LECTURE 3

DISTRIBUTION CHANNELS

Distribution Management
M Wahidul Islam
Spring 2015
Elements of
Distribution
Management
WHAT IS A DISTRIBUTION CHANNEL?

 A group of people and firms involves in the transfer of

title or ownership as the product moves from the
producer to the ultimate consumer

 “the structure of intra company organization units and

extra company agents, dealers, wholesalers and retailers
through which a commodity, product or service is
marketed” – American Marketing Association
KEY QUESTIONS FOR
DISTRIBUTION CHANNEL

Whowill be the Channel

Members?

Who is driving the Channel?

What is the Channel Format?

What would be the Patter of

Distribution?
 DISTRIBUTION CHANNEL MEMBERS
Owned or Contracted Exclusive / Shared
Company Owned Distribution Center
Distributors/ Dealers / Stockiest

Carrying and Forwarding Agents

Value Added Resellers

Consignment Selling Agents or General Selling

Agents

Wholesalers
Direct Marketing Sales force

Retailers
Franchises
DISTRIBUTION CHANNEL MEMBERS
 C&FA
 Facilitators
 Do not pay for the product or hold physical possession of the
goods. Merely stores in a central location and then pass it on to
the distributor
 Example: Edible Oil Industries

 Consignment Selling Agents (CSAs) or General

Selling Agents (GSAs)
 Sales the goods on behalf of the company and transfer amount to
the producer
 Example: Shipping Companies, Airlines Companies

 Value Added Resellers

 Purchases incomplete product or kit and add value to assembling
it and then selling to customers
 Example: Personal Computers, Bicycles,
 Producer

Direct Marketing Central Authorized Own Branded

CSAs / GSAs
Team Distributor Reseller Store

Regional /
Market Specific
Distributor

Wholesalers

Retailers

Customers
PATTERS OF DISTRIBUTION
 It represents the service level that the organization provides
to its customers

Intensive •The strategy is to make the product available to as

many customer as possible
Distribution •Example: Unilever, GP, BATB, FMCG Products

Selective •Few carefully selected outlets are permitted to

keep company’s products
Distribution •Example: QUBEE, HP, Nikon

Exclusive •Only one or two outlets in a market may keep the

company’s product
Distribution •Example: Franchises, BATA, Transcom, KFC
 DISTRIBUTION CHANNEL MEMBERS
Owned or Contracted Exclusive / Shared
Company Owned Distribution Center
Distributors/ Dealers / Stockiest

Carrying and Forwarding Agents

Value Added Resellers

Consignment Selling Agents or General Selling

Agents

Wholesalers
Direct Marketing Sales force

Retailers
Franchises
 CHANNEL FORMATS
 Who plays the major / dominant role in the distribution
channel is also a big deciding factor

Producer Driven Seller Driven Service Driven Others

Company Owned Existing Retailers Multilevel marketing

Retail Outlets Couriers
Wholesalers
Licensed Outlets Credit Card Kiosks
Modern Store Formats

Consignment Selling
Companies TV home shopping
Agents Specialty Stores networks
Financial
Factory / Discount Stores
Franchisers Institutions Catalogue shopping
Agents / Dealers
3P Logistic
Distributors D2D Sales People service providers Internet based sellers
HOW TO DECIDE WHICH
DISTRIBUTION CHANNELS TO USE?
 Product type
 Industrial / Textile / Chemicals and Fertilizers Automotive
 FMCG
 Pharmaceutical
 Telecommunication
 IT hardware
 Services
 Consultancy

 Requirement of after-sales service??

 Who is driving the channel?

 Ability to influence consumer’s buying decision

 Producer

Direct Marketing Central Authorized Own Branded

CSAs / GSAs
Team Distributor Reseller Store

Regional /
Market Specific
Distributor

Wholesalers

Retailers

Customers
INDUSTRIAL PRODUCTS
 General natures
Producer
 Technical
 Mostly B2B
 Need of more personal Agent

interaction with the customer

 Relationship management very
Industrial
important Distributor

 Examples: Production Raw Materials,

Steel Mills Customers

Critical Question:
How do you manage the relationship with the Customer?
PHARMACEUTICAL PRODUCTS
 Highly technical Producer
 Doctors one of the key
stakeholders
 End Users / Customers virtually Distributor

have no communication with the

Wholesaler
manufacturer Doctors

Retailer /
Chemist
 Examples: Medicine Companies
Customers

Critical Question:
Can the producer influence Customers buying decision?
CONSUMER PRODUCTS
 Target is to reach as many Producer
customers as possible
 Every possible route is selected

 Most evolved distribution flow / Distributor

channels format
Wholesaler

 Examples: Lux, Clear, Low Cost Ball Different forms of Retail

Pen, Mineral Water etc.
 FMCG Products Customers /
Consumers

Critical Question:
Which distribution flow is right for my product?
Is my Consumer buying my product?
CONSUMER DURABLES
 Similar to Consumer Products Producer
 But needs to be maintained /
serviced
 Targeted Customer / End Users Market Specific
Distributor
based
 Usually high-end Product Service
Team
Different
forms of Retail

 Examples: Samsung, NOKIA, Sony,

Mercedes Benz, QUBEE Customers /
End Users

Critical Question:
Which is more important?
Distribution Flow or Service? After Sales Service??
SERVICES
 Customer Experience is the most important
factor, leading to high coordination of Sales Service Provider
and After Sales Customer Service
 The customer interaction is directly with
Company Representative, usually
 Usually customer goes through a process of
service experience Different Forms
of Service Outlets
 Purchase > Experience > Post Evaluation
 Franchises / Agents are carefully chosen,
and are closely controlled

 Examples: DHL, Hospitals, Airlines’ Customers

 Telecommunication?? GP??

Critical Question:
Does a distribution flow exist as there is no physical movement of services?
NEW FORM OF DISTRIBUTION FLOWS

 Mixture of Service and Physical Distribution

 Online Marketing
 Tele-shopping
 Catalogue Marketing (New or Old)
 Kiosks
 Others????
ONLINE MARKETING
TELE-SHOPPING
CATALOGUE MARKETING
CATALOGUE MARKETING
KIOSK / VENDING MACHINE
 KIOSK / VENDING MACHINE

The Google Vending Machine The Facebook Vending Machine

REFERENCES
 Chapter 8 – Distribution Management and the Marketing Mix
 Havaldar K. and Cavale V. M. (2011) Sales and Distribution
Management – Text and Cases (2nd Edition) Delhi: Tata
McGraw-Hill Education Private Limited
 Chapter 9 – Marketing Channels
 Havaldar K. and Cavale V. M. (2011) Sales and Distribution
Management – Text and Cases (2nd Edition) Delhi: Tata
McGraw-Hill Education Private Limited
END