Marketing Managememnt Class 16-Distribution

8/17/2019 Marketing Managememnt Class 16-Distribution

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DISTRIBUTION

DECISIONSBNMIT MBA


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INTRODUCTIONDistribution of goods or services from the factory to the consumer

provides strategic advantage to the company in the highy competitiveenvironment! "arier peope used to #ait to get the products but no#companies shoud ma$e them avaiabe as and #hen customer

demands! This has thro#n up an opportunity as #e as chaenge to theorgani%ations to provide right product at a right pace in a right time!

Companies are aso emphasi%ing on ho# to reduce the cost in thesuppy chain! To meet the cost reduction ob&ectives' they are integratingtheir system #ith information technoogy' outsourcing the distributionfunctions and streamining the suppy chain!

Use of technoogy and interest of corporate in the distributionmanagement resuted in the evoution of professiona retaiing and#hoesaing in India!

These above factors have made distribution as one of the importantpart of the mar$eting panning!


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Need of marketing channels

Mar$eting channes are set of independent organi%ationsinvoved in the distribution of the goods or services to theconsumer from the factory at right time' and right pace!

Mar$eting channes incude retaiers' #hoesaers' agents'bro$ers etc! (ome companies do not use these channes! Theydirecty mar$et their products to consumer!

)or e*ampe' De computers as$ its customers to ogin to the#ebsite' con+gure their product' and order the same on theinternet!

Then generay a ,uestion comes to the mind' #hy manycompanies use mar$eting channes and some do not!

To ans#er the ,uestion #e need to understand #hat are thefunctions mar$eting channes do and ho# they areadvantageous than direct mar$eting!


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Functions of marketing channels

-! .hysica distribution/ transporting and storing goods!

0! Communication/ Mar$eting intermediaries promotes thecompany1s products! 2ere channe member provide the

information regarding the product and pushes it to customer!3! Information/ retaiers and #hoesaers coect the

information from the customer and provide the same to thecompany!

4! Tite transforming/ Mar$eting intermediaries purchases the

goods from the company and transform the tite of goods tone*t intermediary or customer!

5! Reationship management/ 2ere mar$eting intermediariestry to understand the needs of consumer' try to match hisneeds and satisfy them!


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Decisions involved in setting u a channel

Mar$eter shoud consider various factors before deciding the particuar type of channe! It maybe company or competitive factors! The type of goods to be transported and stored #i decide

the ength and intensity of channe! To decide on the particuar channe' mar$eter #i ta$efoo#ing decisions!

-! Understanding the customer profle: Purchasing habits diers rom individual to individual.Individuas #ho face shortage of time #oud i$e to purchase on the net 6direct channe7 and

#ho have abundance of time #oud i$e to e*perience the shopping! (ome of them #oud i$e tohave variety of goods #hie others #ant uni,ue or speciai%ed products! 2ence mar$eter shoud

understand #ho are his customers8 2o# do they purchase8 )or e*ampe' customer don1t i$e totrave haf a $iometer to purchase a shampoo sachet but he don1t mind traveing t#o $iometers #hie purchasing durabe goods!

0! Determine the objectives on which channel to be developed.

a! Reach/ Company #oud i$e to ma$e the goods avaiabe in most of the retai outets! It #iadopt intensive distribution channe!

b! .ro+tabiity/ Company #ants to reduce the cost in the channes and enhance their pro+tabiity!

It #i restructure the channe to optimum eve so that it can reduce the cost and increase thepro+t!

c! Di9erentiation/ Company positions their products di9erenty! :hen most of the industry payersfoo# conventiona system' company goes #ith ne# format of channes! )or e*ampe' a

computer manufacturers #ere adopting deaer retaier channe to se their products but Destarted seing its product on the internet!


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3! Identiy type o channel members: nce the objectives are set on the basis o company!s policies" it #i anay%e #hich type of the channe best suits! Merchants' agents and reseers are

some intermediaries invoved in the distribution! Merchants are those #ho buy the product' ta$etite and rese the merchandise! Agents #i +nd the customers' negotiate #ith them but do not

ta$e the tite of the product! )aciitators are the peope #ho aid the distribution but do notnegotiate or ta$e the tite of the product!

