Distribution management &
Marketing Mix
 Distribution refers to bringing the product
to the market and giving it to the final
consumer
According to Mossmam & Norton
“distribution is the operation which creates
time,place & form utility through the
movement of goods and persons from one
place to another”.
 Are sets of interdependent organizations involved
in the process of making a product or service
available for use or consumption
 Right product in
Right quantity in
Right condition at the
Right time and
Right place for the
Right customer at
Right cost
 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 possession
utility to 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 the
location of a producer and the location of widely
scattered markets
 Temporal discrepancy:- a situation that occurs when
a product is produced but a customer is not ready to
buy it
 Need for breaking the bulk
 Need for assortment
 Derived from the corporate strategy and the
marketing strategy
 Steps for designing the distribution strategy are:
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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.
 Affordability also 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 utility
which the customer can expect out of the channel
network
Set of activities….
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 Manner in which the company and its marketing
channels go about achieving the customer service
levels
 Some of these steps could be:
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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 to who is to perform
which task
Organization….
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 Extent of company support and outsourcing to be
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decided
Budget for the cost of the distribution effort
Select suitable channel partners – C&FAs, and
distributors
Setting clear objectives for the partners
Agree on level of financial commitments by the
channel partners.
Policy and procedure..
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 Define policy and implementation guidelines through
Operating Manuals
 Policy guidelines include
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Code of conduct for channel members
System for redressal of complaints
Any additional subsidies etc
Handling institutional business
Service policy for engineering products
KPIs….
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 For measurement of effectiveness. Some of these
could be:
 Consistent achievement of targets by product groups,
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periods and territories
Achievement of market shares
Achievement of profitability
Zero complaints from customers
No stock returns
Ability to handle emergencies and sudden spurts in
demand
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 For measurement of effectiveness. Some of these could
be:
 Balanced sales achievement during a period – no period
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end skews
Market coverage with ready stocks
Excellent management of accounts receivables
Minimize losses on account of stock-outs
Minimize damages to products
CSFs…
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 The distribution strategy also needs the support
and encouragement of top management to succeed
 Some of the CSFs could be:
 Clear, transparent and unambiguous policy and
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procedure
Serious commitment of the channel partners
Fairness in dealings
Clearly defined customer service policy
High level of integrity
Equitable distribution at times of shortage
Timely compensation of channel partners
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 C&FAs and CSAs
 Distributors, dealers, stockists, value-added re-
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sellers
Agents and brokers
Franchisees
Electronic channels
Wholesalers
Retailers
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 C&FA: carrying and forwarding agent and C&SA:
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carrying and selling agent – both are on contract
with 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 to
distributors against indents
Goods belong to the company
C&SA also sells the goods on behalf of the company
but remits proceeds after sale
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 Name denotes the extent of re-distribution
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done by them
Distributors invest in the products – buy
products 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 company
Agents bring buyer and seller together
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 Operate out of the main markets
 Deal with a number of company products of
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their choice
Are 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
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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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Customers may also direct from company sales force
Producer
Producer
Agent/middleman
Industrial Distributor
Industrial Distributor
Industrial Customer
Industrial Customer
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Retailers may also direct from company sales force
Producer
Producer
Producer
Distributor
Distributor
Wholesaler
Retailer
Retailer
Retailer
Customer /
consumer
Customer/
Consumer
Customer/
Consumer
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 Determines the intensity of 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 aimed
at having a product available in every outlet where
target customers might want to buy it.
 Selective distribution:- a form of distribution
achieved by screening dealers to eliminate all but a few
in any single area
 exclusive distribution:- a form of distribution that
establishes one or a few dealers within a given area
 Intensive: distribution through every reasonable
outlet available – FMCG
 Selective: multiple, but not all outlets in the market –
pharma, frozen food
 Exclusive: may be only one outlet in a market - car
dealers
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 Strategy is to make sure that the product is available in
as many outlets as possible
 Preferred for consumer, pharmaceutical products and
automobile spares
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 A few select outlets will be permitted to keep the
products
 Outlets selected in line with the image the company
wants 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 one
outlet in an entire market
 Could include outlets set up by companies – Titan,
Bata
 Producer wants a close watch and control on the
distribution of his products.
Channel strategy…
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