THE INSTITUTE OF CHARTERED ACCOUNTANTS OF
SRI LANKA
POSTGRADUATE DIPLOMA IN BUSINESS
MANAGEMENT
MARKETING STRATEGY
DISTRIBUTION: DESIGN & MANAGEMENT
Lecturer: Hafeez Rajudin
DISTRIBUTION CHANNELS
•
A distribution channel consists a set of people and firms involved in
the transfer of title to a product as the product moves from producer
to ultimate consumer or business user”
• An effective distribution channel makes the right
quantities of the right product available in the right place
at the right time to satisfy the target customer.
• An efficient distribution channel also reduces the cost of
marketing and acquiring the product.
MAJOR CHANNELS OF DISTRIBUTION
PRODUCERS OF CONSUMER GOODS
AGENTS
MERCHANTS
WHOLESALERS
MERCHANT
WHOLESALER
RETAILERS
RETAILERS
AGENTS
RETAILERS
ULTIMATE CONSUMER
RETAILERS
MAJOR CHANNELS OF DISTRIBUTION
PRODUCER OF BUSINESS GOODS
INDUSTRIAL
DISTRIBUTOR
MERCHANT
WHOLESALERS
(INDUSTRIAL
DISTRIBUTORS)
RESELLERS
BUSINESS USERS
AGENTS
AGENTS
MERCHANT
WHOLESALER
(INDUSTRIAL
DISTRIBUTORS)
MAJOR CHANNELS OF DISTRIBUTION
PRODUCERS OF SERVICES
AGENTS
ULTIMATE CONSUMERS OF BUSINESS USERS
FACTORS AFFECTING CHOICE OF CHANNELS
• TYPE OF MARKET
• NUMBER OF POTENTIAL CUSTOMERS
• GEOGRAPHIC CONCENTRATION
• ORDER SIZE
DESIGNING DISTRIBUTION CHANNELS
OBJECTIVES TO BE ACCOMPLISHED
• Increase the availability of goods or services to potential
customers.
• Satisfy customer requirements by providing high levels
of service.
• Ensure promotional efforts.
• Obtain timely and detailed market information.
• Increase cost effectiveness.
• Maintain flexibility.
COMPARISON OF INTENSIVE, EXCLUSIVE AND SELECTIVE
COVERAGE STRATEGIES
INTENSIVE
EXCLUSIVE
SELECTIVE
RETAIL
COVERAGE
MAJOR
STRENGTH
MAJOR
WEAKNESS
Maximum
Maximises
product availability
Lack of retailer
support
Matches retailer
clientele with target
market; facilitates
close co-operation
with retailer
Risk of relying on
single retailer
Single
Limited
Provides adequate
coverage but not at
expense of
manufacturer-retailer
co-operation
Difficult to implement
given instore
competition,
especially where
discounts may occur
PRODUCT MOST
APPROPRIATE
FOR
Low-involvement
consumer
convenience
goods
high- involvement
speciality or shopping
goods
Infrequent purchased
shopping goods
DISTRIBUTION CHANNEL OBJECTIVES AND MEASUREMENT
CRITERIA
(PRODUCT AVAILABILITY)
PERFORMANCE
OBJECTIVE
POSSIBLE MEASURES
APPLICABLE PRODUCTS
AND CHANNEL LEVEL
Coverage of relevant
retailers
Percentage of all
commodity volume (ACV)
Consumer products
(particularly convenience
goods) at retail level
In-store positioning
Percentage of shelf facing
or display space gained by
product, weighted by
importance of store
Consumer products at retail
level
Coverage of geographic
markets
Frequency of sales calls by
customer type; average
delivery time
Industrial product,
consumer goods, at
wholesale level.
DISTRIBUTION CHANNEL OBJECTIVES AND MEASUREMENT
CRITERIA
(Meeting Customer Service Requirements)
Performance Objectives
Installation, training, after
sales services, reliability,
order cycle time etc.,
Possible Measures
Number of service
technicians receiving
technical training;
monitoring of customer
complaints; customer
satisfaction level.
Applicable Products and
Channel level
Industrial products,
particularly those involving
high technology; consumer
durables at retail levels;
consumer and commercial
services
DISTRIBUTION CHANNEL OBJECTIVES AND MEASUREMENT
CRITERIA
(Promotional Efforts)
Performance Objectives
Possible Measures
Applicable products and
channel level
Effective point-of-purchase
(P-O-P) promotion
Percentage of stores using
special displays and P-O-P
materials, weighted by
importance of store
Consumer products at retail
level
Effective personal selling
support
Percentage of salespeople’s
time devoted to product;
number of salespeople
receiving training on
products.
Industrial products:
consumer durables at all
channel levels: consumer
convenience goods at
wholesale levels
DISTRIBUTION CHANNEL OBJECTIVES AND MEASUREMENT
CRITERIA
(Market Information)
Performance Objectives
Monitoring sales trends,
inventory levels, competitor
activities
Possible Measures
Quality and timeliness of
information obtained
Applicable Products and
Channel Level
All levels of distribution
DISTRIBUTION CHANNEL OBJECTIVES AND MEASUREMENT
CRITERIA
(Cost Effectiveness)
Performance Objective
Cost of channel function
relative to sales volume
Possible Measures
Middlemen margins and
marketing costs as
percentage to sales
Applicable products and
channel level
All levels of distribution
DISTRIBUTION CHANNEL OBJECTIVES AND MEASUREMENT
CRITERIA
(Flexibility)
Performance Objectives
Ability to switch to new
channels or types of
middlemen as conditions
change
Possible Measures
Applicable Products and
Channel level
•Amount of specialized
assets or dedicated
investments devoted to
current channel
•Number of long-term
commitments to current
channel members
All levels of distribution;
product or service
categories experiencing
rapid market development
or technological change.