UNIT III NOTES

CHANNELS OF DISTRIBUTION

A distribution channel is the network of businesses or intermediaries through which a good

or service passes until it reaches the final buyer or the end consumer. Distribution channels
can include wholesalers, retailers, distributors, and even the internet. Distribution channels
are part of the downstream process, answering the question "How do we get our product to
the consumer?" This is in contrast to the upstream process, also known as the supply chain.
A distribution channel is a path by which all goods and services travel to arrive at the
intended consumer. Distribution channels can be short or long, and depend on the number of
intermediaries required to deliver a product or service. Increasing the number of ways, a
consumer can find a good can increase sales but it can also create a complex system that
sometimes makes distribution management difficult. Longer distribution channels can also
mean less profit for each intermediary along the way.

Components of a Distribution Channel

• Producer: Producers combine labor and capital to create goods and

services for consumers.

• Agent: Agents commonly act on behalf of the producer to accept

payments and transfer the title of the goods and services as it moves
through distribution.

• Wholesaler: A person or company that sells large quantities of goods,

often at low prices, to retailers.

• Retailer: A person or business that sells goods to the public in small

quantities for immediate use or consumption.

• End Consumer: A person who buys a product or service.

Types of Distribution Channels

Direct

A direct channel allows the consumer to make purchases from the

manufacturer. This direct, or short channel, may mean lower costs for
consumers because they are buying directly from the manufacturer.

Indirect

An indirect channel allows the consumer to buy the goods from a

wholesaler or retailer. Indirect channels are typical for goods that are sold
in traditional brick-and-mortar stores.
Hybrid

Hybrid distribution channels use both direct channels and indirect

channels. A product or service manufacturer may use both a retailer to
distribute a product or service and may also make sales directly with the
consumer.

Distribution Channel Levels

Level 0

This is a direct-to-consumer model where the producer sells its product directly to the end
consumer. Amazon, which uses its platform to sell Kindles to its customers, is an example of
a direct model. This is the shortest distribution channel possible, cutting out both the
wholesaler and the retailer.

Level 1

A producer sells directly to a retailer who sells the product to the end consumer. This level
includes only one intermediary. HP or Dell are large enough to sell their computer products
directly to reputable retailers such as Best Buy.

Level 2

Including two intermediaries, this level is one of the longest because it includes the
producer, wholesaler, retailer, and consumer. In the wine and adult beverage industry, a
winery cannot sell directly to a retailer. It operates in a multi-tiered system, meaning the law
requires the winery to first sell its product to a wholesaler who then sells to a retailer. The
retailer then sells the product to the end consumer.

Level 3

This level may add the jobber, this level adds the role of the individual who may assemble
products from a variety of producers, stores them, sells them to retailers, and acts as a
middle-man for wholesalers and retailers.

Difference between Direct and Indirect Distribution Channel

Direct distribution channels are those that allow the manufacturer or service provider to deal
directly with its end customer. For example, a company that manufactures clothes and sells
them directly to its customers using an e-commerce platform would be utilizing a direct
distribution channel. By contrast, if that same company were to rely on a network of
wholesalers and retailers to sell its products, then it would be using an indirect distribution
channel.

Promotion Decisions
Promotion decision is used to find the appropriate and effective method to promote a
particular product to increase the sales.
Integrated Marketing Communication: Integrated marketing communication (IMC) is a
continuous effort to plan, execute and evaluate techniques for selling or advertising a product
by using traditional and non-traditional methods of promotion.
The following are the major features of promotion decisions: -
 Awareness of target consumer and their preference of media
 Knowledge of consumers’ beliefs that can be related to the product to get the expected
response
 Setting different promotional tools, each tool for specific target but all linked to
acquire a common target
 Coordinating of advertising, sales, promotion and public relation as proportional
strategy
 Continuous broadcasting of information about the product

Promotion decisions are made on the basis of characteristics. Such decisions help in target
marketing of the product; this decreases the advertising expenses.

Marketing Communication Process

Marketing communication process comprises the following eight stages –
Stage I − Source
Stage II − Encoding
Stage III − Transmission
Stage IV − Decoding
Stage V − Receipt
Stage VI − Response
Stage VII − Feedback

Promotion Decisions

Special pricing strategy is mostly used for the promotion of the product. In this strategy,
pricing is changed for a short interval of time.
Promotion decision can be executed by implementing the following steps −
Step 1 − Setting of the objectives
Step 2 − Determining promotion budget
Step 3 − Target Market
Step 4 − The appeal
Step 5 − Promotion Mix
Promotion Mix
Promotion mix is a combination of various marketing techniques, oriented to acquire a
common target. It provides a structure for budget allocation for different elements of the
promotional mix.
Some elements of promotional mix are as follows −
 Advertising
 Sales promotion
 Public relations and publicity
 Personal selling
 Direct marketing
 Type of product market
 Overall marketing strategy
 Buyer readiness stage
 Product life cycle stage

Direct Marketing
Direct marketing is a form of marketing in which a single customer is approached for
advertisement of the product.
It attempts to acquire and retain customers by contacting them without the use of an
intermediary. The objective of direct marketing is to garner a direct response, which may take
one of the following forms −
 A purchase over the telephone or by post
 A request for a catalogue or sales literature
 An agreement to visit a location / event (e.g., an exhibition)
 Participation is some form of action (e.g., joining a political party)
 A request for a demonstration of a product
 A request for a sales person’s visit

Forms of Direct Marketing

The following are the different forms of direct marketing −
 Catalogue marketing
 Direct mail marketing
 Telemarketing
 Teleshopping /home shopping
 Database marketing
 Kiosk marketing
Advertising
Advertisement is a paid promotion type. The company pays a platform or a business. The
business displays the company information. The advertisement model has been a
traditional promotion decision. It includes television, print, internet, or media advertisements.
For example, a business running ads on television channels. The advertisement model helps
reach a large audience. Many people will become aware of the company. The company
carefully decides on the message. It should be crisp, entertaining, and promotional.

Direct Promotion
Many companies directly approach customers. It is through calls or emails. The agents often
start a conversation. Direct promotion happens when there are no middlemen. The company
staff directly talks with the clients. For example, the company team calls the customers. They
inform you about the ongoing offers. It starts a conversation. The agent can explain the
business operations easily. Also, it helps get feedback on the spot. New businesses can
benefit from this measure. It includes emails, calls, fliers, etc.

Sales Promotion
Several consumer brands send their staff to customers. They sell products door-to-door or in
public places. Such companies invest in self-promotion. Self-promotion decisions have been
around for many years. It is a traditional marketing method. Agents target areas and work to
promote the company. It helps answer all customer queries. Also, it can lead to more sales.
The company also receives feedback for the product. They can use this survey for product
improvement. Self-promotion also includes selling discounted products directly. The agents
report back with the sales. The business may use its team or outsource to another business.
Public Relations
Public relations refer to a brand's image. It includes how the public perceives the company. It
should have a positive image to promote sales. PR promotion decisions are integral. They're
primarily intrinsic and don't require third parties. Examples can be the promotion of the
company's donations. Businesses should follow ethical practices. This promotion should not
seem like paid advertising. That's what makes PR different. It should be more about a
company's work and goodwill. Every large business has a PR team to manage promotions.
They're also responsible for controlling the company image if there are no issues or cases.
These different promotion decisions are available for a company. It should understand the
budget considerations to follow the best measure. It will help improve brand awareness and
company goodwill.