objectives for each channel partners should be set & system to measure the performance of these partners should be there.
  13. 13. 5. Policy & procedures • It is expected that the company sales personnel & channel partners understand what is expected of them and discharge their roles & responsibilities faithfully. • Hence companies clearly define policy and guidelines. Normally this is in the form of Operation Manuals which are in the custody of sales people. • This manual is capable of answering any query on procedure which sales people or channel partner may have in any given situation.
  14. 14. Policy & procedures Apart from routine procedures, guidelines are also required for: – Complaints from channel partners – System for settling disputes – Any additional payments to the channel members – Coverage of business & service levels to be extended
  15. 15. 6. Key Performance Indicators (KPIs) • Consistent achievements of targets by product groups, territories. • Achievement of market shares & profitability. • Zero complaints from the customers. • No stock returns. • Ability to handle emergencies & sudden rise in demand. • Balanced sales achieved. • Market coverage with ready stocks. • Minimise damages to the product.
  16. 16. 7. Critical Success Factors (CSFs): • Clear, transparent and unambiguous policy & procedure. • Serious commitment to the channel partners. • Fair dealing of the company with all its partners i.e. no biasness. • Clearly defined customer service policy. • Equal distribution in times of shortage of a product. • Compensation to channel partners on special promotional activity should be prompt & not delayed.
  17. 17. Two types of distribution strategy 1.Distribution Scope Strategy : - Establishing the scope of distribution, i.e. the target customers, Choices are: – Exclusive Distribution (one retailer is granted sole rights in serving a given area)eg: Bata, Nike, Mercedes, Gucci bags , Rolex watches. – Intensive Distribution (a product is made available at all possible retail outlets) eg. Toothbrush, toothpaste etc. – Selective Distribution (Between exclusive and intensive distribution there is Selective Distribution, many but not all retail outlets in a given area distribute a product). Eg. Consumer Durables
  18. 18. 2. Multiple Channel Strategy Employing two or more different channels for distribution of goods and services. Multiple-channel distribution is of two basic types: • Complementary (each channel handles a different non-competing product or market segment) Example- VIP Sells through discount stores and company's outlet • Competitive (two different and competing channels sell the same product). Example- two different automobile dealer of Bajaj Automobiles.
  19. 19. E-Commerce: Online Distribution The success depends on the characteristics of the consumers in the market in terms of their disposition to e-commerce and surfing habits e.g. • South Korea has the most dynamic Internet surfers in Asia. They spend the least time—28 seconds—on a web page before moving on • Australian surfers were the “stickiest”, clocking one minute per page (Source: March 2001 figures from Nielsen/Net Ratings Global Index) 19
  20. 20. The Future: M-Commerce • Mobile commerce is going to be the next revenue stream in the coming days 20