Professional Documents
Culture Documents
Design of Distribution Channel
Design of Distribution Channel
Channel
Distribution Management
Management of all activities which facilitate
movement and co-ordination of supply and
demand in the creation of time and place utility in
goods
The art and science of determining requirements,
acquiring them, distributing them and finally
maintaining them in an operationally ready
condition for their entire life.
Distribution Channels
Are intermediaries or middlemen
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, specialisation and scales
of operation
Types of Channels
Sales: motivates buyers, shares information
between company and its consumers, negotiates
fair bargains for consumers and finances the
transactions
Delivery channel meant only for physical part of
the distribution
Service channel – performs after sales service
Distribution Intensity
Intensive: distribution through every
reasonable outlet available – FMCG
Selective: multiple, but not all outlets in the
market – pharma, frozen food
Exclusive: may be only one outlet in a
market - car dealers
Distribution Channel design
Steps for designing the distribution strategy
are:
Defining customer service levels
Distribution objectives and steps
Structure of the network required
Policy and procedure to be followed
Key performance indicators
Critical success factors
Customer Service Levels
Defined by the nature of the industry, the
products, competition and market shares.
Affordability also decides the service level
It should at least match competition.
Customer expectations have no limit
Distribution Objectives
Influenced by the customer expectations
Defines the extent of time, place and
possession utility which the customer can
expect out of the channel network
Set of Activities
Manner in which the company and its marketing
channels go about achieving the customer service levels
Some of these steps could be:
Sales forecasts
Dispatch plans
Market coverage beat plans
Journey plans for service engineers
Collection of sales proceeds
Carrying out promotional activities
The company also decides as to who is to perform which
task
Distribution Organization
Extent of company support and outsourcing to be
decided
Budget for the cost of the distribution effort
Select suitable channel partners – C&FAs, and
distributors
Setting clear objectives for the partners
Agree on level of financial commitments by the
channel partners.
Policy & Procedure
Define policy and implementation
guidelines through Operating Manuals
Policy guidelines include
Code of conduct for channel members
System for redressal of complaints
Any additional subsidies etc
Handling institutional business
Service policy for engineering products
Key Performance Indicators
For measurement of effectiveness. Some of these
could be:
Consistent achievement of targets by product groups,
periods and territories
Achievement of market shares
Achievement of profitability
Zero complaints from customers
No stock returns
Ability to handle emergencies and sudden spurts in
demand
Key Performance Indicators
For measurement of effectiveness. Some of
these could be:
Balanced sales achievement during a period –
no period end skews
Market coverage with ready stocks
Excellent management of accounts receivables
Minimize losses on account of stock-outs
Minimize damages to products
Critical Success Factors
The distribution strategy also needs the support and
encouragement of top management to succeed
Some of the CSFs could be:
Clear, transparent and unambiguous policy and procedure
Serious commitment of the channel partners
Fairness in dealings
Clearly defined customer service policy
High level of integrity
Equitable distribution at times of shortage
Timely compensation of channel partners