Chapter-Four
Distribution Management and Marketing Mix
Distribution management determines optimal quantities of each product to be made at each plant
and to be distributed to each warehouse, such that manufacturing. A marketing channel is a set of
interdependent organizations involved in the process of making a product or service available for
use or consumption. That is, a marketing channel is not just one firm doing its best in the market
— whether that firm is a manufacturer, wholesaler, or retailer. Rather, many entities are typically
involved in the business of channel marketing. Each channel member depends on the others to do
their jobs
Objectives of Distribution Management
The main objective of a distribution channel is to provide a link between production and
consumption. Organizations that form any particular distribution channel perform many key
functions:
• Information :Gathering and distributing market research and intelligence - important for
marketing planning
• Promotion :Developing and spreading communications about offers
• Contact: Finding and communicating with prospective buyers
• Matching: Adjusting the offer to fit a buyer's needs, including grading, assembling and
packaging
• Negotiation: Reaching agreement on price and other terms of the offer
• Physical distribution :Transporting and storing goods
• Financing: Acquiring and using funds to cover the costs of the distribution channel
• Risk taking :Assuming some commercial risks by operating the channel (e.g. holding
stock)
Number of Distribution Channels
Each layer of marketing intermediaries that performs some work in bringing the product to its
final buyer is a "channel level". The figure below shows some examples of channel levels for
1
consumer marketing channels:
Aspects of Distribution Management
Channel management, as a process by which a company creates formalized programs for selling
and servicing customers within a specific channel, can really impact your business—and in a
positive way! To get started, first segment your channels by like characteristics (their needs,
buying patterns, success factors, etc.) and then customize a channel management program that
includes:
1. Goals. Define the specific goals you have for each channel segment. Consider your goals for
the channel as a whole as well as individual accounts. And, remember to consider your goals for
both acquisition and retention.
2. Policies. Construct well-defined polices for administering the accounts within this channel. Be
sure to keep the unique characteristics of each segment in mind when defining policies for account
set up, order management, product fulfillment, etc.
3. Products. Identify which products in your offering are most suited for each segment and create
appropriate messaging. Also, determine where your upsell opportunities lie.
4. Sales/Marketing Programs. Design support programs for your channel that meet THEIR needs,
not what your idea of their needs are. To do this, you should start by asking your customers within
this segment, ―how can we best support you in the selling and marketing of our products?‖ That
being said, the standard considerations are product training, co-op advertising, seasonal
promotions, and merchandising. Again, this is not a one-size fits all, so be diligent about
addressing this segment’s SPECIFIC needs in these areas.
Physical Distribution and Marketing Logistics
Physical distribution is the process of delivering the product to the marketing channels and
consumers.
It encompasses the various activities involved in the physical flow of the product from the
producer to the consumer. Marketing logistics is somewhat larger in scope compared to physical
2
distribution. It covers physical distribution plus a part of the task of marketing channels. While
physical distribution takes care of functions such as transportation, warehousing and inventory
management and facilitates the flow of the product, marketing channels actually connect the firm
with its customers.
Marketing logistics covers physical distribution in full measure, plus a part of the function of
marketing channels. Marketing logistics bring in greater value addition in the delivery chain,
beyond mere transportation or distribution. Logistics and marketing management are concerned
with the effective flow of products and services in the economy and pertain to the distribution of
both consumer and industrial goods. Marketing is considered to be a vital part of an economy and
there is a need for an efficient marketing system which can ensure that all marketing activities are
carried out in accordance with the predefined goals of the business. Logistic managers are given
the task of marketing logistics as well as communicating logistics with a purpose of positioning
logistics in the present competitive environment.
Importance of Physical Distribution/Marketing Logistics
The importance of Physical distribution/marketing logistics are as follows:
• Ensures the physical flow of the product from the producer to the consumer.
• Without this flow, marketing cannot take place.
• Confers place and time utility on products
• Helps build clientele.
• Where production locations and markets are distanced, physical distribution becomes all
the more crucial.
• A promising area for cost reduction.
Role of channel of distribution in marketing
The role of channel of distribution are as follows:
• Information gathering and distribution
• product promotion
• arranging contacts and matching products to meet buyers needs
• negotiation of prices and financing the costs of the activities in the channel
• physical distribution of products through the channel.
OTHER ROLES
• Transport services for a timely and safe physical movement of goods. Major transportation
modes are: Rail, Road, Water and Air.
• Warehousing facilities that irons out the market fluctuations and make the goods available
to the customer’s when/where needed.
• Sorting/grading of goods thus facilitating customers choice in selection of goods.
3
Factors influencing the channel selection
1. Product or Market characteristics factors: Product or market features is the factor
influencing the selection of channels. It is necessary to know that how many customers are
there in the market, the cost of the product because the product is of low cost and only need
to have a short medium to reach the ultimate consumers then at that time the cost may get
high. So it includes:
• Number of customers
• Cost of the product
• Type of the product
2. Company characteristic factors
• Degree of Channel control desired
• Financial resources
• Ability of Management
3. Middleman consideration.
• Services provided by the middlemen
• Availability of desired middleman
• Attitude of middleman towards manufacturer’s Policy
4. Environmental characteristics factors.
Trends of Marketing Channels
The digital marketing trends are complex and unpredictable, but a thrilling one for any person
who keeps eye on contemporary trends Every year, new hardware, new applications, new
organization, and new customers liking say aloud a mass of extensive alterations that either get
accepted or unnoticed by the industries of the globe
Products are available Anytime, Anytime, Anyhow, Any Device
The trends of marketing channels are as follows:
• symbolic marketing;
• Third party delivery,
• Multi-channel Marketing System (MMS);
• Multi Level Marketing (MLM),
• e-marketing and
• the channel of distribution.
