DISTRIBUTION 1 DISTRIBUTION PLACE ISSUES At the end

DISTRIBUTION 1

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 DISTRIBUTION 2

DISTRIBUTION / PLACE – ISSUES SUGGESTED READINGS 1. Marketing management by Kotler, Millineium edition, chapter 16. 2. Marketing management by Ramaswami and Namkumari, chapter 21. DISTRIBUTION 3

DISTRIBUTION / PLACE – ISSUES DISTRIBUTION ISSUES – PLACE · Why do you use - Dealers - Stockist - Distributors etc… · How does the product becomes available to customer DISTRIBUTION 4

DISTRIBUTION / PLACE – ISSUES Marketing channels Set of interdependent organizations involved in the process of making a product for use or consumption Example - Dealers - Distributors - Retailers - Agent DISTRIBUTION 5

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. · DISTRIBUTION 6

DISTRIBUTION / PLACE – ISSUES CHANNEL FUNCTIONS & ROLES 1. Information gathering / feedback Potential / current customers Competitors Used by companies to alter marketing mix Can take actions to counter competition DISTRIBUTION 7

DISTRIBUTION / PLACE – ISSUES 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 DISTRIBUTION 8

DISTRIBUTION / PLACE – ISSUES 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 DISTRIBUTION 9

DISTRIBUTION / PLACE – ISSUES 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 DISTRIBUTION 10

DISTRIBUTION / PLACE – ISSUES 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 DISTRIBUTION 11

DISTRIBUTION / PLACE – ISSUES 7. Extend credit to select customers - Buy now, pay later. 8. Helps in test marketing - Testing products before launch - Use channel premises DISTRIBUTION 12

DISTRIBUTION / PLACE – ISSUES CHANNEL LEVEL · No of channel partners between producer & consumer · Various levels are 1. Zero – level 2. One – level 3. Two - level 4. Three – level DISTRIBUTION 13

DISTRIBUTION / PLACE – ISSUES 1. Zero – channel · No channel partners · Producer directly to customers Examples · Eureka Forbes Door – to – door selling · Boeing Directly to Indian airlines DISTRIBUTION 14

DISTRIBUTION / PLACE – ISSUES 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 DISTRIBUTION 15

DISTRIBUTION / PLACE – ISSUES 4. Three – level channel · Three intermediaries Example – Hindustan lever Company Stockist …. (district level) Wholesaler …… (town level) Retailer…… (village level) DISTRIBUTION 16

DISTRIBUTION / PLACE – ISSUES 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 DISTRIBUTION 17

DISTRIBUTION / PLACE – ISSUES 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 DISTRIBUTION 18

DISTRIBUTION / PLACE – ISSUES 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 ? DISTRIBUTION 19

DISTRIBUTION / PLACE – ISSUES 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 Delhi · Honda About 2 dealers · Maruti offers greater spatial convenience than Honda · Repair and search cost lower in Maruti. DISTRIBUTION 20

DISTRIBUTION / PLACE – ISSUES 4. Product variety · Variety · Normally customers prefer variety · More choice Example · Shoppers Stop vs. Snowhite · Wide variety in Shoppers Stop · Snowhite – only garments DISTRIBUTION 21

DISTRIBUTION / PLACE – ISSUES 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. DISTRIBUTION 22

DISTRIBUTION / PLACE – ISSUES 6. MAJOR CHANNEL ALTERNATIVES Has three elements 1. Types of intermediaries 2. Number of intermediaries 3. Terms and responsibilities of intermediaries DISTRIBUTION 23

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 DISTRIBUTION 24

DISTRIBUTION / PLACE – ISSUES 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. DISTRIBUTION 25

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 DISTRIBUTION 26

DISTRIBUTION CHANNELS B. Number of Intermediaries Three types of strategies 1. Exclusive distribution 2. Selective distribution 3. Intensive distribution DISTRIBUTION 27

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 DISTRIBUTION 28

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 DISTRIBUTION 29

DISTRIBUTION CHANNELS 3. Intensive Distribution As many outlets as possible Multiple channels Consumers widespread Reach critical Problems of control Example Lux Soaps, Lifebuoy, Colgate DISTRIBUTION 30

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 DISTRIBUTION 31

DISTRIBUTION CHANNELS Territorial Limit - Scope of each other’s activities · Both work united · Conflicts happen when their roles are not clear - DISTRIBUTION 32

Channel-Design Decisions Criteria for Channel Alternative Evaluation Economic Control Adaptive DISTRIBUTION 33

Channel-Management Decisions The Channel Development Process Channel Member Selection Training Motivation Channel Evaluation Modification DISTRIBUTION Channel 34