DISTRIBUTION CHANNEL DECISION

Presented by;- Ambika ghosh (MBA , DIMAT)

DISTRIBUTION CHANNEL DECISION

Distribution channel decision

DISTRIBUTION

Is a set of interdependent organizations that help

make a product available for use or consumption

by the consumer or business user

TYPES OF INTERMEDIARIES

1. RETAILER

2. WHOLESALER

RETAILING

Retailing includes all the activities in selling goods and services directly to final consumer for non business use.

TYPE OF RETAILER1. Specialty store- narrow product line, Athelete’s

foot ,reebok2. Department store- several products line, Nordstrom A-

Z departmental store3. Super market- large, low cost, low margin, high

volume, self service. Food emporium, Safeway ,bigbazar ,easyday,

Subhiksha4. Convenience store- small store in residential area,

often open 24*7. 7-eleven, circle-k, Reliance Fresh

Conti……

5. Off- price retailing- leftover goods, irregular merchandise sold at less than retail, factory outlets. Tj max, Costco, samsonite ,

6. Superstores- huge selling space, routinely purchased food and household item plus services (laundry, shoe repair, dry cleaning, deep assortment in one category). Pet smart, Star India Bazaar , Reliance Retail

7. Catalog showroom- broad selection of high markup fast moving brand name goods sold by catalog at discount. Bike , New digital world(sony)

WHOLESALING

Wholesaling includes all the activities in selling goods or services to those buy for resale or business use, it includes manufacturers and farmers. Because they are engaged primarily in production.

TYPES OF WHOLESEALER1. Merchant wholesaler- independently owned

businesses that take title to merchandise they handle they are full service and limited service jobbers distributer.

Conti..

2. Full service wholesaler- carry stock maintain a sale force offer credit, make deliveries, provide management assistant.

3. Limited service wholesaler- cash and carry wholesaler sale a limited line of fast moving goods to small retailer for cash, truck wholesaler, hospitals, restaurants.

4. Broker and agent- facilities buying and selling on commission. Brokers bring buyer and seller together and assist in negotiation, insurance broker, real state broker.

Conti…

5. Manufacturers and retailers branches and offices- wholesaling operation conducted by seller or buyer themselves rather than through independent wholesaler.

6. Specialized wholesaler- agricultural assemblers (buy the agricultural output of many firms), petroleum bulk plants (consolidate the output of many wells)

FUNCTION OF INTERMEDIARIES

1 Assorting

2 Buying  

3 Contact

4 Distribution

5 Financing

6 Market information 

FUNCCTION OF INTERMEDIARIES

7. New Products 

8. Product Planning

9. Promotion

10. Pricing 

11. Price negotiation 

14. Risk Taking

Consumer Marketing Channels

ConsmrMfgr.0-level channel

2-level channel

3-level channel

1-level channel

Whlslr Jobber Retailer ConsmrMfgr.

Retailer ConsmrMfgr.

Whlslr Retailer ConsmrMfgr.

Industrial Marketing Channels

Man

ufa

ctu

rer

Co

nsu

mer

0-level channel

Manufacturer’srepresentative

2-level channel

Manufacturer’ssales branch

3-level channel

Industrialdistributors

1-level channel

WHY ARE MARKETING INTERMEDIARIES USED?

1.Direct Channels2.Indirect Channels3.Single Marketing Channels4.Multiple Marketing Channels5.Vertical Marketing Systems

Types of Marketing Channels

Producer: Eureka forbesCummins Engine Co.(International market)Diesel engine

Producer:TelebrandMunder Capital Man-agement (International market) Mutual Fund

Producer:Dell Computer Corp.(International market)Personal computers

Telemarketing,direct response

advertising

Toll-freephone/faxordering,internet

Consumer

Consumer

Personalselling

Business buyer:Truck manufacturers

Companies Using Direct Marketing Channels

Producer:Thousands of manufacturers

Examples: Black & Decker, Stanley Tools, 3M, Weedeater

Producer:Beecham Products

Examples: Aqua-Fresh toothpaste, Mennen aftershave,Sucrets lozenges

Wholesaler:Orgill Brothers, one of the world’s largest hardware

Wholesalers, located in Memphis, Tennessee

Retailers:Thousands of hardware stores

Retailers:Thousands of drug, grocery & discount stores

Examples: Wal-mart, Kroger, Eckerd Drugs, Walgreens

Ultimate consumers:Millions of people around the world

Ultimate consumers:Millions of people in the United Stated, Mexico,

South & Central America

BA

Companies Using Indirect Marketing Channels

Corporate Forward integration: raymond ,Polo, Laura Ashley, Gulf States Paper Corp. Backward integration: Winn-Dixie grocery chain Description, One channel member owns one or more other channel members

