Description
Channel functions, channel flows, establishing channel objectives, identifying channel alternatives, evaluating alternatives, selecting channel partners, training and motivating channel members, Channel dynamics, conflict and cooperation in channel members, Market logistics, Sales force
Managing the Distribution Function
Channel functions, channel flows, establishing channel objectives, identifying channel alternatives, evaluating alternatives, selecting channel partners, training and motivating channel members, Channel dynamics, conflict and cooperation in channel members, Market logistics, Sales force management.
• Dabur 800SKUs produced at 22 locations and services at 15 lac outlets. • They were having multiple packages for integrating planning and logistics. • But, now they have front-end software called Drishti and SAP at backend. • This reduced the gap between production and sale to 4.5%.
Role of Middlemen or Intermediaries
a) Provide information about the market to the manufacturer
b) Maintain price stability in the market c) Promotion of the products in his territory d) Financing by providing the necessary working capital in the form of advance payments for goods and services e) Middlemen also take the title of the goods and services and trade in their own name
Physical Flow:
Suppliers of Inputs Transporter and Warehouses Manufacturer Transporters and C & F Agents of Company Warehouses
Customers
Retailers
Transporters
Wholesalers
Title Flow:
Input Suppliers
Manufacturer
Wholesalers/ Dealers
Retailers
Customers
Payment Flow:
Suppliers
Bank
Manufacturer
Wholesaler/ Dealers
Retailers
Customers
Information Flow:
Suppliers of Inputs
Transporter and Warehouse and Banks
Manufacturer
Transporter and Warehouse and Banks
Wholesalers /Dealers
Transporter and Warehouse and Banks
Customers
Retailers
Promotion Flow:
Supplier of Input
Advertising Agency
Manufacturer
Advertising Agency
Trade
Customer
Channel Level
Decisions that a firm must take regarding the number of channel
levels appropriate to serve a given market.
Zero Level or Direct marketing channel: Directly from the
manufacturer to the final customer. Eg. Door to door sales, mail order, manufacturer owned stores.
One level channel: This contains one selling intermediaries
between manufacturer and customer.
Two level Three level
(a) Zero Level Manufacturer
(b) One Level Manufacturer Wholesaler/ Dealer
Customer Customer
Length of channel distribution
Two Level Manufacturer Wholesaler/ Dealer
Three Level Manufacturer
Distributor Wholesaler
Retailer
Retailer Customer
Customer
Length of channel distribution
Channel level
Firm adopts a one channel level when: a) Number of customers is high b) Customers in specific geographical area c) Order lot size not uniform d) Firm sells goods to wholesaler or a large dealer 2, 3 or even 4 levels in case of: a) Consumer products b) Customers spread across the country c) Market is large
Factors determining the length of the Channel a) Size of the market-larger it is more economical it is to serve it directly
b) Order lot size-if it is small, better to have longer channel
c) Service requirements-if higher level of service is required, then it is better to have a shorter level. d) Product variety-if customers shop for product assortment, a wider channel of distribution is required.
Width of channel of distribution
Manufacturer
Market 1
Dealer Dealer A B
Dealer C
Dealer D
Dealer E
Dealer Dealer F G
Retailers Customers Customers Customers
Market Market Market Market Market Market Market Market Market Market Market Market Market Market Market
Market Market Market
Retail spokes-restaurants, soft drink kiosks, panwalsa, sweetmarts
Market Market Market Market Market
Dealer/wholesaler Dealer Hub
Market Market
Market
Market Market
Franchise Major Hub of Parent Company
Market
Market Market
Market
Market Market Market
Market
Hub and spoke pattern of distribution of a soft drink firm
Type and Nature of Middlemen Merchant Middlemen intermediaries who take title to the goods and services and resell them. Dealers, Wholesalers, Retailers. Agents help in identifying potential customers and help in negotiations. C&F Agents, Broker, Jobbers. They earn commissions on the deal.
Facilitators independent business units that facilitate the flow of goods and services. Transport companies, Banks, Independent Warehouse. They are paid their service charges.
