Distribution Management and Marketing Mix

Chapter 8

Krishna Havaldar

Distribution Management

This aspect of the marketing function provides Place Time Possession

Form

Utility to the customer

Placeutility Time

utility

Possessionutility

Form

Distribution Management

Consumer wants to buy Colgate PLACE: Make it available at retail shop close

to his residence (alternative places) TIME: He wants it at 8 pm on Tuesday (not a

office time) (At customers chosen time POSSESSION: He pays and take it home FORM: He wants a single packet, and not a

carton.

Distribution Management

The management of all activities which facilitates movement and co-ordination of supply and demand in the creation of time and place utility in goods.

The art and science of determining requirements, acquiring them , distributing them and finally maintaining them in an operationally ready condition for their entire lives

Broad range of activities concerned with the efficient movement of finished products from the end of the production line to the consumer and in some cases it also includes the movement of raw materials from the source of supply to the beginning of the production line.

Supply chain, and weak link

Supplier’s Supplier

Supplier Company Customer Customer’s

Customer

Supplier’s Supplier’s Supplier

Customer’sCustomer’s Customer“Who could be this weak link?”

Need for distribution channels

How else can we distribute ? door-to-door? through exhibitions? through C&F agents? through wholesalers? through distributors? . . . .

Need for distribution channels

Functions of Intermediaries: To accumulate right kind of goods, aggregating and sorting to meet

consumer needs at POP To believe in routine and simplified transaction and work with large

no of products, so that the distribution costs could get minimized. To provide information both to the sellers and the buyers to help

them manage their business better To buy a large variety of goods and can compare costs and prices

and make the right recommendations to their customers To be aware of the environment in which they operate and hence

isolate companies from the direct impact of these local conditions To reduce the no of touch points. The company will be able to meet

demands of thousands of customers directly and hence needs intermediation.

Help manufacturer to effectively run trade and consumer promotions Provide credit facilities to their buyers

“Are intermediaries necessary?”

Philip Kotler

Marketing Channels and Value Networks

Philip Kotler

Role of Marketing Channels

M

M

M

M

M

MC

C

C

C

C

CD

M: ManufacturerD: DistributorC: Customer

No of contactsM x C = 3X3 = 9

No of contacts M + C = 3+3 = 6

Gather info about potential and current customers, competition, and other actors and forces in the marketing environment

Develop and disseminate persuasive communications to stimulate purchasing

Reach agreement on terms Place orders Invest in business Assume risks Inventory control Manage financial transactions Delivery and ownership transfer

Philip Kotler

Channel Functions and Flows

“Direct distribution or Indirect distribution?”

Philip Kotler

Channel Levels: Consumer Marketing Channel

Manufacturer Manufacturer Manufacturer Manufacturer

Consumer Consumer Consumer Consumer

Retailer Retailer Retailer

Wholesaler

DistributorDistributor

0- level 1- level 2- level 3- level

Direct

Discrepancies and Distribution channels (Wroe Alderson) Distributional channel members take care of four

discrepancies that exist in the market place Spatial discrepancy

Helps reduce the distance between the producer and the consumer

Temporal discrepancy Helps speed up time in meeting the requirement of the

consumer Need to break the bulk

Reduce large quantities into acceptable lot sizes for the consumer

Need to provide assortment Provide variety to the consumer to choose from

Financial support Helps fund the activities of reaching the product to the

consumer

How does distribution add value? Distribution channel strategy

Customer service level ABC analysis of service level and then plan

Setting distribution objectives Availability, finance, requirements

Set of activities expected by them Provide forecast to them Arrange dispatches Develop beat plan Market visits to sell proceeds Collections Promotions Build long term relationships with A class dealers

The distribution organization Extent of company support Affordability Selecting channel partners Set system for monitoring Ensuring financial investment

Policy and procedure Key performance indicators (KPIs) Critical success factors (CSFs)

Distribution channel

Distribution channel can broadly be classified as Sales channel

Delivery channel

Service channel

Patterns of Distribution

Intensive distribution As many outlets as possible Ex. FMCG products of HLL

Selective distribution Only few carefully selected outlets Outlets that matters the most Ex. Consumer durables

Exclusive distribution More selective Only one outlet in a market Own outlets or franchisee outlets Ex. McDonalds, Automobiles