Sales & Distribution Management Module 3.pdf

Copyright © 2023 Jayanti Rajdevendra Pande. All rights reserved.
RASHTRASANT TUKDOJI MAHARAJ NAGPUR UNIVERSITY
MBA
SEMESTER: 3
SPECIALIZATION
MARKETING
SUBJECT
SALES & DISTRIBUTION MANAGEMENT
MODULE NO : 3
ASPECTS OF DISTRIBUTION MANAGEMENT
- Jayanti R Pande
DGICM College, Nagpur

Q1. What is Distribution Management & Need for Distribution Management?
DISTRIBUTION MANAGEMENT
• Distribution management is a critical facet of business operations responsible for the efficient movement of products from
manufacturers to end consumers or retailers.
• It involves planning, implementing, and controlling various activities, such as inventory management, transportation, order
processing, and warehousing, to ensure products reach their intended destinations in a timely and cost-effective manner.
• Distribution management plays a pivotal role in enhancing a company's competitiveness, customer satisfaction, and overall
success by addressing these critical needs and ensuring the smooth flow of products through the supply chain.
NEEDS FOR DISTRIBUTION MANAGEMENT
1. Cost Control: The need to manage escalating distribution costs, including transportation, warehousing, and labour expenses,
to ensure profitability.
2. Management Coordination: To address conflicts and ensure alignment among various departments involved in distribution,
such as logistics, sales, and marketing.
3. Cost Reduction Opportunities: Identifying and capitalizing on opportunities to minimize distribution-related costs through
optimization and efficiency measures.
4. Marketing Support: Assisting marketing efforts by ensuring products are available when and where customers demand them,
contributing to brand success.
5. Time Efficiency: Meeting time constraints by optimizing delivery schedules and reducing lead times to fulfil customer orders
promptly.

Q2. How to add value to the distribution management?
ADDING VALUE TO DISTRIBUTION MANAGEMENT
Distribution management aims to enhance the overall value of products or services as they move through the supply chain. This
value addition can be categorized into three key utilities. By focusing on these utilities, distribution management can add
substantial value to products or services, resulting in higher customer satisfaction, increased sales, and improved
competitiveness in the market
1 Time Utility:
• Inventory Management: Efficiently manage inventory levels to ensure products are available when customers need them,
reducing lead times.
• Timely Delivery: Implement precise delivery schedules to meet customer demands promptly.
• Demand Forecasting: Utilize data and analytics to predict future demand, allowing for proactive inventory management.
2 Place Utility:
• Optimal Location Selection: Strategically position distribution centers and warehouses to minimize transportation costs and
deliver products closer to consumers.
• Transportation Efficiency: Use efficient transportation methods and routes to reduce the time and cost of delivering products
to various locations.
• Market Expansion: Extend distribution networks to reach new geographic markets, increasing accessibility and customer
reach.
3 Possession Utility:
• Customer Experience: Provide exceptional customer service throughout the distribution process, including easy ordering,
hassle-free returns, and responsive support.
• Customization: Offer product customization options, allowing customers to tailor products to their preferences.
• Financing Solutions: Provide financing or credit options to make products more accessible to customers.

Q3. What do you mean by physical distribution decisions? Give the components of physical distribution.
PHYSICAL DISTRIBUTION DECISIONS: Physical distribution decisions involve strategic choices and actions to efficiently manage
the movement of products from production facilities to end-users or retailers. These decisions are crucial for ensuring that
products are delivered reliably, timely, and cost-effectively.
KEY COMPONENTS OF PHYSICAL DISTRIBUTION
1. Order Fulfilment: Managing the entire order processing cycle, from order receipt to order shipment, to ensure accuracy and
timeliness in fulfilling customer requests.
2. Inventory Management: Efficiently handling and controlling inventory levels to strike a balance between meeting customer
demand and minimizing holding costs.
3. Material Handling: Utilizing appropriate equipment and techniques for the safe and efficient movement of products within
warehouses and distribution centres.
4. Warehousing Strategies: Designing and managing warehousing facilities to optimize storage space, improve product
accessibility, and facilitate efficient order picking and packing.
5. Transportation Planning: Selecting the most suitable transportation methods, routes, and carriers to minimize shipping
costs and delivery times.
6. Customer Service Excellence: Ensuring top-notch customer service throughout the distribution process, which includes
responsive communication, accurate order tracking, and efficient issue resolution.
These components collectively form the core of physical distribution decisions, enabling businesses to meet customer demands,
reduce operational costs, and gain a competitive edge in the market.

