MODULE 8

Distribution Strategy and The Strategic Selling Cycle

LEARNING OUTCOMES:

The following specific learning objectives are expected to be realized at the end of the session:

1. To understand the distribution mix and strategic selling cycle.

2. To know what are the different distribution channel.
3. To know what is gray marketing.

KEY POINTS

Distribution Mix Distribution Channel

Selling Cycle Gray Marketing

CORE CONTENT

Introduction

“Distribution‟s (main) role is to provide an effective link between production and the target
consumer. In today‟s environment, the main question is who will perform this task and how will it be
executed given the new tools of technology and management.”

By:
Cristina Tan
General Manager,
Suy Sing Commercial

IN-TEXT ACTIVIES:

Distribution Strategy and the Strategic Selling Cycle

Making products available requires a clear distribution plan composed of the following six (6) mix
elements:
1) Coverage
2) Placement
3) Volume
4) Display
5) Pricing
6) Goodwill

Coverage

Having the proper types of outlet in a geographical area is important.

Example:

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San Miguel Beer put up more satellite bottling plants in the areas of Laguna, Cavite, Cagayan de Oro and
Ilocos region, not just to expand capacity but to lower cost and increase speed of logistics.

Placement

A product has placement when it is carried in a store. Placement objectives or having a right
target number of outlets ensure consumer‟s utmost convenience.

Another example:

The Philippines is one of the few places where cigarettes can still be bought on a per piece basis. The
abundance of our unique street vendors (sometimes called „‟tak-a-tak‟‟ boys) enables the most saleable
brands like Hope cigarette and candies to enjoy a place utility advantage.

Volume

The right inventory level at the stores is critical. A firm may lunch a new brand of shampoo or a
promotional campaign, which may result in out-of-stock situations. Too much inventory or “overloading”
the outlets, on the other hand, is unhealthy as it goes against how a channel member normally earns
profit.

Display

The right shelf and off- shelf locations plus adequate display space assure marketers a higher
probability that consumers will choose their brand over competition. The good spaces in the stores, such
as those at eye level, are usually given to the leading brands. As a consequence, new brands have to
assure an equal chance of being seen in the marketplace.

Example:
Nescafe has dominant 70% of the space for coffee while Great Taste and Blend 45 may have to share
the balance.

Pricing

Having the right resale prices promotes healthy competition among dealers. Price wars are
usually avoided, as dealers do not gain anything in the end. Some dealers might also end up not wanting
to sell the firm‟s products due to financial non-gain.

Example:
Pure foods would meet with their wet market vendors in a price war situation to discourage them from
proceeding with their price in case supply be pending if they continue to do so.

Goodwill

Goodwill refers to the best relationship between a supplier and his channel members. Goodwill
enables marketers to have good display space in the stores, increases their inventory levels, and in some
cases, enables firms to have advanced notice about impending competitive promotional activities or price
movements.

Goodwill is a result not only of monetary gains but also most importantly, of consistent “win-win”
partnerships between two parties within the distribution chain.

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Strategic Selling Cycle

Strategy Selling – organization's strategy that combines all of its marketing goals into
one comprehensive plan. A good marketing strategy should be drawn from market research and focus on
the right product mix in order to achieve the maximum profit potential and sustain the business. The
marketing strategy is the foundation of a marketing plan.

A. Selling to the End User B. Selling to the Distribution Channels

Selling to the End User

The producer sells the goods or provides the service directly to the consumer with no involvement
with a middleman such as an intermediary, a wholesaler, a retailer, an agent, or a reseller.

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Prospecting

Identify who is your target customer.

Pre-Approach

It is when you gather relevant information regarding the prospect in order to create customized
sales presentation.

Approach

This step is where you begin to build relationship between your buyer.

Sales Probing

To understand and satisfy customer‟s needs and wants.

Presentation

To identify the customers requirements, a better trust is created between the seller and the buyer.

Handling Objections

To identify the customers requirements, a better trust is created between the seller and the buyer.

Demonstration

It is a presentation with the use of an actual product (while a presentation may only be using
sales aids like brochures.

Closing

It is the final step of a transaction. In sales, it is used more generally to mean achievement of the
desired outcome.

Selling to Distribution Channels

Buy the product from the manufacturer and sell them directly to the consumer. This cycle works
best for manufacturers that produce shopping goods like, clothes, shoes, furniture, tableware, and toys.
Buy the products from the manufacturer and sell them to the consumer. In this cycle, consumers can buy
products directly from the wholesaler in bulk.

