Unit 4 Distribution Management
Unit 4 Distribution Management
Unit 4 Distribution Management
DISTRIBUTION MANAGEMENT
Marketing Channels can be defined as the set of people, activities, and the
intermediary organizations that play a crucial role in transferring the ownership of
the goods from the point of production or manufacturing to the point of consumption.
Basically, they are the various channels or platforms through which
the products reach to the consumers or the end-users. They are also known as
the distribution channels.
1) Manufacturer to Consumer
This is one of the most simple and effortless types of the Marketing Channels as the
goods produced reach to the consumers directly from the house of manufacturer. It
works as cost-effective and profitable for both the parties involved as there is no
further involvement of the middlemen such as retailer, wholesalers, and agents that
charge their commission increasing the overall price of the products.
This type of Marketing Channels is one of the highly adopted and preferred channels
in the industry. The manufacturers who specialize in the manufacturing of the
shopping goods such as shoes, furniture, and fashion apparels amongst others opt
for this Marketing Channel.
3) Manufacturer to Wholesaler to Consumer
This category of Marketing Channel is usually adopted by the consumers who are
looking out for bulk purchases of the specific items and procuring the same from the
wholesaler works out quite easy and cost effective for them owing to the economies
of scale factor plus no involvement of other intermediaries. The wholesaler reduces
the cost to the consumer such as service cost or sales force cost making the items
available to the consumer at cheaper rates.
Example of this marketing channel : Shopping from the factory outlets of the
brand or warehouse clubs where the consumer has to sign for the membership with
the wholesaler in order to buy the products at cheaper rates.
This type of Marketing Channel involves more than one middlemen or intermediary
making the goods reach to the consumers. The agents or the middlemen helps and
assists with the sale of the goods and charge their commission from the
manufacturer. They are quite helpful when the goods need to reach the consumers
in a short span of time.
Distribution channels provide time, place, and ownership utility. They make the
product available when, where, and in which quantities the customer wants. But
other than these transactional functions, marketing channels are also
responsible to carry out the following functions:
Channel Planning:
Channel planning has grown both more complex and more important, presenting a
tricky challenge for marketers who need to reach the right people, at the right time.
The secret to effective channel planning lies in mapping out the consumer
journey and responding to the touchpoints that convert. Optimizing your channel
planning in this way starts with some simple steps.
To create a plan that delivers, you need to understand how, when and where your
customers are likely to interact with your brand.
Your persona research will play a key role in telling you which channels to
target.This means identifying the channels your target consumers are most likely to
use – from TV, brand websites and apps to social media platforms and review sites.
Now you have the data to define your customers in as much detail as possible, you
can develop the best content for the right medium.
A channel design starts with analysing the market requirements. Basis the
customer, product category, and marketing environment, the organisation has to
follow the matching channel strategy – Exclusive distribution, Intensive distribution
and Selective distribution. The availability of the intermediary also influences the
selection of the channel member. The intermediary that the organisation wishes to
sell through should be available in the target market. In their absence, the
organisation will have to opt for an intermediary that is available to them. Or the
organisation will have to invest to open their own stores, opt for direct selling, etc.
Sometimes the intermediary is unwilling to distribute the organisations products. In
such cases the firm should be ready to involve channel alternatives.
Evaluation :
Channel selection:
An organisation can select one or more channel alternatives. The firm can do
market testing and experiment with the channel alternatives. Two factors that affect
the final selection are – the reach of the intermediaries to the customers in the target
market and economic viability in the channel.
The first priority for any company is choosing the right channel members. As the
business is dependent upon the marketing channel partners, it becomes crucial for
the success of any company to select the best channel partner. All the companies
whether it’s a product manufacturing company like Colgate or Onida or a service
company like IMS or Career Launcher, needs a good channel partner to succeed.
Once the channel partner is selected, they need to be trained as they are the face of
the company. All the companies have intensive training programmes for its dealers
to tell them about their sales and service capabilities, product knowledge, expected
service quality and operational procedures to follow. For example, LG Electronics
India regularly trains its sub-dealers, direct dealers and service franchisees.
If the performance of the channel member is satisfactory, then it is rewarded for its
efforts and if the performance falls below mark, it is advised to make necessary
changes in the processes. In case of channel members, where the problems are
beyond rectification, they are removed and the company appoints a new channel
member.
With the changing times, the company needs to modify its channel arrangements.
The product line can expand, the consumers buying pattern can change, the new
competition can come up, a new distribution channel can emerge or the demand of
the product can change by getting into the later stages of product life cycle. All these
factors can lead the company to change its channel arrangement.
Channel Intermediaries:
Importance of Wholesaling:
From cost prospective, wholesalers have a great impact on prices. Operating costs
for wholesalers include inventory charges, sales force salaries, rent charges and
costs of advertising etc. Wholesaler costs and profits depend on inventory turnover,
money value of products the functions performed and efficiency etc.
Functions of Wholesaling:
(i) Enable manufacturers and service providers to distribute locally without making
customer contacts.
iii) Provide marketing and research supports for manufacturers, service providers
(iv) Purchase large quantities, thus reducing total physical distribution costs.
(vi) Provide credit facilities for retail and institutional customers, whenever required.
(viii) Take risks by being responsible for theft, deterioration and obsolescence of
inventory. Wholesalers who take title of ownership of products and services usually
In this case a firm has its own sales offices and wholesale activities are done at
these offices. Sales office may be conveniently located in a market place. This type
marketing and/or customers who may be few in number and each is a key account.
Merchant wholesalers buy, take title and take possession of products for further
resale. Merchant wholesalers may perform full range distribution tasks. They provide
credit, store and deliver products, after merchandising and promotion assistance,
have a personal sales force, offer research and training support and provide all
and grocery items etc. Merchant wholesalers demand higher compensation for
They perform various wholesale tasks, but do not take title of products, unlike
Such agents and brokers may work for many firms and carry non competitive and
and pricing. This class is prevalent in steel, cement, automobile and white goods.
Voltas Ltd. works as wholesale agent for many white goods manufacturers.
RETAILING:
Retail involves the sale of merchandise from a single point of purchase directly to a
customer who intends to use that product. The single point of purchase could be a
brick-and-mortar retail store, an Internet shopping website, a catalog, or even a
mobile phone.
The retail transaction is at the end of the chain. Manufacturers sell large quantities of
products to retailers, and retailers attempt to sell those same quantities of products
to consumers.
The retail supply chain consists of manufacturers, wholesalers, retailers, and the
consumer (end user). The wholesaler is directly connected to the manufacturer,
while the retailer is connected to the wholesaler, and not to the manufacturer.
Types of Retailers:
Here are some examples of the different types of retail stores where consumers can
purchase products for immediate use or consumption.