Symbolic Marketing: In marketing, a brand is the symbolic embodiment of all the information
connected with a product / service. Brand is a name, term, sign, symbol or design or a
combination of them which is intended to identify the goods/services of one seller or a group of
sellers and to differentiate them from those of competitors
4
Characteristics of good brand
1. Distinctiveness
2. Suggestiveness
3. Appropriateness
4. Easy to remember
5. Adaptable to new products
6. Easy to Register
Third-party logistics : Third-party logistics in logistics and supply chain management is a
company's use of third party businesses to outsource elements of the
company's distribution and fulfillment services. Third party logistics providers typically specialize
in integrated operation, warehousing and transportation services which can be scaled and
customized to customers' needs based on market conditions, such as the demands and delivery
service requirements for their products and materials
Often, these services go beyond logistics and include value-added services related to the
production or procurement of goods, i.e., services that integrate parts of the supply chain. When
this integration occurs, the provider is then called a third-party supply chain management provider
Third-party logistics providers include freight forwarders, courier companies, as well as other
companies integrating & offering subcontracted logistics and transportation services.
Multichannel marketing system : A multichannel marketing system is an approach to marketing
that uses a variety of media to communicate with customers and prospects. There is use of media
such as websites, printed publications, advertising, email, mobile communications and social
networking sites to communicate marketing messages, build customer relationships or sell
products and services. The key to successful multichannel marketing is selecting the channels that
customers prefer to use and ensuring that the messages are consistent across every channel.
Multichannel marketing is becoming more important because your customers are changing the
way they acquire and share product information.
In traditional marketing, advertisers set the agenda and customers obtained information from one-
way media such as advertisements and direct mail. Today, customers research information on
websites and take account of the opinions of other customers on product review sites, forums and
social networking sites. They also expect companies to provide information that they can access
via smartphones or other mobile devices. To be successful, there must have an effective presence
in all these channels by adopting a multichannel marketing system
A multichannel marketing system gives different options for selling products. It may currently sell
to customers via a sales team or through a network of retailers or distributors. In a multichannel
marketing system, it can offer customers the choice of ordering products via additional channels
such as your website or call center. This increases convenience for customers and may also reduce
your sales and distribution costs.
5
Multi-level marketing (MLM): Multi-level marketing (MLM) is a marketing strategy in which
the sales force is compensated not only for sales they personally generate, but also for the sales of
others they recruit, creating a downline of distributors and a hierarchy of multiple levels of
compensation.
Multi-level Marketing (MLM) is a modified version of direct selling. Only a few firms, who do
not mind experimenting in reaching out to th consumers, practise it. Avon, Amway, Oriflame,
ModiCare: Avon, Amway, Orif1ame International are among the largest MLM outfits in the
world. The Indian firm, ModiCare of the K.K. Modi Group also sells its range of household and
personal care products through a large MLM network. MLM utilises a multi-tiered, non-employee
sales persons-cum distributors to sell the products.
Multi-level marketing (MLM) is a powerful business model for marketing products and services.
In the recent years, MLM opportunities have come under legal scanner as a fraudulent method of
exploiting unsuspecting people. Network marketing and multi-level marketing have been
described by author Dominique Xardel as being synonymous, and as methods of direct
selling. Other terms that are sometimes used to describe multi-level marketing include "word-of-
mouth marketing", "interactive distribution", and "relationship marketing
Multi-level marketing is a strategy that some direct sales companies use to encourage their
existing distributors to recruit new distributors by paying the existing distributors a percentage of
their recruits' sales; the recruits are known as a distributor's "downline." All distributors also make
money through direct sales of products to customers. Amway is an example of a well-known
direct-sales company that uses multi-level marketing.
In MLM no distributor is expected to make all sales on her own. Instead, the system envisages the
distributor recruiting a second rung of distributors. The distributor earns commissions at two
levels. The first is the commission that accrues to her on what she sells by herself, and is made up
of the difference between the distributor price and the consumer price. The second is the share
that accrues to her out of the commissions earned by the distributors at the next lower level, whom
she has recruited and trained.
eMarketing : eMarketing is any marketing done online via websites or other online tools and
resources. eMarketing can include paid services while other methods are virtually free.
A wide variety of eMarketing methods are at your disposal, including: direct email, SMS/text
messaging, blogs, webpages, banners, videos, images, ads, social media, search engines, and
much, much more. There are several main categories of eMarketing activities. Businesses may
choose to engage in several or all of the eMarketing activities depending on the goals of the
company, product types, target market, company capacity and other decision-making criteria. The
main objectives of marketing is to achieve marketing objectives through use of electronic
communications technology. Marketing is also similar to the term digital marketing.
