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Promotion Mix - II

Distribution decisions and Distribution channels

Distribution means the movement of goods and storage of goods, transfer of
good’s ownership from producer to consumer or we can say that distribution is a
process in which producer gives his products in the hands of the actual users with
the help of intermediaries .

Functions of distribution channels

1. Products flow to the market with the help of distribution channels
2. With the help of distribution channel time and place utility takes place.
3. Distribution channels helps in providing satisfaction to consumers by providing
them services at doorstep.
4. Distribution channel is the source of contact between Producers and
Consumers

Types of distribution channels

The distribution channels can be classified into three parts
1. direct distribution channel
2. indirect distribution channel
3. both direct and indirect distribution channel

Direct distribution channel- It is a distribution channel in which product is

transmitted directly from producer to consumer.
Following methods can be used in direct distribution:-

1. By own sale shop

2. By mail order
3. By telephone

Advantages of direct distribution channel

1. Less time consuming methods
2. Prices are reasonable due to absence of middleman
3. Things are done on cash basis

Indirect channels of distribution

It is the channel in which the manufacturer sales his good with the help of
intermediaries.
There are three level of indirect channel

One level
:Producer-retailer- consumer
or
Producer-wholesaler – Consumer

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Two level channel

Producer- Wholesaler – Retailer - Consumer

Three level channel have

Producer -Agent –Wholesaler- Retailer -Consumer

Advantages

1.The consumer can avail credit facility

2. They have a choice of selection because the intermediary have different brands
.
3. they can compare different brands
4.Can do product channel expansion

Dual distribution channel then the manufacturers of both the channels that is
direct and Indirect channel

It is known as dual distribution channel distribution policy in which distribution

takes place by both methods(direct and indirect) according to the demand of the
market.

Distribution policy

Intensive distribution- In this type of distribution the sales is proceed through

large number of salesman and large no of distributors ,this method is suitable for
convenience goods.

Exclusive distribution- In this policy the sales is done through a fixed area
through fixed middleman,this is suitable for specific goods.

Selective distribution- It is combination of intensive and exclusive distribution

which used both strategies of distribution according to the market . This is suitable
for shopping and speciality goods.

Wholesalers

These are the marketing intermediaries who purchase goods from manufacturer
in large quantities and sell them to retailers in small lots.

Services of wholesalers

They take bulk orders from manufacturers which leads to decrease in per unit cost
of production

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They give financial help to manufacturers by giving them advance payment and
give credit facility to retailers
Helps in convenience in buying by providing goods at each place

They reduced the needs of Storage for retailers by providing time and place utility
They help in price stability

Retailers- These are intermediaries who are engaged in the passage of goods
from the wholesaler to the final consumer

Services of retailer
They provide the whole information to the customers
They help in advertisement of new manufactured good
They advertise product
They provide wide choice to the customers
They make shopping easy

Types of retailers

1.Departmental Store -This type of retailer channel offering a wide range of

products and can appear as a collection of small retail shop managed by one
company, this type of stores have large number of product variety due to providing
large number of goods under one roof.

2.Supermarket- This type of retailer concentrates in supplying a range of food

products and beverages .

3.Warehouses retailer- This type of retailers place at areas where rent are low
and can store much stock

4.Speciality Retailer- These type of retailers are specific company retailers who
retail only a particular company's products.

5.Convenience retailers-These retailers are located in residential Areas where

they provide convenient shopping for customer

Pricing Strategies

Pricing is the main elements to which profits or revenue generated in the firm from
price.It is very essential to decide the price after considering internal and external
factors. Both internal factors that affect prices

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Internal factors are

a. Corporate and marketing objective

b. Image of the firm
c. Characteristics of the product
d. Elasticity of demand of product
e. Stage of PLC
f. Cost of product
g. Differentiation of products

External factors these are the factors like

a. Market demand
b. Type of customer
c. Level of competition
d. Buyer behavior
e. Bargaining power of customers and supplier
f. Government involvement and control on price

Objectives of pricing

i. Profit maximization in short and long run

ii. To achieve sales volume
iii. To achieve market share
iv. To make image of the product and formed to beat
competitors
v. To recover investment amount

Types of prices

1. Cost based prices –It focused only to cover the manufacturing cost in selling.
Following are the methods of doing cost based pricing

Markup pricing- It refers to the pricing in which selling price is fixed by adding
margins to its cost price.

Absorption cost pricing -In this pricing the selling price is decided by using
standard cost techniques or by dividing cost in two fixed and variable cost

Marginal cost pricing -Marginal cost pricing includes all the direct variable cost
of the products

Merits of cost based pricing

1. The firm can ensure the target profit

2 . Risk is minimum

Demerits of cost based pricing

1. Percentage of profit is arbitrary
2. Profit can be lost by keeping prices too low

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2.Demand and market based pricing

In this matter price is set on the basis of demand in market

Methods of demands pricing

a. Skimming pricing - This method is based on high price and high profit
concept, this method is very useful in the presence of new product especially for
luxury items. In this method a product is introduced with very high prices.

b. Penetration pricing- in this method products sold that at low price,this

method is opposite of skimming pricing. This method is used to capture market
or penetrate market.

3. Value pricing

Price and value have direct relationship with each other price revolves around
value In this method the value of the products created in the eyes of the
consumers and pricing of the product is done according to the value of product

4. Product line pricing

. In this type the pricing is done on the basis of the price of all products in a
product line.

5.Differential pricing
Differential pricing is a method in which different prices are charged for same
products according to the market and customers.

6.Going rate pricing-In this method pricing is set on the prevailing market price

7.Competition based pricing-This method of pricing is done after analyzing the

pricing policy of competitors.

Steps in the process of pricing decision

1.Identify the target customer segment

2.Decides the market position and price image

3.Determine the price and demand elasticity

4.Analyse the stages in PLC

5.Analyse competitors price

6 Analyse other environmental factors

7.choose the pricing method

8. select the price

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