Contractual Wholesaler-sponsored voluntary groups: Ace Hardware, Western Auto Retailer-sponsored cooperative groups: Affiliated Grocers, Cotter & Company (True Value Hardware) Franchise system: McDonald’s, NIIT, APOLLO HOSPITAL

Description Channel members operate according to contractual agreement

Administered Abbott Labs, General Electric, Rolex Description Channel members operate according to agreed-upon plan

Companies Using Vertical Marketing Systems

FACTORS AFFECTING CHOICE OF DISTRIBUTION CHANNEL

Market Factors:

Nature of MarketNumber of Potential CustomersGeographic ConcentrationOrder Size

Product Factors:

Unit valuePerishable GoodsTechnical Nature of Products

Sizes & weight  of the product

Company Factors:

Financial ResourcesManagerial CapabilityDesire for Channel ControlService provided by the seller

How a Marketing Intermediary Reduces the Number of Channel Transactions

Analyzing Consumer Service Needs

Setting Channel Objectives & Constraints

ExclusiveDistribution

SelectiveDistribution

IntensiveDistribution

Identifying Major Alternatives

Evaluating the Major Alternatives

Designing International Distribution Channels

CHANNEL DESIGN DECISIONS

Logistics

Involves entire supply chain Increasing importance of logistics

effective logistics is becoming a key to winning and keeping customers.

logistics is a major cost element for most companies.

the explosion in product variety has created a need for improved logistics management.

information technology has created opportunities for major gains in distribution efficiency.

Market Logistics

Involves the planning, implementing and controlling the physical flows of materials and final goods from point of origin to points of use to meet customer requirements at a profit.

It involves materials management, distribution systems and IT systems interlinked with one another

Logistics objective

Getting the right goods at the right place at the right time for the least cost

‘the last frontier for cost economies’.

Goals of Logistics system• Provide a Targeted Level of Customer Service at the Least Cost.

• Maximize Profits, Not Sales.

Higher Distribution Costs/ Higher Customer Service

Lower Distribution Costs/ Lower Customer Service Levels Levels

Levels

Integrated Logistics ManagementConcept Recognizes that Providing Better Customer

Service and Trimming Distribution Costs Requires Teamwork, Both Inside the Company and Among All

the Marketing Channel Organizations.

Cross-Functional Teamwork inside the Company

Cross-Functional Teamwork inside the Company

Building Channel PartnershipsBuilding Channel Partnerships

Third-Party LogisticsThird-Party Logistics

Logistics Functions

• Order Processing• Warehousing• Inventory Management• Transportation

Design system to minimize costs of attaining objectives

Inventory vs Service levels

inventory

cost

Serv

ice level

100%

Reorder point should balancethe risks of stockouts against costs of overstocking

Company needs to balance ordering costs vs inventory carrying costs

Transportation ModesTransportation Modes

RailNation’s largest carrier, cost-effective for shipping bulk products, piggyback

RailNation’s largest carrier, cost-effective for shipping bulk products, piggyback

TruckFlexible in routing & time schedules, efficient

for short-hauls of high value goods

TruckFlexible in routing & time schedules, efficient

for short-hauls of high value goods

WaterLow cost for shipping bulky, low-value

goods, slowest form

WaterLow cost for shipping bulky, low-value

goods, slowest form

PipelineShip petroleum, natural gas, and chemicals

from sources to markets

PipelineShip petroleum, natural gas, and chemicals

from sources to markets

AirHigh cost, ideal when speed is needed or to

ship high-value, low-bulk items

AirHigh cost, ideal when speed is needed or to

ship high-value, low-bulk items

Top 10 Logistics Companies in India: TNT Express AFL DHL Blue Dart Gati Safeexpress Ashok Leyland Packers & Movers DTDC First Flight

THANK YOU