INSTITUTE-USB

DEPARTMENT-BBA
Bachelor Of Business Administration
Marketing Marketing
BAT-153

DISCOVER . LEARN . EMPOWER

SERVICES MARKETING
 Channel
Management /
Distribution
Course Outcome
CO Title Level
Number
CO1 To understand the Importance of Marketing; Remember
 
Z
Classification o Marketing Implications; Services
Marketing Management Process
CO2 To understand the Consumer Decision Making in Understand
Services, Customer Expectations and Perceptions;  
Defining and Measuring Service Quality and
Customer Satisfaction
CO3 Promotion and Distribution Decisions: Understand
Communication Process; Promotion Tools-
Advertising, Personal Selling, Publicity and Sales httpshttps://www.google.com/search?
q=communication+in+marketing+management+ppt&rlz=1C1CHBD_enIN
Promotion; Distribution Channel Decisions-Types
908IN909&source=lnms&tbm=isch&sa=X&ved=2ahUKEwi7kqu0o8bvAh
and Functions of Intermediaries XG7HMBHRC6CLQQ_AUoAXoECAEQAw&biw=1366&bih=600

2
A channel of distribution comprises
a set of institutions which perform
all of the activities utilized to
move a product and its title from
production to consumption

Bucklin - Theory of Distribution Channel Structure

3
 Physical distribution is…
• Organizing and moving products through the
channels

• aka: Logistics = ordering, transporting, storing,

handling and inventory control

• The 3rd largest expense for most businesses

• (#1 Materials #2 Labor)

4
 Explain how channel members add value
Right PLACE
Right TIME

• Place UTILITY
• Location – having the product where customers can buy it

• Time UTILITY
• Having the product available when the customer wants/needs it

5
Channel members add value to a
product by performing certain channel
activities expertly
• Marketing
• Packaging
• Financing
• Storage
• Delivery
• Merchandising
• Personal selling

6
 Adding Value through
Distribution
• Intermediaries provide value to producers because they
often have expertise in certain areas that producers do
not have.

• Intermediaries are experts in displaying, merchandising,

and providing convenient shopping locations and hours
for customers.

7
 CHANNEL FUNCTIONS
• Information
• Promotion
• Contact
• Matching
• Negotiation
• physical distribution
• Financing
• Risk taking

8
CHANNEL FUNCTIONS (cont.)
• Providing marketing information:
• Companies rely on market research to determine their
target markets’ needs and wants
• Ex: small business producing handmade greeting cards

• Promoting products:
• Can be expensive
• Retailers often take a large portion of promotion
responsibilities
• Ex: local supermarkets/discount stores

9
CHANNEL FUNCTIONS
(cont.)
• Contact
• Matching
• Negotiating with the customers:
• Different prices are paid by the wholesaler, retailer and
consumers based on negotiation
• Physical distribution
• Financing and risk taking:
• Moving products through a channel costs money
• When channel members work together to finance activities and
to assume financial risks, channels will be more effective

10
 Today’s system of exchange

Promotion
Contact

Negotiation

Transporting and storing

Producers

Users
Financing
Packaging
Money

Goods

11
Explain key channel tasks
• Marketing
• Packaging
• Financing
• Storage
• Delivery
• Merchandising
• Personal selling

12
Explain key channel tasks (cont.)
• Providing marketing information
• Rely on market research to determine their target markets’ needs
and wants
• Promoting products
• Costs and responsibilities can be shared
• Negotiating with customers
• Offering to deliver and install products
• Reducing discrepancies
• Selling large quantities of products to wholesalers and retailers
• Financing and risk-taking
• Work together to finance activities to become more effective

13
Tasks of Intermediaries -
Wholesalers
• Break down ‘bulk’
• Buys from producers and sell small quantities to
retailers
• Provides storage facilities
• Reduces contact cost between producer and
consumer
• Wholesaler takes some of the marketing
responsibility e.g sales force, promotions

14
Tasks of Intermediaries -
Retailer
• Much stronger personal relationship with the
consumer
• Hold a variety of products
• Offer consumers credit
• Promote and merchandise products
• Price the final product
• Build retailer ‘brand’ in the high street

15
Tasks of Intermediaries -
Internet
• Sell to a geographically disperse market
• Able to target and focus on specific segments
• Relatively low set-up costs
• Use of e-commerce technology (for payment,
shopping software, etc)
• Paradigm shift in commerce and consumption

16
Tasks of a Logistics Manager
• plans the flow of materials in a manufacturing
organization (beginning with raw materials and
ending with delivery of finished products to
channel intermediaries or end customers) and
coordinates the work of departments involved in
the process, such as procurement, transportation,
manufacturing, finance, legal, and marketing.

