UNIT 3

DISTRIBUTION CHANNEL
MANAGEMENT
Dr. Parveen Nagpal
 DISTRIBUTION CHANNEL
 Distribution channel (also called sales channel or trade
channel) constitute an important factor or link in
effective sales management.
 It is the chain of businesses or intermediaries through

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which a good or service passes until it reaches the end
consumer.
 Distribution channel can include wholesalers, retailers,
distributors, agents, dealers etc., known as
intermediaries, middleman or channel partners.
 Channels connect the producers to the ultimate
consumers – it is the route through which goods move
from the point of production to the point of ultimate
consumption.
 DISTRIBUTION CHANNEL
 When goods reach consumers through various
intermediaries, it is called as Indirect selling.
 In indirect selling, goods reach final consumers
through the distribution channel.

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 When the manufacturer sells directly to final
consumer it is called direct selling, or zero level
channel.
 Then there are one level, two levels and three levels
channels depending upon number of intermediaries
involved in the distribution channel.
 BASIC CHANNELS OF CHANNELS OF DISTRIBUTION

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(source: https://medium.com/@jpcueva/distribution-channels-dc07d3848e8c)
 MANAGEMENT OF DISTRIBUTION CHANNEL
 Channel management is a process by which a company
creates formalized programs for selling and servicing
customers within a specific channel.
 Number of individual entities comprising the channel of
distribution between producer and consumer is called

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Channel length.
 Number of different entities available for providing the same
distribution function (as a distributor, wholesaler, or retailer)
at different stages in a distribution channel is called as
Channel Width.
 The channel management service refers to how companies
build tailored business streams to more effectively manage
their business within and across channels, setting
investment priorities and key areas of operational focus;
managing channel conflict; deciding on the right products
and services to better and more profitably serve customers.
 NEED FOR A DISTRIBUTION CHANNEL
 Every organization needs a good distribution channel so
that the commodity reaches the customer at the right
place and at the right time as per his convenience.
 There are many functions to be carried out in moving

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the product from manufacturer to the customer and
each require funding and, often, specialist knowledge
and expertise.
 Distribution channel adds value to selling or the product
and the consumer. Value addition takes place through
place utility, time utility and possession utility
 NEED FOR A DISTRIBUTION CHANNEL

Supply of Information

Product Promotion

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Financing of
Operations

Maintaining Price Stability

Title of Goods

Creation of Place, Time and Form Utilities

Holding Stock
 NEED FOR CHANNEL MANAGEMENT

Channel Efficiency

Reduced Distribution Costs

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Role Clarity

Reduced Channel Conflict

Ensure Timely Delivery of Goods

Ethical Practices

Maintain Price Stability

 TYPE OF CHANNEL PARTNERS
1. Wholesalers
A wholesaler is an intermediary in the distribution
channel who buys in bulk and sells to resellers rather than
to consumers.

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“The wholesaler, or the wholesale trader, is a trader, who
purchases goods in large quantities from manufacturers
and resells to retailers in small quantities.” – S E Thomas
“Wholesaling is concerned with the activities of those
persons or establishments that sell to retailers and other
merchants, and/or industrial, institutional, and
commercial users, but that do not sell in large amounts to
final consumers.” – US Bureau of Census
 TYPE OF CHANNEL PARTNERS
Functions of Wholesalers
• Assembling Goods
• Distribution of Goods
• Provides a Trained Sales force
• Marketing and Research

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• Reduces Physical Distribution Cost
• Warehousing and Delivery facilities
• Credit Facilities
• Advertisement
• Finance – make advance payment and place the order
• Undertake Risks
 TYPE OF CHANNEL PARTNERS
2. Distributors
A distributor is an intermediary entity
between the producer of a
distribution
product channel or supply chain,
and another entitysuch
in as the
a retailer’

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The distributor performs some of the same functions that
a wholesaler does but generally takes a more active role.
Distributors sell to both – Wholesalers and retailers.

