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BBA 205

Prepared by :

Marketing Management
Asha Chauhan

UNIT III

Distribution Channel

Goods are produced by a manufacturer for the user or the ultimate customer. The customer is the
ultimate target for a marketer. The customer purchases goods only when it is available in the
market. The availability of

the product depends on the efficacy of distribution channel.

Therefore distribution channel plays a significant role in the marketing activities.


According to William J. Stanton, a distribution channel for a product is the route taken by
the goods as they move from the producer to the ultimate customer.

Producers

Intermediari
es

Consumer

Distribution Channel is a set of independent organizations that help make a product or service
available for use or consumption by the consumer or business user. Distribution channels are
also called marketing channels because they are not only concerned with the physical
distribution goods but also with their promotion, selling and marketing.

Objectives of Distribution Channels:


1.
2.
3.
4.
5.

Availability of product in the target market.


Smooth movement of the product from the producer to the customer.
Cost-effective and economic distribution
Information communication from the producer to the consumer.
Supplies several products and in suitable assortments, as required by the consumers.

(matching segments of supply with segments of demand)


6. Breaks the bulk and caters to the small size needs of the consumers
7. Take care of the various flows involved in distribution: (forward, backward, and 2 way
process)
a. Physical flow of products (Forward flow)
b. Title/ ownership flow (forward flow)
c. Risk flow
(both way flow)
d. Negotiation flow (both way flow)
e. Payment flow (backward flow)
f. Information flow (both way flow)
g. Promotion flow. (forward flow)

BBA 205
Prepared by :

Marketing Management
Asha Chauhan

UNIT III

How a distributor effects an economy of effort.

a.

Number of contacts
M*C = 3*3 = 9
M= manufacturer

b. number of contacts
M+C = 3+3= 6
D= Distributor

C= customer

FUNCTIONS OF MARKETING CHANNELS

1. Information:
Gathering and distributing marketing research and intelligence information about actors
and forces in the marketing environment needed foe planning and aiding exchange.
2. Promotion:
Developing and spreading persuasive communications about an offer.
3. Contact:
Finding and communicating with prospective buyers.
4. Matching:
Shaping and fitting the offer to the buyers needs, including activities such as
manufacturing, grading, assembling and packaging.
5. Negotiation:

BBA 205
Prepared by :

Marketing Management
Asha Chauhan

UNIT III

Reaching an agreement on price and other terms of the offer so that ownership or
possession can be transferred.
6. Physical Distribution:
Transporting and storing goods.
7. Financing:
Acquiring and using funds to cover the costs of the channel work.
8. Risk taking:
Assuming the risks of carrying out the channel work.

Factors in Choice of Distribution

A large number of middlemen are available through which a product can be distributed. Each
middlemen involves some cost which enters into the price of the product thet the ultimate
consumer has to bear. If a wrong choice of distribution channel is made, it will lead to increase in
the distribution cost which will lead to either lowering down of profits or increasing the cost of
the product to the customer.

Choice of
Distribution
Channel

Product
Price
Promotion

Profitability/cost
to the customer

BBA 205
Prepared by :

Marketing Management
Asha Chauhan

UNIT III

Fig: Effect of Choice of Distribution Channel on business and consumer


The choice of appropriate channels of distribution is not a simple job. While taking a decision in
this regard, management should carefully consider the following factors:
A.
B.
C.
D.

Market Considerations
Product Consideration
Company Consideration
Middlemen Consideration
A.

Market Consideration:
The nature of market is the key factor influencing the choice of channels of
distribution.
The following features of the market should analyzed to determine the channels.
1. Consumer or industrial market:
If the product is for industrial market or industrial users, i.e channel of
distribution will be a short one. Since industrial users purchase in large quantities,
they can purchase directly from the producers or manufacturers, i.e. there is no
need of retailers. The manufacturer can establish contacts with the industrial users
by sending his agents. But in case of product for the consumer retailer may have
to be included in the channel of distribution.
2. Number of potential customers:
A large potential market is likely to put weigh in favour of the use of middlemen.
If the number of customers is relatively small, the manufacturer may be able to
sell directly by using his own sales force as customer handling would not be
difficult.
3. Size of the order:
Direct selling is convenient and economical where customers place order in big
lots as in case of industrial goods. But where the product is sold in small
quantities, middlemen are used to distribute such products.
4. Buying habits of customer:
The customer buying habits like
the time he is willing to spend
the preference for personal attention and

BBA 205
Prepared by :

Marketing Management
Asha Chauhan

UNIT III

the preference for one stop shopping

affect the choice of distribution channels.


