AMITY GLOBAL

BUSINESS SCHOOL Noida

Module 3 - Distribution and

Logistics Decision

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AMITY GLOBAL
BUSINESS SCHOOL Marketing Channel Noida

• Definition:
– A marketing channel system is the particular
set of interdependent organizations involved
in the process of making a product or service
available for use or consumption.

– Intermediaries

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AMITY GLOBAL
BUSINESS SCHOOL Noida

• Channels and Marketing Decisions:

– A push strategy uses the manufacturer’s
sales force, trade promotion money, and other
means to induce intermediaries to carry,
promote, and sell the product to end users
– A pull strategy uses advertising, promotion,
and other forms of communication to
persuade consumers to demand the product
from intermediaries

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• Hybrid Channels:
– Today’s successful companies typically
employ hybrid channels and multichannel
marketing, multiplying the number of “go-to-
market” channels in any one market area.
Hybrid channels or multichannel marketing
occurs when a single firm uses two or more
marketing channels to reach customer
segments.

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• Buyer Expectations for Channel

Integration:
– Ability to order a product online and pick it up
at a convenient retail location
– Ability to return an online-ordered product to a
nearby store
– Right to receive discounts based on total
online and offline purchases

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BUSINESS SCHOOL Noida

• Channel Member Functions:

– Gather information
– Develop and disseminate persuasive
communications
– Reach agreements on price and terms
– Acquire funds to finance inventories
– Assume risks
– Provide for storage
– Provide for buyers’ payment of their bills
– Oversee actual transfer of ownership
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• Marketing Flows in the Marketing Channel:

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BUSINESS SCHOOL Noida

• Marketing Channel Levels: Consumer

Markets

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BUSINESS SCHOOL Noida

• Marketing Channel Levels: Industrial

Markets

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AMITY GLOBAL
BUSINESS SCHOOL Noida

• Reverse-Flow Channels:
– Channels normally describe a forward movement of
products from source to user, but reverse-flow
channels are also important:
• to reuse products or containers (such as refillable chemical-
carrying drums)
• to refurbish products for resale (such as circuit boards or
computers)
• to recycle products (such as paper)
• to dispose of products and packaging.
Reverse-flow intermediaries include manufacturers’ redemption
centers, community groups, trash collection specialists, recycling
centers, trash-recycling brokers, and central processing
warehousing. Many creative solutions have emerged in this area
in recent years, such as Greenopolis.
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AMITY GLOBAL
BUSINESS SCHOOL Noida

• https://www.youtube.com/watch?v=7Y2mZ
OS8wc4

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BUSINESS SCHOOL Noida

• Designing a Marketing Channel System:

– Analyze customer needs
– Establish channel objectives
– Identify major channel alternatives
– Evaluate major channel alternatives

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AMITY GLOBAL
BUSINESS SCHOOL Noida

• A study on European Customer Value:

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AMITY GLOBAL
BUSINESS SCHOOL Noida

• Service Output of Channels: Channels produce

five service outputs:
– Lot size is the number of units the channel permits a
typical customer to purchase on one occasion. In
buying cars for its fleet, Hertz prefers a channel from
which it can buy a large lot size; a household wants a
channel that permits a lot size of one.
– Waiting and delivery time is the average time
customers wait for receipt of goods. Customers
increasingly prefer faster delivery channels.

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AMITY GLOBAL
BUSINESS SCHOOL Noida

– Spatial convenience is the degree to which the

marketing channel makes it easy for customers to
purchase the product.
– Product variety is the assortment provided by the
marketing channel. Normally, customers prefer a
greater assortment because more choices increase
the chance of finding what they need, although too
many choices can sometimes create a negative
effect.
– Service backup is the add-on services (credit,
delivery, installation, repairs) provided by the channel.
The greater the service backup, the greater the work
provided by the channel.
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AMITY GLOBAL
BUSINESS SCHOOL Noida

• Identifying Channel Alternatives:

– Types of intermediaries
– Number of intermediaries
– Terms and responsibilities

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BUSINESS SCHOOL Noida

• Number of Intermediaries:
– Exclusive Distribution
– Selective Distribution
– Intensive Distribution

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AMITY GLOBAL
BUSINESS SCHOOL Noida

• Terms and Responsibilities of Channel

Members:
– Price policy
– Condition of sale
– Distributors’ territorial rights
– Mutual services and responsibilities

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BUSINESS SCHOOL Noida

• The Value-Adds versus Costs of Different

Channels:

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BUSINESS SCHOOL Noida

• Break-Even Cost Chart

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AMITY GLOBAL
BUSINESS SCHOOL Class Discussion Noida

• Which among the 4Ps are most important

for marketers?
• Being a pharma company, you are about
to launch a painkiller OTC drug. What type
of distribution you will select and why?

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AMITY GLOBAL
BUSINESS SCHOOL Noida

• Channel-Management Decisions/ Process:

– Selecting channel members
– Training channel members
– Motivating channel members
– Evaluating channel members
– Modifying channel members

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BUSINESS SCHOOL Noida

• Channel Power:
– Coercive
– Reward
– Legitimate
– Expert
– Referent

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BUSINESS SCHOOL Noida

• Channel Integration and Systems:

– Vertical marketing systems
• Corporate VMS
• Administered VMS
• Contractual VMS
– Horizontal marketing systems
– Multichannel systems

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AMITY GLOBAL
BUSINESS SCHOOL Noida

• Integrated Marketing Channel System:

– An integrated marketing channel system is
one in which the strategies and tactics of
selling through one channel reflect the
strategies and tactics of selling through one or
more other channels.

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BUSINESS SCHOOL Noida

• Channel Conflict
– What types of conflict arise in channels?
– What causes conflict?
– What can marketers do to resolve it?

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AMITY GLOBAL
BUSINESS SCHOOL Noida

• Causes of Channel Conflict:

– Goal incompatibility
– Unclear roles and rights
– Differences in perception
– Intermediaries’ dependence on manufacturer

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AMITY GLOBAL
BUSINESS SCHOOL Noida

• Strategies for Managing Channel Conflict:

• Strategic • Cooptation
justification • Diplomacy
• Dual compensation • Mediation
• Superordinate goals • Arbitration
• Employee exchange • Legal recourse
• Joint memberships

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AMITY GLOBAL
BUSINESS SCHOOL Noida

• Retailing:

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BUSINESS SCHOOL Noida

• Major Retailer Types:

 Specialty store  Discount store
 Department store  Off-price retailer
 Supermarket  Superstore
 Convenience store  Catalog showroom

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AMITY GLOBAL
BUSINESS SCHOOL Noida

• Levels of Retail Service:

– Self service
– Self selection
– Limited service
– Full service

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• Non-Store Retailing:
– Direct selling
– Direct marketing
– Automatic vending
– Buying service

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BUSINESS SCHOOL Noida

• Changes in Retail Environment:

– New retail forms and combinations
– Competition between store-based and non-
store-based retailing
– Growth of giant retailers
– Decline of middle market retailers
– Growing investment in technology
– Global profile of major retailers
– Growth of shopper marketing

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BUSINESS SCHOOL Noida

• Tips for Increasing Sales in Retail Space:

– Keep shoppers in the store
– Honor the transition zone
– Don’t make them hunt
– Make merchandise available to the reach and
touch
– Note that men do not ask questions
– Remember women need space
– Make checkout easy

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BUSINESS SCHOOL Noida

• Private Label Brands:

– Private labels are ubiquitous
– Consumer accepts private labels
– Private-label buyers come from all
socioeconomic strata
– Private labels are not a recessionary
phenomenon
– Consumer loyalty shifts from manufacturers to
retailers

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AMITY GLOBAL
BUSINESS SCHOOL Wholesaling Functions Noida

• Selling and • Transportation

promoting • Financing
• Buying and • Risk bearing
assortment • Market
building information
• Bulk breaking • Management
• Warehousing services and
counseling

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AMITY GLOBAL
BUSINESS SCHOOL Noida

• Major Wholesaler Types:

– Merchant
– Full-service
– Limited-service
– Brokers and agents
– Specialized

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BUSINESS SCHOOL Noida

• Supply Chain Management:

– Supply chain management starts before
physical distribution and means strategically
procuring the right inputs (raw materials,
components, and capital equipment);
converting them efficiently into finished
products; and dispatching them to the final
destinations.

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BUSINESS SCHOOL Noida

• https://youtu.be/80N8cBp2LvU

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BUSINESS SCHOOL Noida

• Market Logistics Planning:

– Deciding on the company’s value proposition
to its customers
– Deciding on the best channel design and
network strategy
– Developing operational excellence
– Implementing the solution

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AMITY GLOBAL
BUSINESS SCHOOL Noida

• Integrated Logistics System:

– An integrated logistics system (ILS)
includes materials management, material flow
systems, and physical distribution, aided by
information technology.

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AMITY GLOBAL
BUSINESS SCHOOL Noida

• Tasks of Market Logistics:

• Sales forecasting • In-plant
• Distribution warehousing
scheduling • Shipping-room
• Production plans processing
• Finished-goods • Outbound
inventory decisions transportation
• Packaging • Field warehousing
• Customer delivery
and servicing
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AMITY GLOBAL
BUSINESS SCHOOL Noida

• Market Logistics Decisions:

– How should orders be handled?
– Where should stock be located?
– How much stock should be held?
– How should goods be shipped?

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AMITY GLOBAL
BUSINESS SCHOOL Noida

• Transportation Factors:

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AMITY GLOBAL
BUSINESS SCHOOL Noida

• E-commerce:
– Ecommerce uses a Web site to transact or facilitate
the sale of products and services online. Online
retailers compete in three key aspects of a transaction:
• customer interaction with the Web site
• delivery
• ability to address problems when they occur.
We can distinguish between pure-click companies,
those that have launched a Web site without any
previous existence as a firm, and brick-and-click
companies, existing companies that have added an
online site for information or e-commerce.

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AMITY GLOBAL
BUSINESS SCHOOL Noida

• M-Commerce:
– The widespread penetration of cell phones and smart
phones—there are currently more mobile phones than
personal computers in the world—allows people to
connect to the Internet and place online orders on the
move. Many see a big future in what is now called m-
commerce (m for mobile). The existence of mobile
channels and media can keep consumers connected
and interacting with a brand throughout their day-to-
day lives. GPS-type features can help identify
shopping or purchase opportunities for consumers for
their favorite brands.

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