CHAPTER 7
CHAPTER 7Distribution Strategy and The Strategic Selling
Cycle
Distributions main role is to provide an effective link between
production and the target consumer. In todays environment,the main
question is who will perform this task and how will it be executed
given the new tools of technology and management
-CRISTINA TANGeneral Manager, Suy Sing Commercial
Distribution MixBoth firms aim to make their products readily
available consistent with their target customers purchasing
pattern.
Making products available needs a coherent distribution plan
composed of the following 6 mix elements ; 1.CoverageHaving the
proper types of outlet in a geographical area is important.Ex:
Muslim do not eat pork so there is no need to prioritize coverage
of pork luncheon meat in areas strongly dominated by Muslims.
2. PlacementA product has placement when it is carried in a
store. Placement objectives or having a right target number of
outlets ensure customers utmost convenience.
3.VolumeThe right inventory level at the stores is critical . A
firm may launch a new brand of shampoo or advertise a promotional
campaign, which may result out-of-stock situations.
4.DisplayThe right shelf and off-shelf locations plus adequate
display space assure marketers a higher probability that consumers
will choose their brand. The good spaces in the stores such as
those at eye level are usually given to the leading brands,
5.PricingHaving the right resale prices promotes healthy
competition among dealers.
6.GoodwillGoodwill refers to the best relationship between a
supplier and his channel members.
Strategic selling cycle
Shows a comparative selling process of a firm targeting end
users versus distribution channels.
Selling to End Users B. Selling to Distrubution Channels
ProspectingRoutine ObservationPre-ApproachDisplay Check
ApproachWarehouse CheckSales ProbingCollection
PresentationPresentation
Handling ObjectionsHandling Objections
DemonstrationSell-Out Plan
Closing ClosingDistribution channels
Marketing intermediaries make up a marketing or distribution
channel. A distribution channel performs the work of moving
products from manufacturers to final consumer or business users. A
good distribution channel shortens the time, place, and possession
gaps between the manufacturers and consumers.
Distribution Channels :
ManufacturerDistributorsJobbersRetailersEnd UsersDistributors:
Distributors are appointed to perform the distribution function
for manufacturers in making their products available. They may sell
to wholesalers or retailers or may even go directly to
consumers.
Wholesaling:
Wholesaling are activities of persons or organizations that sell
to those who buy for resale (like retailers) or business use (like
industrial, institutional, and commercial users).
Divisoria:
There are several wholesalers located in divisoria and some
retailers prefer to buy from them instead of directly from
manufacturers because of their lenient credit policy.
Jobbers:
Jobbers are wholesalers who also provide warehousing space for
manufacturers and distributors, thus enabling the latter to avoid a
fixed cost.Is a sales operation where the ex-truck salesman carries
stocks in his van or small truck, saturates a given territory
regularly by selling his stocks on cash basis, and delivers the
stocks immediately upon order.EX-TRUCK
FEEDERSome manufacturers or wholesalers/distributors are using
the feeder model. Here instead of two-man team of the ex-truck
sales-man and delivery helper saturating a territory with stocks in
their van, a distributor salesman goes around by himself to take
orders and relays these to a delivery team who will bring the
orders to the retailers.RETAILINGIs an activity involving the sale
of products or services directly to final consumers.
FRANCHISINGAn accelerated method to expand distribution is thru
franchising. Franchising is a business relationship in which the
franchisor (the owner of the business providing the product or
service) assigns to independent people the right to market and
distribute the franchisors goods or service, and to use the
business name for the fixed period of time.
Direct Selling:
There are over two-dozen members of Direct Selling Association
Of The Philippines (DSAP). Some members are:
Amway (personal and home care)Avon (cosmetics and related
products)Nu Skin (beauty and health care)Sunrider (food
supplements)Tupperware (plastic wares)Waters (water purifiers and
foot detox)
Internet:
E-business has been buzzword since the 1990's. No longer are
companies limited to sell products through stores or through direct
sales.
Home Delivery:
Home delivery offers a huge potential influenced by more women
working, lack of household maids, traffic and parking problems, as
well as the consumer psyche of rewarding themselves after a hard
day's work.
Diagnostic Distribution:
We use the term diagnostic distribution to mean the proper
matching of distribution channels to the selling process as in
exhibit 7-3. Marketers, for instance, may combine different
distribution channels to achieve desired sales, profit, market
penetration and market shares objectives.