For example, cigarette are purchased in one and two and rarely in packets.
5. Geographical concentration of the market :
Where prospective customers are located in a particular geographical region,
direct selling is more feasible than it would be, if the market were spread over the
whole country. Use of wholesaler and retailers may become essential to sell the
product to the widely dispersed consumers or industrial users.
B. Product Consideration
The type and nature of the product influences the number and type of middlemen to
be chosen for distributing the product.
Important factors with regard to the product are as follows:
1. Unit value: if the unit value of the product is lower and the turnover is higher, the
channel of distribution will be longer. For instance product like cosmetics,
stationary and small accessory equipment are distributed through agents,
wholesalers and retailers. Product of high value like jewellery and industrial
machines are sold directly to the users.
2. Product line: a manufacturer manufacturing several products in the same line
will sell directly or through retailers since it is economical. But a manufacturer
with only one item may have to use wholesalers and retailers to sell his product.
3. Standardised product: Standardised products can be distributed through longer
channels because their brand names are very popular. But custom made and
unstandardised products can more easily be sold directly by the producers to the
user.
4. Technical nature: Industrial products which are highly technical, say air
conditioners and super computers, are often distributed directly to the industrial
users. The manufacturer of such a product can appoint sales engineers who can
explain the product to the potential customer and provide presale and after sale
service to them.

BBA 205
Prepared by :

Marketing Management
Asha Chauhan

UNIT III

But consumer products of technical nature are generally


sold direct and through retailers. This is because of the fact that consumer
products are sold in large number and it is not feasible for the manufacturer to
provide after sale service to the consumer as in case of television sets and
refrigerators.
5 Bulk and Weight: bulky and heavy goods are distributed direct to users in order
to minimize the physical handling of the product because transportation of such a
product involves huge cost.
6. Perishability: the producers of perishable products generally sell directly to the
consumers or sell through the middlemen who have the special storage facilities.
Manufacturer of non-perishable commodities have a wider choice in the channel
selection.
C. Company consideration
The nature and size of the business firm have an important impact on the selection of
channels of distribution. Following important factors are considered :
1. Volume of production: a big manufacturer may find it more profitable to sell
directly to the customers through his sales force. If he is manufacturing a wide
range of products, he may sell his products by opening retail outlets in
different parts of the country. But a small manufacturer with only a small
number of items cannot afford to sell directly because of his small scale
operations.
2. Financial resources: a financially strong company can distribute products by
employing its own sales force and opening retail outlets. But a financially
weak company which cannot invest money in distribution will have to use
middlemen to sell its output.
3. Experience and competence of management: if a company management is
having sufficient experience and know how to market its products, preference
should be given to distribute products directly. A company lacking this ability
and experience will often rely heavily on middlemen to do the marketing job.

BBA 205
Prepared by :

Marketing Management
Asha Chauhan

UNIT III

4. Services provided to the cannels: a manufacturer can find good retailers only
if the marketing department undertakes sufficient advertising. Some
manufacturer of technical products undertake to provide after sale service .
such manufacturer can also reputed retailers for selling its products.
5. Desire for control of channels: a manufacturer who wants to control the
distribution of his product will select a short channel of distribution. He may
do so even though the distribution cost is hirer if he feels that the marketing
department can give aggressive promotion to the product.
D. Middlemen Consideration
1. Availability of desired middlemen: a manufacturer will rely on the middlemen if
they operate according to his desire. The marketer may not entrust product to a
middlemen who is carrying competitive products. In such a case, it may prefer to
open branches to sell products directly.
2. Financial ability: a large manufacturer will generally select those middlemen
who are financially strong, can provide credit facilities to the customers, and pay
their bills to the manufacturer regularly and promptly.
3. Sales potential : a manufacturer will general select a channel offering the greatest
potential sales volume over the long-run though it is very difficult to access which
channel will generate the largest sales volume.
4. Cost: the manufacturer also consider the cost of selling through alternative
channels. it does not mean that a middlemen charging high cost would be
excluded from consideration. A manufacturer may select6 even a high cost
charging middlemen who provides man services to the customers which are not
provided by other middlemen. This would provide added value to the customer.
5. Competition and legal constraints: many times the manufacturer are compelled
to use the same channels of distribution which are been used by the competitor.
Government regulations also affect the choice of middlemen.
For instance, a pharmaceutical company can market its product through licensed
chemists only.