Factors Influencing Distribution Decisions
Market Characteristics
Company Characteristics
Product Characteristics
Middlemen Characteristics
Intensity of Competition
Environmental Characteristics
4.Factors affecting Choice of Distribution
Market Variables Nature of Market No. of Potential customers Geographic concentration of the market Order size Customer Value models Customer Buying Habits
Product Variables Unit sale value Bulk and Weight Perishable Nature
Marketing Intermediary Variables Financial Soundness Desire for Channel control Direct Distribution Strengths Managerial Capabilities
Firm’s Variables
Technical Products Nature of The product
Contribution of Middleman in Value addition Availability of Desired middleman Firm marketing Intermediary Relationships dynamics
Channel Design
•
• • •
•
•
The channel design is normally meant to give a clear idea about: The number of channel entities in the channel network, The way in which they are linked, The roles and responsibilities of the entities in the network The rewards for participating in the activities and also Clear cut guidelines for the major activities to be performed during the normal functioning of the channel.
Terms and Responsibilities of Intermediaries a) Price policy-the middlemen have to ensure that everyone involved gets a fair and equitable deal b) Payment terms-the manufacturing firm stipulates the mode and terms of payment c) Returns policy-this indicates the warranty that the manufacturer extends to the intermediary d) Territorial rights-the territorial jurisdiction should be spelt out to avoid territory jumping e) Mutual services and responsibilities-should be spelt out, particularly in case of franchised and exclusive agency channels
Identifying Major Distribution Alternatives Intensive Distribution involves all possible outlets that can be used to distribute the product. Eg FMCG, Newspaper Selective Distribution firm selects some outlets to distribute its products. Shopping goods, durable goods. Exclusive Distribution firm distributes its brand through just one or two major outlets in the market. Exclusive outlets for automobile products, etc.
• Manufacture sponsored retailer franchise: Maruti • Manufacture sponsored whole seller franchise: Coke license bottlers to buy the syrup concentrate solution and then carbonate, bottle and sell to retailers in the local market.
• Service firm sponsored retailer franchise: Domino’s pizza, pizza hut, etc.
Controlling channel members • • • • •
Referent power Expert Power Legitimate Power Reward Power Coercive Power Print media.
ITC, Maruti IBM, Sony, Intel Legal action. Incentives HUL in FMCG , TOI in
Channel commitments
• Affective commitments: A genuine desire to work accordingly with the companies. • Moral commitments: When the channel members feels it is the right things to do. • Calculative commitments: Relationship that is maintained out of obligation .
Horizontal Marketing SystemsThis reflects the readiness or willingness of two or more nonrelated companies to put together resources to exploit an emerging market opportunity. Multi-channel Marketing SystemsThe firm uses two or more channels to reach one or more market segments. Managing the ChannelTo effectively manage the channel members, the marketer has to: a) manage channel conflict b) motivate channel members
Channel Conflict Type of conflict: i) Vertical level conflict-when the channel member at one level is in conflict with another member at the next higher or lower level. Newspaper hawkers vs. newspaper strand owner. ii) Horizontal level conflict-conflict at the same level between channel members. Between the hawkers. iii) Multi channel level conflict-middlemen come in conflict with the manufacturer, using both direct and indirect means of distribution. Newspaper selling by hawkers, newspaper strand, local market, etc.
Nature or Causes of Conflict
i) Goal incompatibility-between manufacturers and wholesalers
ii) Role ambiguity-common cause of conflict in multi channel conflict iii) Differences in Perceptions of the Market-may create a conflict between manufacturer and middlemen
Magnitude of Conflict When a conflict assumes significant magnitude, the manufacturer must take the initiative to resolve it
Managing The Conflict a) Communication-have regular communication between the manufacturers and the channel members b) Dealer Councils-helpful in resolving conflicts at horizontal level and vertical level
c) Superordinate goals-through evolving a superordinate goal of maximizing customer satisfaction d) Arbitration and mediation-in intra-middlemen conflict horizontal or vertical- the manufacturer may arbitrate or mediate
Motivating Channel Members
Achieved through financial and non-financial rewards
Eight Steps in Designing the Market Driven Distribution are: 1. 2. 3. 4. 5. 6. 7. Know what the customers want Decide on the outlet Determine the costs Bound the ‘ideal’ Compare the alternatives Review assumptions in the list of research Confront the gap between the ideal and the actual distribution system 8. Implement changes in the system, if required
Retailing Types of Retail Stores: a) b) c) Specialty Stores Department Store Supermarket
d)
e)
Convenience Stores
Discount Stores
Positioning of Retail Outlets Lele
High Growth Dedicated stores Computer stores, Shopper’s stop Mature Apna Bazar
Breadth of Product Line
Low
Introduction Boutiques in fashion, design wear
Decline Discount stores
High
Value Added
Low
Vertical Marketing System
VMS are of three types i) Corporate Vertical Marketing Systems-successive stages from production to distribution are under single ownership. Eg Reliance textiles, oil & refinery. Bata, Woodland,etc. ii) Administered VMS-seeks to control successive stages from production to distribution not through ownership but through the size and power of one of the channel members. Eg. HUL, Coke.
