Rahul Pratap Singh Kaurav

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The process by which a producer or supplierdirects marketing activity by involving and motivating parties comprising its channel of distribution.

MEANING AND DEFINITION

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ROLE OF DISTRIBUTION CHANNELS

To adjust the discrepancy of assortment through the process of

sorting, accumulation, allocation, and assorting

To minimize the distribution costs through routinising and

standardizing transactions to make exchange more efficient

and effective

To facilitate the searching process of both buyers and sellers

by structuring the information essential to both the parties

To provide a place for both parties to meet each other and

reducing uncertainty

HOW DO DISTRIBUTION CHANNELS CONTRIBUTE

Intermediaries can improve the efficiency of the

exchange process

Channel intermediaries adjust the discrepancy of

assortment through the performance of the sorting

process

Marketing intermediaries hang together in channel

arrangements to provide for the routinisation of

transactions

Channels facilitate the searching process

DISCREPANCIES IN THE PROCESS OF EXCHANGE

Need to break the bulk

Need to provide assortment

THE COST AND CONTROL ASPECTS OF INTERMEDIATION

Direct Distribution Indirect distribution

Control Cost

efficiency

DISTRIBUTION CHANNEL STRATEGY

Setting distribution objectives in terms of the customer

requirements

Finalizing the set of activities that are required to be

performed to achieve the channel objectives

Organizing the activities so that the responsibility of

performing the activities is shared among the entities

who are meant to perform these activities

Developing policy guidelines for the smooth functioning

of the channel on a day to day basis

DISTRIBUTION CHANNEL MANAGEMENT (CONTD.)

Distribution channel management encompasses all activities

dealing with the distribution function of the firm

The distribution strategy provides guidelines for decision

making

The distribution management function can be viewed as

happening in two phases: the ex ante phase and the ex poste

phase

DISTRIBUTION CHANNEL MANAGEMENT (CONTD.)

The ex ante phase involves all the activities that are

associated with the design and establishment of the

distribution channel. These activities actually take place

before the distribution channel actually starts functioning.

The exposte phase involves managing the day to day

activities of the channel wherein the behavior of the

individual channel members are coordinated

CHANNEL MANAGEMENT TASKS

Distribution Channel Strategy

Channel Objective

Activity Finalization

Organizing the activities

Developing Policy Guidelines

Design of the

channel

structure

Establishing

the channel

Motivating

Channel

Members

Resolving

Conflicts among

channel

members

Ex ante

Phase

Ex Poste

Phase

The channel design is normally meant to give a clear idea about: The number of channel entities in the channel network,

The way in which they are linked,

The roles and responsibilities of the entities in the network

The rewards for participating in the activities and also

Clear cut guidelines for the major activities to be performed during the normal functioning of the channel.

Channel Design

WHAT ARE THE SERVICE OUTPUTS

Waiting time

Breaking the bulk

Spatial convenience

Assortment

DISTRIBUTION CHANNEL DESIGN

To consume

a product

Service outputs

have to be delivered

Channels

Participates in

channel flows

Activities have

to be performed Thus performs activities

EXAMPLE: OF A SERVICE OUTPUT DELIVERED TEMPLATE

Sl.No. Service dimension Service output delivered

1. Bulk-Breaking Units are delivered in ones

2. Spatial convenience There is at least one outlet for almost every

3 km radius excluding of course thinly

populated areas

3. Waiting time Not more than 2 days for any model

4. Assortment Other consumer goods items including that

of other competitors are available at all the

outlets where the products are otherwise

Available

5. Installation support Available

6. After sales support Free for first two years, but available on

payment afterwards. Also available at every

city from where the product was bought.

7. Consumer financing Available

PARAMETERS FOR COMPARING CHANNEL DESIGNS

Efficiency

Effectiveness

Equity

Scalability

Flexibility

THE CHANNEL ESTABLISHMENT PLAN (CONTD.)

The main purpose of the channel to be set-up

The profile of the customers who are the target market

for the channel

The needs and requirements of the target market with

regard to the identified service outputs provided by the

proposed/ existing channel:

Analysis of the operations of the existing channels that

deal in similar product/service lines

Detailed activity chart for achieving the service output

objectives

PLAN…..CONTD.

