Designing Distribution Channels
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Transcript of Designing Distribution Channels
7/29/2019 Designing Distribution Channels
http://slidepdf.com/reader/full/designing-distribution-channels 1/22
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Designing Distribution
Channels
7/29/2019 Designing Distribution Channels
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Definition
Channel design refers to those decisions
involving the development of new
marketing channels where none had
existed before, or the modification of
existing channels
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Variables
Market coverage
Sales contact
Inventory Order processing
Gathering market information
Customer support Volumes
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Objectives
Channel positioning: Ease or exclusivity
Comfort
Technical or service support Inventory levels to hold
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Volkswagen
Where Volkswagen might trip, say analysts,
is distribution. India is a large country and
hundreds of dealers are required to cover
its length and breadth. With about 300dealers, industry norms suggest, a car
maker can cover up to 80 per cent of the
market. How does Volkswagen measureagainst this benchmark? At the moment,
Volkswagen has 43 dealers in 32 cities.
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Channel formats
Push strategy or pull strategy
Zero level to three level
Producer driven: – Company owned outlets
– Licensed outlets
– Franchises, CSAs – Brokers, Vending machines
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Channel formats
Seller driven:
– Retailers
– Department stores/supermarkets
– Specialty stores
– Door-to-door
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Channel formats
Service driven
– Restaurants
– Automobiles
Other formats
– Direct marketing
– Horizontal Marketing System
– Hybrid Marketing Systems
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Any company must ensure that:
1. Distribution channels meet the company’s objectives.
2. Channels are created to match with brand perceptioncreated by advertising.
3. It is aware of market trends and change distributionstrategies accordingly.
4. The product receives the display and attention by allchannel partners.
5. Consumers either find it easy to buy products or arewilling to bear some difficulty in acquiring the company’sproducts.
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VMS (3 types)
Corporate VMS: When successive stages of
distribution are under a single ownership.
Contractual VMS: When independent firms at
different levels of distribution join together through contracts it is known as Contractual
VMS. (3 types)
Administered VMS: A channel member controls
the other channel members in the distribution
chain by the sheer power of its size.
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Contractual VMS
Producer-Wholesaler: When Marutiappoints dealers, it would be under acertain contract.
Producer-Retailer: A Samsung store willnot be owned by the company.
Wholesaler-Retailer: Co-operatives fall
under this category. Retailers buy from the jointly-owned wholesaler and share theprofits those purchases generate.
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Logistics
Suppliers, agents, marketers, channel members,
and customers
Inbound and outbound logistics
Technologies: product codes, satellite tracking,electronic data interchange (EDI), and electronic
funds transfer (EFT)
Includes: Order receiving and processing,Warehousing and storage, Inventory
management, Scheduling and Transportation
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: o o ar eStrategy (GTM)
HUL – total 2400 distributors
Mumbai: 21 distributors into four ‘mega
distributors’ [Rs 480 crore]
Target: of €1.5 billion (Rs 9,855 crore)
Orders logged in evening, delivered the
next evening to the distributor by C&F Consumers get fresher stock, more
visibility
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Inventory held by distributor: 0
HUL salesmen use handheld terminals
Replenishment orders from retailers Mahindra Logistics: 0 losses in transit
Single distributor per store model
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Choosing a channel: the Aspinwall
Approach
Characteristic Red Orange Yellow
Replacement
rate
High Medium Low
Gross margin Low Medium High
Adjustment Low Medium High
Time of
Consumption
Low Medium High
Searching
time
Low Medium High
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Aspinwall technique
Red Orange Yellow
Long Medium Short
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Financial Approach
C&F 0.5% - 1%
Distributor 4%
Wholesaler 4 – 10% Retailer 7.5 – 25%
Logistics 5 – 10%
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Channel StrategyThe broad principles by which the firm
expects to achieve its distribution
objectives for its target market/s
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Peter Drucker
Everybody knows how fast technology is
changing. Everyone knows about markets
becoming global and about shifts in the
workforce and in demographics. But fewpeople pay attention to changing
distributive channels
“Manage by Walking Around Outside”
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Tom Peters
Most firms make the mistake of paying toolittle attention to the somewhat attenuatedmembers of their marketing team
[marketing channel]. The few companiesthat mind their distribution reap tangiblerewards
“Ignore Distribution Channels at your ownrisk”
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Good channel management is good
general management
Frank Cespedes