DISTRIBUTION NETWORK

 Know what work marketing

channels perform
 Know how channels should be
designed
 Know what decisions companies
face in managing their channels
 Know how companies should
integrate channels and manage
channel conflict
NEED FOR A DISTRIBUTION
SYSTEM

GENERAL DISCREPANCY EXISTING :

 SPATIAL DISCREPANCY

 TEMPORAL DISCREPANCY

 NEED TO BREAK THE BULK

 NEED TO PROVIDE ASSORTMENT

 INFORMATION GAP
ENTITIES

1)PHYSICAL DISTRIBUTION

2) MARKETING CHANNELS
PHYSICAL DISTRIBUTION

1.TRANSPORTATION
-MODE:air,rail,road,water,pipeline

-ROUTING

-COST
….cont.
2. WAREHOUSING
a. Critical storage points

nos. Location

b. Inventory control-costs

ordering carrying stockout

….cont.

EOQ
Economic order quantity:

= 2 Q Co. *2
CI
MARKETING CHANNELS

MOST PRODUCERS DO NOT SELL THEIR GOODS

DIRECTLY TO THE FINAL USERS; BETWEEN THEM
STANDS A SET OF INTERMEDIARIES PERFORMING A
VARIETY OF FUNCTIONS

These intermediaries constitute a marketing channel

SET OF INDEPENDENT ORGANISATIONS

INVOLVED IN THE PROCESS OF
MAKING A PRODUCT OR SERVICE
AVAILABLE FOR USE/CONSUMPTION.
 INTERMEDIARIES:

TYPES OF MARKETING
INTERMEDIARIES
 CFAs

 Distributor/wholesaler

 Retailer

exclusive:owned or franchise
shop in shop
 commission agents
FUNCTIONS
a)Information-Potential & current customers
-Competitors
-Forces in the mktg. environment
b)Promotion
c)Negotiation
d)Risk taking(financial,credit
terms,storage,pilferage)
e)Transactional efficiency
financing to the manufacturer
service provider
presale
post sale
assist in introducing new product
LEVELS OF CHANNEL
 ZERO LEVEL
manufactureconsumer
eg: EUREKA forbes
 ONE LEVEL
Presence of one intermediary
Manufactures----retailer agents distributor
---consumer
Eg. Automobiles
 TWO LEVELS
Manufacturewholesaler-retailer-consumer
Eg. FMCG products
 THREE LEVELS
Manufactureagentswholesaler-retailer-
consumer
Eg. agricultural products
 CHANNEL DESIGN DECISIONS

1. ESTABLISH CHANNEL OBJECTIVE

-market coverage
-control objectives
-ensuring minimum effort exerted by the
consumer in procuring the product
-quality objective
 …cont.
2. DETERMINING THE TYPES OF
CHANNELS TO BE USED.
- Largely depends on the channel objectives of
the firm.

3. IDENTIFY CHANNEL
ALTERNATIVES

i)Intensity of distribution
 Exclusive( one area, one shop )
 Selective ( products available in few shops)
 Intensive ( every retail shop has the product )
 ii) Proximity to end users.
iii) Existing distribution practices (by
competitive analysis).

4. EVALUATE THE ALTERNATIVES.

 Economic criteria
cost Vs value
 time period taken by a channel to
deliver
 control criteria
 channel availability
5. SELECTING THE FINAL CHANNEL
MEMBER
 they should stick to your terms and
conditions.
 Motivate them
 Train them
 Resolve channel conflicts.
CHANNEL CONFLICTS
TYPES OF CONFLICT AND COMPETITION
 Vertical channel conflict means conflict
between different levels within the same
channel.
 Horizontal channel conflict involves
conflict between members at the same
level within the channel.
 Multi-channel conflict exists when the
manufacturer has established two or more
channels that sell to the same market.
CAUSES
 Goal incompatibility.
 Unclear roles and rights.
 Improper communication.
 Lack of autonomy
 CONFLICT MANAGEMENT METHOD

1. INSTITUTIONAL APPROACHES
JOINT MEMBERSHIP OF ASSOCIATION
EXCHANGE OF EXECUTIVES
COOPTATION
DEALER COUNCIL

2. THIRD PARTY MECHANISM

MEDIATION
ARBITRATION
Integration of channels

VMS
HMS
MULTI-CHANNEL MARKETING