Distribution channels help companies reach customers by making products available for consumption. They include intermediaries like distributors, wholesalers and retailers. Companies must decide on their distribution intensity, structure their distribution network, and implement policies and procedures to govern channel members. Key performance indicators are used to measure the effectiveness of the distribution strategy and critical success factors like commitment, fairness and customer service are important for the strategy's success.

1. Distribution Management &
Marketing Mix

2. Distribution Channels Defined
•Are sets of interdependent organizations involved
in the process of making a product or service
available for use or consumption
oWhether selling products or services, marketing
channel decisions play a role of strategic importance in
the overall presence and success a company enjoys in
the marketplace.

3. Distribution Channels
•Are intermediaries or middlemen
oExist because producers cannot reach all their
consumers
oMultiply reach and provide efficiency to the marketing
process
oFacilitate smooth flow and create time, place and
possession utilities
oHave the core competence and reach
oProvide contact, experience, specialization and scales of
operation

4. Types of Channels
•Sales: motivates buyers, shares information
between company and its consumers, negotiates
fair bargains for consumers and finances the
transactions
•Delivery channel meant only for physical part of
the distribution
•Service channel – performs after sales service
Channel
members…

5. Listing of Channel Members
•Company own sales team
•C&FAs and CSAs
•Distributors, dealers, stockists, value-added re-sellers
•Agents and brokers
•Franchisees
•Electronic channels
•Wholesalers
•Retailers

6. 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

7. 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

8. 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

9. 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 personalized services to their customers

10. Industrial Products
Producer
Producer
Industrial Distributor
Industrial Customer
Industrial Distributor
Industrial Customer
Agent/middleman
Customers may also direct from company sales force

11. Consumer Products
Producer
ProducerProducer
Customer /
consumer
Retailer
DistributorDistributor
Retailer
Customer/
Consumer
Wholesaler
Customer/
Consumer
Retailer
Retailers may also direct from company sales force

12. Patterns of Distribution
•Determines the intensity of the distribution
•Intensity decides the service level provided
•Types of distribution intensity:
oIntensive
oSelective
oExclusive

13. Distribution Intensity
•Intensive: distribution through every
reasonable outlet available
•Selective: multiple, but not all outlets in
the market – pharma, frozen food
•Exclusive: may be only one outlet in a
market - car dealers

14. 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

15. 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
•Keeps distribution costs lower

16. Exclusive Distribution
•Highly selective choice of outlets – may be
even one outlet in an entire market
•Could include outlets set up by companies
•Producer wants a close watch and control
on the distribution of his products.
Channel
strategy…

17. Distribution Channel Strategy
•Derived from the corporate strategy and the
marketing strategy
•Steps for designing the distribution strategy are:
oDefining customer service levels
oDistribution objectives and steps
oStructure of the network required
oPolicy and procedure to be followed
oKey performance indicators
oCritical success factors

18. Customer Service Levels
•Defined by the nature of the industry, the
products, competition and market shares.
•Affordability also decides the service level
•It should at least match competition.
•Customer expectations have no limit

19. Distribution Objectives
•Influenced by the customer expectations
•Defines the extent of time, place and
possession utility which the customer can
expect out of the channel network
Set of
activities….

20. Set of Activities
•Manner in which the company and its marketing channels
go about achieving the customer service levels
•Some of these steps could be:
o Sales forecasts
o Despatch plans
o Market coverage beat plans
o Journey plans for service engineers
o Collection of sales proceeds
o Carrying out promotional activities
•The company also decides as to who is to perform which
task
Organizatio
n….

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. Policy & Procedure
•Define policy and implementation
guidelines through Operating Manuals
•Policy guidelines include
oCode of conduct for channel members
oSystem for redressal of complaints
oAny additional subsidies etc
oHandling institutional business
oService policy for engineering products
KPIs
….

23. Key Performance Indicators
•For measurement of effectiveness. Some of these
could be:
oConsistent achievement of targets by product groups,
periods and territories
oAchievement of market shares
oAchievement of profitability
oZero complaints from customers
oNo stock returns
oAbility to handle emergencies and sudden spurts in
demand

24. Key Performance Indicators
•For measurement of effectiveness. Some of
these could be:
oBalanced sales achievement during a period –
no period end skews
oMarket coverage with ready stocks
oExcellent management of accounts receivables
oMinimize losses on account of stock-outs
oMinimize damages to products
CSFs

25. Critical Success Factors
•The distribution strategy also needs the support and
encouragement of top management to succeed
•Some of the CSFs could be:
oClear, transparent and unambiguous policy and procedure
oSerious commitment of the channel partners
oFairness in dealings
oClearly defined customer service policy
oHigh level of integrity
oEquitable distribution at times of shortage
oTimely compensation of channel partners

26. 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

27. 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, organization to deliver the
service, measurement of performance and critical
success factors