Details about the various channel constituents who will

be performing these tasks

The cost of performing the activities

The designated roles and responsibilities of the channel

constituents

The proposed remuneration for performing these roles

and responsibilities

Standards for measuring the performance

Procedures for reporting and information sharing

Monitoring mechanisms

Criteria for appointing the channel members

LOGISTICS STRATEGY

Cost reduction

Capital reduction

Service improvement

Retailer

Stockist

Supplier

Retailer Retailer Retailer Retailer

Stockist

echelon

lead time

Stockist

echelon

Inventory

Echelon inventory

CHANNEL RELATIONSHIPS/ BEHAVIOUR

Perceptions of organisational power

Dependence

Control

Trust

Commitment

Co-operation

CHANNEL CONTROL

Pay–Off

Function

Tolerance

Function

Supplier authority

Distributor’s

profit earned

Zone of acceptance

ROLE OF PERSUASION, AUTHORITY, AND COERCION IN CHANNEL CONTROL

Authority persuasion

Coercion

Pay –off

function

AB

C

Channel members

profit

Tolerance

function

control

COMPONENTS OF CHANNEL OFFERING

Financial returnsQuality

productsCompetitive priceReliable delivery

National

reputation

Promotional

supportTraining

Market

researchCompany

policies

Technical

assistance

Responsiveness

systems

Manufacturer sales

force incentives

Distributor

sales force

incentives

Distributor firm

incentivesCapability

building

programmesChannel core

elements

Incentive

programme

Influence

Strategy

group

Types of Influence strategy Explanation

Indirect

influence

strategies

Information exchange

Information control

Modeling

Where information on general business

issues and the channel program is

merely exchanged with channel

member personnel.

Direct

Unmediated

Strategies

Recommendation

Warning

Positive normative

Negative normative.

In this type of strategy the

consequences of the acceptance or

rejection of the channel programme or

its implementation are stressed, but

these consequences are based on a

response from the market environment,

not on the mediation of the channel

Principal.

INFLUENCE STRATEGY TYPES (CONTD.)

(CONTD.) INFLUENCE STRATEGY TYPES

Reward and

Punishment

Strategies

Economic reward

Non-economic reward

Economic punishment

Non-economic punishment

In this type of strategy rewards

and punishments are directly

given to channel members

Direct

unweighted

strategy

Direct request This strategy involves making a

direct request to the channel

member where the Principal

mainly communicates desires or

wishes concerning the channel

member’s acceptance of the

channel program.

Direct

Mediated

strategies

Personal plea

Promise

Threat and

Legalistic reference.

In this type of strategy specific

action is requested;

consequences of acceptance or

rejection are stressed and are

based on the mediation of the

channel principal.

INFLUENCE SITUATIONS IN CHANNEL RELATIONSHIP

Reinforcement

process

Behavioural

reinforcement

Moderate

rationalization

Attitude change

Radical

rationalization

Attitude change

Inducement process

Behavioural change

Moderate

confrontation

Behavioural and

attitudinal change

Radical

confrontation

Behavioural and

attitudinal change

Positive NegativeNeutral

+ ve

- ve

Attitude towards the channel progranmme

Behaviour

towards the

channel

programme

STAGES IN CHANNEL CONFLICT

Attitudinal

sources

of conflict

Structural

sources of

conflict

Conflict

resolution

Cognitive/

Affective

conflict

Manifest

conflict

Conflict

outcomes

CAUSES OF CONFLICTS

Attitudinal Causes

Structural causes

CONFLICT MANAGEMENT METHODS AT DIFFERENT STAGES OF CONFLICT

Latent conflict

Felt conflict

Manifest conflict

Institutional approaches

Joint membership of associations

Exchange of executives

Cooptation

Dealer councils

Third party mechanisms

Mediation

arbitration

Negotiation

NEGOTIATION STRATEGIES

Accommodative Collaborative/problem

solving

Compromise

Avoidance Competitive

/aggressive

Concern

for the

others

interest

HIGH

LOW

LOW HIGHConcern for

own interest

Refer to Unit I and II.

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