Dr.

Mohua Banerjee
Distribution channels are sets of interdependent
organizations involved in the process of making a
product or service available for use or consumption
 Least visible aspect of a company’s marketing
efforts
 Manufacturing sector – distribution sector
 Focus on increasing convenience to end consumers
– either by increasing the number of benefits or
delivering benefits at lower rates
 Internet has enabled manufacturers to perform
distribution activities without intermediaries
 Spatial discrepancy – physical distance between the
location where a product is manufactured and where
it is consumed
 Temporal discrepancy – point in time when a
product is manufactured and when it is consumed
 Need to break bulk – products are manufactured in
bulk and consumed in smaller quantities
(consolidation of payments)
 Need to provide assortment – large quantities
produced of a single product and consumers
demand assortment of products
 To adjust the discrepancy of assortment through
the process of sorting, accumulation, allocation,
and assorting
 To minimize distribution costs through
routinizing and standardizing transactions to
make exchange more efficient and effective
 To facilitate the searching process of both
buyers and sellers by structuring the information
essential to both the parties
 Manufacturer can exercise higher level of control in
the distribution function
 Same level of commitment cannot be expected from
an autonomous entity
Ex: Dell vs. candy manufacturer
 Products to be available in as many outlets for
gaining market share
 Costs associated with direct distribution is
prohibitive
 Each intermediary shares the cost of distributing the
company’s product with other products they are
distributing
 Cost efficiency
Control

Direct distribution Indirect distribution

A trucker will deliver goods at lesser cost, but wait for a full load,
otherwise it is not profitable for him
 Nature, scope, economics of distribution activities
 Objectives and capabilities of a firm
 Competitor policies and programs
 Industry norms
 Future trends
 Brand positioning strategy
 Penetration levels and market share growth

Business strategy

Marketing strategy

Distribution strategy
The distribution strategy provides guidelines for
decision making
 Setting distribution objectives in terms of the
customer requirements
 Finalizing the set of activities that are required to be
performed to achieve the channel objectives
 Organizing the activities so that the responsibility of
performing the activities is shared among the entities
who are meant to perform these activities
 Developing policy guidelines for the smooth
functioning of the channel on a day to day basis
 Design of the
channel
structure Ex ante
Phase
Establishing the
channel
Distribution Channel Strategy
Channel Objective
Activity Finalization
Organizing the activities
Developing Policy Guidelines Motivating
Channel
Members
Ex poste
Phase
Resolving
Conflicts among
channel
members
Distribution management function can be viewed
as happening in two phases: ex ante phase and ex
poste phase
 The ex ante phase involves all the activities that
are associated with the design and establishment
of the distribution channel. These activities
actually take place before the distribution
channel actually starts functioning.
 The ex poste phase involves managing the day
to day activities of the channel wherein the
behaviour of the individual channel members are
coordinated.
 Conceiving the Channel Flows
Classification Schemes of Channel Flows
Flow Name Explanation

Physical possession Transportation and storage of the product in order to physically

deliver the product to the end-user
Ownership Nominally taking title to the product so that in case the product is
damaged or lost due to any reason, the loss is accounted for
Promotion Promoting the product to the customers in several ways such as
advertising, displaying, demonstrating, giving information about,
etc.
Negotiating Coming down to an agreement about the terms of trade with the
upstream and downstream entities in the channel including the
customer
Financing Taking care of the financial requirements (mainly working capital) of
the members of the channel
Risk-taking Underwriting the risks associated with the possession of ownership
of the channel including warranties for after-sales service
Ordering Receiving and recording the order, consolidating it, and passing it
on to the upstream
Payment Receiving payment, recording it, consolidating it, and passing it on
to the upstream