Q4. Mention the patterns of physical distribution & also list the importance of physical distribution decision.
PATTERNS OF PHYSICAL DISTRIBUTION
1 Intensive Distribution: Intensive distribution is a strategy where a company aims to make its products available in as many outlets as
possible, ensuring widespread access for consumers. It's commonly used for fast-moving consumer goods.
Example: Soft drink giants like Coca-Cola and Pepsi utilize intensive distribution, making their beverages accessible in convenience
stores, supermarkets, restaurants, and vending machines worldwide.
2 Selective Distribution: Selective distribution involves a company choosing to distribute its products through a limited number of
carefully chosen outlets, often those that meet specific criteria or offer the desired customer experience. This strategy is typical for
products requiring special handling or a specific brand image.
Example: Apple employs selective distribution for its premium products like the iPhone and MacBook, selecting authorized retailers
that provide a high-quality shopping experience and align with Apple's brand values.
3 Exclusive Distribution: Exclusive distribution is a strategy where a company grants exclusive rights to specific retailers or distributors
to sell its products. This approach is common in the luxury and high-end product market to maintain exclusivity and control.
Example: Luxury watchmaker Rolex practices exclusive distribution, partnering with a select few authorized dealers, often only one or
two per major city, to maintain a sense of rarity and prestige around its timepieces.
IMPORTANCE OF PHYSICAL DISTRIBUTION DECISIONS
 Inventory Management: Efficient decisions optimize working capital by avoiding overstocking or stockouts.
 Cost Reduction: Well-planned strategies lower transportation, warehousing, and fulfillment costs, boosting profit margins.
 Customer Satisfaction: Proper distribution ensures timely deliveries and order accuracy, enhancing loyalty.
 Sales Growth: Effective decisions expand market reach, increasing sales volume.
 Market Expansion: Facilitate entry into new markets, tapping untapped customer bases.
 Brand Control: The right distribution reinforces brand image and control over product presentation.

Q5. Who are the different participants in physical distribution process?
PARTICIPANTS IN THE PHYSICAL DISTRIBUTION PROCESS
1. Sole Selling Agent: A sole selling agent is an individual or entity authorized to exclusively represent and sell a
manufacturer's products in a particular region or market. They play a key role in establishing and maintaining a market
presence.
2. Wholesalers: Wholesalers are intermediaries that purchase goods in bulk from manufacturers or distributors and then
distribute them to retailers or other businesses. They often serve as a link between manufacturers and retailers, providing
storage, and logistics services.
3. Retailers: Retailers are the businesses that sell products directly to consumers. They play a vital role in the distribution
process by making products available to end-users through physical stores, e-commerce websites, or other sales channels.
4. Merchants: Merchants can refer to any business entity involved in the buying and selling of products. They can include
wholesalers, retailers, and e-commerce platforms that facilitate the exchange of goods between producers and
consumers.
5. C&F Agents (Clearing and Forwarding Agents): C&F agents are responsible for the physical movement and storage of goods,
often acting as intermediaries between manufacturers and distributors. They handle tasks such as transportation,
warehousing, and order processing.
6. Semi-Wholesalers: Semi-wholesalers are intermediary businesses that operate between traditional wholesalers and
retailers. They purchase goods in larger quantities but may not provide the same level of services as wholesalers.
7. Value Added Resellers (VARs): VARs are businesses that enhance or customize products before selling them to end
customers. They often add value by bundling products with services, software, or other complementary offerings.