17
Describe when a channel will be
most effective
The channel must be properly managed
Recognize the importance of their task and
make informed decisions
Each member is assigned tasks it can do
best

18
Describe when a channel will be most
effective (cont.)
• Channel members share a common goal
• Commitment to quality of the product
• Satisfying the target market’s needs and
wants
• All members cooperate to attain overall
channel goals

• If the channel is not effective, conflict occurs…..

19
 Distinguish between
horizontal and vertical conflict

• Horizontal Conflict: occurs between channel

members at the same level

• Good, old-fashioned business competition

• Ex: two retailers selling pet supplies compete to

sell to the same target market

20
Distinguish between
horizontal and vertical conflict (cont.)

• Vertical Conflict: occurs between

channel members at different levels
within the same channel

• Producers and wholesalers, wholesalers &

retailers, or producers and retailers

21
CHANNEL MANAGEMENT
DECISIONS

• Channel strategy is not formulated in

a vacuum
• Channel strategy and product strategy

• Channel strategy and price strategy

• Channel strategy and promotion strategy

22
 Describe channel management
decisions
Decisions about a product’s physical movement and transfer of ownership from
producer to consumer.

• FIRST - Setting channel objectives

• Determine what the company is trying to achieve
• Meet the needs and wants of their target market
• Give their product a competitive edge

• SECOND - Channel members:

– Selection
– Management
– Motivation
– Evaluation
23
 1. Selecting Channel Members
Determine the types of members the belong in the
channel, as well as the channel length (total number
of channel members)
• Usually based on the nature of the product
• Factors to consider:
• Create product value that others cannot or are not willing to
provide
• Channel the product to its desired market
• Have a pricing and promotion strategy compatible with the
product’s needs
• Offer customer service compatible with the products needs
• Be willing and able to work cooperatively with other members
within the product’s channel

24
1. Selecting Channel Members
(cont.)
Involves determining the characteristics that
distinguish the better ones by evaluating channel
members
• Do they: Provide value? Perform a
function? Expect an economic return ?
• Years in business
• Lines carried
• Profit record
• Policies, strategies, & image
• Experience & track record

25
1. Selecting Channel Members
(cont.)
Selecting intermediaries that are sales agents
involves evaluating

• Number and character of other lines

carried

• Size and quality of sales force

26
 1. Selecting Channel Members
(cont.)
• Market segment - must know the specific segment
and target customer

• Selecting intermediates that are retail stores that

want exclusive or selective distribution involves
evaluating
• Store’s customers

• Store locations

• Growth potential
27
2. Managing Channel Members

• Determining channel responsibilities

• Members must work together appropriately and
perform the tasks they are best suited for

• The company must sell not only through the

intermediaries but also to/with them

28
2. Managing Channel Members (cont.)

• Partner relationship management (PRM) and

supply chain management (SCM) software are
used to
• Forge long-term partnerships with channel members
• Recruit, train, organize, manage, motivate, and
evaluate channel members

29
 3. Motivating Channel Members
• Develop a cooperative/collaborative and balanced relationship
with the partner
• Understand the partner’s customers – their needs, wants, and
demands
• Understand the partner’s business – operationally and
financially and what’s really important to them
• Look at the partner’s needs in terms of customer support,
technical support, and training
• Establish clear and agreed upon expectations and goals
• Develop recognition programs focusing on the partner’s
contributions
• Build internal support systems and dedicate resources to the
partner

30
3. Motivating Channel Members (cont.)

