Distribution Management and the
Marketing Mix
ANGIE
SANDARA
JULIUS
Sales & Distribution Management
Chapter 8: Distribution Management & The Marketing Mix
Learning Objectives
Role of distribution management in the marketing mix
Why distribution channels are required
Distribution channel strategy
Overview of distribution channel members
Intensity in the distribution effort
The Marketing Mix
Product
Place
Price
Promotion
Distribution channels help in the ‘place’ aspect of the marketing mix
Distribution provides place, time and possession utility to the consumer
Example
Consumer wants to buy a tube of toothpaste
Made available at a retail outlet close to her residence – place
Made available at 8 pm on a Tuesday evening when she wants it – time
She can pay for the toothpaste and take it away – possession
The company distribution function has made all this possible.
The situation would be similar if a customer wants to buy a refrigerator or medicines or
even an electric motor
Players Involved
The company and its distribution network
Direct company to consumer
Company to a C&FA / distribution center to distributors to retailers
Distributor to wholesaler to retailer
All these intermediaries help the process of ‘exchange’ of the product or service.
Distribution Management
Management of all activities which facilitate movement and co-ordination of supply and
demand in the creation of time and place utility in goods
The art and science of determining requirements, acquiring them, distributing them and
finally maintaining them in an operationally ready condition for their entire life.
Distribution Channels Defined
Are sets of interdependent organizations involved in the process of making a product or
service available for use or consumption – Stern & Ansary
Whether selling products or services, marketing channel decisions play a role of
strategic importance in the overall presence and success a company enjoys in the
marketplace.
All retailers, wholesalers and logistical organisations are intermediaries - Kotler
More Definitions
Networks through which producer’s products flow to the market – Cundiff & Still
External contractual organisation which management uses to achieve its distribution
objectives – Bert Rosenbloom
Set of independent organisations involved in the process of making a product or service
available for use or consumption by the customer or industrial user – Kotler &
Armstrong
Distribution Channels
Exist because producers cannot reach all their consumers
Multiply reach and provide efficiency to the marketing process
Facilitate smooth flow and create time, place and possession utilities
Have the core competence and reach
Provide contact, experience, specialisation and scales of operation
Types of Channels
Sales: motivates buyers, shares information between company and its consumers,
negotiates fair bargains for consumers and finances the transactions (company
salespeople, internet)
Delivery channel meant only for physical part of the distribution (the railways)
Service channel – performs after sales service (authorised service centers)
Listing of Channel Members
Company own sales team
C&FAs and CSAs (consignment selling agent)
Distributors, dealers, stockists, value-added re-sellers
Commission agents, jobbers and brokers
Value added resellers
Franchisees
Electronic channels
Wholesalers
Retailers
C&FAs / C&SAs
C&FA: carrying and forwarding agent and C&SA: carrying and selling agent – both are
on contract with a company
Both are transporters who work between the company and its distributors
Collect products from the company, store in a central location, break bulk and despatch
to distributors against indents
Goods belong to the company
C&SA also sells the goods on behalf of the company but remits proceeds after sale
Distributors, Dealers, Stockists
Name denotes the extent of re-distribution done by them
Distributors invest in the products – buy products from the company
Are on commission, margins or mark-up
May or may not get credit – but extend credit
Distributors cover the markets as per a beat plan. All others merely finance the
business.
Distributors could be exclusive for a company
Agents bring buyer and seller together
Wholesalers
Operate out of the main markets
Deal with a number of company products of their choice
Are not on contract with any company
Sell to other wholesalers, retailers and institutions
Negotiate about 15 days credit from company distributors – also provide credit to their
customers
Operate on high volumes and low margins
Retailers
The final contact with consumers
Operate out of their shops and sell a large assortment and variety of goods or services
for personal and non-business use
Located closest to consumers
Buy from company, distributors or wholesalers
Highest margins in the network
Provide personalised services to their customers
Patterns of Distribution
Determines the intensity of the distribution
Intensity decides the service level provided
Types of distribution intensity or strategy:
Intensive
Selective
Exclusive
Distribution Intensity
Intensive: distribution through every reasonable outlet available – FMCG
Selective: multiple, but not all outlets in the market – pharma, frozen food
Exclusive: may be only one outlet in a market - car dealers
Distribution Channel Strategy
Derived from the corporate strategy and the marketing strategy
Steps for designing the distribution strategy are:
Defining customer service levels
Distribution objectives and steps
Structure of the network required
Policy and procedure to be followed
Key performance indicators
Critical success factors
Key Learnings
Marketing channels are networks through which producer’s products flow to the
markets.
Companies use distribution channels to reach their large customer base
The channel members could be nominated like distributors or freelance like retailers
Distribution channels provide the time, place and possession utility for consumers for
the company products