A distributor may be required under three circumstances:

o Entering a new town.

o Additional coverage in the same town.

o Replacing an existing distributor

 TYPE OF CHANNEL PARTNERS
Consumer durable, electronics, hardware or other
equipment, medicines are perfect examples of sectors
which use distributors and not wholesalers.
A medicine retailer may have more then 1000 different

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type of medicines. He cannot afford to visit wholesalers
who are stocking all these machines.
So the companies appoint a distributor who can distribute
the various medicines to the retailer who in turn sells it to
customers.
For instance, Samsung Smart phones are distributed to all
stores and the distributors may visit all the shops within a
region to ensure that the material is on display by the
retailers. There is no wholesaler of Samsung but only
retailers and distributors.
 TYPE OF CHANNEL PARTNERS
Functions of Distributors
• Selling

• Promotion

• Customer Service

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• Market Research

• Financing
 TYPE OF CHANNEL PARTNERS
DISTRIBUTOR
GenerallyWHOLESALER
works on No contract is
contractua required basis with the
l
manufacturer

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Customers can be retailers, Customers are the retailers
wholesalers and end users.
Wider area of operation Limited area of operation
Require promotion to sell No promotion required
Exclusive suppliers Bulk buyers
Earns from the service fees Gains profit from the
price charged discounts on bulk
purchases
Exclusively sells one brand at a Deals in a variety of brands
time.
 TYPE OF CHANNEL PARTNERS
3. Retailers
Retailer may be defined as a dealer or trader who sells
goods/ services in small quantities to consumers for
personal or family use.

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According to Philip Kotler “Retailing includes all the
activities involved in selling goods or services directly to
final consumers for personal, non business use”
Retailing is a set of business activities that adds value to
the products and services.
Retailing may be understood as the final step in
distribution of merchandise, for consumption by the end
consumers
 TYPE OF CHANNEL PARTNERS
Any organization selling to final consumer is
retailing, whether they are:
A Manufacturer
A Wholesaler
A Retailer

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It does not matter how they sell or serve by -
Person
Mail
Telephon
e
Vending Machine or
Internet
Social Media
Or
Where these are
sold - A store, street
or consumers
house
 TYPE OF CHANNEL PARTNERS
Functions of Retailers
• Providing Assortments
• Breaking Bulk
• Holding Inventory

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• Providing Goods at Convenient Locations and Timings
• Providing Services
• Feedback
• Increasing the Value of Products and Services
 Dr. Parveen Nagpal
(Ref.: https://www.marketing91.com/difference-between-wholesalers-retailers-and-
distributors/)
 Dr. Parveen Nagpal
(Reference: https://difference.guru/difference-between-a-wholesaler-a-distributor-
and-a-retailer/)
 Dr. Parveen Nagpal
INDUSTRY 4.0
 DISTRIBUTION 4.0
Asian Paints recently realized from market research that its
consumer is the woman of the house who was making the
choice of home decor. The conventional profile used to be the
male consumer, 35-45 years of age. The findings from the
research compelled the company to start looking at the female

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consumer strongly. "We have aligned our decor orientation at
Asian paints to the woman of the house," said Amit Syngle,
president, technology, sales & marketing, Asian Paints, adding
that "all marketing initiatives, even in the social media space,
are targeted at the woman".
The company has roped in Deepika Padukone as the brand
ambassador and is also keen to improve its gender diversity,
which currently stands at 7%. Asian Paints believes it has now
developed a better connect with its audience. "We have hit the
arrow at the right spot and it is showing clearly in terms of the
equity of the brand," said Syngle.
 APPLE MAY TWEAK INDIA STRATEGY IN BID TO INCREASE MARKET SHARE
(MINT, 02 MAY 2019, 10:00 AM IST)
Apple Inc. is likely to make some adjustments to its India
strategy to improve its market share in the world’s second-
largest market for mobile phones. As part of the strategy, the
iPhone maker is expected to boost its manufacturing capacity
and open branded retail stores.
After announcing its fiscal-second-quarter earnings on

