Designing Distribution Channels



design refers to those decisions involving the development of new marketing channels where none had existed before, or the modification of existing channels


Variables  Market coverage  Sales contact  Inventory  Order processing  Gathering market information  Customer support  Volumes 3 .

Objectives  Channel  Comfort  Technical positioning: Ease or exclusivity or service support  Inventory levels to hold 4 .

5 .

6 . say analysts. industry norms suggest. is distribution. With about 300 dealers. Volkswagen has 43 dealers in 32 cities. How does Volkswagen measure against this benchmark? At the moment. a car maker can cover up to 80 per cent of the market. India is a large country and hundreds of dealers are required to cover its length and breadth.Volkswagen Where Volkswagen might trip.

Vending machines 7 .Channel formats  Push strategy or pull strategy  Zero level to three level  Producer driven: ± Company owned outlets ± Licensed outlets ± Franchises. CSAs ± Brokers.

Channel formats  Seller driven: ± Retailers ± Department stores/supermarkets ± Specialty stores ± Door-to-door Door-to- 8 .

Channel formats  Service driven ± Restaurants ± Automobiles  Other formats ± Direct marketing ± Horizontal Marketing System ± Hybrid Marketing Systems 9 .

3. 5. It is aware of market trends and change distribution strategies accordingly. The product receives the display and attention by all channel partners. 2. Channels are created to match with brand perception created by advertising.Any company must ensure that:      1. 10 . Distribution channels meet the company¶s objectives. 4. Consumers either find it easy to buy products or are willing to bear some difficulty in acquiring the company¶s products.

11 . Contractual VMS: When independent firms at different levels of distribution join together through contracts it is known as Contractual VMS.VMS (3 types)    Corporate VMS: When successive stages of distribution are under a single ownership. (3 types) Administered VMS: A channel member controls the other channel members in the distribution chain by the sheer power of its size.

Contractual VMS  Producer-Wholesaler: Producer- When Maruti appoints dealers. Retailers buy from the jointlyjointly-owned wholesaler and share the profits those purchases generate.  Wholesaler-Retailer: Co-operatives fall WholesalerCounder this category. it would be under a certain contract.  Producer-Retailer: A Samsung store will Producernot be owned by the company. 12 .

marketers. Inventory management. channel members. and customers Inbound and outbound logistics Technologies: product codes. agents. electronic data interchange (EDI). Scheduling and Transportation 13 .Logistics     Suppliers. Warehousing and storage. satellite tracking. and electronic funds transfer (EFT) Includes: Order receiving and processing.

5 billion (Rs 9.855 crore)  Orders logged in evening. more visibility 14 . delivered the next evening to the distributor by C&F  Consumers get fresher stock.CASE: HUL Go To Market Strategy (GTM)  HUL ± total 2400 distributors  Mumbai: 21 distributors into four µmega distributors¶ [Rs 480 crore]  Target: of ¼1.

 Inventory held by distributor: 0  HUL salesmen use handheld terminals  Replenishment orders from retailers  Mahindra Logistics: 0 losses in transit  Single distributor per store model 15 .

Choosing a channel: the Aspinwall Approach Characteristic Red Replacement High rate Gross margin Low Adjustment Low Orange Medium Medium Medium Medium Medium Yellow Low High High High High Time of Low Consumption Searching time Low 16 .

Aspinwall technique Red Orange Yellow Long Medium Short 17 .

5 ± 25%  Logistics 5 ± 10% 18 .1%  Distributor 4%  Wholesaler 4 ± 10%  Retailer 7.Financial Approach  C&F 0.5% .

Channel Strategy The broad principles by which the firm expects to achieve its distribution objectives for its target market/s 19 .

But few people pay attention to changing distributive channels by Walking Around Outside´ 20  ³Manage . Everyone knows about markets becoming global and about shifts in the workforce and in demographics.Peter Drucker  Everybody knows how fast technology is changing.

Tom Peters  Most firms make the mistake of paying too little attention to the somewhat attenuated members of their marketing team [marketing channel]. The few companies that mind their distribution reap tangible rewards Distribution Channels at your own  ³Ignore risk´ 21 .

 Good channel management is good general management Frank Cespedes 22 .