BBA 205
Prepared by :

Marketing Management
Asha Chauhan

UNIT III

LEVELS OF CHANNELS
Companies can design their distribution channels to make products and services available to
customers in different ways. Each layer of marketing intermediaries that performs some work in
bringing the product and its ownership closer to the final buyer is a channel level. Because the
producer and the final consumer both perform some work, they are part of every channel.
The number of intermediary levels indicate the length of a channel.
There are two type of Marketing Channel Systems:
1. Vertical Marketing System (VMS)
2. Horizontal Marketing system (HMS)

Vertical Marketing system


It refers to a distribution channel structure in which the producer, wholesalers, and
retailers act as unified system. One channel member owns the others, has contracted with
them or has so much power that they all co operate. The primary channel participants
are retailers, wholesalers and the manufacturer. The vertical marketing channel system
can be represented as:

R
Producers
Retailer
Its simply a
channel in
which members
at different
levels (hence,
vertical) work
together in a
unified way
(hence system)
to accomplish
the work of the
channel

Wholesaler

BBA 205
Prepared by :

Marketing Management
Asha Chauhan

UNIT III

consum
er

Horizontal Marketing System


It refers to a channel arrangement in which two or more companies at one level join together to
follow a new marketing opportunity. By working together companies can combine their capital,
production capabilities or marketing resources to accomplish more than any one company could.
In working along with others, a company might join hands with competitors or non-competitors.
For example: McDonalds places express versions of its restaurants in wal-marts stores.
McDonalds benefits from Wal-Marts heavy store traffic and wal-mart keeps hungry shoppers
from needing to go elsewhere to eat.
For example, coco cola and nestle formed a joint venture to market ready to drink coffee and tea
worldwide. Coke provided worldwide experience in marketing and distribution of beverages and
Nestle contributed two established brand names Neascafe and Nestea.
Distribution channels are usually of two kinds:
1. Direct Marketing Channel (or zero level)
2. Indirect marketing Channel

Direct Marketing Channel:


Producer
0 level
Consumers
This type of channel has no intermediaries. The company sells goods direct to consumers.
For example; Eureka Forbes and Amway sell their products door to door, through home
and office sales parties and on the web;
Dell sells direct via the telephone and the internet.

Indirect Marketing Channel:

BBA 205
Prepared by :

Marketing Management
Asha Chauhan

UNIT III

These channels contains one or more intermediaries. The business marketer can use its
own sales force to sell directly to business customers. Or it can sell to various types of
intermediaries, who in turn sell to these customers. Consumers with even more levels can
sometime be found, but less often.
From the producers point of view, a great levels of numbers means less control and great
channel complexity, moreover, all of the institutions in the channels are connected by
several types of flow. These include the physical flow of product, the flow of ownership,
the payment flow, the information flow, and the promotion flow. These flows can make
even channels with only one or few levels very complex.
Indirect marketing channel may further classified in the following categories:
1. One Level Channel
In this type channel there is only one intermediary between producer and consumer.
This intermediary may be retailer or a distributor.
The number of intermediary levels indicate the length of a channel.

Producer
Retailer

1 level

Consumer
If the intermediary is a distributor, this type of channel is used for specialty products like
washing machines, refrigerators or industrial products.

Producer
Distributor
Consumer

10

1 level

BBA 205
Prepared by :

Marketing Management
Asha Chauhan

UNIT III

2. Two-Level Channel
This type of channel has two intermediaries, namely, wholesaler/distributor and retailer.
Producer
Wholesaler/Distributor
2 Levels
Retailer
Consumer
3. Three- Level Channel
This type of channel has three intermediaries, namely distributor, wholesaler and
retailer. This pattern is also used for convenience products.
Producer
Distributor
Wholesaler
3 Levels
Retailer
Consumer
4. Four-Level Channel
This type of channel has four intermediaries , namely, Agent, Distributor, Wholesaler and
Retailer. This is somehow similar to the previous two. This type of channel is used for consumer
durable products also.
Producer
Agents
Distributor

4 Levels

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BBA 205
Prepared by :

Marketing Management
Asha Chauhan

UNIT III

Wholesaler
Retailer
Consumer

CONSUMER MARKETING CHANNEL

Producer

Producer

Producer

Wholesaler

Consumer

Retailer

Retailer

Consumer

Consumer

BUSINESS MARKETING CHANNEL

Producer

Producer

Producer
Manufacturers
Representatives or
Sales branch

Business
Business Distributor

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BBA 205
Prepared by :

Marketing Management
Asha Chauhan

UNIT III

Distributor
Business
Customer

Business customer

Business customer

CHANNEL DESIGN DECISION


In designing marketing channels, manufacturer struggle between what is ideal and what is
practical. A new firm with limited capital usually starts by selling in a limited market area.
In smaller markets, the firm might sell directly to retailers, in large markets, it might sells though
distributor. In one part of the country, it might grant exclusive franchises, in another, it might sell
through all available outlets.
Marketing channel design calls for analyzing consumer needs, setting channel objectives,
identifying major channel alternatives, and evaluating them.
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BBA 205
Prepared by :

Marketing Management
Asha Chauhan

UNIT III

ANALYZING CONSUMER NEEDS


Designing the marketing channel starts with finding out what target consumers want from the
channel.

