Chapter :- 8

1. Chapter :- 8 Distribution management& Marketing Mix

2. Meaning and definition • Distribution refers to bringing the product to the market and giving it to the final consumerAccording to Mossmam & Norton “distribution is the operation which creates time,place & form utility through the movement of goods and persons from one place to another”.

3. Distribution Channels Defined • Are sets of interdependent organizations involved in the process of making a product or service available for use or consumption

4. 7 Rs • Right product in Right quantity in Right condition at the Right time and Right place for the Right customer atRight cost

5. Distribution Channels • 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

6. The Marketing Mix • Product • Place • Price • Promotion • Distribution channels help in the ‘place’ aspect of the marketing mix • Distribution provides place, time and possession utility to the consumer

7. Example • 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

8. Discrepancies and Distribution channel • Spatial discrepancy :- the difference between the location of a producer and the location of widely scattered markets • Temporal discrepancy:- a situation that occurs when a product is produced but a customer is not ready to buy it • Need for breaking the bulk • Need for assortment

9. Distribution Channel Strategy • Derived from the corporate strategy and the marketing 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

10. Customer Service Levels • Defined by the nature of the industry, the products, competition and market shares. • Affordability also decides the service level • It should at least match competition. • Customer expectations have no limit

11. Distribution Objectives • Influenced by the customer expectations • Defines the extent of time, place and possession utility which the customer can expect out of the channel network Set of activities….

12. Set of Activities • Manner in which the company and its marketing channels go about achieving the customer service levels • 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 to who is to perform which task Organization….

13. Distribution Organization • Extent of company support and outsourcing to be decided • Budget for the cost of the distribution effort • Select suitable channel partners – C&FAs, and distributors • Setting clear objectives for the partners • Agree on level of financial commitments by the channel partners. Policy and procedure..

14. Policy & Procedure • Define policy and implementation guidelines through Operating Manuals • Policy guidelines include • Code of conduct for channel members • System for redressal of complaints • Any additional subsidies etc • Handling institutional business • Service policy for engineering products KPIs….

15. Key Performance Indicators • For measurement of effectiveness. Some of these could be: • Consistent achievement of targets by product groups, periods and territories • Achievement of market shares • Achievement of profitability • Zero complaints from customers • No stock returns • Ability to handle emergencies and sudden spurts in demand

16. Key Performance Indicators • For measurement of effectiveness. Some of these could be: • Balanced sales achievement during a period – no period end skews • Market coverage with ready stocks • Excellent management of accounts receivables • Minimize losses on account of stock-outs • Minimize damages to products CSFs…

17. Critical Success Factors • The distribution strategy also needs the support and 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 of integrity • Equitable distribution at times of shortage • Timely compensation of channel partners

18. Listing of Channel Members • C&FAs and CSAs • Distributors, dealers, stockists, value-added re-sellers • Agents and brokers • Franchisees • Electronic channels • Wholesalers • Retailers

19. C&FAs / C&SAs • C&FA: carrying and forwarding agent and C&SA: carrying and selling agent – both are on contract with 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 to distributors against indents • Goods belong to the company • C&SA also sells the goods on behalf of the company but remits proceeds after sale

20. Distributors, Dealers, Stockists, Agents • Name denotes the extent of re-distribution done by them • Distributors invest in the products – buy products 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 company • Agents bring buyer and seller together

21. Wholesalers • Operate out of the main markets • Deal with a number of company products of their choice • Are 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

22. Retailers • 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

23. Industrial Products Customers may also direct from company sales force Producer Producer Agent/middleman Industrial Distributor Industrial Distributor Industrial Customer Industrial Customer

24. Consumer Products Retailers may also direct from company sales force Producer Producer Producer Distributor Distributor Wholesaler Retailer Retailer Retailer Customer / consumer Customer/ Consumer Customer/ Consumer

25. Patterns of Distribution • Determines the intensity of the distribution • Intensity decides the service level provided • Types of distribution intensity: • Intensive • Selective • Exclusive

26. Intensive distribution:- a form of distribution aimed at having a product available in every outlet where target customers might want to buy it. • Selective distribution:- a form of distribution achieved by screening dealers to eliminate all but a few in any single area • exclusive distribution:- a form of distribution that establishes one or a few dealers within a given area

27. Distribution Intensity • Intensive: distribution through every reasonable outlet available – FMCG • Selective: multiple, but not all outlets in the market – pharma, frozen food • Exclusive: may be only one outlet in a market - car dealers

28. Intensive Distribution • Strategy is to make sure that the product is available in as many outlets as possible • Preferred for consumer, pharmaceutical products and automobile spares

29. Selective Distribution • A few select outlets will be permitted to keep the products • Outlets selected in line with the image the company wants to project • Preferred for high value products • Tanishque jewelry • Keeps distribution costs lower

30. Exclusive Distribution • Highly selective choice of outlets – may be even one outlet in an entire market • Could include outlets set up by companies – Titan, Bata • Producer wants a close watch and control on the distribution of his products. Channel strategy…