Q6. Describe distribution channels. What factors affect the choice of channels?
DISTRIBUTION CHANNELS: Distribution channels refer to the pathways or routes through which products or services move from
producers or manufacturers to end-users or consumers. These channels serve as critical intermediaries in the marketing and distribution
of goods. Distribution channels can vary widely, encompassing direct sales to consumers, selling through intermediaries like wholesalers
and retailers, or employing online marketplaces and e-commerce platforms.
FACTORS AFFECTING THE CHOICE OF DISTRIBUTION CHANNELS:
1. Product Characteristics: The nature of the product, including its size, weight, perishability, and technical complexity, can influence the choice of
distribution channel. For instance, complex technical products may require direct sales and customer support, while non-perishable goods may
be suited for traditional retail channels.
2. Target Market and Customer Preferences: Understanding the preferences and buying behaviors of the target market is crucial. Factors like
geographic location, demographics, and shopping habits can guide channel selection. Online channels may be preferred by tech-savvy
customers, while traditional retail stores may suit others.
3. Market Reach and Coverage: The extent of market coverage required can dictate channel choices. Broad market reach may necessitate multiple
distribution channels, while niche markets might benefit from a more focused approach.
4. Competition and Industry Norms: Competitive dynamics within the industry can influence channel decisions. Examining how competitors
distribute similar products can provide insights into industry norms and best practices.
5. Costs and Resources: The availability of financial resources and infrastructure can impact channel choices. For example, setting up and
maintaining an e-commerce platform may require substantial upfront investment, while leveraging existing retail networks may be more cost-
effective.
6. Regulatory and Legal Considerations: Compliance with regulations and laws governing distribution, such as trade restrictions or product safety
standards, can influence channel selection. Certain products may have specific distribution requirements.
7. Channel Partners' Capabilities: Assessing the capabilities of potential channel partners, such as wholesalers or distributors, is essential. Their
expertise, reach, and commitment to your product can affect channel effectiveness.
8. Technology and Market Trends: Keeping abreast of technological advancements and emerging market trends can help identify new distribution
opportunities. For example, the rise of e-commerce and online marketplaces has created new channels for many businesses.

Q7. Mention the nature & function of marketing channels.
NATURE OF MARKETING CHANNELS
1. Supply-Demand Linkage: Marketing channels serve as vital connectors between producers and consumers, ensuring that products
and services flow from where they are produced or sourced to where they are needed in the market.
2. Tool of Marketing: Marketing channels are a core component of the marketing mix. They are strategic tools that businesses use to
distribute their offerings effectively, alongside product, price, and promotion strategies.
3. Interdependent Relationships: Marketing channels often involve complex networks of interdependent relationships among various
intermediaries, such as wholesalers, retailers, and distributors, all working together to facilitate product distribution.
4. Market Access: Marketing channels provide businesses with access to a wider market than they might reach on their own. They help
overcome geographic and logistical barriers, expanding the reach of products and services.
5. Value Creation: Marketing channels add value to products and services by optimizing the flow of goods, providing convenience to
consumers, and reducing inefficiencies in the distribution process. They enhance the overall customer experience and satisfaction.
FUNCTIONS OF MARKETING CHANNELS:
1. Information Provider: Marketing channels collect, analyze, and disseminate market information, including consumer preferences,
trends, and competitor activities. This data helps businesses make informed decisions.
2. Matching Buyers and Sellers: Marketing channels facilitate the efficient matching of buyers' needs and preferences with the products
or services offered by sellers, ensuring a smooth exchange process.
3. Time and Place Utility: Marketing channels create time and place utility by making products available when and where customers
need them. This enhances convenience and customer satisfaction.
4. Price Stability: Marketing channels play a role in price stability by moderating price fluctuations. They help balance supply and
demand, reducing extreme price volatility.
5. Product Assortment: Marketing channels offer a variety of products or services to consumers by aggregating goods from multiple
producers or sources. This provides consumers with more choices and enhances market competitiveness.

1.Conventional Marketing Channels 2.Unconventional Marketing Channels
C Multichannel or Hybrid
A Direct Channels
1 Selling at Manufacturer's Plant
2 Door-to-Door Selling
3 Sale by Mail
4 Multiple Shops
B Indirect Channels
1 Wholesale
2 Retail
1 Mail Order Marketing or Catalogue
Marketing
2 E-Marketing or Online Marketing
3 Merchandising Format at the Point of
Consumption
4 Third-Party Influencer Formats
5 Television Home Shopping
6 Telemarketing
7 Direct Response Marketing
8 Database Marketing
Q8. Explain the different forms of channels in detail.
DIFFERENT FORMS OF CHANNELS

