MARKETING

MANAGEMENT II

Channels of
Distribution

Presented by:-
Vivek Singh Rana
Assistant Professor
SRMGPC
 Characteristics or Elements
of Channel of Distribution
1. Route or Pathway : Channel of distribution is a route or
pathway through which goods and services flow from the
manufacturers to consumers.

2. Composition : It is composed of intermediaries, such as

wholesalers, retailers, agents, distributors etc, also called
middlemen who participate in the flow voluntarily.
 CONT:-

4. Functions : The intermediaries perform such functions

which facilitate transfer of ownership title and possession
of good and services from manufacturers to consumers.

5. Remuneration : The intermediaries are paid in the form of

commission for the services rendered by them. The same
is compensated by the manufacturer in the form of
commission allowed by the manufacturer or added in the
price of the goods sold.
 Function of Channels of Distribution

1. Helpful in Price Determination : Channels of distribution

are very helpful in determining the price of products
because they are in direct touch with consumers. They
can estimate paying capacity of consumer for product.
Therefore, the manufacturer must invite the suggestion of
middleman while determining the price of his products.

2. To Manage Finance : All the manufacturers have limited

financial resources. Middlemen help manufacturers in
making adequate financial resources available. They
purchase the goods produced by manufacturers and make
the payment for that. This way, they help in solving the
financial problems of manufacturers.
 CONT:
3. -To Make the Process of Distribution Easy : It is not possible
for a producer, particularly a producer of consumer goods to be
in direct touch with all the consumers. Therefore it is not very
practical for a producer to distribute his goods to his consumers
directly. Channel of distribution help producers in this regard.
They distribute the goods produced by producers at right time
and right place to the right consumers.

4. Promotional Activities : Channels of distribution help

producers not only in the distribution of goods and services but
also in promoting the sales of these producers. Wholesalers
advertise for the goods dealt with by them and retailers help in
increasing the sales by adopting the measures of sales
promotion. Retailers display the goods in their showrooms so
that more and more consumers may be attracted.
 CONT:-
5. Helpful in Communication: It is the time of
Change. Habits, tastes, nature and attitudes of
consumersfrequently.
changing keep on In the light of these changes,
it becomes imperative for every
producer changes
necessary to in his
makeproducts.
Channels of distribution helps producers in communicating
the changes in products to the consumers and in
communicating the changes in habits, tastes, likings and
preferences of consumers to the manufacturers.
Thus, channel of distribution play an important role in
communicating the needs of consumers to the
manufacturers and policies of manufacturers to
consumers. It increases the sales of manufacturers.the
 CONT:-
6. Matching of Demand and Supply : The most important
function of middlemen is to collect goods and services from
many producers so that consumers may select from among a
large number of alternatives.
In the words of Wroe Alderson , "The goal of
marketing is the matching of segments of demand and
supply." Thus, the middleman play the game of matching
demand and supply of goods and services in a market.

7. Other Functions : Other functions of channels of distribution

may be –
a) To stabilize the prices;
b) To help in forecasting the demand for a product;
c) To help in marketing research;
d) To help in production activities.
 Factors Determining the
Choice of Distribution Channels

• There are a number of factors-both objective and subjective

varying from company to company which govern choice or
selection of channel of distribution.

• But there are some which stand out and influence channel
of distribution choice in all cases.

• They may be described as under :-

A. Factors Relating to Product Characteristics
B. Factors Relating to Company's Characteristics
C. Factors Relating to Market or Consumer's Characteristics
D. Factors Relating to Middlemen Considerations
E. Factors Relating to Environmental Characteristics
 A. Factors Relating to
Product Characteristics
 Product manufactured by a company is a governing factor
in the selection of the channel of distribution.
 Product characteristics are as follows:-

1) Industrial/Consumer Products.
2) Perishability.
3) Unit Value.
4) Style Obsolescence.
5) Weight and Technicality.
6) Standardized Products.
7) Purchase Frequency.
8) Newness and Market Acceptance.
9) Seasonality.
10) Product Breadth.
 Characteristics:-

1.Industrial/Consumer Product :- When the product being

manufactured and sold is industrial in nature, direct channel
of distribution is useful because of the relatively small
number of customers need for personal attention, salesman
technical qualifications and after sale servicing etc.
However, in case of a consumer product, indirect channel
of distribution, such as wholesalers, retailers is the most
suitable.