Do consumers want to buy from nearby locations or are they willing to travel to more

distant centralized locations?


Would they rather but in person, by phone, or online?
Do they value breadth of assortments or do they prefer specialization?
Do consumers want many adds-on services (delivery, repairs, installation), or will they
obtain these elsewhere?

Providing higher levels of service results in higher costs for the channel and higher prices for
consumers. The company must balance consumer needs not only against the feasibility and costs
of meeting these needs but also against customer price preference.

SETTING CHANNEL OBJECTIVES


Companies should state their marketing channel objectives in terms of targeted levels of
customer service. Usually a company can identify several segments wanting different levels of
service the company should decide which segments to serve and the best channels to use in each
case. In each segment, the company wants to minimize the total channel cost of meeting
customer service requirements.
The company channel objectives are influenced by

Nature of the company


Its products
Its marketing intermediaries
Its competitors
And the environment.
For example, the companys size and financial situation determine which marketing

functions it can handle itself and which it must give to intermediaries. Companies selling
perishable products may require more direct marketing to avoid delays and too much handling.

IDENTIFYING MAJOR ALTERNATIVES

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BBA 205
Prepared by :

Marketing Management
Asha Chauhan

UNIT III

When the company has defined its channel objectives, it should next identify its major channel
alternatives in terms of types of intermediaries, the number of intermediaries, and the
responsibilities of each channel member.

Types of intermediaries
A firm should identify the types of channel members available to carry out is channel work. Most
companies face many channel member choices. For example, initially Dell sold directly to final
consumers and buyers only through phones and internet marketing channel. It also sold directly
to large corporate, institutional, and government buyers using its direct sales force. However to
reach more consumers and to match competitors such as HP, Dell now sells indirectly through
retailers such as E-Zone, Big Bazaar, and Walmart. It also sells indirectly through value added
resellers, independent distributor and dealers who develop computer systems and applications
tailored to the special needs of small and medium-sized business customers.
Number of Marketing Intermediaries:
Companies must also determine the number of channel members to use at each level.
Three strategies are available :
1. Intensive distribution
2. Exclusive distribution
3. Selective distribution
Producers of convenience products and common raw materials typically seek
intensive distribution. a strategy in which they stock their products in as many outlets
as possible. These products must be available where and when consumers want them
for ex: toothpaste, paan masala, cigrattees, candy and other similar items.
Ex: HUL, coco-cola, Nestle
Exclusive distribution: in which the producer gives only a limited numbers dealers
the exclusive right to distribute its products in their territories. ED id the distribution
of luxury automobiles and prestige womens clothing.
For example: Rolex watches are typically sold by only a handful of authorized
dealers in any given market are.

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BBA 205
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Marketing Management
Asha Chauhan

UNIT III

Between intensive and exclusive distribution lies selective distribution: the use of
more than one, but fewer than all, of the intermediaries who are willing to carry a
companys products. Most television, furniture and home appliance brands are
distributed in this manner. For example, whirlpool and general electric sell their major
appliances through dealer networks and selected large retailers
Responsibilities of Channel Members
The producers and intermediaries need to agree on the terms and responsibilities of each
channel member. They should agree on price policies, conditions of the sale, territorial rights,
and specific services to be performed by each party. The producer should establish a list price
and a fair set of discounts for intermediaries.
For example, Mc Donalds provides franchisees with promotional support, a record
keeping system, and general management assistance. In turn franchisees must meet company
standards for physical facilities and food quality, cooperate with new promotion programs,
provide requested information, and buy specified food products.

EVALUATING MAJOR ALTERNATIVES


Each alternative should be evaluated against economic, control and adaptive criteria.
Economic criteria: a company campares like sales, costs, and profitability of different
channel alternatives. What will be the invested required by each channel alternative, and what
return will result?
Control issue: Using intermediaries usually means giving them some control over
marketing of the product, and some intermediaries take more control than others. The company
must prefers to keep as much control as possible.
Adaptive criteria: channels involves long term commitments, yet the company wants to
keep the channel flexible so that it can adapt to environmental changes. Thus, a channel
involving long term commitments should be greatly superior on economic and control grounds.

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BBA 205
Prepared by :

Marketing Management
Asha Chauhan

UNIT III

DESIGNING INTERNATIONAL DISTRIBUTION CHANNELS


International marketers face many additional complexities in designing their channels.
Each country has its own unique distribution system that has evolved over time and changes very
slowly. These channel systems can vary widely from country to country. Thus, global marketers
must usually adapt their channel strategies to the existing structures within each country.
Sometimes custom and government regulation can greatly restrict how a company6
distribute products In global markets. For example, it wasnt an inefficient distribution structure
that caused problems for Avon in China its was restrictive government regulations. Fearing the
growth of multilevel marketing schemes, the Chinese government banned door to door selling
altogether in 1998, focusing Avon to abandon its traditional direct marketing approach and sell
through retail shops. The Chinese government recently gave a warn and other direct sellers
permission to sell door to door again, but the permission is tangled in a web of restrict.

