MODULE 5

CHANNEL OF
DISTRIBUTION &
PROMOTION
TOPICS TO COVER
Channel Of Distribution & Promotion
• Factors affecting choice of channel
• Channel design decision – Channel Management.
• Promotion – Meaning – Promotion mix – Selection of media –
Advertisement copy –Evaluation of advertising – Personal selling –
Sales Promotion.
Producing a product and making it available for buyers requires building relationships not only with
customers but also with key suppliers and resellers in company’s supply chain.
Thus supply chain consists of upstream and downstream partners.
Downstream suppliers (marketing / distribution channels) like wholesalers and retailers look toward
the customer

Good distribution strategies can contribute strongly to customer value and create competitive
advantage for a firm
But firms cannot do that alone, but they must work closely with other firms in a larger value delivery
network
 MARKETING CHANNEL / DISTRIBUTION CHANNEL

A set of interdependent organizations that help make a product or service available for use or
consumption by the consumer or business user

Marketing channel is a set of practices or activities necessary to transfer the ownership of

goods, and to move goods, from the point of production to the point of consumption and, as
such, which consists of all the institutions and all the marketing activities in the marketing
process.
According to Stanton , “ A distribution channel consists of the set of people and firms involved in the transfer of
title to a product as the product moves from producer to ultimate consumer or business user .”
This decision can impact the marketing decisions such as pricing decision, product decisions, promotion etc.
Channels add value to the business
Members of marketing channels perform important functions like
▪ Information
▪ Promotion
▪ Contact
▪ Matching – demand and supply
▪ Negotiation
▪ Physical distribution
▪ Financing
▪ Risk taking
MARKETING CHANNEL
• Biscuits/ chocolates and other groceries
• Cars/bikes
• Electronics
• KFC, MC Donald’s
• Fresh to meat/ licious
• Big basket
 TYPES OF CHANNELS

I. CONVENTIONAL MARKETING CHANNELS

II. VERTICAL INTEGRATED MARKETING CHANNELS (
▪ Producer (manufacturer) – consumer / Zero level
VMS ) OR MODERN CHANNELS OF DISTRIBUTION
channel / Direct channel.
▪ Corporate system – owns production and
▪ Producer – Retailer – Consumer channel / One
distribution facilities
Level Channel
▪ Contractual system - works through franchises or
▪ Manufacturer – Wholesaler – Retailer – Consumer
retail co-operatives, voluntary chains.
channel / Two Level Channel
▪ Administrative system - manufacturer controls
▪ Producer – Agent / Middlemen – Wholesaler –
the marketing of a particular line of merchandise
Retailer – Consumer Channel / Three Level
rather than complete store operation.
Channel
Factors influencing selection of Distribution
Channel in Marketing
Nature of the product

Customer characteristics

Nature of Market

Cost consideration

Time

Availability of middlemen

Competition

Technological factors

Consumption pattern

Other factors relevant to the company

Marketing channel design
A marketing channel is a set of interdependent organizations involved in the
process of making a product or service available for use or consumption.
Primary functions of channel members
• To be a stockiest of your product
• To represent your brand in the market place
• To gather marketing intelligence
• To assume risk
• To deliver product and offer post-sales support
• To add value to the sale
Channel Strategy
Formulating channel strategy: the most crucial aspect is the choice of the level of service by which an enterprise might
seek to secure competitive advantage.The importance of channel strategy is likely to depend upon the existence of one
or more of following conditions:

1. Designing the channel structure

2. Identify the major channel alternatives: considerations need to be given to

• Economic criteria
• Control criteria
• Adaptive criteria
• End user considerations
• Product characteristics
• Manufacturer’s capability and resources

3. Training
2 Examples
• Healthy Me – customized diet food, diet plans, online selling
• FMCG brand – online as well as offline presence
 1. Designing the channel structure: Channel design decision
Designing a channel system calls for analysing customer needs, establishing channel objectives, and identifying and
evaluating the major channel alternatives.

a. Analysing the service output levels desired by customers – 5 outputs include :

• Lot size

• Product variety – the assortment depth

• Service backup - The add-on services (credit, delivery, installation, repairs) provided by the channel

• Waiting time - The average time customers of the channel wait for receipt of the goods

• Spatial convenience - The degree to which the marketing channel makes it easy for customers to purchase the product

b. Determine the channel objectives and constraints - to minimize total channel costs with respect to desired levels of
service outputs. The company’s channel objectives are influenced by the nature of its product, Company
characteristics, Characteristics of intermediaries, Competitor’s channel, external environmental factors.
2. Identify the major channel alternatives:
After channel objective have been determined, the company should identify its major channel alternatives in
terms of :

A. Types of intermediaries – agent, wholesaler, distributors, retailers.

B. The number of intermediaries needed – exclusive distribution, selective distribution, intensive distribution.

C. The terms and responsibilities of each channel members – price policy, conditions of sale, distributor’s
territorial rights, mutual services and responsibilities.

D. Evaluate the major channel alternatives - Each channel alternative needs to be evaluated against economic,
control and adaptive criteria.
3. Training
• Training is a process of providing the intermediaries with specific skills for performing their task better and

helping them to correct deficiencies in their sales performance.

• Training program creates a win-win situation for both individual and the organization.