#. Determining intensity o distribution: Intensity o distribution means how many middlemen willbe used at the #hoesae and retai eves in a particuar territory! If the numbers of intermediariesare e*cess then the cost of the channe #i increase vice versa if the number of intermediariesare ess then company #i not be abe to meet a target customers! Therefore company shoud

adopt optimum number of intermediaries! On the basis of ho# many intermediaries re,uired'company can adopt any one of the foo#ing strategies!

a! Intensive distribution/ A strategy in #hich company stoc$s goods in more number of outets!

The intention is to ma$e the goods avaiabe near to the customer! )or e*ampe' you can +nd

.are; gucose biscuits avaiabe in amost a the retai outets in rura and urban areas!b! (eective distribution/ A strategy in #hich company stoc$s goods in imited number of retai

outets! )or e*ampe' teevisions are sod ony in seected retai outets! Taya s$in

care soution of Marico #as mar$eted through e*cusive distribution!


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5! $ssigning the responsibilities to channel members.%ompany should defne the territory in which channe

member shoud operate' at #hat price he shoud se'services he shoud perform' and ho# he shoud se!

?! &electing the criteria to evaluate the channelmember: company may have dierent types o

channe aternatives! It #oud i$e to choose any oneof the aternatives' #hich meets its ob&ectives!Channes can be evauated in the design phase bythe method caed (C.CA!


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a! (aes6(7/ The abiity of each channe member to generate the saes forcompany in a given period!

b! Cost6C7/ ho# much cost each channe aternatives incur8 :hich one ofthe aternative provides the optimum soution8

c! .ro+tabiity 6.7/ various channe aternatives avaiabe to the companyand their pro+tabiity sha be compared! Company #ith betterpro+tabiity sha be seected!

d! Contro 6C7/ "very company #oud i$e to have better contro over itschanne members! Aternative channes can be evauated on the basis ofho# much contro each channe member desires8 And ho# much contro

the company is #iing to provide8e! Adaptabiity 6A7/ Mar$eting is dynamic #ord! Competition e*erts

pressure on companies to reoo$ at their practices and suppy chaincontinuousy! The channe aternatives shoud be @e*ibe enough to meetthe changing re,uirements! :hichever channe aternative meets suchob&ectives sha be seected!


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C2ANN" "


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C2ANN" "


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CON(UM"R MAR>"T

C2ANN"


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INDU(TRIA MAR>"T

C2ANN"


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Channel management strategies

!anaging and motivating channelmem"er

No# day1s companies are considering theirchanne members as partners! Thesecompanies are as$ing its intermediaries tointegrate their business #ith them! Integratedbusiness reduce the cost'increase theeciency' and heps in better customerservice! Companies are adopting partnerreationship management 6.RM7 soft#are toadd vaue to their suppy chain!


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Evaluating Channel !em"ers

The channe members need to be evauated on areguar basis to assess their performance!

.roducers must periodicay evauate intermediariesEperformance against such standards as saes,uotaattainment' average inventory eves' customerdeivery time' treatment of damaged and ost goods'

and cooperation in promotiona and trainingprograms! A producer #i occasionay discover thatit is paying too much to particuar intermediaries for#hat they are actuay doing!


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Selecting Channel !em"ers

Companies need to seect their channe members carefuy! Tocustomers' the channes are the company! Consider the negative

impression customers #oud get of McDonadEs' (he Oi' or MercedesBen% if one or more of their outets or deaers consistenty appeareddirty' inecient' or unpeasant!

To faciitate channe member seection' producers shoud determine#hat characteristics distinguish the better intermediaries! They shoudevauate the number of years in business' other ines carried' gro#th

and pro+t record' +nancia strength' cooperativeness' and servicereputation! If the intermediaries are saes agents' producers shoudevauate the number and character of other ines carried and the si%eand ,uaity of the saes force! If the intermediaries are departmentstores that #ant e*cusive distribution' the producer shoud evauateocations' future gro#th potentia' and type of cientee!