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Tuesday, chief executive Tim Cook told analysts that Apple,
which only assembles the iPhone 7 in India, will increase local
manufacturing, Press Trust of India reported.
According to Cook, a temporary 22% drop in price for the
iPhone XR in April taught Apple something, as it helped the
company increase sales.
Apple iPhones account for less than 1% of the Indian
smartphone market, largely dominated by vendors such as
Samsung and Xiaomi
The slowdown in the Chinese market is yet another reason for
Apple’s renewed interest in India.
 ENO PARTNERS WITH GOOGLE FOR 'WHAT A RELIEF' CAMPAIGN
(ETBRANDEQUITY, SEPTEMBER 09, 2020)
GSK Consumer Healthcare’s antacid brand, Eno has partnered
with Google to create a campaign where the communication is
customised as per the recipe being searched by the user,
based on search data from Youtube that said in-home food
experiments continue to be a relevant trend.

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With this, it has launched the third phase of the #WhatARelief
campaign to drive relevance for the brand. With this
campaign, the brand aims to drive relevance via contextual
conversations and present itself as a reliable ally against
acidity.
The brand first picked up the top recipes being searched on
YouTube and then developed customised six second creatives
for each recipe. The Eno advertisement is customised on the
basis of the recipe searched and played before the recipe
video commences.
AMAZONS BUSINESS MODEL IN INDIA
Amazon is an American international e-commerce
company. It was started by Jeffrey P. Bezos in the year 1994
and it was launched in India in June 2013.
Few years back, Amazon had no infrastructure in India,

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and now it dominates the Indian markets.
At the very start it was perception of investors that in India
It will not go long like China as in the year 2004 when
Amazon entered in China it hasn’t seen much success
there with Alibaba, its Chinese competitor, dominating the
e-commerce market.
 CASE STUDY
Mr. Desai, the president of ‘Tracks Company’, leaned back in his
chair and reflected on the success of his firm, which produces
and distributes a line of farm equipment across India. He held a
meeting of all his senior managers from different states and
expressed his urge to introduce new models of farm equipment
to satisfy changing demands of the customers (farmers).

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Distributors also suggested many modifications in the
companys products. One of the managers, who had an
engineering background, recognized the implications of the
suggestion that came from the distributors. He said that the
implementation would require greater investments in research
and development. Furthermore, the changes in the highly
automated production line would be very costly. Also having a
wider variety of models would require stocking many more
spare parts depending on the kinds of changes, workers might
need to be retained.
 CASE STUDY
Reflecting on the previous staff meetings, the president realized
that sales or marketing people always wanted a greater variety
of models but never acknowledged costs involved in changing
models. Till date the company had been extremely successful
with just a few models. Consequently, the president decided
against the introduction of new models. Instead he considered

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improving the current models and reducing the cost and price.
He felt that what the customer really wants was value.
Nevertheless, to test his judgement, the president asked a
consultant for an opinion.
Questions
1.What do you think are the opportunities and threats in the
external environment?
2.How would you go about evaluating the strength
and weakness of the firm?
3. Discuss the role of distributors in selling farm equipment
CHOICE OF DISTRIBUTION SYSTEM

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 CHOICE OF DISTRIBUTION SYSTEM
1. Intensive Distribution
Intensive distribution aims to provide saturation coverage of the
market by using all available outlets. The objective is to distribute
the product as extensively as possible. For many products, total
sales are directly linked to the number of outlets used.

