INTERNATIONAL INSTITUTE FOR SPECIAL

EDUCATION

FINAL PROJECT ON “Channels of distribution of Procter and Gamble”

Submitted To: Submitted By:

Dr. Shekhar Srivastava Saurabh Dixit
PGDM Ist
Year

Address: Kalyanpur (West), Lucknow, Uttar Pradesh 226022

Phone: 0522 275 0620

 DECLARATION
I hereby declare that the project work entitled Channels of distribution of
“Procter and Gamble “submitted to the IISE, is a record of an original work
done by me under the guidance of Dr. Shekhar Srivastava Professor ,IISE
Luck now , and this project work has not performed the basis for the award of
any Degree or diploma/ associate ship/fellowship and similar project if any.

Sauarbh Dixit
1542

Acknowledgement

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I have taken efforts in this project. However, it would not have been possible
without the kind support and help of many individuals. I would like to
extend my sincere thanks to all of them.

I am highly indebted to Dr. Shekhar Srivastava for his guidance and constant
supervision as well as for providing necessary information regarding the
project & also for his support in completing the project.
I would like to express my gratitude towards other faculty member as well
for their kind co-operation and encouragement which helped me in
completion of this project.

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 Research Methodology

For my project I have taken all the data from secondary source which is
internet. I have research and gone through different websites to do research
on the topic.

Primary
 Conducted a small research manually with Gomti Nagar Area with
small distributors of the same organization
Secondary
 All the secondary data collected from Internet from different websites.

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 Objective of the project
 To know different strategies of sales & distribution channels
 To know about the company Procter & gamble
 How channels of distribution work in the organization effectively

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 Introduction

Channels of Distribution

A channel of distribution or trade channel is defined as the path or route

along which goods move from producers or manufacturers to ultimate
consumers or industrial users. In other words, it is a distribution network
through which producer puts his products in the market and passes it to the
actual users. This channel consists of :- producers, consumers or users and
the various middlemen like wholesalers, selling agents and retailers(dealers)
who intervene between the producers and consumers. Therefore, the
channel serves to bridge the gap between the point of production and the
point of consumption thereby creating time, place and possession utilities.

A channel of distribution consists of three types of flows:-

 Downward flow of goods from producers to consumers

 Upward flow of cash payments for goods from consumers to

producers

 Flow of marketing information in both downward and upward

direction i.e. Flow of information on new products, new uses of existing
products, etc from producers to consumers. And flow of information in the
form of feedback on the wants suggestions, complaints, etc from
consumers/users to producers.

An entrepreneur has a number of alternative channels available to him for

distributing his products. These channels vary in the number and types of
middlemen involved. Some channels are short and directly link producers
with customers. Whereas other channels are long and indirectly link the two
through one or more
middlemen.

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These channels of distribution are broadly divided into four types:-

 Producer-Customer:- This is the simplest and shortest channel in

which no middlemen is involved and producers directly sell their products
to the consumers. It is fast and economical channel of distribution. Under it,
the producer or entrepreneur performs all the marketing activities himself
and has full control over distribution. A producer may sell directly to
consumers through door-to-door salesmen, direct mail or through his own
retail stores. Big firms adopt this channel to cut distribution costs and to sell
industrial products of high value. Small producers and producers of
perishable commodities also sell directly to local consumers.

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Producer-Retailer-Customer:- This channel of distribution involves only
one middlemen called 'retailer'. Under it, the producer sells his product to
big retailers (or retailers who buy goods in large quantities) who in turn sell
to the ultimate consumers. This channel relieves the manufacturer from
burden of selling the goods himself and at the same time gives him control
over the process of distribution. This is often suited for distribution of
consumer durables and products of high value.

 Producer-Wholesaler-Retailer-Customer:- This is the most

common and traditional channel of distribution. Under it, two middlemen
i.e. wholesalers and retailers are involved. Here, the producer sells his
product to wholesalers, who in turn sell it to retailers. And retailers finally
sell the product to the ultimate consumers. This channel is suitable for the
producers having limited finance, narrow product line and who needed
expert services and promotional support of wholesalers. This is mostly used
for the products with widely scattered market.