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Training Channel !em"ers

Companies need to pan and impementcarefu training programs for theirintermediaries!

Microsoft re,uires thirdparty service

engineers to compete a set of courses andta$e certi+cation e*ams! Those #ho pass areformay recogni%ed as Microsoft Certi+ed.rofessionas' and they can use this

designation to promote business!


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!odif#ing Channel $rrangements

A producer must periodicay revie# andmodify its channe arrangements! Modi+cationbecomes necessary #hen the distributionchanne is not #or$ing as panned' consumer

buying patterns change' the mar$et e*pands'ne# competition arises' innovativedistribution channes emerge' and the productmoves into ater stages in the product ife

cyce!


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D"(I;NIN; MAR>"T

C2ANN"(Designing a mar$eting channe system invoves anay%ing customer needs' estabishing channe

ob&ectives' identifying ma&or channe aternatives' and evauating ma&or channe aternatives!

%& $nal#'ing Customers( Desired Service Outut )evels

Channes produce +ve service outputs/

-! ot si%e/ min ,ty0! :aiting and deivery time3! (patia convenience/ geographic coverage4! .roduct variety

5! (ervice bac$up

The mar$etingchanne designer $no#s that providing greater service outputs means increased

channe costs and higher prices for customers!

*& Esta"lishing O"+ectives and Constraints

-! Channe institutions shoud minimi%e tota channe costs and sti provide desired eves ofservice outputs!

0!.anners can identify severa mar$et segments!

3!Channe ob&ectives vary #ith product characteristics!

4! Channe design must ta$e into account the strengths and #ea$nesses of di9erent types ofintermediaries!


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D"(I;NIN; MAR>"T

C2ANN"(3! Identifying and "vauating Ma&or Channe Aternatives Aternatives are/ saes forces' to agents' distributors' deaers'

direct mai' teemar$eting' and the Internet!

"ach channe has uni,ue strengths as #e as #ea$nesses!

Most companies no# use a mi* of channes!

"ach channe hopefuy reaches a di9erent segment of buyers anddeivers the right products to each at the east cost!

A channe aternative is described by three eements/

The types of avaiabe business intermediaries

The number of intermediaries needed!

The terms and responsibiities of each channe member!


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C2ANN" CON)ICTNo matter ho# #e channes are designed

and managed' there #i be some con@ict' iffor no other reason than that the interests ofindependent business entities do not a#ayscoincide! Channe con@ict is generated #henone channe memberEs actions prevent thechanne from achieving its goa!


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TF."( O) CON)ICT((uppose a manufacturer sets up a vertica channe consisting of #hoesaers

and retaiers! The manufacturer hopes for channe cooperation that #iproduce greater pro+ts for each channe member! Fet vertica' hori%onta' andmutichanne con@ict can occur!

ertical channel con/ict means con/ict between dierent levels within thesame channel. 0eneral 1otors came into con/ict with its dealers in trying toenorce policies on service" pricing" and advertising. %oca'%ola came intocon/ict with bottlers who also agreed to bottle Dr. Pepper.

2ori3ontal channel con/ict involves con/ict between members at the samelevel within the channel. &ome Pi33a hut ranchisees complained about other

Pi33a hut ranchisees cheating on ingredients" providing poor service" andhurting the overall Pi33a hut image.

1ultichannel con/ict e*ists when the manuacturer has established two ormore channels that sell to the same mar(et. 1ultichannel con/ict is li(ely tobe especially intense when the members o one channel get a lower price4based on larger volume purchases5 or wor( with a lower margin.


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CAU("( O) CON)ICTCauses of Channe Con@ict

It is important to identify the causes of channe con@ict!

(ome are easy to resove' others are not!One ma&or cause is goal incompatibility. +or e*ample" the

manuacturer may want to achieve rapid mar(et penetrationthrough a low'price policy. Dealers" in contrast" may preerto wor( with high margins and pursue short'run proftability.

&ometimes con/ict arises rom unclear roles and rights. 2Pmay sell personal computers to large accounts through itsown sales orce" but its licensed dealers may also be tryingto sell to large accounts. 6erritory boundaries and credit orsales oten produce con/ict.