Channel Management Decisions

Once the company has reviewed its channel alternatives and decided on the best channel design,
it must implement and manage the chosen channel.
Marketing channel management deals with selecting, managing and motivating the individual
channel member and evaluating their performance over time.

Selecting Channel members


Producers vary in their ability to attract qualified marketing intermediaries. Some producers have
no trouble signing up channel members. For example, when Toyota first introduced its Lexus
line in the United States, it had no trouble attracting new dealers.
But when Timex when tried sell its inexpensive watches through regular jewelry stores, most
jewelry stores refused to carry them. Because of rapid growth of mass merchandising, its was a
wiser decision from timex to get its watches into mass-merchandise outlets.

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BBA 205
Prepared by :

Marketing Management
Asha Chauhan

UNIT III

Company wants to evaluate each channel members years in business, other lines carried, growth,
and profit record, cooperativeness and reputation.
If the intermediaries are sales agents, the company will want to evaluate the number , size and
quality of salesforce if the intermediary is a retail store that wants exclusive or selective
distribution the company will want to evaluate the storess customers , locations and future
growth potential.

Managing and Motivating Channel members


Once selected, channel members must continuously managed and motivated to do their best. The
company must not sell only through the intermediaries but to or with them. Most companies sees
their intermediaries as first lone customers and partners. They practice strong partner relationship
management PRM for long term partnership with channel

members. This creates a value

delivery system that meets the needs of both company and its marketing partners.
In managing its channels , a company must convince distributors that they can succeed better by
working together. For example; Procter and Gamble, works closely with Big Bazaar and Wal
mart to create superior value for final consumers. The two jointly plan merchandising goals and
strategies, inventory levels and advertising and promotion programs.
Just as they use CRM (Customer relationship management ) software systems to help manage
relationships with important customers, companies can now use PRM SCM Supplier chain
management software to recruit, train, organize, manage, motivate, and evaluating relationships
with channels partners.

Evaluating Channel Members


The producers must regularly check channel member performance against standards such as
sales quota, average inventory levels, customer delivery time, treatment of damaged and lost
goods corporation in company promotion and training programs, and services to the customer.
The company should recognize and reward intermediaries who are performing well and adding
good values for consumers. Those who are performing poorly should be assisted.

18

BBA 205
Prepared by :

Marketing Management
Asha Chauhan

UNIT III

RETAILING MARKETING DECISION

Retailers are always searching for new marketing strategies to attract and hold customers.
Retailers face major marketing decision about segmentation and targeting, store differentiation
and positioning, and the retail marketing mix.

Retail Strategy

Retail Marketing
Mix

Retail
segmentation
and targeting

Product and
service
assortment
Retail prices

Store
differentiation
and positioning

Promotion
Distribution
(location)
19

Create value for targeted retail customers

BBA 205
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Marketing Management
Asha Chauhan

UNIT III

RETAIL STRATEGY
Segmentation:

Facilitates right choice of target market

Facilitate effective tapping of the chosen market

Makes the marketing effort more efficient and economic

Helps identify less satisfied segments and concentrate on them.


Example, When HCL entered PC market, they segment total market on the basis of
income group then identified and select Below Rs 10000/month income group.
Titan Watches also provide a lot of brands of watches for Rich, Middle, Lower group.
Titan provide Dash for Kids segment
Raga for City women
Sonata for rural segment

Targeting:
Targeting means selecting one or more than one segment from total market to provide
goods and services.
Adidas: target women segment in India for product.
Motorola: Now there is no existence of Motorola in industry but when Motorola entered
they initially concentrated on one segment i.e Business market
But after certain period they picked multiple segments into its target market
1. Mass market: so that Motorola will reach to every common person.
2. Business market

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BBA 205
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UNIT III

3. Tech savy up market(multimedia enabled offers) like Razr V3, designer set for the up
market and tech savvy customer price Rs 31995 at the starting level.