2.Perishability :- Perishable goods, such as vegetables,

milk, butter, bakery products, fruits, sea foods etc. require
direct selling as they must reach the consumers as easily
as possible after production because of the dangers
associated with delays and repeated handling.
 CONT:
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3.Unit Value :- When the unit value of a product is high, it is
usually economical to choose direct channel of distribution
such as company's own sales force than middlemen. On
the contrary, if the unit value is low and the amount
involved in each transaction is generally small, it is
desirable to choose indirect channel of distribution, i.e.
through middlemen.

4.Style Obsolescence :- When there is high degree of style

obsolescence in products like fashion garments, it is
desirable to sell direct to retailers who specialize in fashion
goods.

5.Weight and Technicality :- When the products are bulky,

large in size and technically complicated, it is useful to
choose direct channel of distribution.
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6. Standardized Products :- When the products are standardized
each unit is similar in shape, size, weight, colour and quality etc.
it is useful to choose indirect channel of distribution. On the
contrary, if the product is not standardized and is produced on
order, it is desirable to have direct channel of distribution.

7. Purchase Frequency :- Products that are frequently purchased

need direct channel of distribution so as to reduce the cost and
burden of distribution of such products.

8. Newness and Market Acceptance :- For new products with

high degree of market acceptance, usually there is need for an
aggressive selling effort. Hence indirect channels may be used
by appointing wholesalers and retailers as sole agents. This
may ensure channel loyalty and aggressive selling by
intermediaries.
 CONT:
9. -Seasonality :- When the product is subject to seasonal
variations, such as woolen textiles in India, it is desirable to
appoint sole selling agents who undertake the sale of
production by booking orders from retailers and direct mills to
dispatch goods as soon as they are ready for sale as per the
order.

10. Product breadth :- When the company is manufacturing a

large number of product items, it has greater ability to deal
directly with customers because the breadth of the product
line enhances its ability to clinch the sale. Hence, direct
channel is the best choice, such as Delhi Cloth Mills, Bombay
Dyeing, mafatlal Group of Cotton Mills, Calico Mills, Bata
Shoe Company etc. They have got wide product range and
thus sell their products direct through their own multiple
shops or authorized retail shops.
 B. Factors Relating to
Company’s Characteristics

• The choice of channel of distribution is also influenced by

company's own characteristics as to its size,
financial
position, reputation, past channel experience, current
marketing policies and product-mix etc.
• In this connection, some of the main factors are as follows:
1) Financial Strength.
2) Marketing Policies.
3) Size of the Company.
4) Past channel Experience.
5) Product-Mix.
6) Reputation.
 Characteristics:-
1. Financial Strength :- The financial strength of the company
also determines the channel of distribution. A company which
is financially sound may engage itself in direct selling. On the
contrary, a company which is financially weak has to depend
on intermediaries and, therefore, has to select indirect channel
of distribution, such as wholesalers, retailers, with strong
financial background.
2. Marketing Policies :- The marketing policies formulated by a
company play a very important role in influencing channel
choice. The policies relevant to channel decision may relate to
delivery, advertising, after sale service and pricing etc. For
instance, a company which likes to have a policy of speedy
delivery of goods to ultimate consumers may prefer direct
selling and thus avoid intermediaries and will adopt a speedy
transportation system.
 CONT:
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3.Size of the Company :- A large-sized company handling a
wide range of products would prefer to have a direct
channel for selling its products. On the contrary, a small-
sized company would prefer indirect selling by appointing
wholesalers, retailers etc.

