Understanding Marketing Mix-

Place
By
Dr. Amar P Narkhede
 scope
• Place-
• 3.1 The role of marketing channels- channel functions &
flows, channel levels
• 3.2 channel design decisions- analysing customer’s desired
service output levels, establishing objectives and constraints,
identifying & evaluating major channel alternatives
• 3.3 channel options- introducing to wholesaling, retailing,
franchising, direct marketing, E-commerce marketing
practices.
• 3.4Market logistic decisions-Order processing, warehousing
inventory & transportation.
 Marketing channel
• Every producer seeks to link together the set
of marketing intermediaries that best fulfil the
firm’s objectives. These marketing
intermediaries are called marketing channel.
 Functions of marketing channel
• Information & market intelligence provider
• Maintain assortment of product
• Creating place utility
• Financing to manufacturer
• Help manufacturer to decide the pricing
• Using own sales force to market the product
 Channel flows
• In marketing channel a set of activities are
performed by different intermediaries.
• It can be represented as follows
Produce
Wholesaler
Retailer
consumer
 Channel levels

Zero Level Channel Producer —- Consumer

One Level Producer —- Retailer —- Consumer

Producer —- Wholesaler —  Retailer —
Two Level
Consumer

Producer —- Distributor — Wholesaler  —

Three  Level
Retailer — Consumer

Producer — Agent —- Distributor  —

Four Level
Wholesaler—   Retailer —–Consumer
 Zero Level Distribution Channel

• No Intermediary: Producer sells directly to

consumer
• Fast & Economical
• Manufacturer has full control over distribution
• May help to reduce distribution cost
• Direct Mails, Telemarketing, Door to door sales,
Manufacturer’s own store Examples: Dell
Online store, HP Online store, Samsung Online
store, Eureka Forbes Door to Door Sale, Boeing
(Selling directly to Indian Consumers)
 One Level Distribution Channel

• One Intermediary: Generally retailer between

Manufacturer and Consumer or Customer
• Example: Any Automobile company having
channel partner (Hyundai Channel Partner,
Tata Channel Partner), Insurance
Company (LIC, Bajaj Allianz Insurance etc.)
 Two Level Distribution Channel

• Two Intermediary
• Examples: Sony TV, Samsung TV, FMCG
Industry
 Three Level Distribution Channel

• Three Intermediary
• Examples: P&G, Unilever, Consumer Durable
Industry, FMCG Industry
 Designing a marketing channel
• Designing a marketing channel system
involves analysing customer needs,
establishing channel objectives, identifying
major channel alternatives, and evaluating
major channel alternatives.
Channel Design Decisions

Analyzing Customers’ Desired

Service Output Levels

Establishing Objectives
And Constraints

Identifying Major
Channel Alternatives

Evaluating the
Major Alternatives
 Channel Design

• A firm can design any number of channels. Channels are classified by the number
of intermediaries between producer and consumer.
Category Definition

The producer's products are stocked in the majority of outlets. This strategy
Intensive
is common for basic supplies, snack foods, magazines and soft drink
distribution
beverages.

Means that the producer relies on a few intermediaries to carry their

Selective product. This strategy is commonly observed for more specialized goods
distribution that are carried through specialist dealers, for example, brands of craft
tools, or large appliances.

Means that the producer selects only very few intermediaries.Exclusive

Exclusive distribution is often characterized by exclusive dealing where the reseller
distribution carries only that producer's product. This strategy is typical of luxury goods
retailers such as Gucci.
 Benefits of channel partners
• . Channels produce five service outputs:
1)Lot size - The number of units the channels permits typical customer to purchase on
one occasion.
2)Waiting and delivery time - The average time customers of that channel wait for
receipt of the goods. Customers increasingly prefer faster and faster delivery channels.
3) Spatial convenience -“The degree to which the marketing channel makes it easy for
customers to purchase the product.
4) Product variety -The assortment breadth provided by the marketing channel.
Normally, customers prefer a greater assortment because more choices increase the
chance of finding what they need.
5)Service backup - the add-on services (credit, delivery, installation, repairs) provided by
the channel. The greater the service backup, the greater the work provided by the
channel.
– Determining the role of distribution in the company’s overall goals and
strategies.
decisions on objectives & constraints of the channel

– Decide the role of distribution in the marketing mix.

– Knowing how marketing channels should be designed to effectively achieve
distribution objectives.
– Identifying the type of channel members to be selected to meet distribution
objectives.
– Establishing how to manage the channel to effectively and efficiently
implement the channel design.
• Nature of the product . Example- perishable
products require the direct marketing
• Customize products like machinery requires
direct channel
• Products requiring the maintenance services
• High value products turbines need to adopt
direct channel
 Identifying & evaluating major channel
alternatives
1)Economic criteria
2)Control criteria
– Pull strategy
– Push strategy
• Trade incentives