Positioning:
Successful retailers define their target markets well and position themselves strongly.
Positioning consists of arranging for a market offering to occupy a clear, distinctive and desirable
place relative to competing products in the minds of target customers.
Objectives of Positioning:
1. To create a distinctive place of a product or service in the minds of potential customers.
2. To convey attractiveness of the product or the service to the target market.
3. Place an intangible service within a more tangible frame of reference.
4. Help influence both service development and redesign of existing service.
5. Follow consideration of the competitors possible moves and responses so that
appropriate action can be taken as.
6. To give the target markets the reason of buying your services and then design the whole
strategy.
7. To provide guidelines for the development of marketing mix with each element being
consistent with the positioning.
For example, Big Bazaar promises the lowest possible prices to its customers through its
tagline isse sasta aur kahan?
Dominos Pizza, positioned themselves as product will reach within 30 minutes at
customer place.
RETAIL MARKETING MIX
Product assortment and Service decision:
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Marketing Management
Asha Chauhan

UNIT III

Product assortment: retailers should differentiate the retailer while matching target
shoppers expectations.
I Strategy: is to offer no other competitors carries such as store brands or national brands
on which it hold its exclusively. Example, Rolex watches
II Strategy: in order to differentiate, a retailer can obtain exclusive rights to carry a well
known designers labels alongwith its own private label lines.
Example: shopper stop carry national brand like Peter England, Van Heusen, Arrow and
also carrying private label brands like Stop and Kashish.
Service Mix: it can help to set one retailer apart from another .
Example, some retailers invite customers to ask questions or consult service
representatives in person or via phone or keyboard. Retailers can provide toll free number or
membership cards. For example Retailers like Westside and pantaloons are providing
membership cards
Home Depot offers a diverse mix of services to do-it-yourself
Store atmosphere: it is an important element in reseller product. The retailer wants to
create a unique store experience on that suits the target market and moves customers to buy.
For example: Apple store design is clean, simple. The store invites shoppers to stay a
while use the equipment and seek up all the exciting new technology.
Todays successful retailer carefully consider every aspect of the consumer store
experience, down to music, lightning and even the smells.
Bright light create excitement
Softer light create mellow mood.
Price decision: a retailer price policy must fit its target market and positioning, product
and service assortment and competition. All retailers would like to charge high markups and
achieving high volume BUT the two seldom go together.
Most retailers seek either high markups on lower volume (most speciality stores )
OR low markups on higher volume (like discount stores).

Promotion Decision: retailers use any or all of the promotion tools, advertisements,
Personal selling, sales promotion, public relation, direct marketing.

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BBA 205
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Marketing Management
Asha Chauhan

UNIT III

Advertisements: Newspaper, magazines, radio, TV, and on the internet.


Personal selling: how to greet their customer, meet customers needs, and handle their
complaints.
Sales Promotion: Demonstrations, displays, contests. Visiting celebrities.
Public relations: press conferences and speeches, store openings, special events,
newsletters, magazines, and most retailers have to set up web sites, offering customer info. And
other features and often selling merchandise directly.

Retailing

Retailing includes all the activities involved in selling products or services directly to final
consumers for their personal , non-business use. These products and services are sold in smaller
quantities and with high frequency.
Many organization like manufacturer, retailers and wholesalers do retailing but most retailing is
done by retailers.
Types of Retailers:
It can be classified on several characteristics:
1. Amount of service they offer
2. Breadth and depth of their product lines
3. The relative prices they charge

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BBA 205
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Marketing Management
Asha Chauhan

UNIT III

4. How they are organized

A. AMOUNT OF SERVICE
Different types of customers and products require different amounts of service. Retailer
may offer one of three service levels:
1. Self-service retailers: serve customers who are willing to perform their own locatecompare-select process to save time or money. Self service is the basis of all
discount operations and is typically used by retailers convenience goods and
nationally branded, fast moving shopping goods (such as wal-mart or big bazaar).
2. Limited-service retailers: like, shoppers stop in india, provide more sales assistance
because they carry shopping goods about which customers need information. Their
increased operating costs result in higher prices.
3. Full-service retailers: such as speciality stores(eg, croma and e-zone) and full class
department stores such Chenone, salespeople assist customers in every phase of the
shopping process. These stores carry more specialty goods for for which customers
need or want assistance or advice. They provide more services resulting in much
higher operating costs, which are passed along to customers as higher prices.
B. PRODUCT LINE: retailers can be classified by the length and breadth of their product

assortments:
1. Specialty stores:
These stores carry narrow product lines deep assortments within those lines example,
Bata, Titan etc. the increasing use of market segmentation, market targeting, and product
specialization has resulted in a greater need for stores that focus on specific products and
segments,.
2. Supermarket/hypermarket:
These are large scale retailing of wide variety of consumers products under one roof.:
They carry different choice of brands with ample amount of stock and self-service etc.
Supermarket specialize in article of daily consumption like, groceries, vegetable, fruits,
dairy products and households items. consumers have free access enabling them pick
products from the shelves.

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BBA 205
Prepared by :

Marketing Management
Asha Chauhan

UNIT III

Example, Reliance Fresh.


