dirtibution channel by germanshiper

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									Distribution channels
     INTRODUCTION
Channels Of Distribution describes the varieties of
intermediaries (i.e., agents, wholesaler and retailers)
involved in moving products between countries as
well as within countries. The tasks and functions of
the various intermediaries will be examined. It
should be kept in mind that certain types of
intermediaries do not exist in some countries and
that the pattern of use as well as the importance of
each type of intermediary varies widely from country
to country
.
A manufacturer is required to make several decisions
that will affect its channel strategy, including the
length, width, and number of distribution channels to
b used.
          DEFINITION
 THE AMERICAN MARKETING ASSOCIATION
                    DEFINES:--
       CHANNEL OF DISTRIBUTION AS—
    “An organized network of agencies and
institutions which in combination perform all
 the activities required to link producers with
   users to accomplish the marketing task.”
                 DISTRIBUTION:-
     Is the physical flow of goods through
                  channels and
                   CHANNELS:-
Is coordinated groups of individuals or firms
that perform functions adding utility to a
product or services.
    OBJECTIVES OF CHANNELS
TO CREATE UTILITY FOR CUSTOMERS
CHANNEL UTILITY ARE:-
    PLACE
    TIME
     FORM
     INFORMATION

    Ex:-COKE’S LEADERSHIP:-
                     due to PLACE UTILITY
   The most effective channel arrangement is
    a clear focus of the company’s marketing
    effort on a target market and a
    determination of its needs and preferences.
   Channel strategy in global marketing must
    fit the company’s COMPETITIVE POSITION
    and MARKETING OBJECTIVE in each national
    market
   If a company wants to enter a competitive
    market,it has two basic choices:-
                  DIRECT INVOLVEMENT (sales
    force, retail stores etc.)
                  INDIRECT INVOLVEMENT
    (independent agents, distributors,
    wholesalers)
                 Distr ibution C hannel
                              Functions
                    Information

      Transfer
                            Communication

Payments
                                  Negotiation
 Physical
Distribution
                                   Ordering

      Risk Taking
                            Financing
     ROLES OF CHANNEL
         MEMBERS
1. Facilitate the search process of
  buyers & sellers:-
  Lower the uncertainty among end-users
  In their absence, manufactures would also
  be confuse about how to approach
  customers

2. Sorting:-
  Channel members eliminate the
  differences in the collection of goods &
  services offered by company
           CONTD.
3. Making transactions routine:-
  Transactions involve ordering of goods or
  services, fulfilling orders & paying for
  goods & services purchased.
   i.e., Manufacture-Wholesaler-Retailer-
  Customer
  Help in making transactions routine
  through standardizations & automations

4. Contractual efficiency:-
  Channel Intermediaries have to optimize
  the number of exchange relationships
  required to complete a transaction.
    DESIGNING MARKETING
         CHANNELS
Dimensions to choose a channel design:
 The channel length – Number of
  intermediaries between the producer and
  customers

   The channel breadth – Number of
    outlets available to consumers

   The cost involved in selecting a
    particular channel
           CONTD.
     A channel decision depends on the
    following considerations:-
•   CHANNEL STRUCTURE:-
     It refers to the number of levels of
    channels intermediaries (Distributor,
    Wholesaler, Retailer).

    It depends on the number of
    intermediaries uses to distribute its
    product to end-users
    The channel levels are zero level, one
    level, two level & three level.
                                  Zero-level channel



                                 One-level channel
                                      Retailers
Manufactures




                                                                       Consumers
                                 Two-level channel

                   Wholesalers                       Retailers




                                 Three-level channel

               Wholesalers           Agents                Retailers
             CONTD.
2. CHANNEL INTENSITY:-
    It refers to the number of intermediaries present
   in a distribution or marketing channel.

Intensive distribution
  Producers of products stock their goods in as
  many outlets as possible as possible by
  considering time & place utility.

Exclusive distribution
  Producers of some products limit the number of
  intermediaries handling their product to deliver
  maximum service quality to customers, try to
  develop a superior brand image for their product.
         CONTD.
Selective distribution
 It is adopted when the manufacturer
 lacks the resources to adequately
 influences the policies of all the
 intermediaries who can carry a
 particular product.

