Distribution Mix
Right Product
Right Time
Right Quantity
Right Place
Definitions
• Process of moving goods / services from the
point of production to the point of
consumption is termed as DISTRIBUTION
• The hands that a product / service pass
through before reaching the final consumer is
termed as DISTRIBUTION CHANNEL
• The agencies involved in the process are
termed as CHANNEL PARTNERS
Types of Channels
• Direct
– Manufacturer directly sells to the consumer
– Salespeople / Outlet is of the manufacturer
– No third-party interference
– Win-win for both manufacturer & consumer
– Exclusive for the product / brand
– Building reach is a challenge
– High Investment
– Eg. Eureka Forbes / Tupperware / Bata
Types of Channels
• Indirect
– Manufacturer gives to third-party traders
– Traders build their own infrastructure to sell
– Each trader involved in the process gets a certain
pre-defined margin
– Helps build up reach
– Lowers manufacturers cost
– May / may not promote your product exclusively
– Eg. Maruti Suzuki / Videocon / Lux
Essence of Channel Management
• Push vs Pull
– Consumer Involvement
– Brand Loyalty
– Trader Offers vs Consumer Demands
– Trader Sells vs Consumer Buys
– Every channel strategy is a combination
Commonly Used Channels
0-Level
MANUFACTURER
CONSUMER
• Also known as direct
marketing channel
• Door-to-door, company
outlets, catalogue, TV
& internet
• Best deals
• Exclusive channel
• Bata / Tupperware
1-Level
MANUFACTURER
RETAILER
CONSUMER
• One intermediary in
the form of RETAILER
• Used for products
where value is high &
volume is low
• Mostly exclusive
• Automobiles
2-Level
MANUFACTURER
WHOLESALER
RETAILER
CONSUMER
• Two intermediaries in
the form of RETAILER &
WHOLESALER
• Each has a defined role
• Not exclusive
• Durables
3-Level
MANUFACTURER
DISTRIBUTOR
WHOLESALER
RETAILER
CONSUMER
• Three intermediaries
• High volume, low value
products
• High frequency of
purchase
• Best Reach
• FMCG
Designing the Channel
Customers Demand
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Quantity of Purchase
Value of Purchase
Delivery Time
Degree of Convenience Sought
Product Variety
Service Backup
Evaluating Alternatives
• Types of Intermediaries
– Distributors
– Wholesalers
– Retailers
– Agents
– Direct Sellers
– Unconventional (Self-Help Groups / e-Choupal)
Evaluating Alternatives
• Number of Intermediaries
– Exclusive Distribution
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Limited intermediaries
Exclusive dealing arrangements
High control & High Margins
Used for Luxury Products
Gucci
Evaluating Alternatives
• Number of Intermediaries
– Selective Distribution
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More than one but not all
Balance between coverage & control
Assumes a certain loyalty & pull for brands
Tanishq
Evaluating Alternatives
• Number of Intermediaries
– Intensive Distribution
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Product in as many outlets as possible
Availability a strong driver of purchase
High frequency of purchase
High competition resulting in price wars
Can dilute brand image in certain cases
Mentos
Selecting Channel Partners
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Face of the Company
Properly Trained & Motivated
Financial Strength
Infrastructure
Multichannel Marketing
• Firm uses multiple channels
– Increase market coverage (Project Shakti)
– Lower channel cost (Online Sales)
– Brand Image
• Channel Conflict
• Exclusive roles / customer sets for each
E-Commerce: The Emerging Channel
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Electronic platform in place of physical
Geographical reach
Added convenience (Energy & Time)
Ease of Information / Comparison
Pure Click Co. vs Click n Brick Co.
Group Assignment
• Take a product category
• Go in the market and study the distribution
channel in terms of
– Structure
– Role
– Coverage
– Margins
• Deadline: Next Class