CHAPTER 11 (Distribution)

Marketing Management by Arun Kumar and N Meenakshi© Vikas Publishing House Pvt. Ltd. 2006

CHAPTER 11DISTRIBUTION


LEARNING OBJECTIVES

• Various functions performed by distribution channel intermediaries

• Types of distribution channels: Consumer, Industrial and Service channels

• Three components of the channel strategy: How to select channels, decide distribution intensity and degree of integration


• Channel management: Issues regarding intermediary selection, training, motivation, evaluation and conflict management

• Hybrid distribution channels to maximize effectiveness and efficiency

• Decisions regarding physical distribution

Learning Objectives (Contd.)


FUNCTIONS OF CHANNEL INTERMEDIARIES

• Reconciling the needs of producers and customers

• Improve efficiency by reducing the number of transactions and creating bulk for transportation

• Improved accessibility

• Providing specialist services


TYPES OF DISTRIBUTION CHANNELS

• Consumer channels

Manufacturer to consumer

Manufacturer to retailer to consumer

Manufacturer to wholesaler to retailer to consumer

Manufacturer to agent to wholesaler to retailer to consumers


• Industrial channels

Manufacturer to industrial customers

Manufacturer to agent to industrial customer

Manufacturer to distributor to industrial customer

Manufacturer to agent to distributor to industrial customers

Types of Distribution Channels (Contd.)


• Service channels

Service provider to consumer or industrial customer

Service provider to agent to consumer or industrial customer

Service provider via internet to consumer or industrial customer

Types of Distribution Channels (Contd.)


CHANNEL STRATEGY

• Channel selection

Marketing factors

Buyers’ expectations

Willingness of channel intermediaries

Profit margins demanded by wholesalers and retailers

Location and geographic concentration of customers


Manufacturer factors

Financial and managerial resources

Mix of products

Independent channel intermediaries versus manufacturer control

Product factors

Competitive factors

Channel Strategy (Contd.)


• Distribution intensity

Intensive distribution

Selective distribution

Exclusive distribution



• Channel integration

Conventional marketing channels

Conventional marketing channels

Channel Ownership



CHANNEL MANAGEMENT

• Selection

Identifying Sources

Developing selection criteria

• Motivation

• Training

• Evaluation


• Managing conflict

Sources of channel conflict

Differences in goals

Differences in desired product lines

Multiple distribution channels

Inadequacies in performances of channel members and

manufacturer

Channel Management (Contd.)


Avoiding and resolving conflict

Developing a partnership approach

Training in conflict handling

Market portioning

Improved performance

Channel ownership

Coercion

Channel Management (Contd.)


HYBRID DISTRIBUTION SYSTEM

• Avoid chaos and maximize efficiency

• Which channel is supposed to serve which customers?

• Which channel does what tasks of the sales function, and for which customers?

• Which channel gets compensated for which customers and for what tasks?


• Each time a channel is added, the existing relationships, responsibilities, and compensation structures among various channel members are altered

• Customers’ reactions to these new relationships and responsibilities are very important

• Confusions and conflicts among various channels should be addressed

Hybrid Distribution System (Contd.)


PHYSICAL DISTRIBUTION

• Focuses on an efficient movement of goods from manufacturers to intermediaries and the consumer

• Provide intermediaries and customers with the right products, in the right quantities, in the right locations, at the right time

• Effective physical distribution saves cost and improves customer service levels


• Concerns the balance between cost reduction and meeting customer service requirements

• Analyze the market in terms of customer service needs and price sensitivity

• There may be possible conflicts between elements of physical distribution itself

Physical Distribution (Contd.)


Elements of the physical distribution system

• Customer service

• Order processing

• Inventory control

• Warehousing

• Transportation mode

• Materials handling

Documents

CHAPTER 11 (Distribution)