1. Conventional Marketing Channels:
A. Direct Channels: In direct marketing, a company sells its products directly to customers without intermediaries. This can include
selling at the company's own store, door-to-door sales, mail-order catalogues, or through company-owned retail locations.
i. Selling at Manufacturer's Plant: In this direct channel, manufacturers sell their products directly to consumers at their production
facility. Customers visit the manufacturing plant to make purchases. This approach is common for specialty products or factory
outlets.
ii. Door-to-Door Selling: Direct sales representatives visit customers' homes or businesses to sell products directly. This channel allows
for personalized demonstrations and sales pitches, often used for products like vacuum cleaners or encyclopaedias.
iii. Sale by Mail: This channel involves selling products through mail-order catalogues. Customers receive catalogues, place orders by
mail, and receive products via postal services. catalogue marketing was popular before the digital era.
iv. Multiple Shops: Manufacturers or retailers operate multiple physical stores, allowing customers to purchase products at various retail
locations. This approach provides convenience and widens market access.
B. Indirect Channels: Indirect marketing involves using intermediaries or middlemen between the company and customers.
Manufacturers sell products to wholesalers, who then sell to retailers, and finally, retailers sell to customers.
i. Wholesale: Manufacturers sell products to wholesalers, who then distribute them to retailers. Wholesalers buy in bulk and offer
warehousing and logistical support to manufacturers.
ii. Retail: Retailers purchase products from manufacturers, wholesalers, or distributors and sell them directly to consumers through
physical stores or e-commerce platforms.
C. Multichannel or Hybrid: Multichannel marketing is when a company uses a mix of both direct and indirect channels to reach
customers. For example, a company might sell products directly to customers online through its website (direct channel) and also sell
products to retailers (indirect channel). This approach allows companies to reach a broader audience and offer more options to
customers. Multichannel or hybrid strategies involve using a combination of direct and indirect channels to reach a broader audience. For
example, a company may sell directly to consumers online while also distributing products through various retailers.

2. Unconventional Marketing Channels:
1. Mail Order Marketing or Catalogue Marketing: Businesses promote products through catalogues sent to customers, who place
orders by mail or online. This channel was prevalent before digital marketing.
2. E-Marketing or Online Marketing: This channel leverages the internet for advertising, promotion, and sales. It includes strategies
such as social media marketing, email marketing, and online advertising.
3. Merchandising Format at the Point of Consumption: This unconventional channel involves product displays or vending
machines at points of high customer traffic, like airports, malls, or public transportation hubs.
4. Third-Party Influencer Formats: Brands collaborate with influencers or celebrities to promote their products through blogs, social
media, or endorsements.
5. Television Home Shopping: Products are promoted and sold through live or recorded television broadcasts, allowing viewers to
call in or purchase online.
6. Telemarketing: Companies use telephone calls to promote and sell products directly to consumers. This channel requires skilled
sales representatives.
7. Direct Response Marketing: This channel encourages immediate customer responses through tactics like infomercials, toll-free
numbers, or web forms.
8. Database Marketing: Businesses use customer data and analytics to tailor marketing messages and offers, delivering personalized
content to target audiences.

Q9. Describe the channels for consumer goods, industrial goods & services.
CHANNELS FOR CONSUMER GOODS
1. Zero Level Channel: In a zero-level channel, also known as direct marketing, the manufacturer sells products directly to consumers.
This often occurs through company-owned stores, e-commerce websites, or direct sales representatives. It eliminates intermediaries.
2. One Level Channel: In a one-level channel, also called a single-level channel, products pass through one intermediary before reaching
consumers. For example, a manufacturer sells to retailers, and retailers sell to consumers.
3. Two Level Channel: In a two-level channel, products move through two intermediaries. Manufacturers sell to wholesalers, who, in
turn, sell to retailers. Retailers then sell to consumers.
4. Three Level Channel: In a three-level channel, products go through three intermediaries. Manufacturers sell to agents or brokers, who
sell to wholesalers. Wholesalers then sell to retailers, and finally, retailers sell to consumers.
CHANNELS FOR INDUSTRIAL GOODS
1. Direct Channels: Industrial goods manufacturers often use direct channels to sell their products directly to business customers. This
approach is common for high-value or complex industrial products.
2. Indirect Channels: Indirect channels involve selling industrial goods through intermediaries like distributors or dealers. Manufacturers
may sell to distributors, who then sell to businesses or end-users.
3. Integrated Multichannel Strategy: Some industrial goods companies employ integrated multichannel strategies. They combine direct
sales efforts with indirect channels to reach a wider range of customers effectively.
CHANNELS FOR SERVICES
1. Agents and Brokers: Services can be distributed through agents or brokers who act as intermediaries, connecting service providers
with customers. Examples include insurance agents and real estate brokers.
2. Franchising: Franchising is a channel often used for service businesses. Franchisors grant franchisees the right to operate under their
brand and business model. This approach allows for rapid expansion.
3. Electronic Channels: Many services are distributed electronically through websites, apps, and online platforms. This includes e-
commerce websites for retail services and digital platforms for content streaming or online education.