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Intensive distribution is usually required where customers have a
range of acceptable brands to choose from. In other words, if one
brand is not available, a customer will simply choose another. This
alternative involves all the possible outlets that can be used to
distribute the product.
This strategy is particularly useful in low involvement products like
soft drinks where distribution is a key success factor. Here, soft drink
firms distribute their brands through multiple outlets to ensure
their easy availability to the customer. Hence, on one hand these
brands are available in restaurants and five star hotels and on the
other hand they are also available through small soft drink stalls,
kiosks, sweet marts, tea shops, and so on.
 CHOICE OF DISTRIBUTION SYSTEM
2. Selective Distribution
Selective distribution involves a producer using a limited
number of outlets in a geographical area to sell products. It
ensures more control over the outlets. An advantage of this
approach is that the producer can choose the most
appropriate or best-performing outlets and focus efforts like

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training on them. Selective distribution works best when
consumers have a preference for a particular brand or price
and will search out the outlets that supply.
This alternative helps focus the selling effort of manufacturing
firms on a fewer outlets. It also enables the firm to establish a
good working relationship with channel members. Selective
distribution can help the manufacturer gain optimum market
coverage and more control but at a lesser cost than intensive
distribution.
E.g. Dior or Prada perfumes are available at some department
stores.
 CHOICE OF DISTRIBUTION SYSTEM
3. Exclusive Distribution
Exclusive distribution is an extreme form of selective
distribution in which only one or maximum two -
wholesaler, retailer or distributor has the right to sell the
brand. When the firm distributes its brand through just

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one or two major outlets in the market, who exclusively
deal in it and not all competing brands, it is said that the
firm is using an exclusive distribution strategy. This is a
common form of distribution in products and brands that
seek a high prestigious image.
Typical examples are designer wear, major domestic
appliances and even automobiles. By granting exclusive
distribution rights, the manufacturer hopes to have
control over the intermediary’s price, promotion, credit
inventory and service policies.
FACTORS AFFECTING DISTRIBUTION STRATEGY

Locational Demand

Product Characteristics

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Pricing Policy

Speed and Efficiency

Distribution Cost
 SELLING & DISTRIBUTION STRATEGIES
Chandubhai Virani, the 60-year-old founder and director of
Balaji Wafers Private Limited, started making potato wafers in
1982 with a minuscule investment of Rs 10,000 at a shed
erected in the compound of his house. He then went on to
build a company that has reaped Rs 1,800 crore as turnover in
2017.

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Balaji Wafers, the largest regional potato wafer and snack
brand and the second biggest player in the potato wafer
segment in the country, started small.
Now, despite being concentrated in the western States of
Gujarat, Maharashtra, Goa, Rajasthan and Madhya Pradesh, it
is a household name thanks to its strong distribution network.
As one enters the premises of Balaji Wafers Private Limited in
the village of Vajdi (Vad) around 20 km from Rajkot, a small
Balaji temple in the forefront of the 50-acre factory area, is
proof of the faith the owners have in Lord Balaji, from where
the brand name ‘Balaji' came.
 SELLING & DISTRIBUTION STRATEGIES
It was in 1972 that Chandubhai’s father, the late Popat
Ramjibhai Virani who was an ordinary farmer, gave three of his
sons – Meghjibhai, Bhikhubhai and Chandubhai – the sum of
Rs 20,000 to invest it wisely.
The family then lived in Dhundoraji in Jamnagar district - about

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79 km from Rajkot - and Chandubhai was only 15 years old.
His elder brothers invested in agricultural tools and fertilisers,
but lost the money. Forced to leave in search of earnings by a
poor monsoon and subsequent severe drought, the three
brothers came to Rajkot in 1974 while the youngest Kanubhai
stayed back with his parents and two sisters.
Chandubhai, a Class X pass, found a job in Astron Cinema.
While his main job was to serve at the canteen, he also did
odd jobs like sticking film posters, door-keeping and ushering,
all for a monthly salary of Rs.90.
 SELLING & DISTRIBUTION STRATEGIES
“At night after the show, I repaired torn seats and in exchange
got a plate of chorafari (a Gujarati snack) and chutney,” shares
Chandubhai. “We lived in a rented place, but one night we ran
away from there because we did not have even Rs 50 to pay as
rent.” (He later paid the landlord back.)
The brothers started selling various items in the canteen