Exhibit 7-3: Diagnostic Distribution
Direct mailProspecting (sales leads
generation)TelemarketingQualifying SalesDirect SellingApproachSales
ProbingSales PresentationHandling
ObjectivesRetailingDemonstrationClosingDealersAfter Sales
Service
Firms may adapt or change their distribution methods depending
on their needs during different scenarios.
STRATEGIC ALLIANCES:
Trade costumers and suppliers enter into a strategic alliance to
attain some long-term objectives and mutually improve their
position in the industry.
Exhibit 7-4: Strategic alliance framework
ToSalesman as only link
Team selling as an initial step to strategic alliance
Alliances among Competition- Why compete? When you can
collaborate? Competition can sometimes collaborate if the
collaboration will result in the overall increase of satisfaction
of each competitors customers as well as for cost-efficiency.
Evaluating Distribution Channels Marketers must be careful in
choosing their distribution system, as each channel will produce
different levels of costs and sales volume. In evaluating
alternative distribution channels, the 3Cs of distribution must be
considered: Cost- efficiency, Control, and Channel
Modification.
Cost Efficiency- It is important to estimate the long term
impact of having ones own sales force versus appointing a
distributor. Once sales volume increases to an economic level,
having ones own sales force may be more cost-efficient assuming
they can maintain at least the same volume and expense ratio.
Control- As distributors are not the companys employees, they
may have different priorities. Profit may be their main objective
while the firms objective may be market penetration and market
shares. It is important that the objectives, priorities and
expectations of the firm be communicated and agreed upon before
principals are chosen and distributors are appointed.
Channel Modification- The marketplace is ever changing. The
flexibility to modify distribution may be needed. Other changes in
the consumer purchasing pattern such as when the product matures,
when new competition arises, and when innovative distribution
emerges, must also considered.
The distribution criteria 7-5 provide a guide as to when to use
middlemen and when to sell direct.USE MIDDLEMEN
SELL DIRECT
Product Type SimpleSophisticatedAfter Sales
ServiceFewCriticalCompany ResourcesWeakStrongDistributionLow
ControlHigh ControlPriceLowHighBackward DistributionMarketing
Channels usually describe forward movements of products from
manufacturers to the ultimate consumers. However, it is possible
that backward distribution will become trend as well as challenge
with the increase popularity of green marketing as described in
chapter 4-E.
Gray MarketingOr A parallel distribution is a term used to
describe UNATHORIZED importation and distribution of products
bearing genuine brands across markets.
The paraller distributor may or may not be an importer himself.
If he is an importer, he is likely an importer resorting to
smuggling products into Phillipines to avoid paying taxes
.Smuggling comes in many form. -Outright smuggling -Technical
smuggling
Parallel distribution is destructive. This often result in price
wars between the legitimate and the parallel distributor.Another
problem posed by gray marketing is that goodwill established by the
trademark owner is jeopardized because customers who purchase the
goods in gray market do not get the same extended product.
To stop PARALLEL DISTRIBUTION-always price the product
reasonably or to have a goodtrade discount structure.-warn the
customers about the unauthorized distribution where warranty may
not be honored. -stop the supplying source of the parallel
distibution.
Global and regional marketThe european Community or EC became a
single market in 1992. Its formation leaded to the expantion of the
European Market base into US$15 trillion with 501 million consumer
on 2008.US and canada had the similar free trade agreement in 1989.
Mexico join US and Canada to form the NAFTA which officially start
on jan 1, 1994.The ASEAN countries originay composed of Phillipines
, Malasysia, Singapore, Thailand, Indonesia, and Brunei. Also have
their similar version called ASEAN Free trade O AFTA (jan1992).
AFTA: What is it and How does it work?.AFTA is a single unified
market ofover 592 million people worth US $ 1.49 trillion as of
2009.Under the original (CEPT) Common Effective Preferential Tariff
agreement , tariffs for all manufactured products with at least 4o%
ASEA component cont level, have progressively beenreduced to a
maximum of 20% within five to eight years, and zero to five percent
in subsequent seven year period. From production point of view,
AFTA resulted to more and cheaper sources of raw materials as well
as economies of scale.
In the phillipines , tariff reduction was implementes gradually
under EO470 and it started 1996.The Phillipine Government must
FIRST and FOREMOST ensure political stability.The government must
continuosly and consistently encourage local industries to upgrade
production and research technologies to improve productivity and
competitiveness.
The Board of Investment or BOI must cut red tape and shorten the
bureauracy to attract more foreign investment.
Thank you for listening