Distribution

Travel of a cake of soap purchased by Srikant in a retail outlet Purchase of a bottle of coke Mail order

“A marketing channel is a set of interdependent organisations involved in the process of making a product or service available for use or consumption” –Coughlan and others

Not just one firm. Manfr. w./h, retailers, interdependent. Distribution is a process and not an event Purpose- satisfy the end user.

Pull – advt. SP, brand loyalty, involvement Push – intermediary, Trade SP

The Distribution Function distribution is about getting the product or service to the customer as conveniently as possible; it deals with access and availability intermediariesintermediaries perform many of the distribution functions on behalf of suppliers merchant intermediariesmerchant intermediaries actually take title to physical products that they distribute agentsagents do not ever own the products, but they arrange the transfer of title

Distribution Channels The role of distribution entails: – Arranging for its sale and transfer of title – Promoting the product – Storing the product – Assuming some risk during distribution. – Logistical function - moving Intermediaries often perform these activities for producer or consumer.

Provides market information Interprets consumers’ wants Promotes producers’ products Creates assortments Stores products Negotiates with customers Provides financing Owns products Shares risks Anticipates wants Subdivides large quantities of a product Stores products Transports products Creates assortments Provides financing Makes products readily available Guarantees products Shares risks SALES SPECIALIST FOR PRODUCERS PURCHASING AGENT FOR BUYERS I N T E R M E D I A R Y The Distribution Functions

Channel functions Reduce the number of contacts, reduce costs. More efficient. Alleviating discrepancies –Of quantity. E.g petrol –Of assortment –variety of goods, brands

Regrouping- right quantity and mix –Sorting out. Grading, A, B, seconds –Accumulating. Protection against stockout., price fluctuation, economies of scale. –Allocating. Breaking bulk. Smaller units –Assorting.variety of products Standardising transactions. Quotation, negotiation, payment terms.

Match buyers and sellers. Search function. Providing customer service.

Channel Flows Physical flow – transportation  Title flow- transfer of ownership  Information flow . Communication. Order, catalogue, ads, status, complaints Financial flow. Payment  banks, channel Flow of risks. Loss, liability, obsolescence

ULTIMATE CONSUMERS PRODUCERS OF CONSUMER GOODS Retailers Merchant wholesalers Merchant wholesalers Agents Consumer Channels

BUSINESS USERS PRODUCERS OF BUSINESS GOODS Merchant wholesalers (industrial distributors) Agents, Reps, Agents Merchant wholesalers (industrial distributors) Business Channels

Multiple Distribution Channels some firms will use several distribution channels to reach specific markets or segments dual distribution is used, for example, to reach business and consumer markets, or to carry different groups of products or may be used to reach different segments of the seller’s market; different sizes of buyers or different regions of the country some companies operate their own stores

Channel design decisions Lot size. E.g car, veg oil Waiting and delivery time. Faster. E.g bank Spatial convenience. e.g car service, shoes Product Variety Service back up. Add-on. Credit, installation

Channel Alternatives Types of Intermediaries –Own sales force or distributors –Shakthi, e-choupal, Eureka Forbes, airlines No. of intermediaries –Exclusive, own, franchise, distrib –Selective distribution. –Intensive distribution. FMCG

Costs & value added Internet Telemarketing Retail outlet Distrib VAR Sales force

Evaluating Cost –Salaries, expenses, discounts, logistics Control and adaptivity Customer

Motivating channel partners Channel power : ability to alter behaviour.

Types of power Reward power – benefit Coercive power- punishment Expert power – specialised knowledge Legitimate Power – law, norms Referrent power – identify with reference.

Influence strategy Use of power Promise strategy – reward Threat strategy Legalistic strategy Request strategy Information exchange strategy Recommendation strategy

Channel conflicts Goal conflicts – diff. in member’s goals Domain conflicts – diff over what action or responsibility is expected Perceptual conflict – diff. over how market is percieved.

Resolution of conflicts Use power of the channel to reduce the conflict –E.g. distributor not paying enough attention to your products. – give higher discount or create brand equity to ‘pull’

New trends VMS- Vertical Marketing Systems –One channel captain owns or franchises others. –Economies of scale, bargaining power, elimination duplication, customising.

Corporate VMS. Under single entity. E.g petrol Administered VMS. Co-ordinates through power. E.g car dealers, Contractual VMS. – coop of wholesalers, retailers, franchisees

Horizontal MS. 2 unrelated co’s alliance. E.g PO,

Multichannel Marketing system More channels for better coverage, lower unit cost, customisation Channel conflict Clearly define roles.

Roles – lead generation, screening, presales, negotiation, closing sales, post service, account mgt. Channels – internet, direct mail, telemarketing, wholesale, retail, ‘VARs