Distribution & Channel Decisions

 

Marketing channel performs the work of moving goods from producers to consumers Marketing intermediaries try to fill the following gaps: 
  

Time Gap Space Gap Quantity Gap Variety Gap

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Channel Flows: 
    

Physical Flow Title Flow Payment Flow Information Flow Promotion Flow Risk Flow

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Channel Levels: 

Length of a channel: No. of intermediaries b/n producer & final consumer  Zero Level: 

Manufacturer 

Consumers

Eg: Eureka Forbes, Reader¶s Digest 

One Level: 

Manufacturer 

Retailer

Consumer

Eg: Maruti/Suzuki dealers 

Two Level: 

Manufacturer 

Wholesaler

Retailer

Consumer

Eg: FMCG, White goods 

Three Level: 

Manufacturer 

Dist.

Wholesaler

Retailer

Cons.
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Eg: FMCG, White goods

Reverse Channel of Marketing/ Backward Channel: Flow of goods from end users to producers. Eg: Soft drink bottles, product recall, old issues of magazines 

Channel-Design Decisions: 

Understand Service Output levels/Utilities desired by target customers: 
   

Lot Size Utility Temporal Convenience Utility Spatial Convenience Utility Product Variety/Selection Utility Service Utility Minimize Cost & transport time Environmental Constraints Which Markets to serve 

Establishing Channel Objectives & Constraints: 
 

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Channel Design Decisions (Cont.) 

Identifying Major Channel Alternatives: 

Type of Intermediaries: 


Company sales force Outside agency Eg: DSAs employed by many banks Exclusive Distribution: Seen in automobile sector Selective Distribution: Nike shoes, Branded jewelry Intensive Distribution: Used for FMCG products Price Policy/Margins Conditions of Sale/ Guarantees Distributor¶s territorial rights Responsibilities 

Number of Intermediaries: 
  

Terms & Responsibility of Channel Members: 
  

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Channel Design Decisions (Cont.) 

Evaluating Major Alternatives 

Evaluation to be based on: 
 

Economic Criteria Control Criteria Adaptive Criteria

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Channel Management Decisions: 
   

Selecting Training Motivating Evaluating Modifying

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Channel Dynamics: 

Vertical Marketing Systems: 

Producers, Wholesalers, Retailers etc. acting as a unified system Two or more unrelated companies come together to exploit emerging marketing opportunity  

Horizontal Marketing Systems 

Eg: Banks & Car manufacturers¶ tie-ups 

Multi Channel Marketing Systems/Dual Marketing 

Firms using two or more marketing channels to reach its customers 

Eg: Sale of airline tickets online as well as through agents

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Channel Conflict 

These conflicts arise because: 


Unclear areas of work/responsibility Mistrust Encourage ³Cooptation´ Have Exclusive Dealing Have Exclusive Territories Tying agreements Clear contracts
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To avoid conflicts: 
   

Channel Management Decisions: 
   

Selecting Training Motivating Evaluating Modifying

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Channel Dynamics: 

Vertical Marketing Systems: 

Producers, Wholesalers, Retailers etc. acting as a unified system Two or more unrelated companies come together to exploit emerging marketing opportunity  

Horizontal Marketing Systems 

Eg: Banks & Car manufacturers¶ tie-ups 

Multi Channel Marketing Systems/Dual Marketing 

Firms using two or more marketing channels to reach its customers 

Eg: Sale of airline tickets online as well as through agents

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Channel Conflict 

These conflicts arise because: 


Unclear areas of work/responsibility Mistrust Encourage ³Cooptation´ Have Exclusive Dealing Have Exclusive Territories Tying agreements Clear contracts
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To avoid conflicts: 
   

Market Logistics:  

Planning, implementing & controlling the physical flow of material & final goods from pt. of origin to pt. of use. Major Market Logistics Decisions: 

Order Processing 
 

Real Time Replenishment Batch Method Trying to shorten order-to-remittance cycle 

 

Warehousing Inventory Management Transportation

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Inventory Management Concepts    

Reorder Point: Based on order & demand forecasts Order Lead Time: Period b/n the date when order is placed & when raw material is available for production Usage Rate: Ave. rate at which raw materials are used for production Safety Stock: Stock maintained as a buffer for unforeseen circumstances
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Determining Optimal Order Qty: 


OOQ = (2Co*D/Ch)^1/2 Where: 
 

D = Demand/Unit time Ch = Holding cost/Unit time Co = Ordering Cost Demand is constant There is no inventory in transportation Ordering cost is constant
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Assumptions: 
 

Warehousing:  

Warehouse: Place where goods are kept for a limited time period Two Types of Warehouse:  

Storage Warehouse: Relatively long term storage of inventory/raw material Distribution/Transit Warehouse: For temporary storage during transit of inventory

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Functions of a Warehouse: 
      

Receiving Storing Packing Marking Shipping Documentation & Recording Stock Mixing Transloading/Cross Docking
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Wholesalers Vs. Retailers 

Wholesalers 
   

Retailers 
    

B2B Selling Large Transactions Visual Merchandising is not important Location is important keeping tax benefits, other low costs in mind At times, have to give goods on credit to their buyers Retailer oriented promotion 



B2C Selling Small Transactions Visual Merchandising is important Location is important keeping customer¶s accessibility in mind Do not have to give goods on credit Customer oriented promotion
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