Presentation on

DISTRIBUTION

By Arun pandey

MEANING OF DISTRIBUTIONDistribution is the process of making a product or service available for use or consumption by a consumer or business user, using direct means or using indirect means with intermediaries.

According to Philip Kotler”Distribution includes the various activities the company undertakes to make the product accessible and available to target customers.”

COMPONENTS/ELEMENTS OF DISTRIBUTION

The components of distribution are:1.Marketing channels2.Physical Distribution

Marketing channels(Middleman)Channels make the product available to customers. Various intermediaries makeup a marketing channel. They make the flow of products smooth. The middleman can be:

Merchants They buy, take title to, and resell products. Wholesalers and retailers are merchant middleman.

Agents They search for customers and make negotiations but donot take to the product. Sales agents, brokers and sales representatives are agent middleman.

Facilitators They assist in the distribution process. They neither take title to products nor make negotiations.Transporters,insurance companies, warehouses are facilitators.

Physical DistributionIt makes the product accessible to customers. It physically moves the products from producer to customers. The major activities performed are: order processing,warehousing,material handling, inventory management and transportation.

Objectives

Objectives of Distribution

Flow of goods

Availability of goods

Accessibility of goods

Efficiency

Customer Satisfaction

Flow of goods Distribution makes smooth flow of products from manufacturer to channel members and customers.

Availability of Goods Distribution channels make the goods available to custmers.Channels such as wholesalers and retailers ensure availability of goods at all the time.

Accessibility of goods Distribution makes goods accessible to customers through physical distribution. Goods are delivered at right place in right time and in right quantity.

Efficiency Distribution achieves marketing efficiency.

IMPORTANCE OF DISTRIBUTION(CHANNEL FUNCTIONS)

Distribution plays very important role in marketing in the areas of delivering satisfaction to the society, value addition on the product, providing production means and channels of communication and employment to large number of people involved in distribution of products. The following points indicate the importance of distribution:: EfficiencyCommunicationFinancingValue additionEmploymentCompetition

Efficiency Manufacturers produce limited variety of products in

large quantity. Customers desire large variety of products in limited quantity. Distribution facilitates assortment of products. Customers can get all the products to match their needs. This promotes marketing efficiency.

Communication Distribution facilitates communication. It links the

manufacturer and the customer. Manufacturers can transfer messages to customers through channel members about product, price and promotion.

Financing Middleman themselves finance their operations.

They store and finance inventories. Manufacture donot need to establish their own distribution channel.

Value addition Distribution adds value to the product through

delivery at right place in right time and in right quantity. Value is essential to satisfy customers needs.

Employment Distribution creates employment opportunities.

Market intermediaries are important source of direct and indirect employment at retail and wholesale level.

CHANNEL LEVEL FORCONSUMER AND INDUSTRIAL GOODS

INTRODUCTIONChannel level:

refers to the intermediary in marketing distribution channel between the producer/manufacturer and the end consumer. Every channel level plays a role in making the good available to the end consumer.

The number of channel levels between the producer and consumer could be 0,1,2,3 or more.

A zero level channel Is a direct marketing channel where there is no intermediary and

the producer sells directly to the consumer. For example – direct mails, telemarketing etc.

A one level channel Has one intermediary, typically a retailer between a manufacturer

and consumer. Similarly a 2 level channel and a 3 level channel have 2 and 3 intermediaries respectively.

An example of various channel levels is illustrated as below:

Channel level for consumer goods

The goods that the consumers buy for the purpose of consumption or use are called consumer goods.

On the basis of buying behavior, consumer goods can be divided into three classes as convenience goods, shopping goods and specialty goods.

The alternatives available for channel structure of consumer products are;

Zero-level Channel(Producer Consumers)

This channel is also called direct channel. In this, the producers sell their goods or services directly to the

consumers. There is absence of intermediary or middlemen between the producers

and consumers. This is the most common, easy and short channel for sales or distribution

of goods. The small producers of perishable products also sell their products directly

to the local consumers. Big firms, which want to minimize distribution cost and eliminate middlemen, use direct level distribution channel to sell their products.

Eg: Door to Door, mail order, telemarketing, online marketing, TV marketing, own stores

One Level Channel: (Producer........Retailer......Consumers)

In one level channel of distribution, only retailers remain as middlemen between producers and consumers.

In this channel producers sell their products to retailers and the retailers sell them to final consumers. The producers do not seek help of wholesalers or agents to sell their products.

Big retailing shops such as departmental stores, super markets, discount houses etc. have begun to appear in markets. They have made easy to sell any goods or services without the presence of wholesalers in the distribution channel.

Two-level Channel: (Producer.........Wholesaler.........Retailer............Consumers)

In this channel of distribution, the producers sell their products to final consumers through wholesalers and retailers. In other words, the producers sell their products to wholesalers, then wholesalers sell them to retailers and the retailers sell to final consumers.

This channel is used to sell or distribute foodstuffs, medicines, including many other consumer goods. This channel is suitable for the products, which need to be supplied to scattered markets and consumers.

