Distribution Management, Role in Marketing

1. 1
MODULE 3: INTRODUCTION TO DISTRIBUTION MANAGEMENT 8 HOURS
INTRODUCTION; NEED AND SCOPE OF DISTRIBUTION MANAGEMENT;
MARKETING CHANNELS STRATEGY; LEVELS OF CHANNELS
CHANNEL INTEGRATION - VMS; HMS; CHANNEL MANAGEMENT; AND
MARKETING CHANNEL POLICIES & LEGAL ISSUE
INSTITUTIONS FOR CHANNELS- WHOLESALING AND RETAILING;
DESIGNING CHANNEL SYSTEMS; CHANNEL MANAGEMENT;
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM

2. 4P’S OF MARKETING MIX
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM
2

3. 4P’S OF MARKETING MIX
PLACE
 Where do buyers look for your product or service?
 If they look in a store, what kind? A specialist
boutique or in a supermarket, or both? Or online?
Or direct, via a catalogue?
 How can you access the right distribution
channels?
 Do you need to use a sales force? Or attend trade
fairs? Or make online submissions? Or send
samples to catalogue companies?
 What do you competitors do, and how can you
learn from that and/or differentiate?
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM
3

4. Distribution Management
Transport
Area of
Supply
Chain
Management
Sales
Activities
Store
Warehouse
Sales
Depot
CONCEPT OF DISTRIBUTION
Manufacturing
Warehouse
Point of
Sales
Pre Production
Activities
Production
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM
4

5. WHERE DOES IT STAND IN THE COMPANY??
CEO
Production
Manufacturing
Warehousing
Marketing
Product & Brand
Sales /
Distribution /
Trade Marketing
Customer Service
Finance HR Admin
Is distribution the most important function of all??
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM
5

6. SO, WHAT DOES DISTRIBUTION
MANAGEMENT DO??
 Distribution management serves the
primary function of ensuring the product
or service is available to the consumer
within an arm’s length of his / her desire.
 It makes sure that the product or service is
available to the consumer,
 When they want
 Where they want
 How they want
It provides “time”, “place” and “possession”
utility to the consumer
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM
6

7. ISN’T DISTRIBUTION SAME AS SALES?
 Distribution is a part of Overall Sales Activity
 Distribution functions execute the overall Sales and
Distribution Strategy
 Distribution complement Sales and Distribution
Strategy with the management of its elements (i.e.
planning, budgeting, sales force management and
channels as required)
Sales Management
Task
Achievement of volume and market
share
Distribution
Management Role
Physical movement of goods and
storage of products in the market
Ensuring high shelf visibility
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM
7

8. Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM
8

9. Elements/Scope
of Distribution
Management
Planning,
Forecasting
& budgeting
Sales Force
management
Product
pricing and
promotion
Product
Visibility
Distribution
channels
Channel
Information
Systems
Warehousing
and logistics
From recruitment to
motivating to leading the
sales force
Physical Goods
movement and
warehousing
Getting the feedback
from channel partners
and insights
The ways you deliver the
product to the end
consumer
Making sure that the
product is visible and is
where it is supposed to
be
Promoting the product
through different channels
(consumer, sales force,
channel partners etc)
Strategically planning for
sales and distribution.
Forecasting and budgeting to
achieve the same
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM
9

10. ELEMENTS/ SCOPE OF DISTRIBUTION
MANAGEMENT
 Planning, Forecasting & budgeting
 Strategic planning
 Deriving the Sales and Distribution
strategy
 Developing a Sales Forecast
 Sales Forecasting Methods
 Sales Budgets
 Sales Force management
 Recruitment the sales force
 Training the sales force
 Motivating the sales force
 Compensating the sales force
 Leading the sales force
 Product pricing and promotion
 Sales promotion
 Type of promotion
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM
10

11.  Product Visibility
 Product Availability & Visibility /
Point of Sales Merchandizing
 Ensuring the right product
availability
 Utilizing the Point of Sales
 Distribution channels
 Channel formats
 Service channels
 Prominent channel systems
 Channel institutions
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM
11

12.  Channel Information Systems
 Why an information system?
 Elements of a Channel
Information System
 Channel performance evaluation
 Warehousing and logistics
 Scope of logistics
 Order processing
 Supply chain management
 Focus areas of logistics and
supply chain management
 Technology in logistics
management
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM
12

13. DISTRIBUTION CHANNELS DEFINED
• Are sets of interdependent organizations
involved in the process of making a product or
service available for use or consumption
• Whether selling products or services, marketing
channel decisions play a role of strategic importance in
the overall presence and success a company enjoys in
the marketplace.
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM
13

