Chapter :- 8

Distribution management &

Marketing Mix
Meaning and definition
Distribution refers to bringing the product
to the market and giving it to the final
consumer

According to Mossmam & Norton

“distribution is the operation which creates
time,place & form utility through the
movement of goods and persons from one
place to another”.
Distribution Channels Defined
Are sets of interdependent organizations involved
in the process of making a product or service
available for use or consumption
 7 Rs
Right product in
Right quantity in
Right condition at the
Right time and
Right place for the
Right customer at
Right cost
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

5
The Marketing Mix
Product
Place
Price
Promotion
Distribution channels help in the ‘place’ aspect of
the marketing mix
Distribution provides place, time and possession
utility to the consumer

6
Example
Consumer wants to buy a tube of toothpaste
 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 toothpaste and take it away – possession
The company distribution function has made all this
possible.
The situation would be similar if a customer wants to
buy a refrigerator or medicines or even an electric
motor

7
Discrepancies and Distribution channel
Spatial discrepancy :- the difference between the
location of a producer and the location of widely
scattered markets
Temporal discrepancy:- a situation that occurs when
a product is produced but a customer is not ready to
buy it
Need for breaking the bulk
Need for assortment
Distribution Channel Strategy
Derived from the corporate strategy and the
marketing strategy
Steps for designing the distribution strategy are:
 Defining customer service levels
 Distribution objectives and steps
 Set of activities
 The distribution organization
 Key performance indicators
 Critical success factors

9
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

10
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….

11
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
 Despatch 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

Organization….
12
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 and procedure..

13
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

KPIs….14
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

15
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

CSFs…
16
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

17
Listing of Channel Members
C&FAs and CSAs
Distributors, dealers, stockists, value-added re-
sellers
Agents and brokers
Franchisees
Electronic channels
Wholesalers
Retailers

18
C&FAs / C&SAs
C&FA: carrying and forwarding agent and C&SA:
carrying and selling agent – both are on contract with
a company
Both are transporters who work between the company
and its distributors
Collect products from the company, store in a central
location, break bulk and despatch to distributors
against indents
Goods belong to the company
C&SA also sells the goods on behalf of the company
but remits proceeds after sale

19
Distributors, Dealers, Stockists,
Agents
Name denotes the extent of re-distribution done by
them
Distributors invest in the products – buy products
from the company
Are on commission, margins or mark-up
May or may not get credit – but extend credit
Distributors cover the markets as per a beat plan.
All others merely finance the business.
Distributors could be exclusive for a company
Agents bring buyer and seller together

20
Wholesalers
Operate out of the main markets
Deal with a number of company products of their
choice
Are not on contract with any company
Sell to other wholesalers, retailers and institutions
Negotiate about 15 days credit from company
distributors – also provide credit to their
customers
Operate on high volumes and low margins

21
Retailers
The final contact with consumers
Operate out of their shops and sell a large
assortment and variety of goods
Located closest to consumers
Buy from company, distributors or wholesalers
Highest margins in the network
Provide personalised services to their customers

22
Industrial Products
Customers may also direct from company sales force
- Producer Producer

Agent/middleman

Industrial Distributor Industrial Distributor

Industrial Customer Industrial Customer

23
Consumer Products
Retailers may also direct from company sales force

Producer Producer Producer

Distributor Distributor

Wholesaler

Retailer Retailer Retailer

Customer / Customer/ Customer/

consumer Consumer Consumer

24
Patterns of Distribution
Determines the intensity of the distribution
Intensity decides the service level provided
Types of distribution intensity:
 Intensive
 Selective
 Exclusive

25
Intensive distribution:- a form of distribution aimed
at having a product available in every outlet where
target customers might want to buy it.
Selective distribution:- a form of distribution
achieved by screening dealers to eliminate all but a few
in any single area
exclusive distribution:- a form of distribution that
establishes one or a few dealers within a given area
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

27
Intensive Distribution
Strategy is to make sure that the product is available in
as many outlets as possible
Preferred for consumer, pharmaceutical products and
automobile spares

28
Selective Distribution
A few select outlets will be permitted to keep the
products
Outlets selected in line with the image the company
wants to project
Preferred for high value products
Tanishque jewelry
Keeps distribution costs lower

29
Exclusive Distribution
Highly selective choice of outlets – may be even one
outlet in an entire market
Could include outlets set up by companies – Titan,
Bata
Producer wants a close watch and control on the
distribution of his products.

Channel strategy…

30