 Producer-Agent-Wholesaler-Retailer-Customer:- This is the

longest channel of distribution in which three middlemen are involved. This
is used when the producer wants to be fully relieved of the problem of
distribution and thus hands over his entire output to the selling agents. The
agents distribute the product among a few wholesalers. Each wholesaler
distribute the product among a number of retailers who finally sell it to the
ultimate consumers. This channel is suitable for wider distribution of
various industrial products.

An entrepreneur has to choose a suitable channel of distribution for his

product such that the channel chosen is flexible, effective and consistent
with the declared marketing policies and programmes of the firm. While
selecting a distribution channel, the entrepreneur should compare the costs,
sales volume and profits expected from alternative channels of distribution
and take into account the following factors:-

 Product Consideration:- The type and the nature of products

manufactured is one of the important elements in choosing the distribution
channel. The major product related factors are:-

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 Products of low unit value and of common use are generally
sold through middlemen. Whereas, expensive consumer goods and
industrial products are sold directly by the producer himself.
 Perishable products; products subjected to frequent changes in
fashion or style as well as heavy and bulky products follow relatively
shorter routes and are generally distributed directly to minimise costs.
 Industrial products requiring demonstration, installation and
aftersale service are often sold directly to the consumers. While the
consumer products of technical nature are generally sold through retailers.
 An entrepreneur producing a wide range of products may find it
economical to set up his own retail outlets and sell directly to the
consumers. On the other hand, firms producing a narrow range of products
may their products distribute through wholesalers and retailers.
 A new product needs greater promotional efforts in the initial
stages and hence few middlemen may be required.

 Market Consideration:- Another important factor influencing the

choice of distribution channel is the nature of the target market. Some of the
important features in this respect are:-

 If the market for the product is meant for industrial users, the
channel of distribution will not need any middlemen because they buy the
product in large quantities. short one and may as they buy in a large
quantity. While in the case of the goods meant for domestic consumers,
middlemen may have to be involved.
 If the number of prospective customers is small or the market
for the product is geographically located in a limited area, direct selling is
more suitable. While in case of a large number of potential customers, use
of middlemen becomes necessary.
 If the customers place order for the product in big lots, direct
selling is preferred. But,if the product is sold in small quantities, middlemen
are used to distribute such products.

 Other Considerations:- There are several other factors that an

entrepreneur must take into account while choosing a distribution channel.
Some of these are as follows:-

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 A new business firm may need to involve one or more middlemen in
order to promote its product, while a well established firm with a good
market standing may sell its product directly to the consumers.
 A small firm which cannot invest in setting up its own distribution
network has to depend on middlemen for selling its product. On the other
hand, a large firm can establish its own retail outlets.
 The distribution costs of each channel are also an important factor
because it affects the price of the final product. Generally less expensive
channel is preferred. But sometimes, a channel which is more convenient to
the customers is preferred even if it is more expensive.
 If the demand for the product is high, more number of channels may
be used to profitably distribute the product to maximum number of
customers. But, if the demand is low only a few channels would be
sufficient.
 The nature and the type of the middlemen required by the firm and its
availability also affect the choice of the distribution channel. A company
prefers a middleman who can maximise the volume of sales of their product
and also offers other services like storage, promotion as well as after sale
services. When the desired types of middlemen are not available, the
manufacturer will have to establish hisown distribution network.

All these factors or considerations affecting the choice of a distribution

channel are inter-related and interdependent. Hence, an entrepreneur must
choose the most efficient and cost effective channel of distribution by
taking into account all these factors as a whole in the light of the prevailing
economic conditions. Such a decision is very important for a business to
sustain long term profitability.

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 William Procter James Gamble

Introduction and History of Procter & Gamble

 William Procter, a candle maker, and James Gamble, a soap maker,
immigrants from England and Ireland respectively who had settled earlier
in Cincinnati, who met as they both married sisters, Olivia and Elizabeth
Norris, formed the company initially.

 Alexander Norris, their father-in law called a meeting in which he

convinced his new sons-in-law to become business partners. On October
31, 1837, as a result of the suggestion, Procter & Gamble was born.

