LECTURE 3
DISTRIBUTION CHANNELS
Distribution Management
M Wahidul Islam
Spring 2015
Planning,
Forecasting
& Budgeting
Warehousing
and Logistics
Channel
Information
Systems
Sales Force
Management
Elements of
Distribution
Management
Distribution
Channels
Product
Pricing and
Promotion
Product
Visibility
WHAT IS A DISTRIBUTION CHANNEL?


A group of people and firms involves in the
transfer of title or ownership as the product
moves from the producer to the ultimate
consumer
“the structure of intra company organization
units and extra company agents, dealers,
wholesalers and retailers through which a
commodity, product or service is marketed” –
American Marketing Association
KEY QUESTIONS FOR
DISTRIBUTION CHANNEL
Who
will be the Channel
Members?
Who
is driving the Channel?
What
What
is the Channel Format?
would be the Patter of
Distribution?
DISTRIBUTION CHANNEL MEMBERS
Company Owned
Distribution Center
Distributors/
Dealers /
Stockiest
Carrying and
Forwarding Agents
Owned or
Contracted
Consignment
Selling Agents or
General Selling
Agents
Exclusive /
Shared
Value Added
Resellers
Wholesalers
Direct Marketing
Sales force
Retailers
Franchises
DISTRIBUTION CHANNEL MEMBERS

C&FA




Consignment Selling Agents (CSAs) or
General Selling Agents (GSAs)



Facilitators
Do not pay for the product or hold physical possession of
the goods. Merely stores in a central location and then
pass it on to the distributor
Example: Edible Oil Industries
Sales the goods on behalf of the company and transfer
amount to the producer
Example: Shipping Companies, Airlines
Companies
Value Added Resellers


Purchases incomplete product or kit and add value to
assembling it and then selling to customers
Example: Personal Computers, Bicycles,
Producer
CSAs / GSAs
Direct
Marketing
Team
Central
Distributor
Regional /
Market
Specific
Distributor
Wholesalers
Retailers
Customers
Authorized
Reseller
Own Branded
Store
PATTERS OF DISTRIBUTION

It represents the service level that the organization
provides to its customers
Intensive
Distribution
• The strategy is to make the product available to
as many customer as possible
• Example: Unilever, GP, BATB, FMCG
Products
Selective
Distribution
• Few carefully selected outlets are permitted to
keep company’s products
• Example: QUBEE, HP, Nikon
Exclusive
Distribution
• Only one or two outlets in a market may keep
the company’s product
• Example: Franchises, BATA, Transcom,
KFC
DISTRIBUTION CHANNEL MEMBERS
Company Owned
Distribution Center
Distributors/
Dealers /
Stockiest
Carrying and
Forwarding Agents
Owned or
Contracted
Consignment
Selling Agents or
General Selling
Agents
Exclusive /
Shared
Value Added
Resellers
Wholesalers
Direct Marketing
Sales force
Retailers
Franchises
CHANNEL FORMATS

Who plays the major / dominant role in the
distribution channel is also a big deciding factor
Producer
Driven
Seller
Driven
Company Owned Retail
Outlets
Existing Retailers
Service
Driven
Others
Couriers
Multilevel marketing
Wholesalers
Licensed Outlets
Kiosks
Modern Store Formats
Consignment Selling
Agents
Credit Card Companies
TV home shopping
networks
Specialty Stores
Factory / Discount Stores
Financial Institutions
Franchisers
Catalogue shopping
Agents / Dealers
Distributors
D2D Sales People
3P Logistic service
providers
Internet based sellers
HOW TO DECIDE WHICH DISTRIBUTION
CHANNELS TO USE?
 Product







type
Industrial / Textile / Chemicals and Fertilizers
Automotive
FMCG
Pharmaceutical
Telecommunication
IT hardware
Services
Consultancy
 Requirement
of after-sales service??
 Who is driving the channel?
 Ability to influence consumer’s buying
decision
Producer
CSAs / GSAs
Direct
Marketing
Team
Central
Distributor
Regional /
Market
Specific
Distributor
Wholesalers
Retailers
Customers
Authorized
Reseller
Own Branded
Store
INDUSTRIAL PRODUCTS

General natures
Technical
 Mostly B2B

Need of more personal
interaction with the
customer
 Relationship management
very important


Examples: Production Raw
Materials, Steel Mills
Producer
Agent
Industrial
Distributor
Customers
Critical Question:
How do you manage the relationship with the Customer?
PHARMACEUTICAL PRODUCTS
Highly technical
 Doctors one of the key
stakeholders
 End Users / Customers
virtually have no
communication with the
manufacturer


Examples: Medicine Companies
Producer
Distributor
Wholesaler
Retailer /
Chemist
Customers
Critical Question:
Can the producer influence Customers buying decision?
Doctors
CONSUMER PRODUCTS
Target is to reach as many
customers as possible
 Every possible route is
selected
 Most evolved distribution
flow / channels format

Producer
Distributor
Wholesaler
Different forms of Retail


Examples: Lux, Clear, Low Cost
Ball Pen, Mineral Water etc.
FMCG Products
Customers /
Consumers
Critical Question:
Which distribution flow is right for my product?
Is my Consumer buying my product?
CONSUMER DURABLES
Similar to Consumer
Products
 But needs to be maintained
/ serviced
 Targeted Customer / End
Users based
 Usually high-end


Examples: Samsung, NOKIA,
Sony, Mercedes Benz, QUBEE
Producer
Market
Specific
Distributor
Different
forms of
Retail
Customers /
End Users
Critical Question:
Which is more important?
Distribution Flow or Service? After Sales Service??
Product
Service Team
SERVICES



Customer Experience is the most
important factor, leading to high
coordination of Sales and After Sales
Customer Service
The customer interaction is directly
with Company Representative, usually
Usually customer goes through a
process of service experience


Service
Provider
Different
Forms of
Service
Outlets
Purchase > Experience > Post
Evaluation
Franchises / Agents are carefully
chosen, and are closely controlled
Customers
Examples: DHL, Hospitals, Airlines’
 Telecommunication?? GP??
Critical Question:
Does a distribution flow exist as there is no physical movement of
services?

NEW FORM OF DISTRIBUTION FLOWS
 Mixture
of Service and Physical
Distribution
Online Marketing
 Tele-shopping
 Catalogue Marketing (New or Old)
 Kiosks
 Others????

ONLINE MARKETING
TELE-SHOPPING
CATALOGUE MARKETING
CATALOGUE MARKETING
KIOSK / VENDING MACHINE
KIOSK / VENDING MACHINE
The Google Vending Machine
The Facebook Vending Machine
REFERENCES


Chapter 8 – Distribution Management and the Marketing
Mix
 Havaldar K. and Cavale V. M. (2011) Sales and
Distribution Management – Text and Cases (2nd Edition)
Delhi: Tata McGraw-Hill Education Private Limited
Chapter 9 – Marketing Channels
 Havaldar K. and Cavale V. M. (2011) Sales and
Distribution Management – Text and Cases (2nd Edition)
Delhi: Tata McGraw-Hill Education Private Limited
END