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including potato wafers bought from a supplier, who was
always late. This spelt disaster at a movie hall! “After changing
suppliers three times,” says Chandubhai, “I thought – why not
make our own potato wafers?”
By 1982, the whole family had moved to Rajkot and Ramjibhai
had bought a house with a large compound. The family made
‘masala’ sandwiches for the canteen; it was a hit, but a
perishable product and Chandubhai saw a future in wafers
because they could be carried anywhere and everywhere.
With an investment of Rs 10,000, Chandubhai set up a small
shed in the compound and began his experiments with making
chips, after canteen work.
 SELLING & DISTRIBUTION STRATEGIES
Jumbo king was founded by Dheeraj Gupta, a third-
generation entrepreneur from his family. Dheeraj’s family
has been in the hotel and catering business and also had
their sweet shops. Therefore on completing his MBA from
Symbiosis, Pune, Dheeraj decided he will export sweets to

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markets with heavy India population, like Dubai. However,
this attempt at exporting sweets didn’t work out well and
Dheeraj had to shut shop. His second entrepreneurial
outing was with street food and he opened an outlet in
suburban Mumbai, in Malad under the name of Chaat
Factory. As business grew, Dheeraj realized the best selling
item on their menu was vadapav and decided to do a
more thorough job with this particular food product. Thus
began the journey of Jumboking.
 SELLING & DISTRIBUTION STRATEGIES
Jumboking opened its first outlet in 2001 and priced the
vadapav at a premium of Rs 5 when the roadside offering
was being sold at Rs 2. “People were very curious to try a
vadapav in the shop, but they did come,” says Dheeraj.
Being hygienic was their first differentiation. Soon there

Dr. Parveen Nagpal

were flavours and variety -- cheese vadapav, butter
vadapav, schezwan vadapav -- that they started offering.
Sales started picking up and the company continued to
constantly innovate as it chugged along. One of the
earliest things Jumboking did was to open franchise stores
in Tier 1 -2 cities, in areas where there were high footfalls
– like outside a railway station. 200-300 sq. ft. stores that
fit well with the locations, and the customer base was the
crowd rushing to catch that 5.45 local back home, or take
the 9.15 train to rush for that meeting.
DISCUSS THE DISTRIBUTION STRATEGIES

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 FACTORS AFFECTING EFFECTIVE MANAGEMENT OF
DISTRIBUTION CHANNEL
1. Channel Design
2. Channel Policy
3. Channel Conflicts

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4. Resolution of Conflicts
5. Motivating Channel Members
6. Selecting Channel Partners
7. Evaluating Channels
8. Channel Control
 CHANNEL DESIGN
Channel design is the pattern of channel which is suitable
for marketing its products.
It includes the decision about the structure -
 Length of the channel

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 Number of members required in the
distribution network.
 Activities to be performed by channel members.

 Role and responsibility of channel members.

Firms can use different channels to reach different

segments of the market or different channels for reaching
the same market.
 CHANNEL DESIGN
The channel selected should be best suited to the firms
requirements for the particular segment.

It should focus on:

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Customers Needs and Wants
Selling Objectives
Constraints
Customer Convenience
 CHANNEL DESIGN
Steps in Designing the Channel
Analysis of Customer
Needs and Wants

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Establishing Objectives
and Constraints

Identifying and Evaluating Major

Channel Alternatives

Evaluating the Variables

Affecting Channel Design

Selecting
the “Best”
Channel
Structure

Review
 CHANNEL POLICY
Channel Policy has to be reviewed at regular intervals from
time to time.
It is framed in the areas of
 Market Coverage – Extent to which manufacturers cover the
market through the distribution channels.