• Motivation can be positive or

negative
• Sanctions may be imposed on
middlemen not performing well
• Chargebacks – financial penalties
assessed for a variety of problems
• Incentives may be offered for reaching
performance goals

31
4. Evaluating Channel Members

Produces must evaluate intermediaries

performance against such standards as:
• Sales quota attainment

• Average inventory levels

• Customer delivery time

• Treatment of damaged and lost goods

• Cooperation in promotional and training programs.

32
4. Evaluating Channel Members (cont.)

Should constantly evaluate the

channel:

• What is working?

• What is not working?

• What can be improved?

33
4. Evaluating Channel Members (cont.)

Risks & Dangers of Distribution Decisions

• Transaction costs both apparent & hidden

• Risks include loss in transit, destruction, negligence, non-

payment and so on.

• So, careful choice & evaluation of each & every channel

partner is a necessity.

34
Distribution Decisions - Major
Considerations…

• Multiple channels

• Control vs. costs

• Intensity of distribution desired

• Involvement in e-commerce

35
1. Multiple Channels
• Some products meet the needs of both industrial and
consumer markets.
• J & J Snack Foods sells its pretzels, drinks and cookies
using multiple channels to:
• Supermarkets
• Movie Theaters
• Stadiums
• Schools
• Hospitals

36
 2. Control vs. Costs
• All manufacturers and producers must weigh the
control they want to keep over the distribution of
their products against the costs and profitability.
• Direct sales force – company employees are expensive
with payroll, benefits, expenses; may set sales quotas and
easily monitor performance
• Agents – work independently, running their own
businesses; less expensive = less control; agents sell
product lines that make them more money

37
Management’s Desire for Control
of Distribution

• In general, the shorter the channel structure, the

higher the degree of control, and vice versa.

• The lower the intensity of distribution, the higher the

degree of control, and vice versa.

38
3. Distribution Intensity
• = how widely a product will be distributed; marketers
want to achieve the ideal market exposure; determining
distribution patterns.
Achieve ideal market exposure (make their
product available without over exposing
and losing money)
To achieve market exposure, marketers
must determine distribution intensity

39
Distribution Intensity

• Exclusive Distribution

• Selective Distribution

• Intensive Distribution

• Integrated Distribution

40
 Intensity of Channel Structure
• Channel intensity: the number of intermediaries at
each level of the marketing channel.

Intensive Selective Exclusive

All Possible Relatively Few Just One

Intermediaries Intermediaries Intermediary

41
Intensive Distribution
• = the use of all suitable outlets to sell a product.

• The objective is complete market coverage and the ultimate

goal is to sell to as many customers as possible, wherever they
choose to shop.

• Ex. Motor oil is sold in quick-lube shops, farm stores, auto

parts retailers, supermarkets, drugstores, hardware stores,
warehouse clubs, and other mass merchandisers.

42
Selective Distribution
• = a limited number of outlets in a given geographical area are
used to sell the product.

• Very important to select channel members that maintain the

image of the product & are good credit risks, aggressive
marketers & good inventory planners.

• Ex. Armani & Lucky Brand sell their clothing only through top
department stores that appeal to the affluent customers who
buy its merchandise. It does not sell in a chain megastore or a
variety store.

43
 Exclusive Distribution
• = protected territories for distribution of a product in a given
geographic area; business maintains tight control over a product

• Ex. Franchisor legally requires a franchisee to sell only the

franchisor’s products

44
 Integrated Distribution
Manufacturer acts as wholesaler and retailer for its own
products.

• EX. Sherwin-Williams Paint, Merle Norman

• Ex. The Gap or Ann Taylor sells its clothing in company-

owned retail stores.

45
Dual distribution
• A manufacturer may sell its products through multiple
outlets at the same time:

• Toll-free phone system

• Company website
• Multiple retailers

46
4. Involvement in E-commerce
• = means by which products are sold to customers
and industrial buyers through the Internet.
• Consumers have also become accustomed to
buying products online.
• one-stop shopping and substantial savings for
industrial buyers.
• E-marketplaces provide smaller businesses with the
exposure that they could not get elsewhere

47
 Channel Design Decisions
• Channel design/structure = form or shape that a
marketing channel takes to perform the tasks
necessary to make products available to consumers.