14. DISTRIBUTION CHANNELS
•Are intermediaries or middlemen
oExist because producers cannot reach all their
consumers
oMultiply reach and provide efficiency to the marketing
process
oFacilitate smooth flow and create time, place and
possession utilities
oHave the core competence and reach
oProvide contact, experience, specialization and scales of
operation
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM
14

15. TYPES OF CHANNELS
•Sales: motivates buyers, shares information
between company and its consumers, negotiates
fair bargains for consumers and finances the
transactions
•Delivery channel meant only for physical part of
the distribution
•Service channel – performs after sales service
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM
15

16. LISTING OF CHANNEL MEMBERS
•Company own sales team
•C&FAs and CSAs
•Distributors, dealers, stockists, value-added re-sellers
•Agents and brokers
•Franchisees
•Electronic channels
•Wholesalers
•Retailers
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM
16

17. C&FAS / C&SAS
•C&FA: carrying and forwarding agent and C&SA: carrying
and selling agent – both are on contract with a company
and its distributors
•Both are transporters who work between the company
•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
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM
17

18. DISTRIBUTORS, DEALERS, STOCKIEST,
AGENTS
them
•Name denotes the extent of re-distribution done by
•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
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM
18

19. 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
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM
19

20. 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 personalized services to their customers
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM
20

21. INDUSTRIAL PRODUCTS
Industrial Distributor
Industrial Customer
Industrial Distributor
Industrial Customer
Agent/middleman
Customers may also direct from company sales force
Producer Producer
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM
21

22. CONSUMER PRODUCTS
Producer
Producer
Customer /
consumer
Retailer
Distributor
Distributor
Retailer
Customer/
Consumer
Wholesaler
Customer/
Consumer
Retailer
Retailers may also direct from company sales force
Producer
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM
22

23. PATTERNS OF DISTRIBUTION
•Determines the intensity of the distribution
•Intensity decides the service level provided
•Types of distribution intensity:
oIntensive
oSelective
oExclusive
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM
23

24. DISTRIBUTION INTENSITY
•Intensive: distribution through every
reasonable outlet available
•Selective: multiple, but not all outlets in
the market – pharma, frozen food
•Exclusive: may be only one outlet in a
market - car dealers
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM
24

25. 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
Ex. Motor oil is sold in quick-lube shops, farm stores, auto
parts retailers, supermarkets, drugstores, hardware stores,
warehouse clubs, and other mass merchandisers.
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM
25

26. 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
•Keeps distribution costs lower
Ex. Armani & Lucky Brand sell their clothing only through top
department stores that appeal to the affluent customers who buy its
merchandise. It does not sell in a chain megastore or a variety store.
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM
26

27. EXCLUSIVE DISTRIBUTION
•Highly selective choice of outlets – may be
even one outlet in an entire market
•Could include outlets set up by companies
•Producer wants a close watch and control
on the distribution of his products.
Ex. Franchisor legally requires a franchisee to sell
only the franchisor’s products
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM
27

28. 28
INTEGRATED DISTRIBUTION
Manufacturer acts as wholesaler and retailer for its own
products.
 EX. Sherwin-Williams Paint, Merle Norman
 Ex. The Gap or Ann Taylor sells its clothing in company-
owned retail stores.
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM

29. DISTRIBUTION CHANNEL STRATEGY
marketing strategy
•Derived from the corporate strategy and the
•Steps for designing the distribution strategy are:
oDefining customer service levels
oDistribution objectives and steps
oStructure of the network required
oPolicy and procedure to be followed
oKey performance indicators
oCritical success factors
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM
29

30. 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
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM
30

31. 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
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM
31

32. 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:
o Sales forecasts
o Despatch plans
o Market coverage beat plans
o Journey plans for service engineers
o Collection of sales proceeds
o Carrying out promotional activities
•The company also decides as to who is to perform which
task
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM
32

33. 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
.
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM
33

34. POLICY & PROCEDURE
•Define policy and implementation
guidelines through Operating Manuals
•Policy guidelines include
oCode of conduct for channel members
oSystem for redressal of complaints
oAny additional subsidies etc
oHandling institutional business
oService policy for engineering products
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM
34

35. KEY PERFORMANCE INDICATORS
•For measurement of effectiveness. Some of these
could be:
oConsistent achievement of targets by product groups,
periods and territories
oAchievement of market shares
oAchievement of profitability
oZero complaints from customers
oNo stock returns
oAbility to handle emergencies and sudden spurts in
demand
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM
35

