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DISTRIBUTION / PLACE – ISSUES
At the end of this module the learning
outcomes are:
1. What are the roles and functions of
channel partners?
2. Various types of channel levels.
3. What are considerations in channel
design decisions
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DISTRIBUTION / PLACE – ISSUES
SUGGESTED READINGS
1. Marketing management by Kotler,
Millineium edition, chapter 16.
2. Marketing management by Ramaswami
and Namkumari, chapter 21.
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DISTRIBUTION / PLACE – ISSUES
DISTRIBUTION ISSUES – PLACE
 Why do you use
- Dealers
- Stockist
- Distributors etc…
 How does the product becomes available
to customer
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Marketing channels
Set of interdependent organizations
involved in the process of making a
product for use or consumption
Example
- Dealers
- Distributors
- Retailers
- Agent
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DISTRIBUTION / PLACE – ISSUES
Marketing channel
- Hindustan lever – Lifebuoy
Goes to villages
 5 lakhs villages in India
 Can Lever set up 5 lakhs offices?
 Do they have such resources?
 No
 Probably no company in this world has
 Need of partner
 Help you to reach your target customers
Role of channel partner required.

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CHANNEL FUNCTIONS & ROLES
1. Information gathering / feedback
Potential / current customers
Competitors
Used by companies to alter marketing
mix
Can take actions to counter competition
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2. Supply products in assortments
Example – Pepsi
 Pepsi supplies in case of 24 bottles
- Crate
 Suppose consumer requires
- 1 Pepsi
 Shopkeeper
- Provides 1 Pepsi
 Breaks products in assortments
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3. Risk sharing
- Channel members
- Buy goods from producers
- If the goods do not sell?
- Who bears the risk
- Channel partner
Risk sharing is critical
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4. Helps merchandise the product

Merchandising
 Attractive display
 Increases
- Awareness
- Interest
Music world






Wide display of music
Can try
Attractive display
Décor
Invested in space, display
Sales personnel, warehouse, trucks
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5. Provides salesmanship
6. Assists in sales promotion
7. Provides pre-sale and after-sale
service.
- TV servicing in rural areas
- Company or channel
- Done by channel partner
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7. Extend credit to select customers
- Buy now, pay later.
8. Helps in test marketing
- Testing products before launch
- Use channel premises
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CHANNEL LEVEL
 No of channel partners between
producer & consumer
 Various levels are
1. Zero – level
2. One – level
3. Two - level
4. Three – level
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1. Zero – channel
 No channel partners
 Producer directly to customers
Examples
 Eureka Forbes
Door – to – door selling
 Boeing
Directly to Indian airlines
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2. One – level channel
One intermediary
Example
Competent motors
· Channel partners for Maruti
3.
Two - level channel
· Two intermediary
Example
Onida black & white TV
· Onida sells to distributor in each district
· Retailer buy from distributor
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4. Three – level channel
 Three intermediaries
Example – Hindustan lever
Company
Stockist …. (district level)
Wholesaler …… (town level)
Retailer…… (village level)
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Analysing customer’s Desired
Service output levels
- What kind of service levels are
expected by target customers
- Five Service Output levels
1.
2.
3.
4.
5.
Lot Size
Waiting time
Spatial convenience
Product variety
Service backup
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1. Lot size
 No of units the channel permits a typical
customer to purchase on one occasion
Example
Purchase of Air-conditioners
A. Maruti
 Prefer a channel from where it can buy 100
Air – Conditioners
B. Household
 Buying a lot size of 1 Air – conditioner.
 Shop
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2 Waiting time

Average time customers of that channel
have to wait for receipt of the goods.

Customer normally fast delivery channels
Bread / Newspaper

Customer want newspaper every day
morning

Will you wait for newspaper till evening ?
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3. Spatial convenience
Degree to which the marketing channel makes it
easy for customer to purchase the product.
Maruti Baleno vs Honda City
 Maruti
About ten dealers in Dealers in Delhi
 Honda
About 2 dealers
 Maruti offers greater spatial convenience than
Honda
 Repair and search cost lower in Maruti.
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4. Product variety
 Variety
 Normally customers prefer variety
 More choice
Example
 Shoppers Stop vs. Snowhite
 Wide variety in Shoppers Stop
 Snowhite – only garments
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5. SERVICE BACKUP
 Add – on services
- Credit
- Deliver at home
- Installation
- Repairs
 Provided by the channel
Higher the service backup, greater the work
provided by the channel.
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6. MAJOR CHANNEL ALTERNATIVES
Has three elements
1. Types of intermediaries
2. Number of intermediaries
3. Terms and responsibilities of intermediaries
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DISTRIBUTION / PLACE – ISSUES
A. Types of Intermediaries
1.
Company salesforce
 Sales personnel from company directly
 Products are complicated / not
understood
Boeing

Aircrafts

Complex

Can take one yr to finalize the sale

Own sales force Trained
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2. Dealers
 Appoint middleman in different territories
Example – LG
 Sells TV through multibrand dealer outlets
- Pankaj Electronics
3. Canteen stores department (CSD)
 Buys on behalf of defence services in India
 Defence personnel can buy
LG
 BPL supplies in CSD canteens all over India
 Defence personnel buy from CSD departments.
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DISTRIBUTION CHANNELS
CEAT Tyres
1. Company Salesman
 Supply to large Automobile
Manufacturers
- Maruti, Ford, Hyundai
2. Dealers
 Multibrand Shops all over India
3. Ceat exclusive showrooms
 Exclusive shops dealing with Ceat tyres
only
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DISTRIBUTION CHANNELS
B. Number of Intermediaries
Three types of strategies
1. Exclusive distribution
2. Selective distribution
3. Intensive distribution
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DISTRIBUTION CHANNELS
1. Exclusive distribution
 Limiting the use of intermediaries
 Not allowing competing brands
 Maintain control
 Total commitment of intermediary
Maruti
 Exclusive dealers
 Huge investments by dealers
 Maruti provides support
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DISTRIBUTION CHANNELS
2. Selective Distribution
 Use of more intermediaries
 Compared to exclusive
 Need more visibility
 More control
 Less cost
Shahnaz Hussain Herbal products
 Not available from every Grocery shop
 Available at select outlets
 Maintain Image
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DISTRIBUTION CHANNELS
3. Intensive Distribution
As many outlets as possible
Multiple channels
Consumers widespread
Reach critical
Problems of control
Example
Lux Soaps, Lifebuoy, Colgate
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DISTRIBUTION CHANNELS
C. Terms and responsibilities of channel
Members
 Profitable relationship
- Producer
- Channel partner
 Rules of the game
 Channel partner responsibilities
- Prices
- Discounts
- Terms & conditions of sale
– Credit policies
– Defective return policies
– Merchandise
Do’s and Dont’s
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DISTRIBUTION CHANNELS
Territorial Limit
- Scope of each other’s activities
 Both work united
 Conflicts happen when their roles are not
clear
-
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Channel-Design Decisions
Criteria for Channel Alternative
Evaluation
Economic
Control
Adaptive
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Channel-Management Decisions
The Channel Development Process
Channel Member
Training
Selection
Motivation
Channel
Evaluation
Modification
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