Unit 3 Distribution

Place Decisions (Distribution)
E-Commerce Distribution
Network
PLACE: ACCESSABILITY
 Part of 4P of Marketing.
 Deals with the ‘place’ element of the marketing
mix.
 This aspect of marketing function provides place,
time and possession utility to the customer.
Distribution Management
 The management of all the activities which

facilitates movement and coordination of supply
and demand in the creation of time, place and
possession utility in the goods.
 The art and science of determining requirement,

acquiring them, distributing them and finally
maintaining them in an operationally ready
condition for their entire lives.
What is a channel/ intermediary???
A distribution channel is a chain of businesses

or intermediaries through which a good or
service passes until it reaches the end consumer.
It can include wholesalers, retailers, distributors
and even the internet itself.
Distribution Intermediaries Functions
 Helps in the process of exchange.

 Make the product physically available to the customers.
 Accumulate the right kind of goods , aggregating and sorting to meet
consumer needs at the point of purchase.
 To get the routine transactions done and work with a large number of
products so that the distribution costs could be minimized.
 To provide information to both buyers and the sellers to manage their
deals better.
 To be aware of the environment in which they operate and deal with it
properly, hence saving the company from direct impact of these local
conditions.
Distribution Channel for Consumer Products
(B2C)
Industrial Products Distribution
(B2B)
Advantages of Channel
 Provides logistic support
 Provide transactional functions
 Burden Sharing, Time and cost sharing
 Reduces risk.
 Helps in availability of the product to the customer.
 Spatial Convenience for customers.
 Customer can buy in small quantities.
 Helps in boosting sales.
 Customers may receive financial support too.
 Provides valuable information about the customers, competitors
and the market.
Disadvantages of Channel
 Adversely affect revenue and communication
control.
 Product may be sidelined.
 Lack of overall Control.
Intermediaries functions
 Exchange Functions
 Logistics Functions
 Facilitation Functions
Exchange Functions
 Change in Ownership or title transfer

 Finding and seeking buyers and sellers
 Stimulating sales
Logistics Functions
 This function is related with the physical distribution of the product.
 Products are ordered, billed, handled, packed, bundled, sorted, crated
and delivered.
 Products are assembled, stored, warehoused, loaded, unloaded,
shelved, and displayed.
 Shipment of the product.
 Products are exported, imported, documented, marked and
consolidated.
 Products are tracked, recycled and disposed.
 Products are serviced, repaired, returned and installed.
 Products are dropped off and picked up.
 Logistical customer standards are set (Time, Availability. Errors etc.)
Logistic Functions
 Breaking Bulk: Buying goods in large quantities and sell
them in smaller quantities. This action helps in reducing the
cost for customers and company both.
 Accumulating Bulk: Works as assemblers. Eg: Retail, Food,
Vegetables, Milk and other agricultural products etc.
 Creating Assortments: Wholesalers that purchase many
different products from different manufacturers can offer
retailers a greater assortment of items than an individual
manufacturer is able to provide.
 Transaction Efficiency
 Communication Functions
Facilitating Functions
 Augmented Services
 Credit Services
 Risk Taking
Channel Designing Decisions
Analyzing customer needs
(a) Lot size (b) Waiting and delivery time (c) Spatial convenience
(d) Product variety (e) Service backup
Establishing channel objectives

Channel objectives should be stated in terms of targeted service output levels. Channel design
must take into account the strengths and weaknesses of different types of intermediaries.
Identifying major channel alternatives

A channel alternative is described by three elements : (a)the types of available business
intermediaries, (b) the number of intermediaries needed, (c) and the terms and responsibilities of
each channel member.
Evaluating major channel alternatives

A) Economic Criteria
B) Control Criteria
C) Adaptive Criteria
Analyzing customer needs
(a) Lot size :
 In buying cars, taxi services providers like Uber prefers a
channel from which it can buy a large lot size.
 A household may prefer channel that can deliver single units.
(b) Waiting and delivery time :
The average time customers of that channel wait for receipt of the
goods. Customers increasingly prefer faster and faster delivery
channels.
(c) Spatial Convenience: The degree to which the marketing channel

makes it easy for customers to purchase the product.
Example : Pepsico’s spatial convenience is more as compared to Coca
Cola’s Products as it is easily available as compared to Coca Cola’s
products.
(d) Product Variety: The assortment breadth provided by the
marketing channel.
Normally, customers prefer a greater assortment because more
choices increase the chance of finding what they need.
(e) Service Backup : The add-on services are the credit, delivery,
installation, repairs and others provided by the channel. The greater
the service backup, the greater the work provided by the channel.
Establishing Channel Objectives
 Channel objectives result from the company‘s marketing objectives that need
to be stated in terms of targeted service output levels.
 Profit considerations and asset utilization must be reflected in channel objectives
and the resultant design.
 It should be the Endeavour of the channel members to minimize the total
channel costs and still provide with the desired level of service outputs.
For example,
1. Perishable products require more direct distribution capabilities because of the
dangers associated with delays and repeated handling.
2. Products requiring installation and/or maintenance services are usually sold and
maintained by the company or exclusively branches dealers.
3. Custom-built machinery and specialized business forms are sold directly by
company sales representatives because middlemen lack the requisite knowledge.
Identifying Major Channel Alternatives
 Companies can choose from a wide variety of channels for
reaching customers from sales forces to agents, distributors,
dealers, direct mail, telemarketing, and the internet.
Major Channel alternative decisions:
1. The type of business intermediaries: Company Sales force,
prospects in the area, Manufacture’s Agency, Industrial
Distributors.
2. The number of intermediaries: Intensive Distribution &
Exclusive Distribution.
3. Terms and responsibilities of each channel partner: Price
policies, conditions of sale, territorial rights and specific
services to be performed by each party.
Evaluating Major Channel Alternatives
Economic criteria :- Each channel alternative will produce a different level of sales and cost.
 E.g. Company sales representatives are better trained to sell the company’s products but a
Sales agency could economically sell more than a company sales force due to more sales
guys and better knowledge of the geographical area.
Control criteria :- Channel evolution has to include control issues. Using a sales agency
poses a control problem.
 E.g. The agent might not master the technical details of the company’s product or handle
its promotion materials effectively.
Adaptive Criteria :- Each channel involves some duration of commitment and loss of
flexibility.
 E.g. A manufactures seeking a sales agency might have to offer a five year contact. During
this period, other means of selling such as direct mail might become more effective, but
the manufactures is not free to drop the sales agency.
Factors to be considered while choosing
channel
 Type of Customer (Buying Process)
 Type of Product (E.g. Perishable vs. Non perishable products)
 Channel Partner capabilities
 Business environment and technology
 Competitor’s product marketing channels
 Govt. regulations
Channel Members training and its benefits
 Better communication and stronger network

 Less need for company’s support and a lower
churn rate
 Increase in sales
 Easier onboarding
 Protects the brand
 Feedback
Motivating Channel Members
 Coercive power. Manufacturer threatens to withdraw a resource
or terminate a relationship if intermediaries fail to cooperate.
Produces resentment.
 Reward power. Manufacturer offers intermediaries extra
benefits for performing specific acts. E.g. Trade Discounts,
Credit, Samples etc.
 Legitimate power. Manufacturer requests a behavior that is
warranted by the contract.
 Expert power. Manufacturer has special knowledge that the
intermediaries value.
 Referent power. Intermediaries are proud to be identified with
the manufacturer.
EVALUATING CHANNEL
MEMBERS
 Effectiveness
 Efficiency
 Equity and
 Profitability of the channel
 Turnover
 Customer acquired
Modifying Distribution Channels
 Distribution channel is not working as planned.

 Consumer buying patterns change.
 Market expands.
 New competition arises.
 Innovative channels emerge.
 Product shift stages in the product life cycle.
Marketing channel system –Types of Flows

Unit 3 Distribution

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Place Decisions (Distribution)

 The management of all the activities which

 The art and science of determining requirement,

A distribution channel is a chain of businesses

 Helps in the process of exchange.

 Change in Ownership or title transfer

Establishing channel objectives

Identifying major channel alternatives

Evaluating major channel alternatives

(c) Spatial Convenience: The degree to which the marketing channel

 Better communication and stronger network

 Distribution channel is not working as planned.

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