Introduction to

Distribution
Management

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At the end of this module, the learning outcomes are:
• Concept and need for distribution channels.
• Understand distribution channel strategy.
• Overview of distribution channel members.
• Understand the various types of distribution networks

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Suggested Readings:
• Sales and Distribution Management by Havaldar and Cavale, 2nd
edition, Chapter 8.

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Marketing Mix
• Product
• Price
• Place
• Promotion

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Distribution
• Distribution channels relates to the ‘place’ aspect of the marketing
mix.
• How to make product available for the producer to the end consumer.

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Distribution channels
• Exist because producers cannot reach all their consumers
• Multiply reach and provide efficiency to the marketing process
• Facilitate smooth flow and create time, place and possession
utilities
• Have the core competence and reach
• Provide contact, experience, specialization and scales of operation

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How does Distribution add value?
Distribution function adds value by providing
• Time
• Place
• Possession
• Utility to the consumer.

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How does Distribution add value?
• Consumer wants to buy a Soap
• Made available at a retail outlet close to her residence – place
• Made available at 8 pm on a Tuesday evening when she wants it –
time
• She can pay for the Soap and take it away – possession
• The company distribution function has made all this possible.

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Distribution Channels
Take care of five discrepancies
• Spatial discrepancy
• Temporal discrepancy
• Need to break bulk
• Need to provide assortment
• Need for financial support

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Spatial discrepancy
• The channel system helps reduce the ‘distance’ between the
producer and the consumer of his products.
• Consumers are scattered
• Have to be reached cost effectively
• Example: companies produce products in one location even for global
needs

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Temporal discrepancy
• The channel system helps in speeding up in meeting the requirement
of the consumers
• Time when the product is made and when it is consumed is different
• Limited number of production points but hundreds of consumers
• Maruti plant in Gurgaon – cars and spares are available when the
consumer wants.

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Need to break bulk
• Products are manufactured in large quantities.
• Consumer require small quantity.
• Large quantity has to be broken into small quantity.
• Customers are willing to buy.

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Need to provide assortment
A consumer needs various products to have breakfast
• Bread
• Butter
• Milk
• Jam
• Shopkeeper is forced to keep different brands to attract consumers.

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Need for financial support
• Many consumers expect credit.
• Producers reluctant to provide credit.
• Expect channel partners to provide credit.

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Distribution Channel strategy
Depends on
• Corporate strategy
• Business Strategy
• Marketing strategy
• Distribution strategy
• The role of distribution will be guided by Corporate, Business and
Marketing strategy.

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• Distribution strategy
• Defining customer service levels
• Defining distribution objectives
• Strategies to achieve the distribution channel objectives.
• Decide the structure of the network.

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• Defining distribution objectives
• Depends on corporate objectives
• Do you aim to be Market Leader, Challenger or Follower.
• Distribution approach will depend on the above.

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• Defining customer service levels
• Depends on
• Nature of the industry
• Competitive structure
• Product portfolio

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• Strategies to achieve the distribution channel objectives.
• Depend on distribution objectives.
• If you aim to become market leader.
• Increase volume sales.
• You may have to make your product available at multiple outlets.
• Use of intermediaries.

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• Decide the structure of the network.
• Understanding existing market structure.
• Indian market dominated by unorganized retailers.
• Developed markets dominated by organized retailers.
• A distribution network will have to look at how to seek unorganized
retailer’s cooperation.

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• Functions of distribution channels
• Collect information about customers, competitors to aid company
marketing efforts.
• Storage and transportation.
• Provide assortment.
• Break Bulk into marketable sizes.
• Provide salesmanship.
• Provide credit to buyers.

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• Provide selling activities
• Assist in promotions.
Provides pre-sale and after-sale service.
Develop and disseminate persuasive communications to stimulate
purchasing

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DISTRIBUTION MANAGEMENT

Hindustan Unilever experience(HUL)

• Largest FMCG company in India
• Changes in the competitive environment
• Organized retailing gaining importance
• Threats to HUL
• Private labels
• Increasing clout of organized retailers

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DISTRIBUTION MANAGEMENT

Hindustan Unilever experience(HUL)

• How to counter this
• How to strengthen distribution network

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DISTRIBUTION MANAGEMENT

Super Value Stores(SVSs)

• Organized retailing a threat
• Also threat for unorganized retailers
• An adage ‘an enemy’s enemy is a friend’
• Can enemy of organized retailing can become a friend
• Unorganized retailing
• Has to gear up against organized retailing

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DISTRIBUTION MANAGEMENT
Hindustan Unilever experience(HUL)
• Better value proposition to customers
• HUL’s value addition
• Certify them as Super Value Store
• Many small stores becoming SVS
• Nationwide
• Survive against organized retailers.
• Better display of HUL products
• Exclusive promotional offer for its customers
Providing value through distribution

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DISTRIBUTION MANAGEMENT
The Titan watch experience
• Positioned Titan as an ornament
• How consumers buy ornament
• From showrooms
• Created a concept of showroom
• Variety, aesthetics and display
• High investments
• Helped in creating unique positioning for Titan watches
• Providing value through distribution

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DISTRIBUTION MANAGEMENT

B. Number of Intermediaries
Three types of strategies
• Exclusive distribution
• Selective distribution
• Intensive distribution

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DISTRIBUTION MANAGEMENT

Exclusive distribution
· Limiting the use of intermediaries
· Not allowing competing brands
· Maintain control
· Total commitment of intermediary
Maruti
· Exclusive dealers
· Huge investments by dealers
· Maruti provides support

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DISTRIBUTION MANAGEMENT
Selective Distribution
·Use of more intermediaries
·Compared to exclusive
·Need more visibility
·More control
·Less cost
Shahnaz Hussain Herbal products
·Not available from every Grocery shop
·Available at select outlets
·Maintain Image

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DISTRIBUTION MANAGEMENT

Intensive Distribution
• As many outlets as possible
• Multiple channels
• Consumers widespread
• Reach critical
• Problems of control
Example
Lux Soaps, Lifebuoy, Colgate

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DISTRIBUTION MANAGEMENT

Indian Rural Scenario

• Haats
• Mandis
• Melas

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DISTRIBUTION MANAGEMENT

Haats
• Public gathering of buyers and sellers
• Often once a week
• Buying daily items
• Over 40000 in India
• May cover 20 to 50 villages
• 300 outlets

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DISTRIBUTION MANAGEMENT

Mandis
• Agricultural markets
• Set up by state governments
• Procurement of food grains by government
• About 7000
• Each catering to 0.14 million
• Companies setup stalls

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DISTRIBUTION MANAGEMENT

Melas
• Different types
• Integral part of life
• More than 25000 fairs

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