1. Distribution management & Marketing Mix
Chapter :- 8
Distribution management & Marketing Mix

2. Meaning and definition
Distribution refers to bringing the product to the market and giving it to the final consumer According to Mossmam & Norton “distribution is the operation which creates time,place & form utility through the movement of goods and persons from one place to another”.

3. Distribution Channels Defined
Are sets of interdependent organizations involved in the process of making a product or service available for use or consumption

4. 7 Rs
Right product in Right quantity in Right condition at the Right time and Right place for the Right customer at Right cost

5. Distribution Channels
Are intermediaries or middlemen
Exist because producers cannot reach all their consumers
Multiply reach and provide efficiency to the marketing process
Facilitate smooth flow and create time, place and possession utilities
Have the core competence and reach
Provide contact, experience, specialisation and scales of operation

6. The Marketing Mix Product Place Price Promotion
Distribution channels help in the ‘place’ aspect of the marketing mix
Distribution provides place, time and possession utility to the consumer

7. Example Consumer wants to buy a tube of toothpaste
Made available at a retail outlet close to her residence – place
Made available at 8 pm on a Tuesday evening when she wants it – time
She can pay for the toothpaste and take it away – possession
The company distribution function has made all this possible.
The situation would be similar if a customer wants to buy a refrigerator or medicines or even an electric motor

8. Discrepancies and Distribution channel
Spatial discrepancy :- the difference between the location of a producer and the location of widely scattered markets
Temporal discrepancy:- a situation that occurs when a product is produced but a customer is not ready to buy it
Need for breaking the bulk
Need for assortment

9. Distribution Channel Strategy
Derived from the corporate strategy and the marketing strategy
Steps for designing the distribution strategy are:
Defining customer service levels
Distribution objectives and steps
Set of activities
The distribution organization
Key performance indicators
Critical success factors

10. 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

11. 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….

12. 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:
Sales forecasts
Despatch plans
Market coverage beat plans
Journey plans for service engineers
Collection of sales proceeds
Carrying out promotional activities
The company also decides as to who is to perform which task
Organization….

13. 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..

14. Policy & Procedure
Define policy and implementation guidelines through Operating Manuals
Policy guidelines include
Code of conduct for channel members
System for redressal of complaints
Any additional subsidies etc
Handling institutional business
Service policy for engineering products
KPIs….

15. Key Performance Indicators
For measurement of effectiveness. Some of these could be:
Consistent achievement of targets by product groups, periods and territories
Achievement of market shares
Achievement of profitability
Zero complaints from customers
No stock returns
Ability to handle emergencies and sudden spurts in demand

16. Key Performance Indicators
For measurement of effectiveness. Some of these could be:
Balanced sales achievement during a period – no period end skews
Market coverage with ready stocks
Excellent management of accounts receivables
Minimize losses on account of stock-outs
Minimize damages to products
CSFs…

17. Critical Success Factors
The distribution strategy also needs the support and encouragement of top management to succeed
Some of the CSFs could be:
Clear, transparent and unambiguous policy and procedure
Serious commitment of the channel partners
Fairness in dealings
Clearly defined customer service policy
High level of integrity
Equitable distribution at times of shortage
Timely compensation of channel partners

18. Listing of Channel Members
C&FAs and CSAs
Distributors, dealers, stockists, value-added re- sellers
Agents and brokers
Franchisees
Electronic channels
Wholesalers
Retailers

19. 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

20. 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

21. 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

22. 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 personalised services to their customers

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

24. Consumer Products Retailers may also direct from company sales force
Producer
Producer
Producer
Distributor
Distributor
Wholesaler
Retailer
Retailer
Retailer
Customer /
consumer
Customer/
Consumer
Customer/
Consumer

25. Patterns of Distribution
Determines the intensity of the distribution
Intensity decides the service level provided
Types of distribution intensity:
Intensive
Selective
Exclusive

26. Intensive distribution:- a form of distribution aimed at having a product available in every outlet where target customers might want to buy it.
Selective distribution:- a form of distribution achieved by screening dealers to eliminate all but a few in any single area
exclusive distribution:- a form of distribution that establishes one or a few dealers within a given area

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

28. 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

29. 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
Tanishque jewelry
Keeps distribution costs lower

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