36. KEY PERFORMANCE INDICATORS
•For measurement of effectiveness. Some of
these could be:
oBalanced sales achievement during a period –
no period end skews
oMarket coverage with ready stocks
oExcellent management of accounts receivables
oMinimize losses on account of stock-outs
oMinimize damages to products
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM
36

37. CRITICAL SUCCESS FACTORS
•The distribution strategy also needs the support and
encouragement of top management to succeed
•Some of the CSFs could be:
oClear, transparent and unambiguous policy and procedure
oSerious commitment of the channel partners
oFairness in dealings
oClearly defined customer service policy
oHigh level of integrity
oEquitable distribution at times of shortage
oTimely compensation of channel partners
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM
37

38. 38
DESCRIBE WHEN A CHANNEL WILL BE MOST
EFFECTIVE
The channel must be properly
managed
Recognize the importance of their
task and make informed decisions
Each member is assigned tasks it
can do best
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM

39. 39
DESCRIBE WHEN A CHANNEL WILL BE
MOST EFFECTIVE (CONT.)
Channel members share a
common goal
 Commitment to quality of the
product
 Satisfying the target market’s
needs and wants
 All members cooperate to attain
overall channel goals
 If the channel is not effective, conflict
occurs…..
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM

40. 40
DISTINGUISH BETWEEN
HORIZONTAL AND VERTICAL CONFLICT
Horizontal Conflict: occurs between
channel members at the same level
 Good, old-fashioned business competition
 Ex: two retailers selling pet supplies
compete to sell to the same target market
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM

41. 41
DISTINGUISH BETWEEN
HORIZONTAL AND VERTICAL CONFLICT
(CONT.)
Vertical Conflict: occurs between
channel members at different levels
within the same channel
 Producers and wholesalers, wholesalers
& retailers, or producers and retailers
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM

42. So there are conflicts at all levels ……
To eradicate conflicts , Modern channel
management has evolved to develop
vertical marketing systems (VMS)
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM
42

43. • Vertical Marketing Systems (VMS) consists of
producers, wholesalers, and retailers acting as
a unified system - that seek to maximize profits
for whole channel.
• Here, one channel members-
owns the others,
has contracts with them or
use so much power that they all cooperate.
• Such systems occur to control channel
behavior and manage channel conflict.
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM
43

44. A conventional marketing channel versus a vertical marketing system
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM
44

45. Vertical
marketing
systems (VMS)
Corporate
VMS
Contractual
VMS
Administered
VMS
Wholesaler-
sponsored
voluntary
chains
Retailer
cooperatives
Franchise
organizations
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM
45

46.  Combines successive stages of production and
distribution under single ownership.
 Breweries and petrol stations are examples.
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM
46

47. • Independent firms join contractually at different
levels to create efficiencies and economies .
• 3 types :
• Wholesaler-sponsored voluntary chains of
independent retailers organised to compete against
large organisations.
Eg: Coca-Cola bottler is a manufacturer-sponsored
wholesaler.
• Retailer co-operatives
• Franchisee
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM
47

48. – retailer cooperatives; are contractual marketing
systems in which ;
– retailers organize a new or
– jointly owned business to carry on wholesaling and
possibly production.
– Eg ; Indian Coffee House , Mother Dairy , Karnataka
Milk Federation (KMF).
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM
48

49. – franchise organizations; are contractual marketing
systems in which a channel member, called a franchiser,
links several stages in the production-distribution process.
There are three forms of franchisees;
• manufacturer-sponsored retailer franchisee system e.g.
Ford licenses dealers to sell its cars. The dealers are
independent business people who got sponsered by
manufacturer.
• manufacturer-sponsored wholesaler franchisee system e.g.
Coca-Cola licenses bottlers (wholesalers) in various markets
who buy Coca-Cola syrup concentrate and then carbonate,
bottle and sell the finished product to retailers in local markets.
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM
49

50. • service-firm-sponsored retailer franchisee
system in which a service firm licenses the
retailers to bring its service to consumers.
• Example;
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM
50

51. • One member of the channel is large and
powerful enough to coordinate the
activities of the other members without an
ownership stake.
• Examples ;
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM
51

52. • High operating Efficiency .
• Each layers has clearly defined functions
and responsibilities.
• Closely monitor and control .
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM
52

53. • Horizontal marketing systems is a channel
arrangement in which two or more
companies at one level join together to
follow a new marketing opportunity.
• The major benefit is that companies
combine their capital, production
capabilities, marketing resources and
therefore accomplish more.
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM
53