 In 1859, sales reached one million dollars. By this point, approximately

eighty employees worked for Procter & Gamble.

 During the American Civil War, the company won contracts to supply
the Union Army with soap and candles. In addition to the increased
profits experienced during the war, the military contracts introduced
soldiers from all over the country to Procter & Gamble's products.

 In the 1880s, Procter & Gamble began to market a new product, an

inexpensive soap that floats in water. The company called the soap Ivory.
William Arnett Procter, William Procter's grandson, began a profit-
sharing program for the company's workforce in 1887.

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 By giving the workers a stake in the company, he assumed correctly that
they would be less likely to go on strike.

 The company began to build factories in other locations in the United

States, because the demand for products had outgrown the capacity of the
Cincinnati facilities .The company's leaders began to diversify its
products as well and, in 1911, began producing Crisco, a shortening
made of vegetable oils rather than animal fats.

 As radio became more popular in the 1920s and 1930s, the company
sponsored a number of radio programs .As a result, these shows often
became commonly known as "soap operas“.

 The company moved into other countries, both in terms of manufacturing

and product sales, becoming an international corporation with its 1930
acquisition of the Newcastle upon Tyne-based Thomas Hedley Co.

 Procter & Gamble maintained a strong link to the North East of England
after this acquisition.

 Numerous new products and brand names were introduced over time, and
Procter & Gamble began branching out into new areas.

 The company introduced "Tide" laundry detergent in 1946 and "Prell"

shampoo in 1950. In 1955, Procter & Gamble began selling the first
toothpaste to contain fluoride, known as "Crest".

 Branching out once again in 1957, the company purchased Charmin

Paper Mills and began manufacturing toilet paper and other paper
products.

 Once again focusing on laundry, Procter & Gamble began making

"Downy" fabric softener in 1960 and "Bounce" fabric softener sheets in
1972.

 One of the most revolutionary products to come out on the market was
the company's "Pampers", first test-marketed in 1961.Prior to this point
disposable diapers were not popular .Although Johnson & Johnson had
developed a product called "Chux". Babies always wore cloth diapers,
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 which were leaky and labor intensive to wash. Pampers simplified the
diapering process

 Procter & Gamble acquired a number of other companies that diversified

its product line and increased profits significantly .These acquisitions
included Folgers Coffee, Norwich Eaton Pharmaceuticals, Richardson-
Vicks, Noxell, Shulton's Old Spice, Max Factor, and the Iams Company,
among others.

 In 1994, the company made headlines for big losses resulting from
leveraged positions in interest rate derivatives, and subsequently sued
Bankers Trust for fraud; this placed their management in the unusual
position of testifying in court that they had entered into transactions they
were not capable of understanding.

 In 1996, Procter & Gamble again made headlines when the Food and
Drug Administration approved a new product developed by the company,
Olestra .Also known by its brand name Olean, Olestra is a substitute for
fat in cooking potato chips and other snacks that during its development
stages is known to have caused anal leakage and gastro-intestinal
difficulties in humans.

 In January 2005 P&G announced an acquisition of Gillette, forming the

largest consumer goods company and placing Unilever into second place
.This added brands such as Gillette razors, Duracell, Braun, and Oral-B
to their stable.

 The acquisition was approved by the European Union and the Federal
Trade Commission, with conditions to a spinoff of certain overlapping
brands.

 P&G has agreed to sell its Spin Brush battery-operated electric

toothbrush business to Church & Dwight. It also divested Gillette's oral-
care toothpaste line, Rembrandt.

 The deodorant brands Right Guard, Soft & Dri, and Dry Idea were sold
to Dial Corporation. The companies officially merged October 1, 2005. In

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 2008, P&G branched into the record business with its sponsorship of Tag
Records, as an endorsement for TAG Body Spray.

 P&G's dominance in many categories of consumer products makes its

brand management decisions worthy of study.

 For example, P&G's corporate strategists must account for the likelihood
of one of their products cannibalizing the sales of another

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 VISION AND MISSION

• Vision:

To be recognized as, the best consumer products and Services Company in

the world.