Third Level Channel: (Producer....Agent....Wholesalers....Retailers....Consumers)This is the longest channel of distribution of consumers

goods. In this channel three middlemen are used to supply goods to the final consumers. In other words, the producers sell their products to final consumers through agents, then agents sell them to wholesalers and wholesalers sell them to retailers and finally the retailers sell the goods to consumers.

This channel is useful to those producers who cannot contact many wholesalers, cannot pay attention to international markets and want to avoid several distribution problems.

Channel level for industrial goodsThe products, which are used by industrial firms

to produce other finished goods, are called industrial products. Raw materials, machines, equipment, management materials and production supplies etc. include in industrial products. The channel for sale and distribution of such goods depends on type and nature of industrial goods, necessity, number of users, geographical distance etc.

The structure of distribution channel for industrial products can be mentioned as follows:

Zero Level Channel:(Producer.......Industrial User)

In this channel the producers directly sell their products to industrial users without the help of intermediaries.

Large quantity of industrial goods, big installations machines, costly equipment's, raw materials and important machine parts re directly sold to the industrial users.

E.g. Manufacturers of planes, big generators, ships, buses

etc. produce the goods according to the order of the customers and contact directly to them. This channel is less costly and more effective in distribution of industrial goods.

. One Level Channel ( Producer.......Industrial distributor........Industrial consumer)

Less costly office materials, equipment, operational supplies, construction materials, spares and parts etc. are sold through industrial distributors.

In this channel, only one level intermediary remains between producers and users. The producers sell their products to industrial distributors and the industrial distributors sell them to industrial users.

Two Level Channel(Producer......Agent.....Industrial distributor.....Industrial user)

This is the longest channel for distribution of industrial goods. Two intermediaries i.e. agent and industrial distributor remain between producer and users. Producer's agent contact industrial distributors and industrial distributors sell the goods to industrial users.

This two level channel becomes useful to sell operating supplies, small spares and parts and other industrial goods that need massive distribution.

Channel power, role and conflictChannel role: Channel role refers to the activities that

channel members are expected to perform. The role can be leader or the followers. This can lead to cooperation or conflict.

Channel power: Power is the ability to influence and

control. Channel power is the ability of control channel members. It results out of the control exercised by the channel participants and the leadership position of a participant in the channel system.

Sources of power

i. Reward power: It is an ability to provide financial and other

benefits to channel members.

ii. Coercion power: It is an ability to give punishment to the channel

members. For eg: Retailers may refuse to carry a brand.

iii. Referent power: It refers to the ability of a leader to influence a

follower because of the follower’s loyalty, respect, friendship, admiration, affection, or a desire to gain approval.

Cont……..iv. Expert power: It refers to the knowledge and expertise

of a channel member. Experience and expertise to distribute products is expertise power. It results in more efficient distribution system.

v. Legitimate power: It is an authority to influence and control

through ownership of brand. It is based on leader-follower relationships in the channel system.

Channel conflict Definition: “Conflict can be defined as disagreement

through which the parties involved perceive a threat to their needs, interests or concern. ”

It can also be defined as all kinds of opposition or antagonistic interaction.

It is a kind of misunderstanding or misperception on a certain interaction.

It is inevitible so it needs to be manage.

Types of conflict:1.Vertical : It is the conflict between different levels within

the same channel. For eg. Manufacturer and retailers.

2.Horizontal: It is the conflict between members at the same

level within the channel. For eg. Retailer and retailer.

3. Multi-channel: It is the conflict when two or more channels

compete in selling to the same market.

Causes of conflicti. Goal incompactibility: Conflict may arise due to the differences in individual

members’s goals. For eg. Manufacturer wants high sales. Retailer wants high profit margin.

ii. Unclear roles: Conflict often arises from role of deviance or malfunction of

a channel member. If a member doesnot perform his/her expected role, other channel members feel bitter, which may lead to a channel conflict.

iii. Perceptual differences: When a channel member percieves that another

channel member is harming individual or common interests, conflict arises.

Cont……

iv. Over - dependence: Over dependence on channels or

manufacturer causes conflict. Exclusive dealers feel over-dependence on manufacturers.

v. Ideological differences: Most of the channel conflicts results due to

the differences in business ideology among the members.

vi. Poor communication: Communication gap between the members

also causes conflict.

Methods of Conflict Resolution Whenever conflicts arises in an

organization , it needs to be resolved as soon as possible. Personal issues should be reduced, it causes an disfunctional conflict.

Functional conflict based on channel related issues can be constructive. It leads to co-operation if resolution properly.

Conflict cannot be eliminated but it can be managed. For managing such conflicts we can followed four methods of resolution. They are:

Cont…….

1.Conciliation: Diplomacy, mediation, and arbitration are

used to resolve conflict.

2. Channel restructuring: Channel structure is modified to manage

conflict.

3. Goal modification: Channel members agree on new goals to

face outside threats.

Cont……..

4. Politics: Trade associations are formed to gain

channel power. Retailers may form retailer associations.

5.Expansion of resources: Financial resources are expanded to

manage conflict. Commission to retailers may be increased.

6. Improved communication: Better communication is promoted for

conflict management.