Phases of developing and conducting training

Successful program consist of four phases :

Training assessment

Program design

Reinforcement

Evaluation
What should the content of the training be?
• Attitude toward selling and toward training
• Knowledge of the company
• Product knowledge and application
• Knowledge of competitive products
• Knowledge of customers knowledge of business principles
• Selling skills
• Relationship-building skills
Promotion mix strategy
• Promotion is one of the market mix elements, and a term used
frequently in marketing.
• There are different ways to promote a product in different areas of
media. Promoters use internet advertisement, special events, and
newspapers to advertise their product.
Elements of Promotion
• Advertising: - Presentation and promotion of ideas, goods, or services by an identified sponsor. Examples:
Print ads, radio, television, billboard, direct mail, brochures and catalogues, signs, in-store displays, posters,
motion pictures, Web pages, banner ads, and emails.

• Personal selling: - A process of helping and persuading one or more prospects to purchase a good or service
or to act on any idea through the use of an oral presentation. Examples: Sales presentations, sales meetings,
sales training and incentive programs for intermediary salespeople, samples, and telemarketing. Can be face-
to-face selling or via telephone.
• Sales promotion: Media and non-media marketing communication are employed for a pre-determined,
limited time to increase consumer demand, stimulate market demand or improve product availability.
Examples: Coupons, contests, product samples, rebates, self-liquidating premiums, trade shows, and
exhibitions.

• Public relations: Paid intimate stimulation of supply for a product, service, or business unit by planting
significant news about it or a favorable presentation of it in the media. Examples: Newspaper and magazine
articles/reports, TVs and radio presentations, charitable contributions, speeches, issue advertising, and
seminars.
• Direct marketing: is a channel form of advertising that allows businesses and non profits to communicate
straight to the customer, with advertising techniques such as mobile messaging, email, interactive consumer
websites, online display ads, fliers, catalogue distribution, promotional letters, and outdoor advertising.
• Many times with the purchase of a product there is an incentive like
discounts, free items, or a contest. This is to increase the sales of a
given product
• A promotional mix specifies how much attention to pay to each of the
five subcategories, and how much money to budget for each.
Promotion
• Promotion is one of the market mix elements, and a term used
frequently in marketing.
• Promoters use internet advertisement, special events, and
newspapers to advertise their product.
Elements of Promotion:

Advertising Personal Selling Sales Promotion

Direct
Public relations
Marketing
A. Consumer Sales Promotions
Consumer sales promotions encompass a variety of short-term
promotional techniques designed to induce customers to respond in
some way. The most popular consumer sales promotions are directly
associated with product purchasing.
Selecting / deciding on the media
A. Consumer Sales Promotions
Free Samples Coupons Exchange scheme

Personality
Discounts Premium offers
promotions

Instalment sales Contests and Point of purchase

sweepstakes displays

Demonstrations &
Trade shows
Personal appearances
B. Trade oriented sales Promotions
Trade-oriented sales promotion programmes are directed at the dealer
network of the company to motivate them to the sell more of the
company’s brand than other brands.
It is also known as push strategy, which is directed at the dealer
network so that they push the brand to the consumers by giving
priority over other competitor brands.
B. Trade oriented sales Promotions

Cash bonuses Stock return Credit terms

Dealer trophies Push incentives Retail demonstrations

Functions of Advertising
Advertising usually constitutes a part of the marketing efforts of an organisation. Advertising is
undertaken by organizations in order to attract the attention of people towards products and services.
Thus, the basic aim of advertising is to create awareness in the minds of people, about the availability of
products and services and influence them to buy the same
• Communicates information
• Creates ground for personal selling
• Educates people
• Creates and extends demand
• Creates image for the product or service
• Builds goodwill
• Counters competition
Types of advertising media

Direct Advertising Media

• Delivered directly to the
prospective customers
Outdoor Advertising Media • Handed to persons on the
Indoor Advertising Media
• Posters sidewalk
• Newspapers
• Printed displays
• Magazines
• Electric signs
• Radio Display Advertising Media
• Travelling display
• Television • 2 types – Window &
• Sky writing
• Film advertising Counter
• Sandwich men
• Attracts the consumers to
the shop
• Impulsive buying
Factors affecting media selection
Nature of product
Nature of customers
Industrial product or Distribution of product
Demographics
consumer product

Advertising objectives Nature of message Size of ad-budget

Media used by competitors Media - availability Media reach and coverage

Media cost Media frequency Media image

Advertising layout
A visual layout of an advertisement has the following elements:
1. Headlines
2. Illustrations and colours
3. Text / content
4. Advertiser or sponsor
5. Black or white space
Advertising copy
• The term ‘copy’ covers all items appearing in an advertisement, the
written words, pictures, design, label and logo.
• Well-designed advertising copy uses four basic steps in selling:
1)Attracting Attention
2) Developing Interest
3) Arousing Desire
4) Finally, generating Action
AIDA formula
Elements of a good advertising copy

Attention value Suggestive value Memorising value

Sentimental
Convincing value Education value
appeal value

Instinctive appeal
value
Personal Selling
Personal selling is a paid two way communication to persuade
customers through information to buy products in an exchange
situation .
Advantages of personal selling :
• Specific communication targeted at one or specific individuals
• Greater impact on customers
• Due to immediate feedback, message may be adjusted.
• Responds to customers’ needed information.