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CAU("( O) CON)ICT(Con@ict can aso stem from dierences in perception. 6he

manuacturer may be optimistic about the short'term

economic outloo( and want dealers to carry higherinventory. Dealers may be pessimistic. In the beveragecategory it is not uncommon or disputes to arisebetween manuacturers and their distributors about theoptimal advertising strategy. %on/ict might also arise

because o the intermediaries, dependence on themanuacturer. 6he ortunes o e*clusive dealers" such asauto dealers" are prooundly aected by themanuacturer,s product and pricing decisions. 6hissituation creates a high potential or con/ict.


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MANA;IN; CON)ICT( There are severa mechanisms for e9ective

con@ict management! One is the adoption ofsuperordinate goas! Channe members cometo an agreement on the fundamenta goathey are &ointy see$ing' #hether it is surviva'mar$et share' high ,uaity' or customersatisfaction! They usuay do this #hen thechanne faces an outside threat' such as amore ecient competing channe' an adversepiece of egisation' or a shift in consumerdesires!


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MANA;IN; CON)ICT(%o'optation is an eort by one organi3ation to

win the support o the leaders o anotherorgani3ation by including them in advisorycouncils" boards o directors" and the li(e. $slong as the initiating organi3ation treats theleaders seriously and listens to their opinions"co'optation can reduce con/ict" but theinitiating organi3ation may have tocompromise its policies and plans to win theirsupport.


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MANA;IN; CON)ICT(:hen con@ict is chronic or acute' the parties may have

to resort to dipomacy' mediation' or arbitration!

Diplomacy ta(es place when each side sends a personor group to meet with its counterpart to resolve thecon/ict. 1ediation means resorting to a neutral third

party who is s(illed in conciliating the two parties,

interests. $rbitration occurs when the two parties agree

to present their arguments to one or more arbitratorsand accept the arbitration decision. &ometimes" whennone o these methods proves eective" a company ora channel partner may choose to fle a lawsuit.


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DI(TRIBUTION (F(T"M(2ori%onta Mar$eting (ystems

Another channe deveopment is the hori%ontamar$eting system' in #hich t#o or more unreatedcompanies put together resources or programs toe*poit an emerging mar$eting opportunity! Manysupermar$et chains have arrangements #ith oca

ban$s to o9er instore ban$ing!

The companies might #or$ #ith each other on atemporary or permanent basis!


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DI(TRIBUTION (F(T"M(,ertical !arketing S#stems

One of the most signi+cant recent channe deveopments is the rise ofvertica mar$eting systems! A conventiona mar$eting channe

comprises an independent producer' #hoesaer 6s7' and retaier6s7!"ach is a separate business see$ing to ma*imi%e its o#n pro+ts!

"ven if this goa reduces pro+t for the system as a #hoe! No channemember has compete or substantia contro over other members!

A vertica mar$eting system 6


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DI(TRIBUTION (F(T"M(!ultichannel !arketing S#stems

Once' many companies sod to a singe mar$et through a singe channe! Today' #ith

the proiferation of customer segments and channe possibiities' more companieshave adopted mutichanne mar$eting! Mutichanne mar$eting occurs #hen a singe

+rm uses t#o or more mar$eting channes to reach one or more customer segments!

By adding more channes' companies can gain three important bene+ts!

The +rst is increased mar$et coverage!

The second is o#er channe costGseing by phone rather than persona visits to

sma customers!

The third is more customi%ed seingGadding a technica saes force to se morecompe* e,uipment!

The gains from adding ne# channes come at a price' ho#ever! Ne# channes

typicay introduce con@ict and contro probems! T#o or more channes may end upcompeting for the same customers! The ne# channes may be more independent andma$e cooperation more dicut!


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MUTI "


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MUTI "


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CRITICI(M O) MUTI "


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C2"C> .OINT( )OR MMChec$ points for the ega MM Company must havetheir o#n branded products!

A good residua pan is must!


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MM IN INDIAAM:AF

MODICAR"

TU.."R:AR"ORI)AM"


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"LAM."

Marketing Managememnt Class 16-Distribution

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