Distribution

BY:-Ashish kumar lamba

MBA 1
 Introduction
“Marketing channels are sets of
interdependent organizations
involved in the process of making a
product or service available for use
or consumption”
Philip Kotler

2
 Distribution Channel
What is a Distribution Channel?
 A set of organizations (intermediaries) involved in the
process of making a product or service available for use
or consumption by the consumer or business user.
 Used to move the customer towards the product
 Selling through wholesalers and retailers usually is
much more efficient and cost effective than direct sales.
 Nature and Importance of
Distribution Channels

 Distribution channels is the circulatory system of a

hospitality company.
 Competition, a global marketplace, electronic
distribution techniques have increased the importance
of distribution.
 In the global economic market, companies should
create innovative ways to approach to new and existing
markets
Distribution Channel Functions
Distribution Key Functions Channel

Information Gathering
Gatheringand
anddistributing
distributingmarketing
marketingresearch
researchabout
about
Information the environment
the environment
Promotion Developing
Developingand
andspreading
spreadingpersuasive
persuasivecommunications
communications
Promotion about an offer
about an offer
Contact
Contact Finding
Findingand
andcommunicating
communicatingwith
withprospective
prospectivebuyers
buyers
Matching
Matching Shaping
Shapingand
andfitting
fittingthe
theoffer
offertotothe
thebuyer’s
buyer’sneed
need
Negotiation Agreeing
Agreeingon
onprice
priceand
andterms
termsofofthe
theoffer
offerso
soownership
ownership
Negotiation ororpossession can be transferred
possession can be transferred
Physical
Physical Distribution:
Distribution:transporting
transportingand
andstoring
storinggoods
goods
Financing
Financing Acquiring
Acquiringand
andusing
usingfunds
fundstotocover
coverthe
thecosts
costsofof
channel
channelwork
work
Risk
RiskTaking
Taking Assuming
Assumingfinancial
financialrisks
riskssuch
suchasasthe
theinability
inabilitytotosell
sell
inventory at full margin
inventory at full margin
 Number of Channel Levels
Channel Level - Each Layer of Marketing Intermediaries that Perform Some Work in
Bringing the Product and its Ownership Closer to the Final Buyer.
0-level channel
Producer
Producer Consumer
Consumer

1-level channel

Producer
Producer Retailer
Retailer Consumer
Consumer

2-level channel
Producer
 
Producer Wholesaler
Wholesaler Retailer
Retailer Consumer
Consumer

3-level channel
   
Producer
Producer Wholesaler
Wholesaler Jobber
Jobber Retailer
Retailer Consumer
Consumer
Basic Channels of
Distribution
Manufacturers/products

Agents/brokers

Wholesalers/distributors

Retailers Retailers

Consumers and organizational end users

7
 Distribution Objectives

 Minimize total distribution costs for a

given service output
 Determine the target segments and the
best channels for each segment
 Objectives may vary with product
characteristics
 e.g. perishables, bulky products, non-standard
items, products requiring installation &
maintenance

8
 Transaction Cost by
Channels
As the value-added increases, the cost of
transaction also increases
 Direct marketing channels—low value-added;
low cost of transactions e.g. e-commerce,
telemarketing
 Indirect marketing channels—medium value-
added; medium cost of transactions e.g. retail
stores, distributors
 Direct sales channels—high value-added; high
cost of transactions e.g. own sales force
9
Competitive Advantage of
Channels
 Traditional means of achieving competitive
advantage is through products but can be
easily copied
 Low-cost as a competitive advantage
 Also suffer from sustainability
 Brands as competitive advantage
 Only if you are a strong brand
 Marketers are turning more and more to
channels as a competitive advantage e.g. Dell
Computer
10
Distribution-Scope Strategies
 Exclusive Distribution
 Limiting the distribution to only one
intermediary in the territory
 Intensive distribution
 Distribute from as many outlets as
possible to provide location
convenience
 Selective distribution
 Appoint several but not all retailers
11
 Exclusive Distribution:
Advantages
 Maximize control over service level/output
 Enhance product’s image & allow higher
markups
 Promotes dealers loyalty, better
forecasting, better inventory and
merchandising control
 Restricts resellers from carrying
competing brands

12
 Example of Intensive
Distribution

 Newspapers
 Most fast moving consumer goods you
see in the newsstand
 Photo processing shops

13
 Intensive Distribution

 Advantages:
 Increased sales, wider customer
recognition, and impulse buying
 Disadvantages:
 Characteristically low price and low-margin
products that require a fast turnover
 Difficult to control large number of
retailers

14
 Selective Distribution
 Advantages:
 Better market coverage than exclusive
distribution
 More control and less cost than intensive
distribution
 Concentrate effort on few productive outlets
 Selected firms capable of carrying full product
line and provide the required service

15
 The Future: M-Commerce
 Mobile commerce is going to be the next
revenue stream once the killer mobile-
application is rolled out

16
 Thank you

???????????????????????
??????????????????????
?????????????????

17