Distribution Channels NEN Advanced Courses Getting to Market: Commercializing your Idea

Marketing perspective A Co’s channel decisions are linked with every other marketing decision – thus managements must design channels with an eye on tomorrow’s likely selling environment as well as today’s.

Marketing Channel A Marketing Channel is a set of independent organizations involved in the process of making a product or service available for use or consumption.

Marketing channels – two major players -Manufacturers & -End users or consumers Marketing Channels bring them closer to facilitate the exchange process. Both parties engage in search for one another – search process is characterized by uncertainty at both ends Role of Channels

What channel partners can do for you Gather information Develop and disseminate persuasive communications Reach agreement on price and terms Acquire funds to finance inventories Assume risks Provide for storage Provider for buyer’s payment of their bills

Distribution channels Traditional channels – Direct sales, – Retail, – Partners/franchises, – Integrators Co-selling through service providers

Types of Channel Members Carrying & Forwarding Agent (C& FA) Distributor / stockist Wholesalers Dealers or retailers Brokers / agents

Channels for Consumer / Industrial / Service Products Manufacturer Service Co BranchC & FAAgent(s) Distributor Stockist Retailer Consumer FMCG / ConsIndustrial Product Service Sub-agent ConsumerIndl. ConsConsumer Agent(s)Branch Sub Agents Sub Ag. W/S

Distribution channels Problems and opportunities with channels – Account ownership, – Conflict How do you manage channel conflict? – Adoption of superordinate goals – Cooptation – Diplomacy – Mediation – Arbitration

Developing Channel Design Channel design refers to those decisions involving the development of new marketing channels where non existed before, or to the modification of existing channels. Channel design decisions include : -Number of levels to be included in each structure -Type of intermediaries to employ -Number of channel intermediaries at each level -Role of logistics & supply chain

Channel Design & Strategy Design of channels encompasses 2 parameters -Marketing design -Logistics design Marketing design 1.Customer focus -Identification & selection of target market segments -Analysis of customers’ buying behaviour 2. Customer analysis -A micro-level approach to development of specific channel design strategies

Channel Design & Strategy (contd…) 3. Segmentation: -Consumer markets/Industrial markets / B2B markets -Determine the market characteristics as to how consumers in each segment are serviced or can be serviced -Of particular importance to channel design are answers to the questions of where customers buy the product, when they buy & how they buy it. 4. Consumer Buying Behaviour - To assess whether a consumer is a variety seeking consumer or shopping good buyer or brand loyal. - Understanding the above will provide insights into channel design. 5. Industrial Buyer’s Behaviour -Decision making process -Sources of supply – Multiple or single -Nature of demand

Channel Design: Logistics Logistics design would consist of : Location…source of supplies, primary & secondary Inventory levels to be maintained Warehousing, any special needs Order Processing norms Packaging, any special needs Transportation, norms and schedules Compliance with statutory requirements

Framework for designing channel Define target market Assess buyers needs & buying behavior Product featuresDetermine retailing needs Satisfy statutory issues Distribution needs Desired Reach Functions to be performed by the channel Determine feasible alternative(s) PRODUCT Profile

Distribution channels Emerging channels – Marketplaces, – App stores, – Online in general Opportunities/problems of global distribution

Designing Channels: Case Discussion HP consumer products business organization: distributing printers via the internet Chapter 22 from the book "Marketing management - text and cases” by Rajiv Lal

Readings ' Pricing and Market Making on the Internet' - Chapter 27 in from the book "Marketing management - Text and Cases” by Rajiv Lal, John Quelch and Kasturi Rangan, Tata McGraw Hill Publication