4.Past Channel Experience :- Past channel experience of

the company also influences the choice of selection of
channel of distribution. For instance, in case of an old and
established company its past good experience of working
with certain kind of intermediaries will like to opt for the
same channel. However, different will be the case of
reverse situation.
 CONT:
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5.Product-Mix :- The wider is the company's product-mix,
the greater will be its strength to deal with its customer
directly. Similarly, consistency in the company's product-mix
ensure greater homogeneity or uniformity and similarity in
its marketing channels.

6.Reputation :- It is said that reputation travels faster than

the man. It is true in the case of companies also who wish
to select channel of distribution. In case of companies with
outstanding reputation like Steel, Bajaj
Tata Hindustan Levers channel Scooters, of
etc.,
(wholesalers, indirect
retailers etc.) is more desirable distribution
and profitable.
 C. Factors Relating to Market
or Consumer's
Characteristics
 Market or consumer's characteristics refer to buying habits,
location of market, size of orders etc.

 They influence the channel choice significantly.

 They may be summarized as under:

1) Consumers' Buying Habits.
2) Location of the Market.
3) Number of Customer.
4) Size of Order
 Characteristics:-
1.Consumers' Buying Habits :- Consumers' buying habits
also Influence the channel decision. If the consumer
expects credit facilities or desires personal services of the
salesman or desires to make all purchases at one place,
the channel distribution may be short or long depending on
the capacity of the company for providing these facilities. If
the manufacturer can afford these facilities, the channel will
be shorter otherwise longer.

2.Location of the Market :- When the customers are spread

over a wide geographical area, the long channel of
distribution is most suitable. On the contrary, if the customer
are concentrated and localized, direct selling would be
beneficial.
 CONT:
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3.Number of Customer :- The number of customers also
influence the channel decision. For instance, if the number
of customers is quite large, the channel of distribution may
be indirect and long, such as wholesalers, retailers etc. On
the contrary, if the number of customers is small or limited,
direct selling may be beneficial.

4.Size Orders :- Size of orders of the

ofinfluences customers the channel decision
customers purchase
significantly.
the product
Where in large quantities, direct
selling may be preferred. On the contrary, where customers
purchase the product in small quantities, frequently and
regularly, such as cigarettes, matches etc., long channel
(wholesalers, retailers etc.) of distribution may be preferred.
 D. Factors Relating to
Middlemen Considerations

• The choice of the channel of distribution is also influenced

by the middlemen consideration.
• They may include the following:
1) Sales Volume Potential.
2) Availability of Middlemen.
3) Middlemen's Attitude.
4) Services Provided by Middlemen.
5) Cost of Channel.
 Characteristics:-
1. Sales Volume Potential :- In selecting channel of distribution,
the company should consider the capability of the middlemen to
ensure a targetted sales volume. The sales volume potential of
the channel may be estimated through market surveys.
However, it should be kept in mind that no single channel is
capable for achieving the targetted sales potential. Two or more
channels may be required for this purpose.

2. Availability of Middlemen :- Availability of the right type of

middlemen is also an important consideration in making channel
choice decision. In this connection, the company should make
efforts to select aggressive oriented middlemen. In case if they
are not available, it is desirable to wait for some time and then to
pick up. In such cases, the company should manage its own
channel so long the right type of middlemen are not available.
 CONT:
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3.Middlemen's Attitude :- The attitude of the middlemen
towards the policies of the company also influences the
channel decision. For example, if the company follows the
resale price maintenance policy, the choice is limited. On
the contrary, if the company allows the middlemen to adopt
their own price policy, the choice is quite wide. Quite a large
number of middlemen would be interested in selling
company's products.

4.Services Provided by Middlemen :- If the nature of

product requires after-sales services, repair services etc.,
such as automobiles, cars, scooters etc., only those
middlemen should be appointed who can provide such
services, otherwise the company will adopt direct selling
channel.
 CONT:
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5.Cost of Channel :- Another factor considered is the cost
involved in the distribution. Direct selling generally is
costlier and thus distribution arranged through middlemen
is more economical. In this connection, it must be kept in
mind that the channel which ensures efficient distribution at
the least expenses and which secures the desired volume
of sales should be chosen.
 E. Factors Relating to
Environmental Characteristics

 The environmental factors include competitor's channels,

economic conditions, legal restrictions, fiscal structure etc,
as given below, affect significantly the channel choice.