3. Convenience store:
These can be thought of as a mini supermarkets. These are located at a convenient
location, very close to where their consumers stay. Convenience store are small store
carry number of high turnover convenience goods.
In subcontinent, they are seen in form of kirana shops. The shopkeeper usually
recognize his/her customer and greets them. Iit will have a store space of less than 5000
sq ft.
Convenience store merchandise include beverages, ready to eat snacks, groceries ,
confectionary etc.
4. Superstores:
Are much larger than regular supermarkets and offer a large assortment of routinely
purchased food products, nonfood items, and services. Wal-mart, big bazaar and other
discount retailers offer supercenters, very combination food and discount stores.
Superstores offer product like food products, pharmaceutical , flowers, books, bakery
items etc under, one roof.
5. Service retailers:
Service retailers include hotels, and motels, banks, airlines, colleges, hospitals, movie
theaters, tennis club, restaurants repair services, hair salons, and dry cleaners. Service
retailers are growing faster than product retailers.
C. RELATIVE PRICES
Retailers can also be classified on the basis of prices they charge. Most retailers charge
regular prices and offer normal quality goods and customer service. Others offers higher
quality goods and services at higher prices. The retailers that features low prices are
discount stores and off-price retailers.
1. Discount stores:
Sells standard merchandise at low prices by accepting lower margins and selling
higher volume.
They often merchandise at 20% or more below the =MRP. Early Discount stores cut
expense by offering few services and operating in warehouse like facilities in low

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BBA 205
Prepared by :

Marketing Management
Asha Chauhan

UNIT III

rent, heavily traveled districts. Todays discounters have improved their store
environments and increased their services , example wal-mart, big bazaar.
2. Off-Price Retailers:
Off price retailers moved in to fill the ultralow-price, high-volume gap.
Ordinary discounters buy at regular wholesale prices and accept lower margins to
keep prices down. In contrast, off price retailers buy at less than regular wholesale
prices and charge consumers less than retailers.
Off price retailers can be found in all aras, from food, clothing, and electronics etc.
example, Factory outlets, these are manufactured and operated stored by firms such as
Nike, Reebok
D. ORGANISATIONAL APPROACH
Although many retail stores are independently owned, other than band together under
some form of corporate or contractual organization.
Types of Retail Organisation:
1. Chain stores:
Such as Bata and ChenOne (department store in Pakistan) are two or more outlets
that are commonly owned controlled. They have many advantages over independents.
Their size allows them to buy in large quantities at lower prices and gain promotional
economics.they can hire specialists to deal with areas such as pricing, promotion,
merchandise, inventory control and sales forecasting.
2. Retailer corporative:
A group of independent retailers that band together to set up a jointly owned, cetral
wholesale operation and conduct joint merchandising and promotion effects. These
organizations give independents the buying and promotion economies they need to
meet the prices of corporate chains.
3. Franchise:
Franchise systems are normally based on some unique product or service, on a
method of doing bus. Or on the trade name, goodwill or patent that the franchisor has
developed. Franchise are mostly in fast food and restaurants , hotels, health, and
fitness cetres and real estate.
Example: Mc-Donals, Pizza hut, 7 eleven.

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BBA 205
Prepared by :

Marketing Management
Asha Chauhan

UNIT III

4. Merchandising conglomerate:
Are corporations that combine several different retailing forms under central
ownership. An example of Future Group, which operates Big Bazaar (a
hypermarket selling merchandise at low prices), Pantaloons(trendy private label
mens and woen apparel) and E-zone (consumer electronic products).such retailing ,
similar to a multibranding strategy, provides superior management sytems and
economics that benefit all the separate retail operations.

Marketing Logistics and Supply Chain Management

In todays global marketplace, companies must decide on the best way to


store, handle, and move their products and services so that they are

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BBA 205
Prepared by :

Marketing Management
Asha Chauhan

UNIT III

available to customers in the right assortments, at the right assortments, at


the right time, and in the right place. Logistics effectiveness has a major
impact on both customer satisfaction and company costs.

Nature and importance of Marketing Logistics


Marketing
logistics
also
called
physical
distribution
involves
planning,implementing, and controlling the physical floe of goods, services,
and related information from points of origin to points of consumptions to
meet customer requirements at a profit. In short, it involves getting the right
product to the right customer in the right place at the right time.
Marketing Logistics involves noy only outbound distribution (moving
products from the factory to resellers and ultimately to customers) but also
inbound distribution (moving products from suppliers to the factory) and
reverse distribution (moving broken, unwanted or excess products returned
by consumers or resellers.).
That is, it involves entire Supply Chain Management managing upstream
and downstream value added flow of materials, final goods and related
information among suppliers, the company, resellers and final consumers.
Companies today are placing greater emphasis on logistics for several
reasons.
1. Companies can gain a powerful competitive advantage by using
improved logistics to give customers better service or lower prices.
2. Improved logistics can yield tremendous cost savings to both the
company and its customers.
3. The explosion in product variety has created a need for improved
logistics management.