iii) Contractual VMS or Value Adding Partnerships (VAP) Almost similar as Administered VMS, but they are formalized through contracts or other legal requirements. Wholesaler sponsored voluntary chains, Retailer cooperativeness, Franchise organization.
Retail Strategy Mix Alternatives
Low Value • Road side/street corner location with low rent/overheads • Minimal fixtures/furniture • Simple organization often owneremployee • Emphasis on price and personalised service like free home delivery in local area • Crowded store/shop complex organisation • Crowding of promotional material • Demonstrations/ Instore • Most merchandize in the shop front High Value • Located in high-rent prime location with typically high overheads located in the shopping hub • Luxurious ambience as reflected by air-conditioning, in-store music, high usage of technology, etc. • Service intensive – like exchange returns, credit, gift-wrapping, etc. Spacious interiors • Promotions and events management
Non-store Retailers
a) Automatic vending machines-coin operated machines, found in areas that have high consumer traffic.
b) Direct Selling-goods sold at customer’s door step c) Buying Services-storeless retailer serving specific client groups, usually employees of large organizations
Marketing decisions to be taken by retail marketers a) b) c) d) e) f) g) Target market decision Location Merchandise Price Store ambience and layout Services Communication
doc_654766215.pptx
Channel functions, channel flows, establishing channel objectives, identifying channel alternatives, evaluating alternatives, selecting channel partners, training and motivating channel members, Channel dynamics, conflict and cooperation in channel members, Market logistics, Sales force
Managing the Distribution Function
Channel functions, channel flows, establishing channel objectives, identifying channel alternatives, evaluating alternatives, selecting channel partners, training and motivating channel members, Channel dynamics, conflict and cooperation in channel members, Market logistics, Sales force management.
• Dabur 800SKUs produced at 22 locations and services at 15 lac outlets. • They were having multiple packages for integrating planning and logistics. • But, now they have front-end software called Drishti and SAP at backend. • This reduced the gap between production and sale to 4.5%.
Role of Middlemen or Intermediaries
a) Provide information about the market to the manufacturer
b) Maintain price stability in the market c) Promotion of the products in his territory d) Financing by providing the necessary working capital in the form of advance payments for goods and services e) Middlemen also take the title of the goods and services and trade in their own name
Physical Flow:
Suppliers of Inputs Transporter and Warehouses Manufacturer Transporters and C & F Agents of Company Warehouses
Customers
Retailers
Transporters
Wholesalers
Title Flow:
Input Suppliers
Manufacturer
Wholesalers/ Dealers
Retailers
Customers
Payment Flow:
Suppliers
Bank
Manufacturer
Wholesaler/ Dealers
Retailers
Customers
Information Flow:
Suppliers of Inputs
Transporter and Warehouse and Banks
Manufacturer
Transporter and Warehouse and Banks
Wholesalers /Dealers
Transporter and Warehouse and Banks
Customers
Retailers
Promotion Flow:
Supplier of Input
Advertising Agency
Manufacturer
Advertising Agency
Trade
Customer
Channel Level
Decisions that a firm must take regarding the number of channel
levels appropriate to serve a given market.
Zero Level or Direct marketing channel: Directly from the
manufacturer to the final customer. Eg. Door to door sales, mail order, manufacturer owned stores.
One level channel: This contains one selling intermediaries
between manufacturer and customer.
