Sales & Distribution 12 & 13

8/2/2019 Sales & Distribution 12 & 13

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SALES & DISTRIBUTION

SESSIONS 12 & 13

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DISTRIBUTION & CHANNELS

Distribution Channels Introduction-Types ofchannels & intermediaries

Selecting a channel Channel design , Vertical

& Horizontal , Channel Evaluation , ChannelProfitability analysis

Managing Key Accounts

Channel Information Systems

Channel Institutions : Retailing , Wholesaling ,Electronic

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Distribution Channels Introduction-

Types of channels & intermediaries

Distribution: Broad range of activitiesconcerned with efficient movement of

finished products from the end of theproduction line to the consumer & in somecases it also includes the movement of raw

materials from the source of supply to thebeginning of the production line

Provides time , place & possession utility

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THE NEED FOR DISTRIBUTION

CHANNELS Cost efficient

Knowledge of local market , local facilities

Core competence

Cons: Loss of control

Exceptions: Industrial , Bata , Eureka Forbes , Medical /Industrial equipment

Internet : Amazon , Dell

Sometimes Combination : Direct & Indirect

Depends on : Nature of products services , customernature , dispersion , Credit requirements , marketcoverage required , competition , size of company

CSD , Government , Institutions

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DISTRIBUTION CHANNELS :

DISCREPANCIES HANDLED

Spatial : Reduce distance : Producerconsumer : Transport , CFA, Distributor ,wholesalers , retailers

Temporal : Speed up meeting consumerrequirements : Kirana store

Break Bulk : Acceptable lot

Assortment : Variety for consume to choosefrom

Financial : Fund activities to reach consumer

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DISTRIBUTION : FUNCTIONS

PERFORMED

Collect customer , competitor information

Storage, physical movement of goods

Place orders

Canvas for sales

Transfer of ownership

Enforce terms & conditions of sale

Finance inventories

Credit to buyers

Trade & consumer promotions

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DISTRIBUTION STRATEGY

Corporate , Marketing strategy

Distribution strategy : Steps

Defining customer service levels

Distribution objectives to achieve these service levels:Hold minimum stocks , but never stock out !

Activities required : DC Objectives

Channel Structure

Policies & Procedures

Stating key performance indicators

Understanding critical success factors : EffectiveDistribution

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ACTIVITIES

Periodic ( Monthly ) Sales forecasts by Geography

Dispatch : PLANT TO C & FA : Inventory levels

Beat Plans for market coverage

Sales people , Service Engineers

Market visits , retailing

Collection of payments

Promotional activities Calling regularly : A category customers : Building

long term relationships

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KEY PERFORMANCE INDICATORS

Consistent achievement of targets by productgroups , periods , territories

Achievement of market shares , profitability

Zero complaints from customers Handle emergencies, spurts in demand

Balanced achievements : No skews !

Market coverage with ready stocks Managing receivables

Minimize product damage

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CRITICAL SUCCESS FACTORS

Transparent , unambiguous policies , procedures

Commitment : Long term

Integrity

Fair dealing , no undue favors

Clear customer service policy

Equitable distribution: Times of shortage

Promotion: Prompt compensation

Distribution : Sales , delivery, service

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TYPES OF DISTRIBUTORS

C & FA : Transportation , storage , braking

bulk. No title

Distributors , Dealers , stockists, agents : Take

title, invest, commission , margin , mark ups .

Credit to customers.

Wholesalers : Main markets. Large number of

companies, products , low margins

Retailers: Highest margin , home delivery

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PROMINENT CHANNEL SYTEMS

VERTICAL MARKETING SYSTEMS

HORIZONTAL MARKETING SYSTEMS

MULTI CHANNEL MARKETING SYSTEMS

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VERTICAL MARKETING SYSTEMS

At variance with conventional marketing

channel system

Integrated system , avoids conflicts

Three types

Corporate VMS :

Successive stages of production & distributionhandled by one entity

Foodworld , shoppers stop, private airlines

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Administered VMS: One entity of certain size &

influence dictates terms to others

HUL , Nestle ,Pepsi Kodak , Coca Cola , Gillette

The clout of competence & success

Contractual VMS: These are convenient

arrangements between channel members when

they get together to obtain economies of scale oruse favorable opportunities to increase their sales

. VALUE ADDED PARTNERSHIPS

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Examples :

Wholesaler sponsored value chains Like Kemp Toys

Retailer cooperatives like Janatha Bazaar , Apna Bazaar:

Economies of scale Manufacturer sponsored Retail Franchises: Car dealers

of Maruti , Hyundai

Manufacturer sponsored wholesaler franchise: Bottlers

of Coke , Pepsi. Concentrate Retail Franchises : Starbucks, Coffee day, McDonalds

& Pizza Hut

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HORIZONTAL MARKETING SYSTEMS

The system operates between two or more

totally unrelated companies , but the

arrangement of working together provides

benefit to both.

ATMS at supermarkets

Caf coffee day outlets at airport

Colgate , HUL offering distribution to rural

areas: non competing products

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MULTI CHANNEL MARKETING

SYSTEMS

Two Or more channels to reach differentsegments

Consumers vs. institutional : CSD

FMCG Phone orders: Distant rural customers

Cost & margins: Vary by channel

ROI rather than markups

Facilities: Vans , salesmen ROI : 25-30% , Industrial: 35-50% , 50- 60% Food

retailers

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MANAGING KEY ACCOUNTS

Pareto principle

Strategic customers

Make or break the company

No democracy ! A , B

Best sales people , service , dedicated team /channel

Partnership Customer requirements

Customers customer

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CHANNEL INFORMATION SYSTEMS

INTRODUCTION

PURPOSE

Helps in market planning : Internal , externalenvironment information

Helps in tapping market opportunities Marketing people alert: Threats from competition

Helps spot trends : Favorable or not

Helps develop action plans for growth Awareness of consumer needs

Better information , better marketing decisions

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A GOOD CIS

An integrated system to handle all regular

data

Useful decision support system

User friendly, user oriented

Convince provider system useful: Provide

information

Cost effective

Fast , reliable

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ELEMENTS OF A CHANNEL

INFORMATION SYSTEM

Marketing Information

Competition tracking

Distributor profiles & database

Primary Sales : Distributor

Secondary Sales =OS + SR - CS

Pricing trends

Promotions history

Promotions evaluation

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WHOLESALING

Two options for FMCGs

Well established free lance wholesalers who

work with dozens of other companies

Operating with distributors , stockists &

agents who have been contracted by the

company to work with it

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WHOLESALERS DELIVER VAUE

Not bothered with location , ambience , orpromotion . Focus: Main market , extendingfavorable prices , and selective credit to theircustomers

Deal with other businessmen , not customers Deal with A SPECIFIC GROUP OF PRODUCTS

Larger trading areas than retailers

Low margins, made up by high volumes Risk reduction : Customer tie up in inventory

reduced ,small customers can also buy on credit

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CLASSIFICATION OF WHOLESALERS

Full Service : Stocking , selling, offering credit, delivery, and any other business assistance provided. Example:Company distributors

Limited Service: Basic services : Cash & Carry , dropshippers, rack jobbers

Rack jobbers, sometimes considered a subcategory ofspecialty-line wholesalers, concentrate on retail stores.They set up and maintain displays and stock them with

goods that are sold on consignment. Retailers dependon rack jobbers for the provision of health and beautyaids, hosiery, books, greeting cards, and magazines.

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Drop shipping is a supply chain managementtechnique in which the retailer does not keepgoods in stock, but instead transfers customer

orders and shipment details to either themanufacturer or a wholesaler, who then shipsthe goods directly to the customer.

Merchant Wholesalers : Independentbusinesses which include distributors , jobbersetc

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Brokers & Agents : Bring buyer & seller

together : Rarely handle goods, commission

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PERFORMANCE MEASURES

Gross margin return on inventory investment

Gross margin per full time equivalent

employee

Electronic retailing : Internet

Retail : Fastest growing industry in India today

Cause of many consumer products successes

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PERFORMANCE MEASURES

Freight & storage costs primary & secondary

Inventory control

History of orders / indents from contracted

channel partners Distribution cost

Distributor ROI

Retailer cards Statutory information & reporting : Sales tax, VAT

Distributor payment record

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RETAILERS

Sell direct to consumers Small order sizes , but many

Managing inventory critical

Critical : Sales personnel, display

Targeted customer mix : Decides elements of marketing mix Consumer selects retailer: Prices , location , merchandise

selection available , sales people , & fairness in dealing

India: Highest number of retail stores in the world

12 MILLION ! Organized retail : 4 to 7 % of total, but growing fast

World wide : US $ 6.6 Trillion

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RETAILING MARKETING STRATEGY

Markets & customers targeted Location

Store Image

Store design aspects Merchandise to be offered

Store personnel : Their role

Promotions to build foot falls , stickiness later

Supplier handling systems including credit &other terms

The terms offered to prospects & customers

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RETAIL LIFE CYCLE

Like product life cycle

INNOVATION: At launch online, value retail

etc.

QUICK GROWTH : Factory Outlets , fixed price

stores

MATURITY : Consolidation : Convenience

stores , fast food, supermarkets

DECLINE : General stores, Catalog Retailers

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OTHER RETAIL THEORIES

Wheel of retailing : Low prices , margins

simplicity

Second stage: higher prices , margins , better

image

Third: Premium image . 4.Gap. New entrant !

Theory of natural selection : Evolution of retail

store influenced by environment : Economic ,demographic, legal , political and technological.

Those retailers that adapt are more successful

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Documents

Sales & Distribution 12 & 13