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 Channel Coverage – Use of various channels (direct and
indirect) to reach diversified group of customers through
different pricing strategies.
 Product Lines – Group of products that are closely related
because they function in similar manner, are sold to the
same customer groups, are marketed through the same
types of outlets or fall within given price ranges. E.g. Bata
 Pricing

 Choice of Channel Partners

 CHANNEL CONFLICTS
Channels are managed by individual businessmen who are
motivated by personal goals
Each channel member is interested to increase sales and
make profits.

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When one channel members actions prevent another
channel from achieving its goals, channel conflicts occur.
Channel conflict is a situation in which channel partners
have to compete against one another or the vendor's
internal sales department.
Channel conflict can cost a company and its partners
losses as partners try to undercut one another.
It can also lower morale within the channel and cause
some partners to consider other vendors.
 CHANNEL CONFLICTS
Channel conflict causes unnecessary hurdles, problems in
sales and reducing efficiencies of the channel partners.
To prevent channel conflict, partners sometimes enact
agreements such as deal registration between

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manufacturer and the channel partner
 CHANNEL CONFLICTS
Types of Channel Conflicts
1. Vertical Channel Conflict: Relates to different levels
within the same channel. E.g. Conflict between
Manufacturer and Distributor

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2. Horizontal Channel Conflict: Takes place on same level
of distribution. E.g. One dealer may overlap and
interfere with sales territory assigned to the other
dealer and adopt price cutting.
3. Multi Channel Conflict: When the manufacturer uses
two or more different channels to sell the product to
the same target market. E.g. A manufacturer may sell
his product through an agent and also online at the
same time
 REASONS FOR CHANNEL CONFLICTS

Role Ambiguity

Goal Incompatibility

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Mismatch of Market Perception

Bias or Target fixing

Competitor Inducement

Demand for Higher Commission

Stocking of Competitive Brands

 RESOLUTION OF CHANNEL CONFLICTS
Channel conflicts should be avoided to maximize
profits and achieve overall goals and objectives.

Conflicts can take different forms such as

hostility, incompatibility, disagreement etc.

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Thus every effort should be taken to resolve conflict by
 Effective communication
 Understanding the nature and intensity of the conflict
 Finding out the source of conflict
 Arbitration
 Formation of Dealer Councils
 Mediation etc.
 KENNETH THOMAS’S 5 STYLES OF CONFLICT RESOLUTION
Kenneth W. Thomas and Ralph H. Kilmann developed five
stages of conflict resolution
It assess individuals behaviour in conflict situations.
In such situation, a persons behaviour can be described

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along 2 dimensions:
a. Assertiveness, the extent to which the
individual attempts to satisfy his own concerns
b. Cooperativeness, the extent to which the
individual attempts to satisfy the other persons
concerns.

The two dimensions of behaviour can be used to

define five methods of dealing with conflict.
KENNETH THOMAS’S 5 STYLES OF CONFLICT RESOLUTION

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 KENNETH THOMAS’S 5 STYLES OF CONFLICT RESOLUTION
1. Competing: is a power – oriented mode
It is assertive and uncooperative.
Competition results from the desire to
survive.

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An individual may follow his own concerns at the other
persons expense.
Competing can emerge as a winning strategy when
assertive individuals are on the job.
2. Collaborating:
It is assertive and cooperative
People try to meet the needs of everyone
and acknowledge them.
Conflict resolution requires mutual respect, a willingness
to listen to others and creativity.
 KENNETH THOMAS’S 5 STYLES OF CONFLICT RESOLUTION
3. Compromising:
Moderate in assertiveness and cooperativeness
Find solutions that will satisfy everyone to some extent.
It is a situation in which both the parties sacrifice to get a
midway solution of the problem.

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They call for meetings, understand the nature of the
problem and get a solution to the problem
4. Avoiding:
It is unassertive and uncooperative
Avoidance is used by the weak or disinterested members
of the channel.
Members who cannot solve a problem try to avoid
or ignore the problem.
Solution of the conflict is postponed or avoided.
 KENNETH THOMAS’S 5 STYLES OF CONFLICT RESOLUTION
5. Accommodating:
It is unassertive and cooperative
Accommodation is a solution through surrender and
understanding.

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In accommodation one channel member allows the other
party to achieve goals without being concerned about his
own interests.
Only those people willing to sacrifice their ego can adopt
this strategy
 MOTIVATING CHANNEL MEMBERS

Referent Power
Motivating Channel Members

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Expert Power

Reward Power

Legitimate Power

Coercive power
 MOTIVATING CHANNEL MEMBERS
1. Referent Power - Image or recognition that a company
enjoys in the market. Such position gives the company
power of reference. Members feel proud to be associated
with such a company and it naturally motivates them to be
associated with the company. Companies like ITC, HUL,
Bisleri, Sony and many others enjoy referent power.

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2. Expert Power - refers to some skills or capability that a
company possesses which can be imparted to the channel
partners. Channel members can thus learn more about the
technology and business and hence get motivated to be
associated with the company. Technology oriented
companies in automobiles, electronics and
telecommunication use this expert power.
3. Reward Power - Companys willingness to reward the
channel members in order to motivate them. It may be
conventional reward or incentive system used by
companies for better results. Rewards can be financial, non
financial or both.
 MOTIVATING CHANNEL MEMBERS
4. Legitimate Power: refers to power or authority derived by
a company from any contract or agreement signed by the
company with its channel partners like distributors. The
agreement gives the company legal powers to expect the
members to perform as per the expectations or members

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are obligated to do so. However the legitimate power
should be used as a source of motivation rather than
means of pressuring the channel partners to perform.
5. Coercive power: refers to use of threat by a company to
make the channel members perform. Large companies
which are very powerful due to their strong positions
make use of these powers to ensure that the work is done
through the distributors. Coercion or threat should be
avoided as it is not a motivating factor.
 SELECTING CHANNEL MEMBERS
Finding the right channel partner may not be an easy task.
Channel partners must efficiently perform the distribution
tasks necessary to implement the channel strategy.
Motivation of channel members can become much easier

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if the correct channel partners are selected.
In case of FMCG products, channel members like
wholesalers and retailers are already present and become
a part of distribution network to the company.
For consumer goods like automobiles and electrical goods,
dealers have to be selected or appointed.
 SELECTING CHANNEL MEMBERS
While selecting the channel partners, must
company evaluate their various characteristics such
as:Reputation


 Location

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 Number of years in business

 Profit Records

 Cooperativeness

 Line Specialization

 Size and Quality of Salesforce

 Future Growth Potential

 SELECTING CHANNEL MEMBERS
A checklist of indicators that can be taken into consideration
before selecting a channel:
• Knowledge of market
• Local presence
• Relationship with customers

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• Reputation in market
• Financial stability
• Sales area coverage
• Selling skills
• Competitive service skills
• Marketing support to manufacturer
• Shared values and culture
• Ethical practices
• Necessary leadership skills
CRITERIA FOR SELECTING CHANNEL MEMBERS

Market

Factors

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Channel
SWOT Product
Analysis
Partners Factors

Selection

Channel

Factors
 SELECTING CHANNEL MEMBERS
1. Market Factors- Existing market structure of the product(s). This
includes the process of buying and selling, consumer location
and preferences and behavior, competition, existence or
proportion of industrial or organizational buyers etc.
2. Product Factors - Product characteristics - physical properties,
technical or technological aspects, life cycles, consumer
perceptions, market position etc.

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3. Channel Factors - Different aspects, characteristics and
capabilities of channel members, such as, financial
trustworthiness or reputation, product promotion capabilities,
selling abilities, after-sales service facilities or abilities
(wherever applicable), and, finally, willingness or availability of
particular channel members.
4. SWOT Analysis refers to the overall appraisal of prospective
channel members before selection. Different channel members
may exhibit different strengths and weaknesses in the existing
market environment, i.e., opportunities and threats. Some
channel members may be effective in pushing slow-moving
products into the market while some other channel members
may be effective in selling Industrial goods.
 EVALUATING CHANNELS
Evaluation is more commonly done on monthly basis;
some companies do on quarterly basis; and some other
companies do on monthly and quarterly basis.
Performance evaluation is done on the basis of prescribed

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standards, tasks and targets.
Tasks and targets can relate to sales volume, channel
inventory level/management, efficiency, profitability etc.
Evaluation norms or criteria are usually agreed between
the company and a particular channel partner.
 EVALUATING CHANNELS
Measures evaluating of
for members: performance channel
 Effectiveness
- assessed
proficiency to satisfy in needs.
customer terms of delivery and

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 Efficiency/ Productivity - involves controlling costs
incurred by intermediaries, maximizing output for a
given level of input
 Equity - the extent to which distribution channels serve
markets/ segments such as distant or isolated consumer
pockets along with normal consumers (Accessibility of
channel among customers)
 Profitability – concerns financial that brings revenue to
the manufacturer.
 CHANNEL CONTROL
Channel control refers to verify whether specified
functions have been carried out in accordance with the
pre-determined targets and to rectify the errors, if any.
Channel control ensures that operations are on the right

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track in prescribed norms and standards.
Channel control can be physical, financial, qualitative,
quantitative, formal or informal.
It depends on the company what kind of control system it
plans to design.
The control system is then administered through
instruments of control, known as control devices
 INSTRUMENTS OF CHANNEL CONTROL

Contract or

Agreement

Dr. Parveen Nagpal

Channel

Control

Budgets and Distribution

Reports Audit
 INSTRUMENTS OF CHANNEL CONTROL
1. Contract or Agreement: The most traditional, oldest,
instrumental method of exercising control over
channel members functioning or operations. Most of
the companies enter into a written agreement that
specifies details of association between the parties

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and also the terms of operations such as:
• Products handled.

• Territories handled.

• Categories or types of customers.

• Selling price and margins.

• Sales promotion responsibility of channel partner.

• Payment and credit mechanism.

• Inventory levels – management by the channel partner

 INSTRUMENTS OF CHANNEL CONTROL
2. Budgets and Reports: Budgets are prepared well in
advance and enables rational utilization of financial
resources. Budgets indicate the framework within
which the entire operation is to be completed. It also
includes the commission/ incentives that are to be

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paid. To ensure that the channel is functioning
smoothly, reporting must keep the channel members
informed about what is going on.
Monitoring and control become very easy and
effective if there is a proper reporting system. Weekly
reports can be short and precise showing immediate
results. Monthly and quarterly reports can be more into
detail showing targets and planning parameters.
 INSTRUMENTS OF CHANNEL CONTROL
3. Distribution Audit: It is systematic and objective criteria
to study the distribution efficiency and evaluate the
distribution policies of the manufacturer. Its objective
is systematic analysis of activities, targets and results
of a channel member. Every manufacturer wants to

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minimize the costs by eliminating wastage and utilizing
manpower optimally.
Distribution audit can easily identify any
shortcomings in operations of a channel. These issues can
be deliberated upon and improvement measures can be
undertaken by channel members on the basis of the
review.
 REFERENCES
1. Nag, Sales And Distribution Management, Mc Graw
Hill, 2013 Edition
2. Richard R. Still, Edward W. Cundiff, Norman A.P.
Govoni, Sales Management, Pearson Education, 5th

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Edition
3. Krishna K. Havaldar, Vasant M. Cavale, Sales And
Distribution Management – Text & Cases, Mc Graw
Hill Education, 2nd Edition, 2011
4. Kotler & Armstrong, Principles Of Marketing – South
Asian Perspective, Pearson Education, 13th Edition
5. Nagpal, Sharma, Kukreja - Sales And Distribution
Management, TYBMS, Sheth Publishers.
 Dr. Parveen Nagpal
THANK
YOU

Dr. Parveen Nagpal

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