 The manufacturer distributes
 products only to specific retailers
 selected on the basis of defined
 criteria.
             CONTD.
3. TYPE OF CHANNEL INTERMEDIARIES AT EACH
   LEVEL
Manufacturer’s representatives
   They sell the manufacturer's product to the
   wholesalers, retailers, other businesses & also to
   institutions such as hospitals, libraries & school.
   They may represent more than one manufacturer.
   Also called account executives or sales engineers.

Manufacturer’s sales force
 It comprises the salespersons who are on the
  company’s rolls & received a fixed salary.
 Devotes their entire time & effort to selling that
  product or service of that manufacturer.
         CONTD.
Industrial distributors
 These are independent firms
  consisting of sales & support
  personnel.
 They differ from manufacturer's in
  that they take possession of the
  products they sell & have a
  partnership arrangement with the
  manufacturer.
 Examples: Norton, Pfizer & 3M.
FACTORS AFFECTING SHAPING
      OF CHANNELS

 CUSTOMERS
 PRODUCTS
 MIDDLEMENAND
 ENVIRONMENT
              CUSTOMER
           CHARACTERISTICS
   Customers number, geographic distribution,
    income, shopping habits and reactions to
    different selling methods all vary from country to
    country and therefore require different channel
    approaches.
   The need for multiple channel intermediaries
    increases as the customers increases.

EX:- 10 customers must be directly contacted by
  either by manufacturer or an agent,
For mass market products bought by millions of
  customers, retail distribution outlets or mail order
  distribution is required.
    Product characteristics
 Degree   of standardization.
 Perishablity
 Bulk/Quantity
 Services (requirements and facilities)
 Unit price
           Types of products
   Product with high unit price rely on controlled
    sales force,(Ex. mainframes computers) since
    selling cost of this expensive distribution method
    is small part of the total SP.
   Cosmetics products and other consumer products
    rely on wide gross selling margins to compensate
    salespeople (Ex. Amway and avon)
   Perishable products need relatively direct
    channels to ensure proper conditions at the time
    of purchase by customers. (bread and eatables)
   Bulky products/large quantity (Ex.soft drinks, beer
    )of product requires minimum shipping
    distances,charges and minimum amt. of
    transactions between intermediaries.
   Middleman characteristics
 Cherry     picking. Practice of taking
  orders from manufacturers whose
  product require less efforts to
  promote.
 Bypassing of cherry picking can be
  done by going alternatives options
  like: own distribution organizations.
    •Setting
   •Going for cooperative arrangements/direct selling
   supports and distribution support systems. ( Rely on
   distributors own sales force by subsidizing the cost of
   the sales representatives the distributer had assigned
   to the company’s products).
    Middleman characteristics
•Selection- finding most efficient and compatible distributers. (Ex. The
local chamber of commerce or local trade associations in country can
provide lists.)
•Before signing make sure the presence of one key person in the
organization who will make it a personal objective to achieve success
with your product.
•Distributer must be capable of assisting of providing necessary
information about customers .
•Distributer/agent should have core competency in related products.
•Motivation in form of commissions is appreciable.
•Clause of termination on the account of performance should be
clearly expressed. (Ex. despite of mentioned clause foreign agent
might sue you on basis of his native country norms.)
             Environmental
             characteristics
              •Economic
              •Social
              •Political


Consumables and eatables are highly sensitive
towards environment. Success of Supermarkets is
classical example of this factor.
                Structure
• Consumer products      Designed to directly put in
the hands of end user.
•Industrial products    Designed for manufacturers
and organizational use.
Consumer product :
             • Door to Door selling
             •Manufacturer- owned store
             •Franchise Operations
             •Combination Structures




Industrial products
                             M                                                        M         M           M         M                   M

                                                                                    Agents/
                                                                                    Brokers    MSF        MSF        MSF
                                                        Manufacturer-Owned Stores




                                                                                                                             W            W
                           Door-to-Door




                                                                                                 W
Mail order




                                          – Time Salesperson
                                          Consignment to Part
             House Party




                                                                                      R
                                                                                                 R          R          R                  R

                                                                                              Customers
             M = Manufacturer                                                                 MSF = Manufacturer’s Sales Force
             W = Wholesaler                                                                   R = Retailer (including online e-commerce
                    Figure :- Marketing Channel Alternatives – Consumer Product
Marketing channels alternatives for industrial
product
THANKS

								
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