Chap 8 Distribution Management

8/4/2019 Chap 8 Distribution Management

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Distribution management&Marketing Mix


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Distribution refers to bringing the productto the market and giving it to the finalconsumer

According to Mossmam & Nortondistribution is the operation which creates

time,place & form utility through themovement of goods and persons from oneplace to another.


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Are sets of interdependent organizations involvedin the process of making a product or serviceavailable for use or consumption


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Right product inRight quantity inRight condition at the

Right time andRight place for theRight customer at

Right cost


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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


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Product

Place

Price

Promotion Distribution channels help in the place aspect of

the marketing mix

Distribution provides place, time and possessionutilityto the consumer


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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


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Spatial discrepancy:- the difference between thelocation of a producer and the location of widelyscattered markets

Temporal discrepancy:- a situation that occurs whena product is produced but a customer is not ready tobuy it

Need for breaking the bulk

Need for assortment


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Derived from the corporate strategy and themarketing 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


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Defined by the nature of the industry, the products,competition and market shares.

Affordabilityalso decides the service level

It should at least match competition. Customer expectations have no limit


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Influenced by the customer expectations

Defines the extent of time, place and possession utilitywhich the customer can expect out of the channelnetwork

Set of activities.


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Manner in which the company and its marketingchannels go about achieving the customer servicelevels

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 towho is to performwhich task

Organization.


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Extent ofcompany support and outsourcing to bedecided

Budget for the cost of the distribution effort

Select suitable channel partners C&FAs, anddistributors

Setting clear objectives for the partners

Agree on level offinancial commitments by thechannel partners.

Policy and procedure..


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Define policy and implementation guidelines throughOperating Manuals

Policyguidelines include Code ofconduct for channel members

System for redressal ofcomplaints Any additional subsidies etc Handling institutional business Service policyfor engineering products

KPIs.


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For measurement ofeffectiveness. Some of thesecould be: Consistent achievement oftargets by product groups,

periods and territories

Achievement ofmarket shares Achievement ofprofitability Zero complaints from customers No stock returns

Ability to handle emergencies and sudden spurts indemand


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For measurement of effectiveness. Some of these couldbe: Balanced sales achievement during a period no period

end skews

Market coverage with ready stocks Excellent management ofaccounts receivables Minimize losses on account ofstock-outs Minimize damages to products

CSFs


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The distribution strategy also needs the supportand 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 ofintegrity Equitable distribution at times of shortage Timelycompensation of channel partners


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C&FAs and CSAs

Distributors, dealers, stockists, value-added re-

sellersAgents and brokers

Franchisees

Electronic channels

Wholesalers Retailers


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C&FA: carrying and forwarding agent and C&SA:carrying and selling agent both are on contractwith 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 todistributors against indents

Goods belong to the company C&SAalso sells the goods on behalf of the company

but remits proceeds after sale


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Name denotes the extent of re-distributiondone by them

Distributors invest in the products buyproducts 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 companyAgents bring buyer and seller together


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Operate out of the main markets Deal with a number of company products of

their choiceAre 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


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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


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Producer Producer

Industrial Distributor

Industrial Customer

Industrial Distributor

Industrial Customer

Agent/middleman

Customers may also direct from company sales force


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Producer ProducerProducer

Customer /consumer

Retailer

DistributorDistributor

Retailer

Customer/Consumer

Wholesaler

Customer/Consumer

Retailer

Retailers may also direct from company sales force


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Determines the intensityof the distribution Intensity decides the service level provided

Types of distribution intensity: Intensive Selective Exclusive


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Intensive distribution:- a form of distribution aimedat having a product available in every outlet wheretarget customers might want to buy it.

Selective distribution:- a form of distributionachieved by screening dealers to eliminate all but a fewin any single area

exclusive distribution:- a form of distribution that

establishes one or a few dealers within a given area


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Intensive: distribution through every reasonableoutlet available FMCG

Selective: multiple, but not all outlets in the market pharma, frozen food

Exclusive: may be only one outlet in a market - cardealers


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Strategy is to make sure that the product is available inas many outlets as possible

Preferred for consumer, pharmaceutical products andautomobile spares


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A few select outlets will be permitted to keep theproducts

Outlets selected in line with the image the companywants to project

Preferred for high value products Tanishque jewelry

Keeps distribution costs lower


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Highly selective choice of outlets may be even oneoutlet in an entire market

Could include outlets set up bycompanies Titan,Bata

Producer wants a close watch and control on thedistribution of his products.

Channel strategy

Chap 8 Distribution Management

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