• Includes ALL the parties involved

48
Channel Design Decisions (cont.)

• Analyzing consumer needs

• Setting Channel Objectives

• Identifying Major Alternatives

• Types of intermediaries
• Company sales force
• Manufacturer’s agency
• Industrial distributors
• Number of intermediaries
• Responsibilities of intermediaries

49
3 Dimensions of Channel Design

1.Length of the channel

2.Intensity of various levels (Exclusive,

Selective, Intensive)

3.Types of intermediaries involved

50
 Length of Channel
• Channel length = number of levels in a distribution channel.

2 level 3 level 4 level 5 level

Manufacturer Manufacturer Manufacturer Manufacturer

Agent

Wholesaler Wholesaler

Retailer Retailer Retailer

Consumer Consumer Consumer Consumer

51
Channel Design (cont.)
• Efficient movement of finished product from the
end of the production line to customers.
• Coordinate the execution of distribution plans
• So as to provide good customer service at
acceptable cost.

52
 Determinants of Channel Structure
1. The distribution tasks that need to be performed

2. The economics of performing distribution tasks

3. Management’s desire for control of distribution

4. Transaction Efficiency (refers to the effort to reduce the

number of transactions between producers &consumers).

53
 REVIEW Channel Structure/Design
1. Setting distribution objectives
 Meeting customer needs is the ultimate goal

2. Specifying distribution tasks

 who does what along the supply chain (channel of distribution)

3. Considering alternative channel structures

 Three dimensions:
• Length/Intensity/Types of intermediaries

4. Choosing optimal channel structures

 each participant in the marketing channel focuses on performing those
activities at which it is most efficient. This results in much greater efficiency
and higher output.
54
Discuss the relationship between the
product being distributed and the
pattern of distribution it uses

• Consumer Good
• Consumer Service
• Industrial Good
• Industrial Service

55
OBJECTIVE TWO:
Explain the relationship between
customer service and channel
management

56
Explain how customer service
facilitates order processing
• Ensures timely delivery of products
• Effective communication is important
• Order processing
• Correct shipping information
• Correct products
• Handling complaints
• Reducing the probability of complaints
• Nice and friendly people

57
Identify actions that customer service can
take to facilitate order processing

• EX. In retail selling, bag the merchandise with care.

Products such as glassware may require individual
wrapping before bagging.Work quickly to bag your
customer’s merchandise and complete the payment
process.
• EX. In business-to-business sales, complete the
paperwork quickly and leave a business card.

58
 Call Customer Online
Center Order

Warehouse
Actions to
Facilitate
Order
Processing Inventory
Check

No, Customer Items Yes, Item Packed

Notified of for Shipment
Backorder in
Stock?
Accounts
Receivable
Processes
Payment

59
Item Shipped
Describe the role of customer
service in following up on orders
• Following up with your customers after the sale
is an important part of providing good customer
service.
• Should customer have questions or problems it is
your duty to make sure they have a positive
experience with your company.

60
Use of Technology in Distribution
• Some businesses have the capacity to distribute most
or all of their products through the internet
• e-commerce: Products are sold to customers and industrial
buyers through the Internet.
• e-marketplace
• Satellite tracking = a dispatcher has current
knowledge of a delivery truck’s location and
destination

61
Use of Technology in Distribution (cont.)

• Tracking of package
• Bar coding on package
• Package scanned at transition points in distribution chain
• Customer uses internet to follow package along
distribution chain; e-mail may be used
• Global distribution: in some countries the postal service is
not reliable; package tracking facilitates global trade

62
 Use of Technology in Distribution (cont.)

• Problems

• Cost of technology

• Changing technology = updating equipment

• Need for compatible systems within and between

businesses & countries

63
 REFERENCES

• Marketing Management: The Millennium Edition

• T1 Kotler,P., Keller, K.L. Koshy, A. and Jha, M., Marketing Management: A South Asian Perspective, Pearson Education,
New Delhi.
• Marketing_Management_ZOSMLuTCjy.pdf (nmims.edu)
• http://www.marketingmanagementunitiiipromotiondistrubution-120620233135-phpapp02.pdf

64
THANK YOU

For queries
Email: