Distribution Management

1. MARKETING CHANNEL
Distribution Management
7th Semester BBA
By
Mr. Navin Raj Saroj
M.B.A. (Marketing)

2. MARKETING CHANNELS
“A marketing channel is a system of
relationships existing among businesses
that participate in the process of buying and
selling products and services.”

3. MEANING OF CHANNEL OF DISTRIBUTION
Sets of interdependent organizations involved in the process
of making a product or service available for use or
consumption.
Whether 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.
Distribution refers to the steps taken to move and store a
product from the supplier stage to a customer stage i.e. raw
materials and components are moved from suppliers to
manufacturers, whereas finished products are moved from
the manufacturer to the end consumer.

4. ROLE OF CHANNEL OF DISTRIBUTION
Marketing channels are key because they are the means of making goods and
services available to ultimate users. The ultimate role of distribution channel is to
bridge the gap between producers and consumers by adding value to product or
services.
• Four functions of marketing channels:
• Channels facilitate the exchange process by reducing the number
of marketplace contacts necessary to make a sale.
• Distributors adjust for discrepancies in the market’s assortment
of goods and services via sorting, channeling products to meet the
buyer’s and producer’s needs.
• Channel members tend to standardize payment terms, delivery
schedules, prices, purchase lots, and other conditions.
• Channels facilitate searches by both buyers and sellers and bring
them together to complete the exchange process.

5. DISTRIBUTION CHANNEL FUNCTIONS
Channel functions are categories of activities and services that add
value to physical goods as they move from manufacturers to
customers
Ordering
Payments
CommunicationTransfer
Negotiation
FinancingRisk Taking
Physical
Distribution
Information

6. Other Books refers Distribution Channel Functions
as stated:
• Information
• Promotion
• Contact
• Matching
• Negotiation
• Physical distribution
• Financing
• Risk taking

7. Marketing Managers select the most feasible
marketing channels that effectively perform the
business processes and functions needed to correct
the targeted gaps in service outputs.
• Hybrid Channels, Multiple Channels and Shorter
Channels or Direct Channels.
FACTORS INFLUENCING THE SELECTION OF
DISTRIBUTION CHANNEL

8. Channel Selection: Traditional View
Manufacturer
Customer
Retailer
Own Sales Force or Reps.Wholesaler Wholesaler

9. THE DESIGN OF MARKETING CHANNELS
Use intermediaries to
reach target market
type
location
density
number of channel
levels
Contact ultimate buyers
directly
using its own sales
force or distribution
outlets
using the Internet
through a
marketing Web site
or electronic
storefront
vs.INDIRECT DIST. DIRECT DIST.

10. FACTORS INFLUENCING THE SELECTION OF
DISTRIBUTION CHANNEL
This includes product, company, customer, competition factors, PLC stages,
objectives, and desired market coverage intensity and control etc.

11. MARKET FACTORS
Customer Profiles
Consumer or Industrial
Customer
Size of Market
Geographic Location
Market Factors
That Affect
Channel
Choices

12. PRODUCT FACTORS
Product Complexity
Product Price
Product Life Cycle
Product Delicacy
Product Factors
That Affect
Channel
Choices

13. ORGANISATIONAL (PRODUCER) FACTORS
Producer Resources
Number of Product Lines
Desire for Channel Control
Producer Factors
That Affect
Channel
Choices

14. COMPETITIVE FACTORS
No. of Players
Market share
Industry Size
Market Opportunity
COMPETITIVE Factors
That Affect
Channel
Choices

15. ROLE OF MIDDLEMEN
 Searching out buyers and sellers (contacting & Mechandising), matching
goods to the requirements of market.
 Offering goods in the form of assortments or packages.
 Persuading and influencing the prospective buyers to favour a certain
product and its maker (personal selling/sales promotion).
 Implementing pricing policies in such a manner that would be acceptable
to buyers and ensure effective distribution.
 Providing feed back information, marketing intelligence and sales
forecasting services for the regions to their suppliers.
 Looking after the process of distribution where necessary.
 Participating actively in the creation and establishment of a market for a
new product.
 Offering pre and after sale services to consumers.
 Communicating the use of technique of the product to the users.
 Offering credit to retailers and consumers.
 Risk bearing with reference to stock hoarding/transport.

16. FACTORS IN FAVOR OF THE ELIMINATION OF
CHANNEL MEMBERS
 END CUSTOMERS/ CONSUMERS
 PRODUCT CHARACTERISTICS
 COMPANY FACTORS
 COMPETITION
 PRODUCT LIFE CYCLE STAGES

17. FACTORS IN FAVOR OF THE ELIMINATION OF
CHANNEL MEMBERS
Excessive number : Often there are too many middlemen between the manufacturers and
consumers. As every middleman charges some commission or profit, the ultimate consumer
has to pay a very high price for goods. They are social parasites thriving at the cost of the
consumer and their ultimate elimination will reduce prices and burden on consumers.
Superfluous : Most middlemen do not render any useful service in lieu of profit or
commission. They act as only transfer agents and unnecessarily cause delay in the flow of
goods. Their elimination will result in quick and smooth flow of goods.
Limited risk taking : Middlemen do not bear the producers' risk such as loss due to strikes,
lockouts, depression and change in fashions and habits, etc.
Anti-social activities : They take undue advantage of adverse conditions in business. Some
businessmen (middlemen) indulge in anti-social activities like hoarding and adulteration to
earn huge amount to profits.
Limiting consumers' choice : The middlemen often promote products which are inferior in
quality and get high margin of profit. Thus they exploit consumers and limit their choice.

18. SELECTION OF CHANNELS FOR CONSUMER GOODS

19. SELECTION OF CHANNELS FOR INDUSTRIAL
GOODS Cont..

20. SELECTION OF CHANNELS FOR CONSUMER
GOODS AND INDUSTRIAL GOODS Cont…
• A company must determine the distribution coverage intensity a product should get, what number
and kinds of channel in which the product will be sold. Three major coverage strategies include
intensive, selective, and exclusive distribution.
• Intensive Distribution: A company uses all available distribution outlets for making its product
available to consumers.
• Selective Distribution: Companies use selective distribution, which means using more than a few
and less than all available outlets in a market area to distribute products.
• Exclusive Distribution: This type of distribution means using one or very limited few outlets.
CHANNEL TERMS AND CONDITIONS
• The producer stipulates terms and condition and responsibilities of channel partners to develop
better mutual understanding and usually include price policy and trade margins, payment terms, and
territorial demarcation, guarantee and returns policy, and mutual responsibilities etc.

21. REASON FOR CHANGING CHANNEL OF
DISTRIBUTION
 Product characteristics.
 Buyer behaviour and location.
 Severity of competition.
 Cost effectiveness and channel efficiency.
 Degree of desired control on intermediaries.
 Adaptability to dynamic market conditions.
OTHER REASONS
 Explosion of Information Technology and E –commerce,
 Greater difficulty of gaining a sustainable competitive advantage,
 Growing power of distributors, especially retailers in marketing
channels,

22. EXAMPLE: DABUR DISTRIBUTION CHANNEL

23. EXAMPLE: DABUR DISTRIBUTION CHANNEL

24. EXAMPLE: DABUR DISTRIBUTION CHANNEL

25. DISTRIBUTION PROCESS
Manufacturing plant
company ware house
Regional ware house
Regional stockist
Super stockist
Stockist
Distributor
Retailer

26. UNDERSTAND - CHANNEL FLOW

27. CHANNEL DESIGN DECISIONS
Analyzing
consumer
needs
Setting
channel
objectives
Identifying
major
channel
alternatives
Evaluation

28. CHANNEL GAPS
• Geography
• Time - Just-in-time systems, Lead Time
• Knowledge
• Technology
Targeted levels of customer service
What segments to serve
Best channels to use
Minimizing the cost of meeting customer service
requirements

29. TOOLS OF MAINTAINING MARKETING
CHANNEL MEMBERS
• Channel Position
• Channel Offering
• Capacity Building Program

30. • Specify channel capabilities the supplier seeks
• in terms of:
• Technical competence
• Sales force deployment
• Warehouse and delivery capabilities
• Financial stability
• Leadership
SELECTION CRIETERIA FOR MARKETING
CHANNEL MEMBERS

31. SELECTION CRIETERIA FOR MARKETING
CHANNEL MEMBERS

32. CHANNEL POSITION
Selecting
channel
members
Managing
channel
members
Motivating
channel
members
Evaluating
channel
members

33. CHANNEL OFFERING - VMS
Vertical Marketing System (VMS) is a
distribution channel in which producers,
wholesalers, retailers and other functional
middleman operate as an integrated entity to
deliver a specific product or service to the
customer.

34. Vertical Marketing System

35. Horizontal marketing systems (HMS) is most similar
to the concept of symbiotic marketing. Generic
business formations which comprise HMSs include
partnerships, strategic alliances, and joint ventures
between firms operating in different markets. A
HMS is defined as two or more, independent firms
combining their resources to take advantage of a
market opportunity.
CHANNEL OFFERING - HMS

36. HORIZONTAL MARKETING SYSTEMS
• Another channel development is the horizontal marketing
system, in which two or more companies at one level join
together to follow a new marketing opportunity.
• By working together, companies can combine their financial,
production, or marketing resources to accomplish more than any
one company could alone.

37. HORIZONTAL MARKETING SYSTEMS

38. • Multichannel distribution system is a distribution
system in which a single firm sets up two or more
marketing channels to reach one or more
customer segments.
• Multichannel distribution systems offer many
advantages to companies facing large and
complex markets.
CHANNEL OFFERING - MDS

39. Producer driven:
This is the effort of the manufacturer to reach the
product to his consumers. Examples:
Company owned retail outlets – Shikhar Shoes,
Adidas, Nike
Bakery Product of Bhatbhateni
RECENT TRENDS IN MARKETING CHANNELS

40. Service Driven
– Transporters and freight forwarders
– Providers of warehouse space
– 3P Logistics service providers
– Couriers
RECENT TRENDS IN MARKETING CHANNELS

41. Seller Driven
– Existing wholesalers and retailers
– Modern retail formats
– Specialty stores – Shoppers’ Stop
– Discount stores –
RECENT TRENDS IN MARKETING CHANNELS

42. • Multi-level marketing systems – Amway, Modicare, Tupperware, Herbalife
• Co-operative societies
• Telephone kiosks
• TV home shopping
• Catalogue marketing
• Exhibitions, fairs and trade shows
• Data base marketing
RECENT TRENDS IN MARKETING CHANNELS

43. MARKETING CHANNELS - PRACTICES
• SYMBIOTIC MARKETING
• THIRD PARTY (3P) DELIVERY
• MULTI- CHANEL MARKETING SYSTEMS (MMS)
• MULTI- LEVEL MARKETING (MLM)
• CHANNEL REDUCTION AND ELIMINATION
• E-MARKETING AND CHANNEL OF
DISTRIBUTION

44. SYMBIOTIC MARKETING
Symbiotic marketing is “an alliance of resources or
programs between two or more independent
organization design to increase the market potential of
each”.
In other words Symbiotic Marketing can be defined as “
Strategic blending resources by two or more actors,
who may be either direct competitors or operate in
completely distinct markets to achieve superior market
returns not achievable by either party independently”.

45. THIRD PARTY DELIVERY
• Third-party delivery is an independent logistics provider that
performs any or all of the functions required to get a client’s
product to market.
• Companies use third-party logistics providers for several reasons.
First, since getting the product to market is their main focus,
using these providers makes the most sense, as they can often
do it more efficiently and at lower cost.
Second, outsourcing logistics frees a company to focus more
intensely on its core business.
Finally, integrated logistics companies understand increasingly
complex logistics environments.

46. Third-party logistics is the outsourcing of
logistics functions to third-party logistics
providers (3PLs)
• Provide logistics functions more efficiently
• Provide logistics functions at lower cost
• Allow the company to focus on its core
business
• Are more knowledgeable of complex logistics

47. MULTI CHANNEL MARKETING SYSTEMS
• Used in situations where:
– Same product but different market segments
– Unrelated products in same market – detergents and ice creams (HUL)
– Size of buyers varies
– Geographic concentration of potential consumers varies
– Reach is difficult
Multi-channel marketing involves the blending of an electronic marketing channel and a
traditional channel in ways that are mutually reinforcing in attracting, retaining, and
building relationships with customers.

48. • MULTI-CHANNEL DIGITAL
MARKETING is a strategy that
combines various kinds of
direct and indirect marketing
channels to generate favorable
actions or responses from
targeted audiences
• It may look like a complex web
of distinct channels all working
towards a similar end, and that
is connecting with potential
customers
• More Potential Customers
means Better results for
business

49. Excessive number : Often there are too many middlemen between the manufacturers and
consumers. As every middleman charges some commission or profit, the ultimate consumer
has to pay a very high price for goods. They are social practices thriving at the cost of the
consumer and their ultimate elimination will reduce prices and burden on consumers.
Superfluous : Most middlemen do not render any useful service in lieu of profit or
commission. They act as only transfer agents and unnecessarily cause delay in the flow of
goods. Their elimination will result in quick and smooth flow of goods.
Limited risk taking : Middlemen do not bear the producers' risk such as loss due to strikes,
lockouts, depression and change in fashions and habits, etc.
Anti-social activities : They take undue advantage of adverse conditions in business. Some
businessmen (middlemen) indulge in anti-social activities like hoarding and adulteration to
earn huge amount to profits.
Limiting consumers' choice : The middlemen often promote products which are inferior in
quality and get high margin of profit. Thus they exploit consumers and limit their choice.
CHANNEL REDUCTION AND ELIMINATION

50. COKE Distribution Process

51. MULTI – LEVEL MARKETING
People sell at different levels in company hierarchy.
Distributors recruit new people to join the program.
The practice is sometimes called “sharing”
business.

52. • E-business describes the use of electronic means and
platforms to conduct a company’s
• business. E-commerce means that the company or site
transacts or facilitates
• the online selling of products and services. E-commerce
has given rise to
• e-purchasing and e-marketing. E-purchasing means
companies decide to buy goods,
• services, and information from various online suppliers.
E-marketing describes company
• efforts to inform buyers, communicate, promote, and sell
its offerings online.
E-MARKETING AND CHANNEL OF DISTRIBUTION

54. M – Commerce:
Consumers and businesspeople no longer need to
be near a computer to go online. All they need is a
cellular phone or personal digital assistant to
wirelessly connect to the Internet so they can check
the weather, sports scores, and more; send and
receive e-mail messages; and place online orders.
Many see a big future in what is now called m-
commerce (m for mobile).

55. FUTURE OF DIGITAL MARKETING
• Mobile still has plenty of room for penetration, and we
believe that the new “small screen” will continue to
grow
• Wearable's and IoT will enter mainstream: According
to Cisco’s Visual Networking Index report, there will be
more than half a billion wearable devices in use every
day by the 2019. We expect to see ultra-personal, on-
time marketing as a result
• Social media will continue to serve both as a way to
push / pull marketing messages, and as a way to
deliver proactive CRM, but consumers will turn to
instant messaging platforms.