• Mission:

We will provide branded products and services of superior quality and value
that improve the lives of the world's consumers. As a result, consumers will
reward us with leadership sales, profit, and value creation, allowing our
people, our shareholders, and the communities in which we live and work to
prosper.

OPERATIONS & PRODUCTS

• Beauty segment

• Grooming segment

• Health Care segment

• Snacks & Pet Care segment

• Fabric Care & Home Care segment

• Baby Care & Family Home Care segment

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AWARDS

Fortune:

• Ranked #2 among “Top Companies for Leaders”

• Consistent #1 ranking within industry on “Most Admired” list for 25

of 26 total years and for 13 years in a row

Barron's:

• Ranked #3 on the “World’s Most Respected Companies List”

Bloomberg Business week:

• Ranked #12 among the “World’s Most Innovative Companies”

Dow Jones Sustainability Indexes:

Named to list of the Global 100 Most Sustainable Corporations in the World,
with top rankings from 2000–10

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Other threat controversies of the past
 Price fixing
 Toxic shock syndrome and tampons
 Animal testing
 Other product
 Logo controversy
 Former P&G logo

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19
 MANUFACTER
PLANT

C/F

DISTRIBUTOR

OUTLETS/ SHOPS

END CONSUMER/
USER

 P&G keeping broaden the market by slashing its no. of distributors

down to one-tenth of its size.
 85% of its sales come from the top 30 towns & its current volume did
not justify a large distributor network.
 So P&G will now have one distributer who will operate like super
stock list. Which help to replenish its distributors more frequently and
reduce their average stock level.
 P&G keep growing on ROI (Return on Investment) which resulted in
each distributer trying to extend its reach to push up volumes.
 With a limited number of distributers, P&G will also not need to
invest in C&F agents.
 P & G follows wholesale format of distribution for Vicks.
 P&G is giving 6% margin to the distributor

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All the Micro and Macro Environment features have been covered in this
project
Promotions and Integrated marketing Communications
Integrated Marketing Communication (IMC) is a term that emerged in
the late 20th century regarding application of consistent brand messaging
across myriad marketing channels. The term has varying definitions
depending upon the source cited. These definitions continue to form an
ongoing discussion in marketing - and therefore are included here for
review, as the differences in these discussions can play a part in how IMC is
viewed and utilized.

The first definition for integrated marketing communication came from

the American Association of Advertising Agencies (also 4A's) in 1989,
defining IMC as "an approach to achieving the objectives of a marketing
campaign through a well-coordinated use of different promotional methods
that are intended to reinforce each other." The 4A's definition of IMC
recognizes the strategic roles of various communication disciplines
(advertising, public relations, sales promotions, etc.) to provide clarity,
consistency, and increased impact when combined within a comprehensive
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communications plan. Basically, it is the application of consistent brand
messaging across both traditional and non-traditional marketing channels.

Components of Integrated Marketing Communications

IMC weaves diverse aspects of business and marketing together. These
include:

 Organizational culture
 Four P's
 Advertising
 Online/internet marketing
 E-commerce
 Search engine optimization (SEO)
 Search engine marketing (SEM)
 Mobile Marketing
 Email marketing
 Content marketing
 Social Media ( Facebook, Twitter, LinkedIn, Google +, Foursquare,
Pinterest, Youtube, Wikipedia, Instagram)
 Sales & customer service
 Public Relations
 Promotions
 Trade shows
 Corporate philanthropy

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Slogans
 'The World Class Quality That Improving Your Life' (1984-1997)
 'Improving The Quality Of Your Life' (1997-2012)
 'Touching Lives, Improving Life' (2012-present)

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 Recommendation & Conclusion

Procter &Gamble is one of the largest consumer products companies in the

world. The P&G is very big in the area of consumer goods. One of the
leading companies of household products in the world. Among its products,
which fall into the main categories of fabric care, home care, beauty care,
baby care, family care, health care, snacks, and beverages. P&G is one of the
most aggressive marketers and is the largest advertiser in the world.

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 Bibliography

 www.P&G.com
 www.mbaknow.com

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