Q10. Explain channel options in detail. Also tell how wholesaling is different from retailing.
Channel Options refer to the different ways in which products or goods are distributed from manufacturers or producers to end consumers.
These distribution channels can vary based on the target market, product type, and business model. Two common channel options are
wholesaling and retailing:
Wholesaling
1. Role in the Supply Chain: Wholesaling involves intermediaries that act as a link between manufacturers or producers and retailers or other
businesses. Wholesalers purchase products in bulk from manufacturers and then sell them in smaller quantities to retailers or other
businesses.
2. Order Quantity: Wholesalers typically deal in large quantities and often sell products in bulk. They cater to businesses, retailers, and other
wholesalers.
3. Customer Interaction: Interaction with end consumers is limited in wholesaling. Wholesalers primarily focus on serving other businesses,
handling transactions with a business-to-business (B2B) approach.
4. Pricing and Markup: Wholesalers operate on lower markup percentages per unit, which results in lower prices per unit when products are
bought in bulk. The emphasis is on providing cost-effective solutions.
5. Location and Store Design: Wholesalers are typically not located in high-traffic, consumer-oriented areas. Their facilities are designed for
efficiency and bulk storage.
6. Packaging and Presentation: There's less emphasis on packaging and product presentation in wholesaling, as business customers often
prioritize cost and quantity.
7. Product Variety: Wholesalers offer a wide range of products within specific categories to cater to the diverse needs of businesses and
retailers.
8. Delivery and Logistics: Wholesalers focus on efficient storage and distribution to meet the demands of business clients.
9. Business Hours: Wholesalers typically operate during regular business hours and do not cater to individual consumers seeking retail-style
shopping experiences.
10.Role in the Supply Chain: Wholesalers act as intermediaries between manufacturers or producers and retailers or other businesses.
11.Markup and Pricing: Wholesalers apply lower markup percentages per unit, often with bulk pricing to incentivize bulk purchases

Retailing
1. Role in the Supply Chain: Retailing involves the direct sale of products to individual consumers for personal use. Retailers are
the final link in the distribution chain, and they interact directly with shoppers.
2. Order Quantity: Retailers sell products in smaller quantities suitable for individual consumers, as opposed to bulk quantities.
3. Customer Interaction: Retailers require direct interaction with individual consumers, providing customer service and
addressing their inquiries and needs.
4. Pricing and Markup: Retailers apply higher markup percentages to cover operating costs and enhance the shopping
experience. Prices per unit are generally higher compared to wholesale prices.
5. Location and Store Design: Retailers often locate their stores in high-traffic, consumer-oriented areas, with an emphasis on
attractive store designs and visual merchandising.
6. Packaging and Presentation: Retailers prioritize attractive packaging and product presentation to create an appealing shopping
experience for consumers.
7. Product Variety: Retailers curate product selections based on consumer preferences and market demand, offering a range of
products tailored to their target audience.
8. Delivery and Logistics: Retailers manage inventory, restocking, and in-store logistics to ensure products are readily available to
consumers.
9. Business Hours: Retailers often extend their business hours, including evenings and weekends, to accommodate consumer
shopping patterns and preferences.
10.Role in the Supply Chain: Retailers sell directly to end consumers for personal use.
11.Markup and Pricing: Retailers apply higher markup percentages to cover operating costs and generate profit.

