Distribution Lec 4

7/31/2019 Distribution Lec 4

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Physical Distribution


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Criteria for selecting Channel

members.

Nature of the product

Extent of market coverage

The speed of demand Company policies

Existing distribution pattern & competition

Availability of suitable persons in the area. Reputation & business standing


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criteria for selecting Channel

members.

Financial capacity

Marketing skill

Experience Capability


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Channel Dynamics

Vertical Marketing system

In a Conventional marketing channel both

producer and channel members are

independent of each other.

In VMS producer and channel members

are unified.


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Corporate system.

It combines successive stages of

production and distribution under single

ownership.

Eg :- A bakery like Monginis & Merwaan

produces & dustributes own bakery items.

Companies having stores at factory gates

like Raymonds,Century & Pidilite.


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Administered System :-

It coordinates successive stages of

Production & distribution not through

common ownership but through size &

power of brands.

Eg;_ Colgate & Pepsi & Coke get unusual

cooperation from channel members wrt

shelf space.


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Contractual :-

The channel members enter into informal

contract with retailers to use common

name.to provide common or same

facilities etc to prevent competition within

the same channel.


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Horizontal marketing system

Readiness of two or more non related

companies to put together resources or

programs to exploit an emerging

marketing opportunity.


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Multichannel Marketing System

When a single company uses two or more

marketing channel to reach one or more

marketing segments.


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Channel Conflicts

Vertical Channel Conflict:-

Conflict between company and dealer

about type of service pattern, pricing and

advertising. Eg Coco cola's partner Parle

marketing own brand.


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Horizontal Channel conflict

Conflict between members at the same

channel level within the channel.eg one

dealer of Samsung offering discount of

1200/- while another dealer is offering Rs800/-.


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Multichannel conflicts

Manufacturer establishes two or more

channels that compete with each other in

selling to the same market.


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Causes of channel conflicts

Goal incompatibility

Unclear role

Difference in perception Great dependence


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Managing channel conflict

Super ordinate goals

Exchange of goals

Treatment Third persons


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Distribution equity

What are distribution costs ?

Cost of reaching markets

Cost of servicing them Cost of shelf space

Cost of merchandising


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Why?

Why did coco cola purchase Parle brands

at Rs 120 crores?

Why did Heinz purchase Glaxo at Rs 210

crores?

Why did BBLIL capture Cadbury's ice

creams Dollops & Kwality at Rs 75 crores?


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Answer

To create Distribution equity

If Brand equity means brands preference ,distribution equity means preferring own

distribution system.


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Why distribution equity is more

important than brand equity?

In a product & price parity situation , thebrand that sells more is the one thatreaches the highest number of customer.

Out of 5.13 million outlets ,HLL itself owns3 million outlets and hence commandshigh distribution cum brand equity. In Indiawhere climate .life style ,languages differat every 500 km distance ,brand loyalty isnot going to help to tackle above aspects.


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Retail space is growing at slower rate than

number of brands .In last 5 years washing

powder brands have increased by 200

%,packed goods by 100 %, whereas retailspace increased only by 8 %


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Distributors measure performance of

brands on the basis of Turn over per

square feet". Hence only fast moving items

will be stocked.

Hence new product launcher must own his

channels initially.


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How to create Distribution equity?

Use IT to slash wastage at every point. Divert

stocks to where it is required.

Cultivate relationship beyond short term

business interests with retailers as he is yourultimate salesman as you cannot be present.

Provide techno commercial training to retailers.

Own road carriers or hire courier services for

better control over transport and improve

efficiencies.


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How to create Distribution equity?

Go to rural markets which is untouched

and contribute 40 % to national markets.

Use of selling environment as a product

differentiator.

Use of selective & intensive distribution a s

tactic to yield maximum benefits on case

to case basis.


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New channel members

Vending machines

Mail orders


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Vending machines

Mainly used for low value consumer non

durables like softdrinks,nespapers,

cigarette etc.

Normally installed in densely populated

areas like railway stations,cinemas,offices

etc


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Unpopular in India

Cheap labor available for distribution

Public awareness is not adequate

Initial heavy capital expenditure Shortage of coins.


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Vending machines

Advantages:-

Fully automatic

24 hrs shopping is possible Self service

Unhandled merchandise.


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Vending machines

Disadvantages :-

Requires frequent stocking

Frequent breakdowns High pilferage

Merchandise cannot be returned.

Expensive.


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Mail orders

Advantages :-

High selectivity of target customers.

Personalized communication possible, Flexibility in purchase decisions

Measuring effectiveness is much easy.


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Mail orders

Disadvantages :-

High commission to middle men.

Poor after sales by middle men Reluctance of middle men due to lack of

info of track record of product.

Distribution Lec 4

Documents

Transcript of Distribution Lec 4