1) Economic Condition.

2) Legal Restrictions.

3) Competitors Channel

4) Fiscal Structure.
 Characteristics:-
1. Economic condition :- when economic conditions are bright
such as inflation, it is desirable to opt indirect channel of
distribution because there is an all-round mood of expectancy,
market tendencies are bullish and favourable. On the contrary,
if the market is depressed (such as deflation), shorter channels
may be preferred.

2. Legal Restrictions :- The legislative and other restrictions

imposed by the state are extremely formidable and give final
shape the channel choice. For instance, in India, M.R.T.P. Act,
1969 prevents channel arrangements that tend to substantially
lessen competition, create monopoly and are otherwise
prejudicial to public interest. With these at the
objectives backdrop, it prevents exclusive territorial
distributorship,
restrictions, resale price maintenance
etc.
 CONT:
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3.Competitors' Channel :- This also influences the channel
choice decision. Mostly, in practice, similar types of
channels of distribution used by the competitors are
preferred.

4.Fiscal Structure :- Fiscal structure of a country also

influences the channel choice decision. For instance, in
India, State Sales Tax rates vary from State to State and
form a significant part of the ultimate price payable by a
consumer. As a result, it becomes an important factor in
evolving channel arrangements. Differences in the sales
tax rates in two different states would not only bring about
difference in the price payable by a consumer but also in
the distribution channel selected.
 CONT:
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• Hence the company should appoint the channel in that
State where the sales tax rates are quite low, such as in
Delhi, and that would give price advantage to the buyers of
those States where the sales tax rates are high.
• For instance, most of the large size companies have either
opened their branches or appointed dealers in Delhi.
• That is why, a large number of customers from neighboring
States like Rajasthan, U.P., Haryana etc. make their
purchases from Delhi in view of the high sales tax rates in
their respective States.
• For example sales tax on plastic goods in Delhi is only 2%
as against 12% in U.P.
• Thus, the manufacturer or the producer should take into
consideration the above factors in the channel decision.
 Types of Channels of Distribution

 The flow goods from the producer to the ultimate

consumer
of may take place through different types
channels of distribution. of
 In this connection, different experts have
discussed different types of channels of distribution.
 According to R.S. Davar , there are three main types
of channels of distribution, as given below :
1. Producer -> Ultimate Consumer

2. Producer -> Retailer -> Ultimate Consumer

3. Producer -> Wholesaler -> Retailer -> Ultimate Consumer

 CONT:
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 According to Philip Kotler , the four main type of channels
of distribution are as follows:

1. Producer ->Ultimate Consumer

2. Producer -> Retailer -> Ultimate Consumer

3. Producer -> Wholesaler -> Retailer ->Ultimate Consumer.

4. Producer -> Wholesaler -> Jobber -> Retailer -> Ultimate

Consumer.
 CONT:
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 William J. Stanton has suggested the following five
types of channels of distribution for consumer goods :
1. Producer ->Ultimate Consumer

2. Producer -> Retailer -> Ultimate Consumer

3. Producer -> Wholesaler -> Retailer -> Ultimate Consumer

4. Producer -> Agent -> Retailer -> Ultimate Consumer

5. Producer -> Agent -> Wholesaler -> Retailer -> Ultimate Consumer
 From the above, it is clear that opinions differ as to types of
channels of distribution. However, the most popular and common
channels of distribution used for bringing the products in the market
from the producer to the ultimate consumer are as follows:
 1) Producer —> Ultimate Consumer

1. This is the oldest, simplest and shortest type of channel of

distribution.

2. Under this method, the producer or the manufacturer

directly
sells goods to the ultimate consumer without any middlemen.

