Chapter :- 8

Distribution management &

Marketing Mix

Meaning and definition

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.

Distribution Channels Defined

Are sets of interdependent organizations

involved in the process of making a

product or service available for use or
consumption

7 Rs
Right product in

Right
Right
Right
Right
Right
Right

quantity in
condition at the
time and
place for the
customer at
cost

Distribution Channels
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

The Marketing Mix

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

Example
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

Discrepancies and Distribution

channel
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

Distribution Channel Strategy

Derived from the corporate strategy and

the marketing strategy

Steps for designing the distribution
strategy are:
Defining customer service levels
Distribution objectives and steps
Set of activities
The distribution organization
Key performance indicators
Critical success factors

Customer Service Levels

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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Distribution Objectives
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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Set of Activities
Manner in which the company and its marketing

channels go about achieving the customer

service levels
Some of these steps could be:
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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Distribution Organization
Extent of company support and

outsourcing to be 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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Policy & Procedure

Define policy and implementation guidelines

through Operating Manuals

Policy guidelines include

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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Key Performance Indicators

For measurement of effectiveness. Some

of these could be:

Consistent achievement of targets by product

groups, 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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Key Performance Indicators

For measurement of effectiveness. Some of

these could be:

Balanced sales achievement during a period

no period 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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Critical Success Factors

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

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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Listing of Channel Members

C&FAs and CSAs
Distributors, dealers, stockists, value-

added re-sellers
Agents and brokers
Franchisees
Electronic channels
Wholesalers
Retailers

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C&FAs / C&SAs
C&FA: carrying and forwarding agent and

C&SA: 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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Distributors, Dealers,
Stockists, Agents
Name denotes the extent of re-distribution

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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Wholesalers
Operate out of the main markets
Deal with a number of company products of

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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Retailers
The final contact with consumers
Operate out of their shops and sell a large

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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Industrial Products
Customers may also direct from company sales force
Producer

Producer

Agent/middleman

Industrial Distributor

Industrial Distributor

Industrial Customer

Industrial Customer

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Consumer Products
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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Patterns of Distribution
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

Distribution Intensity
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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Intensive Distribution
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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Selective Distribution
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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Exclusive Distribution
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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