54. • E.g. Coca-Cola and Nestle formed a joint
venture to market ready-to-drink coffee
and tea worldwide.
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM
54

55. • Greater satisfaction due to greater
freedom and autonomy .
• Provides streamline due to absence of
multiple structured layers .
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM
55

56. 56
CHANNEL MANAGEMENT
DECISIONS
Channel strategy is not
formulated in a vacuum
 Channel strategy and product strategy
 Channel strategy and price strategy
 Channel strategy and promotion strategy
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM

57. 57
DESCRIBE CHANNEL
MANAGEMENT DECISIONS
Decisions about a product’s physical movement and transfer of
ownership from producer to consumer.
 FIRST - Setting channel objectives
 Determine what the company is trying to achieve
 Meet the needs and wants of their target market
 Give their product a competitive edge
 SECOND - Channel members:
– Selection
– Management
– Motivation
– Evaluation
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM

58. 58
1. SELECTING CHANNEL MEMBERS
Determine the types of members the belong in the
channel, as well as the channel length (total number of
channel members)
 Usually based on the nature of the product
 Factors to consider:
 Create product value that others cannot or are not willing to
provide
 Channel the product to its desired market
 Have a pricing and promotion strategy compatible with the
product’s needs
 Offer customer service compatible with the products needs
 Be willing and able to work cooperatively with other members
within the product’s channel
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM

59. 59
1. SELECTING CHANNEL MEMBERS (CONT.)
Involves determining the characteristics that
distinguish the better ones by evaluating
channel members
Do they: Provide value? Perform a
function? Expect an economic return ?
Years in business
Lines carried
Profit record
Policies, strategies, & image
Experience & track record
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM

60. 60
1. SELECTING CHANNEL MEMBERS (CONT.)
Selecting intermediaries that are sales agents
involves evaluating
Number and character of other lines
carried
Size and quality of sales force
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM

61. 61
1. SELECTING CHANNEL MEMBERS (CONT.)
 Market segment - must know the specific segment
and target customer
 Selecting intermediates that are retail stores that
want exclusive or selective distribution involves
evaluating
Store’s customers
Store locations
Growth potential
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM

62. 62
2. MANAGING CHANNEL MEMBERS
 Determining channel responsibilities
• Members must work together appropriately and perform
the tasks they are best suited for
 The company must sell not only through the
intermediaries but also to/with them
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM

63. 63
2. MANAGING CHANNEL MEMBERS (CONT.)
 Partner relationship management (PRM) and
supply chain management (SCM) software are
used to
• Forge long-term partnerships with channel members
• Recruit, train, organize, manage, motivate, and evaluate
channel members
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM

64. 64
3. MOTIVATING CHANNEL MEMBERS
 Develop a cooperative/collaborative and balanced relationship
with the partner
 Understand the partner’s customers – their needs, wants, and
demands
 Understand the partner’s business – operationally and
financially and what’s really important to them
 Look at the partner’s needs in terms of customer support,
technical support, and training
 Establish clear and agreed upon expectations and goals
 Develop recognition programs focusing on the partner’s
contributions
 Build internal support systems and dedicate resources to the
partner
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM

65. 65
3. MOTIVATING CHANNEL MEMBERS (CONT.)
 Motivation can be positive or
negative
Sanctions may be imposed on
middlemen not performing well
Chargebacks – financial
penalties assessed for a variety of
problems
Incentives may be offered for
reaching performance goals
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM

66. 66
4. EVALUATING CHANNEL MEMBERS
Produces must evaluate intermediaries
performance against such standards as:
 Sales quota attainment
 Average inventory levels
 Customer delivery time
 Treatment of damaged and lost goods
 Cooperation in promotional and training programs.
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM

67. 67
4. EVALUATING CHANNEL MEMBERS (CONT.)
Should constantly evaluate the
channel:
What is working?
What is not working?
What can be improved?
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM

68. 68
4. EVALUATING CHANNEL MEMBERS (CONT.)
Risks & Dangers of Distribution Decisions
 Transaction costs both apparent & hidden
 Risks include loss in transit, destruction, negligence, non-
payment and so on.
 So, careful choice & evaluation of each & every channel
partner is a necessity.
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM

69. 69
DISTRIBUTION DECISIONS - MAJOR
CONSIDERATIONS…
 Multiple channels
 Control vs. costs
 Intensity of distribution desired
 Involvement in e-commerce
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM

70. 70
1. MULTIPLE CHANNELS
 Some products meet the needs of both industrial
and consumer markets.
 J & J Snack Foods sells its pretzels, drinks and
cookies using multiple channels to:
 Supermarkets
 Movie Theaters
 Stadiums
 Schools
 Hospitals
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM

71. 71
2. CONTROL VS. COSTS
 All manufacturers and producers must weigh the
control they want to keep over the distribution of their
products against the costs and profitability.
 Direct sales force – company employees are expensive
with payroll, benefits, expenses; may set sales quotas and
easily monitor performance
 Agents – work independently, running their own
businesses; less expensive = less control; agents sell
product lines that make them more money
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM

72. 72
MANAGEMENT’S DESIRE FOR
CONTROL OF DISTRIBUTION
• In general, the shorter the channel structure,
the higher the degree of control, and vice versa.
• The lower the intensity of distribution, the
higher the degree of control, and vice versa.
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM

73. 73
3. DISTRIBUTION INTENSITY
 Exclusive Distribution
 Selective Distribution
 Intensive Distribution
 Integrated Distribution
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM

74. 74
4. INVOLVEMENT IN E-COMMERCE
 = means by which products are sold to
customers and industrial buyers through
the Internet.
 Consumers have also become accustomed
to buying products online.
 one-stop shopping and substantial savings
for industrial buyers.
 E-marketplaces provide smaller businesses
with the exposure that they could not get
elsewhere
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM

75. 75
CHANNEL DESIGN DECISIONS
 Channel design/structure = form or shape that a
marketing channel takes to perform the tasks necessary
to make products available to consumers.
 Includes ALL the parties involved
 Efficient movement of finished product from the end of the
production line to customers.
 Coordinate the execution of distribution plans
 So as to provide good customer service at acceptable cost.
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM

76. 76
CHANNEL STRUCTURE/DESIGN
1. Setting distribution objectives
 Meeting customer needs is the ultimate goal
2. Specifying distribution tasks
 who does what along the supply chain (channel of
distribution)
3. Considering alternative channel structures
 Three dimensions:
 Length/Intensity/Types of intermediaries
4. Choosing optimal channel structures
 each participant in the marketing channel focuses on performing
those activities at which it is most efficient. This results in much
greater efficiency and higher output.
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM

77. 77
THREE DIMENSIONS OF CHANNEL DESIGN
1.Length of the channel
2.Intensity of various levels (Exclusive,
Selective, Intensive)
3.Types of intermediaries involved
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM

78. 78
 Channel length = number of levels in a distribution
channel.
Manufacturer Manufacturer Manufacturer Manufacturer
Consumer Consumer Consumer Consumer
Retailer Retailer Retailer
Wholesaler Wholesaler
Agent
2 level 3 level 4 level 5 level
LENGTH OF CHANNEL
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM

79. 79
DETERMINANTS OF CHANNEL
STRUCTURE
1. The distribution tasks that need to be performed
2. The economics of performing distribution tasks
3. Management’s desire for control of distribution
4. Transaction Efficiency (refers to the effort to
reduce the number of transactions between
producers &consumers).
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM

80. 80
Customer
Warehouse
Call
Center
Online
Order
Inventory
Check
Items
in
Stock?
No, Customer
Notified of
Backorder
Yes, Item Packed
for Shipment
Accounts
Receivable
Processes
Payment
Item Shipped
Actions to
Facilitate
Order
Processin
g
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM

81. 81
DESCRIBE THE ROLE OF CUSTOMER SERVICE IN
FOLLOWING UP ON ORDERS
 Following up with your customers after the sale is an
important part of providing good customer service.
 Should customer have questions or problems it is
your duty to make sure they have a positive
experience with your company.
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM

82. 82
USE OF TECHNOLOGY IN DISTRIBUTION
 Some businesses have the capacity to distribute
most or all of their products through the internet
 e-commerce: Products are sold to customers and
industrial buyers through the Internet.
 e-marketplace
 Satellite tracking = a dispatcher has current
knowledge of a delivery truck’s location and
destination
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM

83. 83
USE OF TECHNOLOGY IN DISTRIBUTION
(CONT.)
 Tracking of package
 Bar coding on package
 Package scanned at transition points in distribution chain
 Customer uses internet to follow package along distribution
chain; e-mail may be used
 Global distribution: in some countries the postal service is
not reliable; package tracking facilitates global trade
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM

84. 84
USE OF TECHNOLOGY IN DISTRIBUTION (CONT.)
 Problems
 Cost of technology
 Changing technology = updating equipment
 Need for compatible systems within and between
businesses & countries
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM

85. END
Dr.
Noor
Firdoos
Jahan,
Professor,
RVIM
85