3. There are 3 alternatives in making direct sales to ultimate

consumer -
 Sale through advertising and direct methods, such as mail order
selling,
 Sale through traveling sales force, such as house to house
canvassing,
 Sale through retail or multiple shops of producer or manufacturer,
such as Delhi Cloth Mill shops, Bata Shoe shops, Bombay
 CONT:
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 This method is suitable in the following situations :

1.When there are few potential buyers such as industrial

buyers.

2.When market for the product is concentrated in a particular

geographical area only.

3.When goods produced are in small quantity.

4.When the product requires demonstration, tests, lengthy

negotiations before sale and there is need to provide after
sale service, such as machinery, automobiles etc.
 CONT:
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5.When the channel costs are higher than that of direct
selling system.

6.When the middlemen are not prepared to undertake the

sale of a new market and introduce the new product in the
market.

7.When the producer or the manufacturer decides

to
eliminate middlemen.

8.When the product is of perishable nature, such as

vegetables, eggs, etc.
 2) Producer -> Retailer ->Ultimate Consumers

• This is also a simple, easy, old and most popular type of

channel of distribution.
• Under this method, producers sell their goods to retailers
and retailers sell them in turn to ultimate consumers.
• Here the producer allows the retailer to have direct access
to him.
• The wholesalers or agents are totally eliminated.
• This channel option is preferable when buyers are large
retailers, such as departmental stores, chain stores, super
bazaars, discount houses, big mail order houses or
cooperative stores.
 CONT:
• It- is also suitable when the products are of perishable
nature, such as vegetables, fruits, eggs, and thus speed in
distribution is essential.
• Home appliances, ready-made garments, automobiles,
shoes etc. are directly sold by the manufacturers to the
retailers.
• This type of channel of distribution maybe suitable in the
following situations :
1.When the product is perishable either physically or due to
changes in fashion and thus requiring speedy distribution.
2.When the wholesalers are unwilling to
undertake
promotional efforts needed by the producer.
 CONT:
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3.When the retailers are financially sound to finance the
producer towards the supplies made to them.

4.When the retailers are large enough to carry on

the
distribution work independently and efficiently.

5.When the producers may desire to have closer contacts so

as to understand buyers' preferences and for product
planning.

6.When the demand for the product is constant.

 3) Producer -> Wholesaler -> Retailer -> Ultimate
Consumer
• It is a normal, regular, traditional and also popular channel
of distribution.
• Under this method, the producer sells goods in
large quantities to wholesalers.
• The wholesaler distributes the goods to retailers as
per their requirements in small quantities.
• The retailer finally sells the same to the
ultimate
consumers.
• In this way the distribution channel is quite long.
• This channel of distribution is desirable for groceries, drugs
and other types of medicines, hardware, food-items etc.
 CONT:
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This type of channel of distribution is suitable in the following
situations :

1.When the producer has a narrow product range.

2.When the wholesalers are specialized and can

provide strong promotional support.

3.When the products are durable and are not subject

to physical deterioration or quick fashion changes.

4.When the retail outlets are more and widely spread.

5.The financial resources of producers are limited.

 4) Producer –> Agent ->Wholesaler ->
Retailer -> Ultimate Consumer

• This is the longest channel of distribution.

• In this channel the producer uses the services of an agent
who has greater outlets and contacts.

• The agent in turn may distribute the goods to wholesalers,

who in turn sell to retailers.

• The retailer sells the goods to the ultimate consumers.

• The agents have a wide distribution system on
national
level.
 CONT:
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• The agent acts as a sole selling agent of the producer, such
as Voltas.

• In this case the producer is not required to undertake

marketing task as the entire supply is purchased by the
agent.

• This type of channel of distribution is suitable for marketing

agricultural and large scale manufactured products, such as
cotton textiles, cement etc.
 5) Producer -> Wholesaler ->
Ultimate Consumer

• In this type of channel of distribution, producer sells the

goods to wholesalers and the wholesalers sell them
directly to ultimate consumers.