Wholesaling Retailing
• Serves businesses, retailers, and other wholesalers • Serves individual consumers making personal purchases
• Deals in large quantities and often sells products in bulk
• Sells products in smaller quantities to individual
consumers
• Limited interaction with end consumers • Requires direct interaction with individual consumers
• Lower markup percentages per unit but offers lower
prices in bulk
• Applies higher markup percentages to cover operating
costs and enhance the shopping experience
• Typically not located in high-traffic, consumer-oriented
areas
• Often located in consumer-oriented areas with appealing
store designs and visual merchandising
• Emphasizes less on packaging and presentation
• Prioritizes attractive packaging and product presentation
to enhance the shopping experience
• Offers a wide range of products within specific categories
• Curates product selections based on consumer
preferences and market demand
• Focuses on efficient storage and distribution
• Manages inventory, restocking, and in-store logistics to
ensure products are available to consumers
• Typically operates during regular business hours
• Often has extended business hours, including evenings
and weekends
DIFFERENCE BETWEEN WHOLESALING & RETAILING

Q11. What do you mean by integrated market channels? Also explain various types of marketing channel systems.
INTEGRATED MARKETING CHANNELS: Integrated marketing channels, also known as integrated distribution channels, refer to a
strategic approach where various marketing and distribution channels are harmoniously coordinated to optimize the flow of products
or services from manufacturers to consumers. The goal of integrated marketing channels is to provide a seamless and consistent
customer experience across multiple touchpoints while ensuring efficient and cost-effective distribution.
Integrated marketing channels involve the alignment of different distribution methods, such as direct sales, retail, e-commerce, and
more, to work together in a cohesive manner. This approach helps businesses reach a wider customer base and improve customer
satisfaction by delivering a consistent message, branding, and product availability across all channels.
VARIOUS TYPES OF MARKETING CHANNEL SYSTEMS
1 Vertical Marketing System (VMS): A VMS is a channel network where different levels of the distribution channel (manufacturer,
wholesaler, retailer) work closely together as a unified system. They often share information and resources to improve efficiency. Types
of VMS include:
• Corporate VMS: A single ownership group controls different levels of the distribution channel, ensuring tight coordination.
• Contractual VMS: Independent firms at different levels of the channel enter into contracts to collaborate, like franchise agreements.
• Administered VMS: Leadership is assumed by one channel member who has significant power and influence to coordinate others,
often based on brand strength.
2 Horizontal Marketing System (HMS): In an HMS, firms at the same level of the distribution channel, such as multiple manufacturers or
retailers, join forces to achieve common goals. They may share distribution facilities or resources.
This system can be beneficial in achieving economies of scale and enhancing competitive strength.
3 Multichannel Marketing System: A multichannel marketing system involves a business using multiple distribution channels to reach its
target audience. This can include direct sales, e-commerce, traditional retail, and more.The key is to create a seamless customer
experience across all channels, allowing consumers to interact with the brand in a way that suits their preferences.

IMPORTANT DEFINITIONS IN THIS MODULE
1 Physical Distribution Decisions
• Physical Distribution Decisions involve the strategic choices made by businesses regarding the efficient movement of products from
production to the end consumer.
• American Marketing Association – Physical Distribution means moving of finished products from one end of a production line to customers.
2 Marketing channels
• Marketing Channels are the pathways or routes through which products or services flow from producers to consumers, encompassing all the
intermediaries involved.
• American Marketing Association – A Marketing Channel is a structure of intra company organisation, units & intra company agents and
dealers, wholesalers & retailers through which a commodity product or service is marketed.
3 Wholesaling
• Wholesaling is the process of selling products in bulk quantities to other businesses, acting as intermediaries between manufacturers and
retailers.
• Cundiff & Still – The wholesalers buy & resell merchandises to retailers & other merchants & to industrial, institutional & commercial users,
but do not sell in significant amount to ultimate consumers.
4 Retailing
• Retailing refers to the sale of products or services directly to individual consumers for their personal use, often in smaller quantities.
• Cundiff & Still – Retailing consists of all those activities involved in selling directly to ultimate consumers.
5 Integrated Marketing Channels
• The strategic coordination of multiple distribution methods to provide a consistent customer experience across all channels.

Copyright © 2023 Jayanti Rajdevendra Pande.
All rights reserved.
This content may be printed for personal use only. It may not be copied, distributed, or used for any other
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