Goals of the Logistics System


Some companies state their logistics objective as providing maximum
customer sevice at the least cost. Unfortunately, no logistics system
can both maximize customer service at the least costs.
The goal of marketing logistics should be to provide a targeted
level of customer service at the least cost. A company must first

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BBA 205
Prepared by :

Marketing Management
Asha Chauhan

UNIT III

research the importance of various distribution services to customers


and then set desired levels for each segment. Th objective is to
maximize profits, not sales.

Major Logistics Functions


1. Warehosing:
A company must decide on how many and what types of
warehouses it needs and where they will be located. The
company might use either storage warehouses or distribution
centers.
Distribution centers are designed to move goods rather than
just store them. They are large and highly automated
warehouses designed to receive goods from various plants
and suppliers, take orders, fill them effectively and deliver
goods to customers as quickly as possible.
For example, Wal Mart operate a network of 112 huge US
distribution centers and another 57 around the globe.
Warehousing has seen dramatic changes in technology in
recent years. Outdated materials-handling methods are
steadily being replaced by newer, computers and scanners
read orders and direct lift trucks, electric hoists, or robots to
gather goods, move them to loading docks, and issue
invoices.
2. Inventory Management:
Managers must maintain the delicate balance between
carrying too little inventory and carrying too much. With too
little stock, the firm risks not having products when customers
want to buy. To remedy this, the firm may need costly
emergency shipments or production. Carrying too mush
inventory results in higher than necessary inventory carrying
costs and stock obsolescence.
Many companies have greatly reduced their inventories and
related costs through just in time (JIT)logistics system. With

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BBA 205
Prepared by :

Marketing Management
Asha Chauhan

UNIT III

such system, producers and retailers carry small inventories


of parts or merchandise, often only enough for a few days of
operations. New stock arrives exactly when needed, rather
than being stored in inventory until being used. JIT system
require accurate forecasting along with fast, frequent and
flexible delivery so that new supplies will be available when
needed.
3. Transportation:

The choice of transportation carries affects the pricing of


products, delivery performance and conditions of goods when
they arrive all of which will affect customer satisfaction.in
shopping goods to its warehouses, dealers and customers ,
the company can choose among five main transportation
modes:
a. Truck: trucks have increased their share of transportation
steadily and now account for nearly 35 % of total cargo ton
miles (more than 60 % of actual tonnage).
Trucks are highly flexible in their routimg and time
schedules, an they can usually offer faster service then
railroads. They are efficient for short hauls of high value
merchandise.
b. Railroads: railroads account for 31% of total cargo ton
miles moved. They are one of the most cost effective
modes for shopping large amount of bulk products coal,
sand, minerals and farm and forest products over long
distances.
c. Water carriers: which account for about 11 % of cargo
ton miles, transport large amounts of goods by ships and
barges on US coastal and in land waterways. The cost of
water transport is very low for shipping bulky, low value,
non perishable products such as sand, coal, grain, oil,
metallic ores, water transportation is the lowest mode and
may be affected by weather.
d. Air carries: transport less than 5% of a nations goods,
they are an important transportation mode. although rates
are much higher than rail or truck rates, but airfreight is
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BBA 205
Prepared by :

Marketing Management
Asha Chauhan

UNIT III

ideal when speed is needed or distant markets have to


reached.
e. Internet: inter carries digital products from producer to
customer via satellite, cable or phone wire. Software firms,
the, media, music companies, and education all make use
of internet to transport digital products. The internet holds
the potential for lower product distribution costs.

Logistics Information Management


Companies manage their supply chain through information. From a logistics
perspective, information flows
such as customer transactions, billing
shipment and inventory levels, and even customer data are closely linked to
channel performance. The company wants to design a simple, accessible,
fast, and accurate process for capturing, processing and sharing channel
information.
Information can be shared and managed in many ways but most sharing
takes place through traditional or internet based electronic data interchange
(EDI), the computerized exchange of data between organizations. Wal mart
for example, maintains EDI links with almost all of its 91000 suppliers.

Integrated Supply Chain Management


This concept recognizes that improved logistics requires teamwork in the
form of close working relationships across functional areas inside the
company and across various organizations in the supply chain. Companies
can achieve logistics harmony among functions by creating cross functional
logistics teams, integrative supply manager positions, and senior level
logistics executives with cross functional authority. Channel partnerships can
take the form of cross company teams, shared projects and information
sharing systems. Today, some companies are outsourcing their logistics
functions to third party logistics (3PL) providers to save costs, increase
efficiency, and gain faster and more effective access to global markets.

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