This distribution cycle involves more than one intermediary before the product gets into the hands
of the consumer. This middleman, known as the agent, assists with the negotiation between the
manufacturer and the seller.

Routine Observation

To ensure their success.

Display Check

Visit the selling area of the retailer to check on his product‟s placement and display.

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Warehouse Check

Done to determine the inventory level of the firm‟s products before collection of accounts is done.

Electronic data interchange (EDI)

It is an electronic communication system that provides standards for exchanging data via any
electronic means.

Handling Objections

When a sales person demonstrates a feature, talks about a benefit or uses a sales closing
technique, their customer may well respond in the negative sense, giving excuses or otherwise heading
away from the sale.

Sell-Out Plan

It is a contract for the sale of securities or commodities one expects to own at a later
date and at more advantageous terms.

Closing

It is the final step of a transaction. In sales, it is used more generally to mean achievement of the
desired outcome.

Distribution Channels

What is Distribution Channels?

A distribution channel performs the work of moving products from manufacturers to final
consumers or business users. A good distribution channel shortens the time, place, and possession gaps
between the manufacturers and consumers.

Manufacturer

Manufacturer makes the good and sells them to the consumer directly with no intermediary, such
as wholesaler or retailer.

Purchases are made by the retailer from the manufacturer and then the retailer sells the
merchandise to the consumer. This channel is used by manufacturers that specialize in producing
shopping goods.

Consumer‟s can buy directly from the wholesaler. The wholesaler breaks down bulk packages for
resale to the consumer. The wholesaler reduces some of the cost to the consumer such as service cost
or sales force cost, which makes the purchase price cheaper for the consumer.

Direct Marketing – is about making direct contact with existing and potential customers to promote your
products or services.

Indirect Marketing – In indirect channels of distribution there are one or more middlemen between the
manufacturer and consumers. There is no direct contact between the producers and the customers.

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Distributors

Distributors are appointed to perform the distribution function for manufacturers in making their
products available. They may cover an entire country on an exclusive distributor basis or may be
appointed to do the distribution function within a defined territory or defined store type.

Wholesaling

Wholesaling are activities of persons or organizations that sell to those who buy for resale (like
retailers) or business use (like industrial, institutional, and commercial users). Wholesaling lessen the
interaction between manufacturers/principals and retailers.

Jobbers

Jobbers are wholesalers who also provide warehousing space for manufacturers and distributors,
thus enabling the letter to avoid a fixed cost.

Jobbers are usually appointed in areas where a firm does not have economies of sales. Jobbers
enjoy a discount depending on the amount they purchase.

Ex-Truck

Ex-truck is a sales operation where the ex-truck salesman carries stock in his van or small truck,
saturates a given territory regularly by selling his stocks on „‟cash” basis, and delivers the stocks
immediately upon order.

Retailing

It is an activity involving the sale of products or services directly to final consumers.

Franchising

It is an accelerated method to expand distribution coverage is thru franchising.

In franchising, a franchise fee is paid to the franchise owner in exchange of an establishment

brand name, a proven system of operation, training and other infrastructure support.

Gray Marketing

Term used to describe unauthorized importation and distribution of products bearing genuine
brands across markets.

A market where a product is bought and sold outside of the manufacturer's authorized trading
channels.

The unofficial trading of a company's shares, usually before they are issued in an initial public
offering (IPO).

For example, if a store owner is an unauthorized dealer of a certain high-end electronics brand,
the product is considered to be sold in the grey market. If the product is illegal, it would be selling on the
"black market".

The grey market is an over-the-counter market where dealers may execute orders for preferred
customers as well as provide support for a new issue before it is actually issued. This activity allows
underwriters and the issuer to determine demand and price the securities accordingly before the IPO.

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SESSION SUMMARY

This module discussed about the different distribution strategies and strategic selling cycle.
Making products conveniently available to the consumers or final users through the distribution channels
from the manufacturer, wholesaler, distributors and retailers.

ASSESSMENT/EVALUATION

Assignment:

Instruction: Research for a specific company and discuss the distribution channel. Include who are their
manufacturer/producer/supplier, wholesaler, distributors and retailers (which is applicable to the
company).

REFERENCES

Refer to the references listed in the syllabus of the subject.

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