Design of Distribution

Channel
 Distribution Management
 Management of all activities which facilitate
movement and co-ordination of supply and
demand in the creation of time and place utility in
goods
 The art and science of determining requirements,
acquiring them, distributing them and finally
maintaining them in an operationally ready
condition for their entire life.
 Distribution Channels
 Are intermediaries or middlemen
 Exist because producers cannot reach all their
consumers
 Multiply reach and provide efficiency to the marketing
process
 Facilitate smooth flow and create time, place and
possession utilities
 Have the core competence and reach
 Provide contact, experience, specialisation and scales
of operation
 Types of Channels
 Sales: motivates buyers, shares information
between company and its consumers, negotiates
fair bargains for consumers and finances the
transactions
 Delivery channel meant only for physical part of
the distribution
 Service channel – performs after sales service
 Distribution Intensity
 Intensive: distribution through every
reasonable outlet available – FMCG
 Selective: multiple, but not all outlets in the
market – pharma, frozen food
 Exclusive: may be only one outlet in a
market - car dealers
 Distribution Channel design
 Steps for designing the distribution strategy
are:
 Defining customer service levels
 Distribution objectives and steps
 Structure of the network required
 Policy and procedure to be followed
 Key performance indicators
 Critical success factors
 Customer Service Levels
 Defined by the nature of the industry, the
products, competition and market shares.
 Affordability also decides the service level
 It should at least match competition.
 Customer expectations have no limit
 Distribution Objectives
 Influenced by the customer expectations
 Defines the extent of time, place and
possession utility which the customer can
expect out of the channel network
 Set of Activities
 Manner in which the company and its marketing
channels go about achieving the customer service levels
 Some of these steps could be:
 Sales forecasts
 Dispatch plans
 Market coverage beat plans
 Journey plans for service engineers
 Collection of sales proceeds
 Carrying out promotional activities
 The company also decides as to who is to perform which
task
 Distribution Organization
 Extent of company support and outsourcing to be
decided
 Budget for the cost of the distribution effort
 Select suitable channel partners – C&FAs, and
distributors
 Setting clear objectives for the partners
 Agree on level of financial commitments by the
channel partners.
 Policy & Procedure
 Define policy and implementation
guidelines through Operating Manuals
 Policy guidelines include
 Code of conduct for channel members
 System for redressal of complaints
 Any additional subsidies etc
 Handling institutional business
 Service policy for engineering products
 Key Performance Indicators
 For measurement of effectiveness. Some of these
could be:
 Consistent achievement of targets by product groups,
periods and territories
 Achievement of market shares
 Achievement of profitability
 Zero complaints from customers
 No stock returns
 Ability to handle emergencies and sudden spurts in
demand
 Key Performance Indicators
 For measurement of effectiveness. Some of
these could be:
 Balanced sales achievement during a period –
no period end skews
 Market coverage with ready stocks
 Excellent management of accounts receivables
 Minimize losses on account of stock-outs
 Minimize damages to products
 Critical Success Factors
 The distribution strategy also needs the support and
encouragement of top management to succeed
 Some of the CSFs could be:
 Clear, transparent and unambiguous policy and procedure
 Serious commitment of the channel partners
 Fairness in dealings
 Clearly defined customer service policy
 High level of integrity
 Equitable distribution at times of shortage
 Timely compensation of channel partners