• The wholesaler may bypass retailer only when there are

large institutional buyers, such as industrial buyers,
government and educational institutions, hospitals,
consumer cooperative stores and large business houses
etc.
 Common Channels of Distribution
of Industrial Goods

• As the industrial goods have quite different nature and

more or less fixed patterns, the channels used by them are
less complicated.
• Major channels of distribution, which are commonly used in
the distribution of industrial goods, are as follows:
1. Producer -> Industrial User

2. Producer -> Wholesaler -> Industrial Users

3. Producer -> Agent -> Industrial Users

4. Producer -> Agent -> Industrial Distributor -» Industrial User

 1) Producer -> Industrial User

• This is the most popular and commonly used channel

in
the distribution of industrial goods.

• This system is most suitable if the goods are sold to

few industries and the number of such industries is quite
small.

• This will help in maintaining close contact with customers

and prospective buyers and create opportunities for more
sales.

• This system is in a position to supply highly specialized

technical service along with after-sales service to their
customers.
 2) Producer -> Wholesaler -> Industrial Users

• In this case, the producers sells goods to wholesalers who

sell them to industrial users.

• This channel of distribution is beneficial when the market is

scattered and the volume of sales in each area is quite
thin.

• This system is useful for small-scale manufacturers of

equipment for air conditioning plants, building construction,
small-sized tools and other standard pieces of equipment
etc.
 3) Producer -> Agent -> Industrial Users

• In this case, the producer uses the services of agents for

selling goods to industrial users.

• The agent may be a broker or commission agent or sales

agent.

• The producer has to rely only on one agent in each

geographical area and is to be prepared to hand over the
marketing function to one agent in a particular area.

• In this case, the cost of distribution is quite low.

• This system is more suitable for small-sized
industrial
enterprises or for introducing a new product in the market.
 4) Producer -> Agent -> Industrial
Distributor -> Industrial User

• This is the longest and popular channel of

which is mostly adopted by large-sized industrial
distribution
enterprises for selling their goods.

• In this case, the producer uses the services of the agent

though the goods are sold to industrial distributors, who in
turn, sell them to industrial users.

• The agent may be a broker, commission agent, sales

agent or producer's agent.

• This channel of distribution is suitable for selling new

products or to enter new markets.
 Evaluating the Effectiveness
of Channels Distribution
• We have discussed earlier in this chapter, the various
channel alternatives available to a producer.

• Now the main problem before the producer is to decide

which of the alternatives would best satisfy the long term
objectives of the firm taking in view the factors which would
affect the channel decision.

• For this purpose, each alternative must be rated against

economic, control, and adaptive criteria.
 1) Economic Criteria

• For evaluating the effectiveness of the channels of

distribution, the economic criteria are the most important
since the firm pursues the profits.

• From the economic point of view, three factors are to be

considered :

1.What would be the sale volume under each of the channel

alternatives? And would a channel be able to push up the
sale of the company? This can be judged by having a
market survey of the sale volume of different channels of
distribution and the sale can be estimated under each
alternative.
 CONT:
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2.The second consideration is to estimate the selling and
distribution costs of each alternative. For this purpose it
would be considered whether the costs of a particular
alternative are reasonable and within the capacity of the
company considering its sale volume and the financial
resources.

3.Then the sales and the costs of different alternatives should

be compared having a comparative view of cost-effect on
the net profit of the firm. Company's own sale force should
also be taken in view and should decide whether it should
hire its own sales force or use the sales agency.
 CONT:
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3.In comparing the estimated net profits available from each
alternative, cost associated with different sales levels
should also be considered. For this purpose, the total costs
should be splitted into fixed costs and variable costs.
Smaller firms having low sales volume or larger firms
marketing in smaller territories would have larger fixed
selling and distribution costs if it decides to install its direct
channel. So, in such circumstances, services of middlemen
should be sought. Contrarily, larger firms or smaller firms,
when their costs for using its own sales force and using
other agency reach at break even point, it would be then
better to have its own sale force.
 2) Control Criteria
• In evaluating the channels the second main consideration
is that of the control, i.e., how would the marketer be in a
position to have a control over a particular channel?

• The more would be the control, the better would be the

channel of distribution.

• For this purpose, he is to consider the relationship between

various channels of distribution, their interests and attitude
about company's product and conflicts among them legal
aspect in appointing a particular channel should also be
considered.
 3) Adaptive
Criteria
• The next consideration in channel decision is to see
whether the channel would be suitable to adapt to the
changing conditions in future.

• Each channel alternative involves some duration of

commitment and loss of flexibility.

• For example, a channel alternative involving a long

commitment must appear to be greatly superior on
economic or control grounds in order to be considered but
it is not valid on the ground of adaptability.
 Problems Involved in the Initial Determination
of Marketing Channels

• Several problems are faced by producers for

the determination of marketing channels.

• The main problems are :

1. Adjustment to Buyers Needs and Expectations.
2. Determining the Best Channel Alternatives.
3. Determining Distribution Intensity.
 1) Adjustment to Buyer's
Needs and Expectations

• Producers determining the market channels adjust to

buyer's wants and expectations.

• As regards the consumer goods marketing, the final buyers

are ultimate consumers and they buy from those retailers
who best serve their needs.
 2) Determining the Best
Channel Alternatives
• From the producer's point of view determining the
best channel alternatives involves :
1. Recognizing what best means.
2. Comparing various alternatives in terms of this meaning.
• Best means most profitable sales volume and cost.
• The producer must have long run estimates of market potential.
• He is free to choose single channel or a number of channels.
• The ultimate test of a policy must be the effectiveness
and economy of serving the customer.
 3) Determining Distribution Intensity

• The distribution methods usually adopted are :

1.Intensive distribution,

2.Selective distribution,

3.Exclusive distribution,

4.Consignment selling, and

5.Franchise selling.
 CONT:
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i) Intensive Distribution:- Under this method, the
management seeks to use as many outlets as possible.
The method, is referred to as maximum expansion. The
method is adopted in the case of convenience goods such
as cigarettes, sweets, etc.

ii) Exclusive Distribution:- This refers to the practice of

selecting and giving a distributor exclusive area of sale
called 'Territory'. The distributor agrees not to handle or
deal in any competing product. It gives some sort of
prestige to the product as having an exclusive dealer. The
exclusive dealer is protected from competitors in the area
allotted.
 CONT:
iii.-Selective Distribution:- Under this policy, a manufacturer
selects the limited number of wholesale or retail distributors and
works closely with them to further the sale of his products.
• This requires considerable planning and thorough knowledge of
the market.
• Selective distribution can be used on any type of product.
• There are certain distinctive advantages of the policy.
• The manufacturer can pick the best outlets he wants.
• Selective distribution is suitable in the case of shopping goods
which carry a higher unit price and which are not purchased as
frequently as convenience goods.
• Goods which require after-sales service are often sold through
selective distribution outlet.
• Washing machines, typewriters etc. are generally sold under
this method.
 CONT:
iv.-Consignment Selling:- It is a practice of placing goods in
the hands of middlemen with the title and control remaining in
the hands of the seller.
• The distributors are neither wholesalers nor retailers but occupy
only the position of agents.
• They usually get a commission on the sales effected together
with charges incurred thereon.
• The manufacturer specifies the manner, time and price of sale.
• The advantages of the system is that the distributor runs no risk
of buying and being struck with goods.
• Further they need not invest any money.
• As for the manufacturer, he could retain all his control over his
merchandise even when they lie in the distributor's hands.
• This kind of distribution is not very commonly found
now-a- days.
 CONT:
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v. Franchise Selling:-
• This method is typically American. A manufacturer
arranges distribution with some individual outlets providing
the required machinery for selling.
• This method is necessary when the owners of outlets lack
capital and knowledge of marketing the products.
• The parent company provides loans, designs for building,
trainings for both the owner and his staff and, helps in
advertising and promoting the business.