Two level Three level
(a) Zero Level Manufacturer
(b) One Level Manufacturer Wholesaler/ Dealer
Customer Customer
Length of channel distribution
Two Level Manufacturer Wholesaler/ Dealer
Three Level Manufacturer
Distributor Wholesaler
Retailer
Retailer Customer
Customer
Length of channel distribution
Channel level
Firm adopts a one channel level when: a) Number of customers is high b) Customers in specific geographical area c) Order lot size not uniform d) Firm sells goods to wholesaler or a large dealer 2, 3 or even 4 levels in case of: a) Consumer products b) Customers spread across the country c) Market is large
Factors determining the length of the Channel a) Size of the market-larger it is more economical it is to serve it directly
b) Order lot size-if it is small, better to have longer channel
c) Service requirements-if higher level of service is required, then it is better to have a shorter level. d) Product variety-if customers shop for product assortment, a wider channel of distribution is required.
Width of channel of distribution
Manufacturer
Market 1
Dealer Dealer A B
Dealer C
Dealer D
Dealer E
Dealer Dealer F G
Retailers Customers Customers Customers
Market Market Market Market Market Market Market Market Market Market Market Market Market Market Market
Market Market Market
Retail spokes-restaurants, soft drink kiosks, panwalsa, sweetmarts
Market Market Market Market Market
Dealer/wholesaler Dealer Hub
Market Market
Market
Market Market
Franchise Major Hub of Parent Company
Market
Market Market
Market
Market Market Market
Market
Hub and spoke pattern of distribution of a soft drink firm
Type and Nature of Middlemen Merchant Middlemen intermediaries who take title to the goods and services and resell them. Dealers, Wholesalers, Retailers. Agents help in identifying potential customers and help in negotiations. C&F Agents, Broker, Jobbers. They earn commissions on the deal.
Facilitators independent business units that facilitate the flow of goods and services. Transport companies, Banks, Independent Warehouse. They are paid their service charges.
Factors Influencing Distribution Decisions
Market Characteristics
Company Characteristics
Product Characteristics
Middlemen Characteristics
Intensity of Competition
Environmental Characteristics
4.Factors affecting Choice of Distribution
Market Variables Nature of Market No. of Potential customers Geographic concentration of the market Order size Customer Value models Customer Buying Habits
Product Variables Unit sale value Bulk and Weight Perishable Nature
Marketing Intermediary Variables Financial Soundness Desire for Channel control Direct Distribution Strengths Managerial Capabilities
Firm’s Variables
Technical Products Nature of The product
Contribution of Middleman in Value addition Availability of Desired middleman Firm marketing Intermediary Relationships dynamics
Channel Design
•
• • •
•
•
The channel design is normally meant to give a clear idea about: The number of channel entities in the channel network, The way in which they are linked, The roles and responsibilities of the entities in the network The rewards for participating in the activities and also Clear cut guidelines for the major activities to be performed during the normal functioning of the channel.
Terms and Responsibilities of Intermediaries a) Price policy-the middlemen have to ensure that everyone involved gets a fair and equitable deal b) Payment terms-the manufacturing firm stipulates the mode and terms of payment c) Returns policy-this indicates the warranty that the manufacturer extends to the intermediary d) Territorial rights-the territorial jurisdiction should be spelt out to avoid territory jumping e) Mutual services and responsibilities-should be spelt out, particularly in case of franchised and exclusive agency channels
Identifying Major Distribution Alternatives Intensive Distribution involves all possible outlets that can be used to distribute the product. Eg FMCG, Newspaper Selective Distribution firm selects some outlets to distribute its products. Shopping goods, durable goods. Exclusive Distribution firm distributes its brand through just one or two major outlets in the market. Exclusive outlets for automobile products, etc.
• Manufacture sponsored retailer franchise: Maruti • Manufacture sponsored whole seller franchise: Coke license bottlers to buy the syrup concentrate solution and then carbonate, bottle and sell to retailers in the local market.
• Service firm sponsored retailer franchise: Domino’s pizza, pizza hut, etc.
Controlling channel members • • • • •
Referent power Expert Power Legitimate Power Reward Power Coercive Power Print media.
