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8/4/2019 Chap 8 Distribution Management
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Distribution management&Marketing Mix
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Distribution refers to bringing the productto the market and giving it to the finalconsumer
According to Mossmam & Nortondistribution is the operation which creates
time,place & form utility through themovement of goods and persons from oneplace to another.
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Are sets of interdependent organizations involvedin the process of making a product or serviceavailable for use or consumption
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Right product inRight quantity inRight condition at the
Right time andRight place for theRight customer at
Right cost
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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
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Product
Place
Price
Promotion Distribution channels help in the place aspect of
the marketing mix
Distribution provides place, time and possessionutilityto the consumer
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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
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Spatial discrepancy:- the difference between thelocation of a producer and the location of widelyscattered markets
Temporal discrepancy:- a situation that occurs whena product is produced but a customer is not ready tobuy it
Need for breaking the bulk
Need for assortment
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Derived from the corporate strategy and themarketing 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
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Defined by the nature of the industry, the products,competition and market shares.
Affordabilityalso decides the service level
It should at least match competition. Customer expectations have no limit
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Influenced by the customer expectations
Defines the extent of time, place and possession utilitywhich the customer can expect out of the channelnetwork
Set of activities.
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Manner in which the company and its marketingchannels go about achieving the customer servicelevels
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 towho is to performwhich task
Organization.
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Extent ofcompany support and outsourcing to bedecided
Budget for the cost of the distribution effort
Select suitable channel partners C&FAs, anddistributors
Setting clear objectives for the partners
Agree on level offinancial commitments by thechannel partners.
Policy and procedure..
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Define policy and implementation guidelines throughOperating Manuals
Policyguidelines include Code ofconduct for channel members
System for redressal ofcomplaints Any additional subsidies etc Handling institutional business Service policyfor engineering products
KPIs.
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For measurement ofeffectiveness. Some of thesecould be: Consistent achievement oftargets by product groups,
periods and territories
Achievement ofmarket shares Achievement ofprofitability Zero complaints from customers No stock returns
Ability to handle emergencies and sudden spurts indemand
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For measurement of effectiveness. Some of these couldbe: Balanced sales achievement during a period no period
end skews
Market coverage with ready stocks Excellent management ofaccounts receivables Minimize losses on account ofstock-outs Minimize damages to products
CSFs
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The distribution strategy also needs the supportand 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 ofintegrity Equitable distribution at times of shortage Timelycompensation of channel partners
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C&FAs and CSAs
Distributors, dealers, stockists, value-added re-
sellersAgents and brokers
Franchisees
Electronic channels
Wholesalers Retailers
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C&FA: carrying and forwarding agent and C&SA:carrying and selling agent both are on contractwith 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 todistributors against indents
Goods belong to the company C&SAalso sells the goods on behalf of the company
but remits proceeds after sale
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Name denotes the extent of re-distributiondone by them
Distributors invest in the products buyproducts 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 companyAgents bring buyer and seller together
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Operate out of the main markets Deal with a number of company products of
their choiceAre 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
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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
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Producer Producer
Industrial Distributor
Industrial Customer
Industrial Distributor
Industrial Customer
Agent/middleman
Customers may also direct from company sales force
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Producer ProducerProducer
Customer /consumer
Retailer
DistributorDistributor
Retailer
Customer/Consumer
Wholesaler
Customer/Consumer
Retailer
Retailers may also direct from company sales force
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Determines the intensityof the distribution Intensity decides the service level provided
Types of distribution intensity: Intensive Selective Exclusive
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Intensive distribution:- a form of distribution aimedat having a product available in every outlet wheretarget customers might want to buy it.
Selective distribution:- a form of distributionachieved by screening dealers to eliminate all but a fewin any single area
exclusive distribution:- a form of distribution that
establishes one or a few dealers within a given area
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Intensive: distribution through every reasonableoutlet available FMCG
Selective: multiple, but not all outlets in the market pharma, frozen food
Exclusive: may be only one outlet in a market - cardealers
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Strategy is to make sure that the product is available inas many outlets as possible
Preferred for consumer, pharmaceutical products andautomobile spares
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A few select outlets will be permitted to keep theproducts
Outlets selected in line with the image the companywants to project
Preferred for high value products Tanishque jewelry
Keeps distribution costs lower
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Highly selective choice of outlets may be even oneoutlet in an entire market
Could include outlets set up bycompanies Titan,Bata
Producer wants a close watch and control on thedistribution of his products.
Channel strategy