3)Adaptive criteria
4)Brand image
• 5)Legal & ethical issues
– Exclusive dealing
– Exclusive territories
– Tying agreements
– Dealers’ rights
 channel options
• E-Commerce:-
• Electronic commerce, commonly known as e-
commerce, is a type of industry where buying and
selling of product or service is conducted over
electronic systems such as the Internet and other
computer networks.
• Electronic commerce draws on technologies such as
mobile commerce, electronic funds transfer, supply
chain management, Internet marketing, online
transaction processing
• Retailing:-
• Retail is the sale of goods and services from individuals
or businesses to the end-user. Retailers are part of an
integrated system called the supply chain.
• A retailer purchases goods or products in large
quantities from manufacturers directly or through a
wholesale, and then sells smaller quantities to the
consumer for a profit.
• Retailing can be done in either fixed locations like
stores or markets, door-to-door or by delivery
 Types of Retail Operations
• Department store
• Specialty store
• Discount/Mass Merchandisers
• Warehouse/Wholesale clubs
• Factory outlet
 Wholesaling
• The sale and distribution of goods to users other than end
consumers. Wholesaling involves selling merchandise to retailers,
merchants, or to industrial, commercial and institutional users. A
wholesaler can act as a middleman, brokering deals between these
businesses.
• Wholesaling often occurs when large quantities of merchandise are
reassembled, sorted, then repackage, and distribute in smaller lots.
• In banking, the term wholesaling refers to services that are
designed for large, institutional clients, including real estate
developers, pension funds and large corporations, as opposed to
retail banking which provides services to standard, individual
customers.
 Franchising
• The franchisor provides licensed privilege to
do business & help in management, training,
merchandising in return for consideration
from the franchisee
• Types of franchising
• Product franchise
• Manufacturing franchise
• Business franchisee
 Importance of Franchising
• Established market for the product
• Bulk purchase advantage
• Training
• Marketing & management benefit
• Standard operating procedure
 Direct Marketing
• The firm approaches the customers on one on one basis
& markets the product to them.
• Direct marketing is an interactive system of marketing
which uses one or more advertising media to affect a
measurable response at any location.
• Methods of direct marketing
• Direct mail marketing
• Telemarketing
• Face to face selling
• Home shopping
 Importance of direct marketing
• Cost effective
• Rapid delivery
• Ease of management
• Relationship building
 Market logistic
• The marketing logistic takes care of planning,
implementing and controlling the efficient ,
cost effective flow and storage of raw material
in process inventory , finished goods.
• It is the management of the flow of resources
between the point of origin and the point of
consumption in order to meet some
requirements, for example, of customers or
corporations.
• The resources managed in logistics can include physical
items, such as food, materials, equipment, liquids, and
staff, as well as abstract items, such as time, information,
particles, and energy.
• The logistics of physical items usually involves the
integration of information flow, material handling,
production, packaging, inventory, transportation,
warehousing, and often security.
• The complexity of logistics can be modeled, analyzed,
visualized, and optimized by dedicated simulation
software.
 Objective of market logistic
• Movement of goods
• Seamless flow of goods
• Customer service
• Productivity & profit for the organization
 Functions of market logistics
• Transportation of goods
• Warehousing
• Maintain the inventory level
• Order processing
 Order processing
• It is the process which ensures the delivery of
goods & services to the customer.
Steps in order processing
• order placement by customer
• Order acknowledgement by supplier
• Order processing at supplier end
• Order shipment to customer
• Order delivery to customer
What is mean by Distribution?
CoD (Channel of Distribution)
 Channels of Distribution/ Marketing Channels
Operating success – not only on Production and sales but
also on the how CoD of company compete with
competitors channels.

According to Philip Kotler

Channel of Distribution “ is a set of interdependent
organizations involved in the process of making a product or
service available for use or consumption by consumer or
business user”.
 Functions of channels
• Provide market information
• Contacts
• Breaking bulk
• Price negotiations
• Physical distribution
• Risk taking
• Providing credits to the customers
• Selling
• Managing flow of distribution
Channel Levels
Channel Management
 Channel Selection

• Selection of proper channel is a very important

in the channel management.
• The success of the company in the market is
majorly depends upon the right selection of the
channel.
• Channel mainly responsible for the availability
of product to end consumer.
 Steps involved in channel design
• Determining the channel objectives (what to be achieved by
using channels, it include coverage of target market, efficient and cost
effective distribution).
• Identifying functions (functions like providing information,
promotion, contact, braking bulk etc.)
• Matching Channel Design to Product attributes (Channel
system should be selected according to the nature of product).
• Evaluating Legal aspects and the distribution
environment (While selecting the channel the environment in
the country or territory should be analysed).
• Assessing company resources and matching channel
design to it.
• Final selection of the best design.
 Channel Strategies

A channel strategy is a plan for reaching customers with products and

services. Channels serve two primary functions:
1.selling to the customer and delivering customer experience including products
2. Providing services which enhance the customer value.
 Channel Conflicts
The Channel Conflict arises when the
channel partners such as manufacturer,
wholesaler, distributor, retailer, etc.
compete against each other for the
common sale with the same brand.
There is a conflict among the channel
partners when one prevents the other
from achieving its objective. It results in
a huge loss for all the partners in the
channel.
 Vertical Channel conflict
This type of conflict arises between the different
levels in the same channel.

