DISTRIBUTION DECISIONS

• Channel of distribution decisions play a vital role to all types of firms. Functions performed by wholesaler, retailers, dealers are called intermediaries who connect producers to end users.

Purpose: • Middlemen are the one who

supplier of raw materials, labor. Distribution channels-retail, wholesaler, agents/brokers. To make things available from the place of production to the place of consumption.

CHANNEL ALTERNATIVES AVAILABLE TO MARKETING MANAGERS:

• Direct Marketing Channel or Zero Level Channels:

Producer Consumer

Indirect Marketing Channel:

• One Level Channel:

Producer Retailer Consumer

Producer Distributor Consumer

Indirect Marketing Channel:

• Two Level Channel:

Producer Wholesaler/Distributor Retailer Consumer

Indirect Marketing Channel:

• Three Level Channel:

Producer Distributor Wholesaler Retailer Consumer

Indirect Marketing Channel:

• Four Level Channels:

Producer Agent Distributor Wholesaler Retailer Consumer

Others• Company Sales Force • Dealer• Value Added Resellers• Merchants• Carrying and Forwarding Agents• Intensive Distribution:

FACTORS AFFECTING CHANNEL CHOICE:

1. Market Factor: • Customer Preferences• Organizational Customers• Geography• Competitors

FACTORS AFFECTING CHANNEL CHOICE:

2. Product Factor:– Life Cycle– Product Complexity– Product Value– Product Size and Weight– Consumer Perception

FACTORS AFFECTING CHANNEL CHOICE:

3. Manufacturer Factor:• Company Objective• Company Resources• Desire for Control• Breadth of Product Life

Channel Design Decision

• The most important task in channel management is the design of an effective and efficient channel for smooth flow of products, titles, payments and information and promotion programs.

Channel Design Decision

A new firm typically starts as a local intermediaries (agents, retailers, whole -sales,)

In small mkts the firm might sell directly to retailers, distributors.

In managing its intermediaries the firm must decide how much effort to devote to push vs pull strategy.

Push Strategy• A push strategy involves the

manufacturers using its sales force, promotion money to induce intermediaries to carry ,promote and sell the pdt to end users. it is appropriate where there is low brand loyalty, brand choice is made in the store.

Pull Strategy• Pull strategy involves the

manufacturer using advertising and promotion to induce customers to ask intermediaries for the pdt pull strategy is appropriate where there is brand loyalty, people choose the brand before they go to the store ex: Two wheeler, car

Designing a Channel System

Analysis of customers desired service output levels

Establishing channel objectives

Identifying major channel alternatives

Evaluating the major alternatives

Analysis of customers desired service output levels• Analyzing customer needs: lot

size: Waiting time: Pdt variety: Service backup

Establishing channel objectives

• Each channel alternatives provide a different level of sales, costs. Internet, tele mktg, retail stores, distributors, reward customers if they book-tickets (internet- movies, Air Bus)

Identifying major channel alternatives

• Company Sales Force • Dealer• Value Added Resellers• Merchants• Carrying and Forwarding Agents• Intensive Distribution:

Identifying major channel alternatives

• Wholesaler• Retailer• Distributor• Middlemen• Agent or Broker

Evaluating the major alternatives

• Once the list of alternative channels is selected, the marketing manager should evaluate each channel alternative to arrive at a final decision.

Channel Management Decision

• Once the channel is selected after careful evaluation, the channel manager should develop channel management strategy for the selected channels.

Channel Management Decision

• Selection of Channel Members• Training of Channel Members• Motivation of Channel Members• Evaluation of Channel Members• Modification of Channel Members

Channel Conflict• Vertical conflict: wholesaler and

manufacturer• Horizontal conflict: Retail outlets• Multi channel –level conflict:

Middlemen come in conflict with the manufacturer using both direct, indirect means of distribution.-franchisee outlet of a firm.

Causes Of Channel Conflict

• Goal incompatibility: IBM sells pc –sales force, dealers both trying to sell on large no .the credit for sales leads to conflict.

• Role Ambiguity: The dealers selling goods to retailers than conflict arise b/w dealer manufacturer.

• Difference in perception: Manufacturer may perceive opportunity in the Indian booming middle class& introduce new pdts, choice, dealers may not accept this pdts.

Managing the conflict• Communication: • Dealers councils:• Super ordinate goals: The channel

members to be motivated to perceive the customer satisfaction as the ultimate goal.

• Multi channel marketing:

Channel Dynamics• Vertical Marketing System• Horizontal Marketing System• Multi Channel Marketing System

Distribution system• Know what customers want: • Waiting time:• Pdt variety:• Decide on the outlet: shoppers stop,

Wal-Mart• Compare the alternatives: Functions

performed by various channels.