04 - Distribution &amp Channel Decisions

Distribution & Channel Decisions
 Marketing channel performs the work of

moving goods from producers to consumers
 Marketing intermediaries try to fill the following
gaps:
 Time Gap
 Space Gap
 Quantity Gap
 Variety Gap
1
Channel Flows:
 Physical Flow
 Title Flow
 Payment Flow
 Information Flow
 Promotion Flow
 Risk Flow
2
Channel Levels:
 Length of a channel: No. of
intermediaries b/n producer & final consumer
 Zero Level:
 Manufacturer Consumers
 Eg: Eureka Forbes, Reader’s Digest
 One Level:
 Manufacturer Retailer Consumer
 Eg: Maruti/Suzuki dealers
 Two Level:
 Manufacturer Wholesaler Retailer Consumer
 Eg: FMCG, White goods
 Three Level:
 Manufacturer Dist. Wholesaler Retailer Cons.
 Eg: FMCG, White goods 3
Reverse Channel of Marketing/ Backward Channel:
Flow of goods from end users to producers. Eg: Soft
drink bottles, product recall, old issues of magazines
 Channel-Design Decisions:
 Understand Service Output levels/Utilities desired
by target customers:
 Lot Size Utility
 Temporal Convenience Utility
 Spatial Convenience Utility
 Product Variety/Selection Utility
 Service Utility
 Establishing Channel Objectives & Constraints:
 Minimize Cost & transport time
 Environmental Constraints
4
 Which Markets to serve
Channel Design Decisions (Cont.)
 Identifying Major Channel Alternatives:
 Type of Intermediaries:
 Company sales force
 Outside agency Eg: DSAs employed by many banks
 Number of Intermediaries:
 Exclusive Distribution: Seen in automobile sector
 Selective Distribution: Nike shoes, Branded jewelry
 Intensive Distribution: Used for FMCG products
 Terms & Responsibility of Channel Members:
 Price Policy/Margins
 Conditions of Sale/ Guarantees
 Distributor’s territorial rights
 Responsibilities 5
Channel Design Decisions
(Cont.)
 Evaluating Major Alternatives
 Evaluation to be based on:
 Economic Criteria
 Control Criteria
 Adaptive Criteria
6
Channel Management
Decisions:
 Selecting
 Training
 Motivating
 Evaluating
 Modifying
7
Channel Dynamics:
 Vertical Marketing Systems:
 Producers, Wholesalers, Retailers etc. acting as a
unified system
 Horizontal Marketing Systems
 Two or more unrelated companies come together to
exploit emerging marketing opportunity
 Eg: Banks & Car manufacturers’ tie-ups
 Multi Channel Marketing Systems/Dual
Marketing
 Firms using two or more marketing channels to
reach its customers
 Eg: Sale of airline tickets online as well as through 8
agents
Channel Conflict
 These conflicts arise because:
 Unclear areas of work/responsibility
 Mistrust
 To avoid conflicts:
 Encourage “Cooptation”
 Have Exclusive Dealing
 Have Exclusive Territories
 Tying agreements
 Clear contracts
9
Channel Management
Decisions:
 Selecting
 Training
 Motivating
 Evaluating
 Modifying
10
Channel Dynamics:
 Vertical Marketing Systems:
 Producers, Wholesalers, Retailers etc. acting as a
unified system
 Horizontal Marketing Systems
 Two or more unrelated companies come together to
exploit emerging marketing opportunity
 Eg: Banks & Car manufacturers’ tie-ups
 Multi Channel Marketing Systems/Dual
Marketing
 Firms using two or more marketing channels to
reach its customers
 Eg: Sale of airline tickets online as well as through 11
agents
Channel Conflict
 These conflicts arise because:
 Unclear areas of work/responsibility
 Mistrust
 To avoid conflicts:
 Encourage “Cooptation”
 Have Exclusive Dealing
 Have Exclusive Territories
 Tying agreements
 Clear contracts
12
Market Logistics:
 Planning, implementing & controlling the
physical flow of material & final goods from pt.
of origin to pt. of use.
 Major Market Logistics Decisions:
 Order Processing
 Real Time Replenishment
 Batch Method
 Trying to shorten order-to-remittance cycle
 Warehousing
 Inventory Management
 Transportation 13
Inventory Management Concepts
 Reorder Point: Based on order & demand
forecasts
 Order Lead Time: Period b/n the date when
order is placed & when raw material is
available for production
 Usage Rate: Ave. rate at which raw materials
are used for production
 Safety Stock: Stock maintained as a buffer for
unforeseen circumstances
14
Determining Optimal Order Qty:
 OOQ = (2Co*D/Ch)^1/2
 Where:
 D = Demand/Unit time
 Ch = Holding cost/Unit time
 Co = Ordering Cost
 Assumptions:
 Demand is constant
 There is no inventory in
transportation
 Ordering cost is constant
15
Warehousing:
 Warehouse: Place where goods are kept
for a limited time period
 Two Types of Warehouse:
 Storage Warehouse: Relatively long term
storage of inventory/raw material
 Distribution/Transit Warehouse: For
temporary storage during transit of inventory
16
Functions of a Warehouse:
 Receiving
 Storing
 Packing
 Marking
 Shipping
 Documentation & Recording
 Stock Mixing
 Transloading/Cross Docking
17
Wholesalers Vs. Retailers
 Wholesalers  Retailers
 B2B Selling  B2C Selling
 Large Transactions  Small Transactions
 Visual Merchandising  Visual Merchandising
is not important is important
 Location is important  Location is important
keeping tax benefits, keeping customer’s
other low costs in accessibility in mind
mind  Do not have to give
 At times, have to give goods on credit
goods on credit to their  Customer oriented
buyers promotion
 Retailer oriented
promotion 18

04 - Distribution &amp Channel Decisions

Uploaded by

Copyright:

Available Formats

04 - Distribution &amp Channel Decisions

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

04 - Distribution &amp Channel Decisions

Uploaded by

Copyright:

Available Formats

Distribution & Channel Decisions

 Marketing channel performs the work of

You might also like