E.g. The conflict between the manufacturer

and the wholesaler regarding price, quantity,
marketing activities, etc.
 Horizontal Channel Conflict
This type of conflict arises between the
same level in the same channel.

E.g. The conflict between two retailers of

the same manufacturer faces disparity in
terms of sales target, area coverage,
promotional schemes, etc.
 Multichannel Conflict
• This type of conflict arises between the different
market channels participating in the common sale
for the same brand.

E.g. If a manufacturer uses two market channels,

first is the official website through which the
products and services are sold. The second
channel is the traditional channel i.e. through
wholesaler and retailer. If the product is available
at a much lower price on a website than is
available with the retailer, the multichannel
conflict arises.
Causes of Channel conflict
Goal incompatibility: Different partners in the channel of
distribution have different goals that may or may not coincide
with each other and thus result in conflict.
E.g. The manufacturer wants to achieve the larger market share
by adopting the market penetration strategy i.e. offering a
product at low price and making the profits in the long run,
whereas the dealer wants to sell the product at a high cost i.e.
market skimming strategy and earn huge profits in the short
run.
Ambiguous Roles: The channel partners may not have a clear
picture of their role i.e. what they are supposed to do, which
market to cater, what pricing strategy is to be adopted, etc.
E.g. The manufacturer may sell its products through its direct
sales force in the same area where the authorized dealer is
supposed to sell; this may result in the conflict.
Different Perceptions: The channel partners may have different
perceptions about the market conditions that hampers the
business as a whole thereby leading to the conflict.
E.g. The manufacturer is optimistic about the change in the price
of the product whereas the dealer feels the negative impact of
price change on the customers.

Intermediary dependency on Manufacturer

Communication barrier
 Channel Motivation
• Generally it is very tough to motivate to direct employees
for sales and service support.
• Motivating the owners and employees of independent
organization like distribution channel members even
requires great effort.
• One can motivate them by using most powerful tool i.e.
“INCENTIVES” .
• Manufacturer offers a better margin to tempt distributor to
push their product rather than of competitor.
• Manufacturer offers extra compensation to distributors sales
personal so that they keep to push the product.
• The company provide training and development to
distributor’s employees.
• Arranging the distributor meet.
 The Most powerful tool is,
“Treating member of CoD as Partner”
 Physical distribution
• It is the set of activities concern with movement of
finished goods from manufacturer to end
consumer.
• It takes within wholesaling, retailing and also
includes important decision area as customer service,
inventory control, material handling, protective
packaging, order processing, transportation,
warehouse site selection.
• Physical distribution is part of the process called
‘distribution’ which includes wholesale and retail
marketing as well as the physical movement of the
products.
 Functions of Physical Distribution
1. Customer service: Providing them service at the right time
with right price.
2. Order processing: fast processing of order received from
concern party.
3. Inventory control: Managing inventory with each of the
point of contact like wholesaler, Distributor and Retailer
which helps to fulfil the need of customer.
4. Transportation and Logistics: availability of products at
place(Wholesaler, distributor and retailer) is mainly depends
on the transportation, so selection of mode of transportation
is very much important.
5. Protective packaging: This is the main function which
protect the product from damages while handling or
transportation.
• It is the sale of goods/merchandise to retailer
(industrial, commercial, institution or other
professional business users).

Who is responsible for this?

“Wholesaler”
“Those firms engaged primarily in wholesaling activity”
Wholesaler mostly buy from manufacture and sell
mostly to
-Retailer
-Industrial Consumer
-Other wholesalers
 Categories of wholesaler

• Merchant wholesaler

• Manufacturer sales branches

• Merchandiser agents/ broker

• Use of Technology Platform (.com)

 Functions of Wholesaling
• Manufacturer can distribute their product in local
market without actually contacting customers.
• It provide trained sales force.
• It provide marketing research to manufacturer,
service providers and retail or institutional consumers.
• Purchase in large quantities and reduce the total
physical distribution cost.
• Providing warehousing and delivery facilities.
• Provide credit facilities, whenever required
• Provide adjustment for defective merchandise.
• Risk taking- in case of theft, D&D (Damage and
deteriorate).
 Retail
Retail is the sale of goods to end users, not for
resale, but for use and consumption by the
purchaser.

“One who perform this function is called

Retailer”
Logistics is used more broadly to refer to the
process of coordinating and moving
resources
-People
- Materials,
-Inventory,
-Equipment
from one location to the desired destination.
The term logistics originated in the military,
referring to the movement of equipment and
supplies to troops in the field.
 Components of Logistics
• Inbound transportation 
• Outbound transportation
• Fleet management (Managing cars, trucks, tempo
etc.)
• Warehousing
• Materials handling
• Order fulfillment
• Inventory management
• Demand planning
• Why Logistics is
E- Channel of distribution
 E- distribution

• It is a type of distribution that purely uses electronic

media.

• It is buying and selling of goods/services over a public

network without physical media.

• This type of distribution is accessible to a large number

of customers and is most cost effective for business.