ITC, Maruti IBM, Sony, Intel Legal action. Incentives HUL in FMCG , TOI in
Channel commitments
• Affective commitments: A genuine desire to work accordingly with the companies. • Moral commitments: When the channel members feels it is the right things to do. • Calculative commitments: Relationship that is maintained out of obligation .
Horizontal Marketing SystemsThis reflects the readiness or willingness of two or more nonrelated companies to put together resources to exploit an emerging market opportunity. Multi-channel Marketing SystemsThe firm uses two or more channels to reach one or more market segments. Managing the ChannelTo effectively manage the channel members, the marketer has to: a) manage channel conflict b) motivate channel members
Channel Conflict Type of conflict: i) Vertical level conflict-when the channel member at one level is in conflict with another member at the next higher or lower level. Newspaper hawkers vs. newspaper strand owner. ii) Horizontal level conflict-conflict at the same level between channel members. Between the hawkers. iii) Multi channel level conflict-middlemen come in conflict with the manufacturer, using both direct and indirect means of distribution. Newspaper selling by hawkers, newspaper strand, local market, etc.
Nature or Causes of Conflict
i) Goal incompatibility-between manufacturers and wholesalers
ii) Role ambiguity-common cause of conflict in multi channel conflict iii) Differences in Perceptions of the Market-may create a conflict between manufacturer and middlemen
Magnitude of Conflict When a conflict assumes significant magnitude, the manufacturer must take the initiative to resolve it
Managing The Conflict a) Communication-have regular communication between the manufacturers and the channel members b) Dealer Councils-helpful in resolving conflicts at horizontal level and vertical level
c) Superordinate goals-through evolving a superordinate goal of maximizing customer satisfaction d) Arbitration and mediation-in intra-middlemen conflict horizontal or vertical- the manufacturer may arbitrate or mediate
Motivating Channel Members
Achieved through financial and non-financial rewards
Eight Steps in Designing the Market Driven Distribution are: 1. 2. 3. 4. 5. 6. 7. Know what the customers want Decide on the outlet Determine the costs Bound the ‘ideal’ Compare the alternatives Review assumptions in the list of research Confront the gap between the ideal and the actual distribution system 8. Implement changes in the system, if required
Retailing Types of Retail Stores: a) b) c) Specialty Stores Department Store Supermarket
d)
e)
Convenience Stores
Discount Stores
Positioning of Retail Outlets Lele
High Growth Dedicated stores Computer stores, Shopper’s stop Mature Apna Bazar
Breadth of Product Line
Low
Introduction Boutiques in fashion, design wear
Decline Discount stores
High
Value Added
Low
Vertical Marketing System
VMS are of three types i) Corporate Vertical Marketing Systems-successive stages from production to distribution are under single ownership. Eg Reliance textiles, oil & refinery. Bata, Woodland,etc. ii) Administered VMS-seeks to control successive stages from production to distribution not through ownership but through the size and power of one of the channel members. Eg. HUL, Coke.
iii) Contractual VMS or Value Adding Partnerships (VAP) Almost similar as Administered VMS, but they are formalized through contracts or other legal requirements. Wholesaler sponsored voluntary chains, Retailer cooperativeness, Franchise organization.
Retail Strategy Mix Alternatives
Low Value • Road side/street corner location with low rent/overheads • Minimal fixtures/furniture • Simple organization often owneremployee • Emphasis on price and personalised service like free home delivery in local area • Crowded store/shop complex organisation • Crowding of promotional material • Demonstrations/ Instore • Most merchandize in the shop front High Value • Located in high-rent prime location with typically high overheads located in the shopping hub • Luxurious ambience as reflected by air-conditioning, in-store music, high usage of technology, etc. • Service intensive – like exchange returns, credit, gift-wrapping, etc. Spacious interiors • Promotions and events management
Non-store Retailers
a) Automatic vending machines-coin operated machines, found in areas that have high consumer traffic.
b) Direct Selling-goods sold at customer’s door step c) Buying Services-storeless retailer serving specific client groups, usually employees of large organizations
Marketing decisions to be taken by retail marketers a) b) c) d) e) f) g) Target market decision Location Merchandise Price Store ambience and layout Services Communication
doc_654766215.pptx